I love the optimists; and we can certainly use a good dose of optimism, as long as it is rational optimism. Today, however, the optimists were out in the press, buzzing about the jobless claims number for the week ending January 12, 2013. According to Bloomberg.com, jobless claims decreased by 37,000 to 335,000 last week, the least since January 2008.
There is an obvious problem in simply making the statement that last week’s jobless claims is the lowest number in 5 years and joining it to statements that lead to the belief that it is reason to be looking for better days ahead considering that what became the “Great Recession” started in 4Q 2007. A different article on Bloomberg.com states that this number signals that “employers are comfortable with staffing levels” and the shedding of jobs is likely coming to an end. But I wouldn’t be so sure of it. There are mass layoffs coming that we’ve heard about, like those planned by Morgan Stanley where the majority of some 30,000 will be in New York, NY, alone. The company I work for announced 2,500 for the first quarter which started just last week. Happy New Year, now here’s your pink slip.
It makes me wonder what kind of people Bloomberg has working for them, having the eye of the storm hovering overhead and they declare it over. It seems a bit irresponsible to me.
I hate to be the skunk at the garden party, but I find little reason to be optimistic. I see disappointment in the jobless numbers for the coming weeks because the Fed has made little progress in boosting income expectations against a backdrop of tax increases that, regardless of what was said in the press, are hitting nearly everyone. The payroll tax reduction expired and the extra Medicare taxes for ObamaCare kicked in at the first of the year – and those hit everyone. The bill for that “Hope and Change” is now coming due with the folks at the Fed still having their head stuck in their outboxes regarding inflation targeting and obsolete interest rate pegs. It’s not a bright picture for aggregate demand management to start off the year with as I pointed out here.
We really need to stop calling the dirty shirts clean simply because there are those that are dirtier, like the Euro Zone. I demand and expect more out of the monetary authorities in repairing the damage they caused with explicit headline inflation targeting than stabilization of the economic situation at the level of awful. This Great Recession isn’t going to be over until the Fed commits to closing the majority of the NGDP gap and happily sets out to do it with no wavering, no hemming and hawing. That is when we will have turned the corner to much brighter days ahead.