September 1, 2011

Despite 0.7% Average First-Half Growth, Press Not Questioning White House’s 1.7% Full-Year Projection

Today, the White House’s Office of Management and Budget published its Mid-Session Review (large PDF), an economic forecast projecting, among other things, that Gross Domestic Product (GDP) for calendar 2011 will be 1.7%. That doesn’t sound like much (and it isn’t), but to get there growth will have to almost triple its most recently reported level during the second half of the year. Second-half growth will also have to exceed the estimates of most economists.

Good luck finding any skepticism in the press over OMB’s numbers. What follows is the numerical runthrough, followed by two media coverage examples.

Running through why OMB’s calendar 2011 growth estimate is doubtful is pretty easy:

  • First-quarter growth was an annualized 0.4%.
  • Second-quarter growth, pending any September revision, was an annualized 1.0%.
  • To achieve 1.7% growth for the calendar year, second-half growth will have to come in at an annualized 2.7%.
  • If, as many expect, the final revision to second-quarter GDP is adjusted down to 0.7%, second-half growth will have to be another tenth of a point or so higher.

Earlier today, the Associated Press’s Christopher Rugaber, in his report on unemployment claims, wrote: “Economists expect growth will only improve to about a 2 percent (annualized) pace in the second half of this year.”

We’re already two months into the third quarter, and the economic reports we’ve seen during that time hardly support a belief in Rugaber’s reported estimate, let alone the White House’s (and that’s being extremely kind in both instances).

Yet Rugaber’s AP colleague Andrew Taylor, in covering the OMB release, while at least framing the White House’s in gloom, exhibited no skepticism, and made no reference to the lower figure Rugaber named, let alone some of the much lower ones which have been cited by others:

The bleak figures from the Office of Management and Budget, which also projected overall growth this year at just 1.7 percent, serve as further confirmation of a sputtering economy while dramatizing the challenge Obama will face in making his case for re-election. The 1.7 percent growth rate is a full percentage point less than the administration predicted at the beginning of the year.

Do these guys ever communicate with each other, or read each others’ work?

At CNNMoney.com, Jeanne Sahadi also didn’t question the White House’s word:

The Office of Management and Budget also lowered its estimates for annual GDP growth by roughly a percentage point for this year, next year and 2013. Its forecasts for 2015 and 2016 are somewhat higher than they were.

OMB said in its “mid-session review” that it now expects the economy to grow at a 1.7% rate this year, down from its 2.7% forecast in February.

Growth is expected to be 2.6% next year and 3.5% in 2013.

We should be so lucky.

Recall that the first eight quarters after the 1980s recession ended growth averaged well over 6% while Ronald Reagan was President. After the most recent recession officially ended in June 2009, the eight-quarter growth average has been 2.5%. During quarters 5 through 8, the average under Reagan was 6.9%; under Obama, 1.6%.

The AP and CNN would have been better off using the approach of Jackie Calmes at the New York Times. Given two chances to note the hard-to-handle White House growth figure (here and here), Ms. Calmes “solved” the problem by not mentioning it either time.

Cross-posted at NewsBusters.org.

NIghtmare on Pennsylvania Avenue

Filed under: Economy,Taxes & Government — Tom @ 5:17 pm

The Institute for Policy Innovation identifies five items in Alan Krueger’s background which should have free-market supporters and anyone else who wants to see the “Rebound? What Rebound?” economy legitimately recover screaming in horror (bolds are mine):

President Obama has appointed Princeton University economics professor Alan Krueger to replace the departing Austan Goolsbee as head of the White House Council of Economic Advisors.

… Here’s what Professor Krueger is famous for:

  • A thoroughly debunked (and thus infamous) study asserting that raising the minimum wage caused employment to increase. Not only was this “finding” contrary to all common sense and normal economic analysis, it was rebutted several times by several different research economists. (What the heck, then let’s raise it to $30 an hour. — Ed.)
  • Another study asserting that public school students who transferred to private schools through the use of a voucher program showed no discernible educational improvement, and that “the provision of vouchers in New York City probably had no more than a trivial effect on the average test performance of participating black students.” Again, this is contrary to virtually all other research on the impact of moving disadvantaged students from dysfunctional public schools to private schools.
  • Championing a 5 percent value-added tax (VAT) on top of the existing income tax system that he thinks would raise $500 billion in new revenue on top of the existing system, as if somehow the entire economy would continue to produce output at the same level regardless of such a significant increase in the marginal tax rate on labor and capital.
  • Designing the “cash for clunkers” program wherein $3 billion in taxpayer dollars was spent (borrowed?) for the purpose of advancing car sales forward in time by a few months.
  • Advocating that governments stop measuring performance by GDP and instead measure by National “Well-Being” Accounts (NWBA), which would attempt to quantify things like how tired Americans are, or whether they feel happy, worried, or hostile. Now, we can understand why the Obama administration might want to stop talking about GDP, but …

Yeah, that final item is ridiculous, subjective and … so completely leftist. When you don’t like the answers, change the question.

ISM Manufacturing Stays in Expansion With Slight Dip to 50.6%

Filed under: Economy — Tom @ 11:45 am

Well, it stayed in expansion, but some of the underlying elements were troubling.

From the Institute for Supply Management:

Economic activity in the manufacturing sector expanded in August for the 25th consecutive month, and the overall economy grew for the 27th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.

… “The PMI registered 50.6 percent, a decrease of 0.3 percentage point from July, indicating expansion in the manufacturing sector for the 25th consecutive month, at a slightly slower rate. The Production Index registered 48.6 percent, indicating contraction for the first time since May of 2009, when it registered 45 percent. The New Orders and Backlog of Orders Indexes edged up slightly from July, but both indexes are indicating contraction in August at slower rates than in July. The rate of increase in prices slowed for the fourth consecutive month, dropping another 3.5 percentage points in August to 55.5 percent. The overall sentiment is one of concern and caution over the domestic and international economic environment, which is affecting customers’ confidence and willingness to place orders, at least in the short term.”

The items in bold can’t stay in contraction for long without dragging the overall number down with them.

The scoreboard for the 18 industries reporting was 10 in expansion, 6 in contraction, and 2 apparently neutral. The in-expansion number is I believe the lowest in almost two years, if not more than that.

According to the Associated Press, economists had expected a sub-50% reading, which would have indicated contraction for the first time in 25 months. (Funny how AP suddenly decided to compare results to expectations, something it rarely does with reports other than jobs and GDP.)

Zero Hedge’s reax: “ISM Beats Expectations Even As Core Components Continue To Deteriorate.” Specifically, “The problem is that the beat was once again on purely artificial data, with Inventories and Customer Inventories posting the largest increase in the month, or basically the two most hollow economic series.”

If inventories are increasing across the board while production is contracting, you’re forced to conclude that end user purchases are declining.

Unemployment Claims: 409K SA, Down from Previous Week’s 421K; NSA Only 334K

Filed under: Economy,Taxes & Government — Tom @ 9:42 am

From the Department of Labor:

In the week ending August 27, the advance figure for seasonally adjusted initial claims was 409,000, a decrease of 12,000 from the previous week’s revised figure of 421,000. The 4-week moving average was 410,250, an increase of 1,750 from the previous week’s revised average of 408,500.

The advance number of actual initial claims under state programs, unadjusted, totaled 334,372 in the week ending August 27, a decrease of 10,498 from the previous week. There were 383,135 initial claims in the comparable week in 2010.

Business Insider’s email had an SA prediction of 407K. Reuters’ Google result said it was “as expected” (the article as it now appears is silent on expectations). Bloomberg had 410K, observing that “The figure remains higher than it was three weeks earlier, before the labor dispute at Verizon pushed the numbers up.”

Here’s the four-week average graph, showing 400K or more for 19 weeks in a row:

UnempClaims4wkAvg082711

Take out Verizon, and the streak would still be alive. Though the NSA number is legitimately encouraging, overall this is not a good place to be stuck.

Positivity: Honest Japanese Return $78 Million Found in Quake Rubble

Filed under: Positivity — Tom @ 9:00 am

From Tokyo (HT Daryn Kagan):

Aug. 17, 2011

The earthquake and tsunami that walloped Japan left much of its coastline ravaged, but left one thing intact: the Japanese reputation for honesty.

In the five months since the disaster struck, people have turned in thousands of wallets found in the debris, containing $48 million in cash.

More than 5,700 safes that washed ashore along Japan’s tsunami-ravaged coast have also been hauled to police centers by volunteers and search and rescue crews. Inside those safes officials found $30 million in cash. One safe alone, contained the equivalent of $1 million.

The National Police Agency says nearly all the valuables found in the three hardest hit prefectures, have been returned to their owners.

“In most cases, the keyholes on these safes were filled with mud,” said Koetsu Saiki with the Miyagi Prefectural Police. “We had to start by cutting apart the metal doors with grinders and other tools.”

Determining who the safes belonged to, proved to be the easy part. Saiki says most kept bankbooks or land rights documents inside the boxes, containing their names and address. Tracking the owners down, was much more challenging. …

Go here for the rest of the story.

Positivity: The teenager with a Mercedes hand

Filed under: Positivity — Tom @ 6:00 am

From Wokingham, Berkshire, England (HT Daryn Kagan):

Last updated at 2:35 PM on 16th August 2011
Car firm grants £35,000 wish for disabled boy

There must be many a young boy who dreams of one day owning a Mercedes.

Formula One fan Matthew James, however, had a more specific ambition. He wanted the car company to help build him a new bionic hand.

Now, thanks to determination and a healthy dose of cheek, the 14-year-old has had his wish granted.

Matthew, who was born without his left hand, put his plan into action by writing to Ross Brawn, boss of F1 team Mercedes GP Petronas, asking for £35,000 to pay for a top-of-the range artificial one.

In return, the schoolboy said he would let the company sponsor the hand by putting the Mercedes logo on it – just like the adverts on F1 cars.

Rather than being put off by the precocious advance, Mercedes was touched by Matthew’s ‘intelligent and moving letter’ and agreed to help him raise the money he needed.

It also teamed up with prosthetics specialists Touch Bionics to create a customised i-LIMB Pulse – the most advanced technology of its type in the world.

The hand – strong enough to hold a 14-stone load – is also so versatile that Matthew can grip a pen to draw pictures and write, tie his shoe laces and catch a ball.

After it was fitted on Friday, the teenager – who lives with parents Rob, 44, and Tina, 42, in Wokingham, Berkshire – said: ‘It is just amazing. My old artificial hand had a pretty basic open-close mechanism similar to a clamp.

‘But with this one I can do everything. It also looks really cool – the outer-shell is see-through so you can actually see the mechanics working. They are even going to put a little Mercedes badge by the wrist.’

Matthew travelled to the Touch Bionics headquarters in Livingston, Scotland, after the company agreed to waive its £25,000 fee to fit the hand and train him to use it.

He said: ‘I am actually looking forward to getting back to school so I can test it out.

‘I like science and am planning to go into engineering but I used to struggle with lab experiments. Now they should not be a problem.

‘I also love sport but anything that involves two hands, like cricket, has always been a struggle. Now I can compete with the other lads.’

After receiving Matthew’s letter in June, Mercedes invited him to its headquarters, where he toured the factory and met racing driver Michael Schumacher….

Go here for the rest of the story.

Wausau, Wis. Labor Council Bitterly Reverses Ban on GOP Pols’ Labor Day Parade Participation

In Wausau, Wisconsin, after being told by the town’s mayor that it couldn’t exclude GOP politicians from a Labor Day parade unless it reimbursed the city for its out-of-pocket costs (noted Tuesday night at NewsBusters; at BizzyBlog), the Marathon County Labor Council reversed its earlier decision and will allow them to participate.

Labor Council President Randy Radtke is not handling it well, something readers of the Associated Press’s terse three-paragraph locally distributed story predictably won’t learn. Reuters and Fox News have far more complete coverage. Here is the portion of Mr. Radtke’s rant carried at Reuters:

“We didn’t start this fight in Wisconsin, but were responding to anti-worker positions and policies supported by local Republican politicians, including those who have complained about not being invited,” Radtke said in the statement, posted on the website of WAOW-TV in Wausau.

“Just like we’d hoped, our decision has stimulated a great debate in our community about the meaning of Labor Day,” Radtke said.

“But because we don’t want to wind up having community groups and school bands affected in the process, we will let everyone march and hope these Republican politicians finally take away some lessons about what Labor Day really means. We know their actions and voting records speak more loudly than waving at any parade.”

Reuters clearly identified the contentious legislation passed by Wisconsin’s legislature earlier this year as being about public-sector workers’ collective-bargaining rights. Yesterday, its story’s opening paragraph gave readers the erroneous impression that the law applies to all unionized workers.

Here is additional Radtke verbiage found at Fox News:

“We didn’t start this fight in Wisconsin, but were responding to anti-worker positions and policies supported by local Republican politicians, including those who have complained about not being invited,” Radtke’s statement said, according to Wausau Daily Herald.

“With the track records that Pam Galloway, Sean Duffy, Scott Walker and Jerry Petrowski have all put together this year, they should be ashamed to even show their faces at a Labor Day parade.”

Kudos to Wausau Mayor Jim Tipple for his principled insistence that an exclusionary Labor Day parade would have to foot the bill for city services used.

Before Mr. Radtke tries to take ownership of Labor Day in Wausau again, he should consider the following words from Samuel Gompers, whom writer Aaron Steelman accurately described in 1997 as “the greatest friend labor has ever known”:

“Labor Day differs in every essential way from the other holidays of the year in any country,” said Samuel Gompers, founder and longtime president of the American Federation of Labor. “All other holidays are in a more or less degree connected with conflicts and battles of man’s prowess over man, of strife and discord for greed and power, of glories achieved by one nation over another. Labor Day…is devoted to no man, living or dead, to no sect, race, or nation.”

Contrary to what you and your “brothers” believe, Mr. Radtke, Labor Day is not exclusively about unionized workers. It’s about all workers, and all producers.

Readers would be interested to know that the quote from Mr. Gompers, who recognized the need for unionized business to progress and make profits while opposing the welfare state and heavy-handed government regulation, was scrubbed from the Department of Labor’s “History of Labor Day” web page last year after appearing there during at least the previous nine. That would appear to be because Hilda Solis’s Department of Labor is now populated with more than a few Randy Radtke’s — and we’re decidedly not better off for it.

Cross-posted at NewsBusters.org.