Wonkbook: Previewing the jobs report

If you have difficulty viewing this newsletter, click here to view as a Web page. Click here to view in plain text.
	Friday, April 6, 2012

Ezra Klein's Wonkbook

Happy jobs day! Here's Bloomberg with the preview:

"Employers probably added more than 200,000 workers to payrolls in March for a fourth straight month as U.S. companies gained confidence sales will keep improving, economists said before a government report today. Hiring increased by 205,000 after rising by 227,000 in February, according to the median projection of 80 economists surveyed by Bloomberg News. The last time employment advanced at a similar pace for as many months was late 1999 into 2000. The jobless rate probably held at a three-year low of 8.3 percent. The pickup in jobs has propelled consumer sentiment to a four-year high, boosting the odds household spending, which accounts for 70 percent of the economy, will keep growing."

Of course, those are just estimates. And estimates can be wrong. We'll find out at 8:30am ET, when the Bureau of Labor Statistics releases the official numbers for March. And then, over the next few months, we'll find out whether what we found out today was true, when the BLS releases its revisions to the March jobs numbers. (Remember: revisions to jobs numbers can be quite significant, as when BLS initially reported that we had added zero jobs in August 2011 and then revised than to 100,000.)

At this point, I think it's cliche (but correct!) to say that the first Friday of every month -- that is to say, the day the jobs numbers are released -- is the most important day of the month for the 2012 election. But looking forward on the calendar, the election will be held on Tuesday, November 6th. That is, you'll note, only a few days after Friday, November 2nd -- the day the October jobs numbers come out.

If those numbers are unexpectedly high or low -- even if they're wrong and will later be revised -- they could have an unusually large impact on voters trying to decide whether Obama's recovery is a solid thing or it's better to turn to new leadership. In fact, it doesn't seem like an exaggeration to say that in a tight election, in an uncertain economy, the BLS's first read on the October labor market could decide who wins the presidency in 2012. Just something to think about.

Top stories

1) Jobless claims fell again this week. "New applications for jobless benefits fell to the lowest level in nearly four years last week, further evidence that U.S. employers likely added a healthy number of workers to their payrolls in March. Initial jobless claims decreased by 6,000 to a seasonally adjusted 357,000 in the week ended March 31, the Labor Department said Thursday. Economists surveyed by Dow Jones Newswires predicted that 360,000 new claims would be filed last week. The prior week's level of claims was revised up to 363,000 from a previously reported 359,000. The four-week moving average of claims, which smooths out week-to-week volatility, decreased by 4,250 to 361,750, the lowest average since April 2008. The level of weekly claims has steadily declined since last fall. That shows companies are laying off fewer workers and points to a general strengthening of the labor market." Eric Morath and Jamila Trindle in The Wall Street Journal.

@justinwolfers: Private payrolls fell -913k over W's first term; rose +267k over his second term. Obama on track to do better than both.

@ryanavent: Economy is 274k jobs away from net private-sector empl growth under Obama. Will he get it tomorrow? Probably not. Soon though.

@grossdm: Bad news for the bad news bears. Macroeconomic Advisers says q1 GDP 2.2%, estimates q2 growth of 2.7 %. Pace of econ. growth accelerating

2) The transportation bill doesn't have an easy road ahead. "As Congress starts back down the road on hammering out a transportation bill, expect more nail-biting extension deadlines, delayed projects for states and partisan spats. The reason is simple: money. With gas tax revenues falling, there just isn't enough money to go around for federal transportation programs...The pressure from states and outside groups to finish a bill has politicians upping the rhetoric and reaching for some unorthodox and ultimately temporary solutions...The underlying problem remains that the Highway Trust Fund, the place where gas tax revenues are deposited, does not have enough money in it to adequately fund the country's transportation needs. Raising the gas tax -- which has remained static since the last time it was raised in 1993 -- is something politicians won't touch, especially in an election year. And the other widely discussed solution, switching to a system that would charge people based on how many miles they've driven, has technological and ideological challenges." Kathryn Wolfe in Politico.

3) Growth in corporate profits is likely to slow. "Corporate profits have been among the brightest lights of the economic recovery, helping to lift the stock market more than 25 percent since October. But analysts predict that when the first-quarter reporting season starts in earnest next week, American companies will show the slowest rate of growth in operating earnings in three years. One widely used gauge of profits, the Standard & Poor's Capital IQ survey, forecasts that earnings will have grown 0.93 percent in the first quarter, compared with the first quarter of 2011, for the companies that make up the S.& P. 500-stock index...Many companies struggled through the difficult period since the 2008 financial crisis by trimming costs and laying off employees to help rebuild their bottom lines. Now analysts say that the cutbacks may have reached their limits and that profits could very well have peaked in the second half of last year." Christine Hauser in The New York Times.

4) The companies lobbying for a tax holiday on overseas profits have been stockpiling profits in anticipation. "Overseas cash and earnings stockpiles for 12 of the United States' biggest businesses -- from Microsoft to Merck -- grew by about 20 percent in 2011, as most of them lobbied hard in Washington for a 'tax holiday' to bring that money home at a steep discount. A POLITICO review of annual reports and Securities and Exchange Commission filings shows that a dozen of the most vocal corporate critics of U.S. tax policy finished 2011 with more than $455 billion in cash, investments and other earnings held by foreign subsidiaries -- up from $381 billion the year earlier. The companies have avoided U.S. taxes on almost every penny of their international profits by keeping the money offshore. And nearly that entire haul has been designated by top executives of those firms as 'permanently' or 'indefinitely' reinvested abroad, partly because of the 35 percent U.S. tax rate companies must pay to bring home foreign money...U.S. multinationals have hired an army of lobbyists to sell the idea of a tax holiday to Congress, so they might repatriate a pot of overseas profits estimated at more than $1 trillion for as low as a 5.25 percent rate." David Saleh Rauf in Politico.

5) The JOBS Act will mean less information for investors. "Since 2004, when the Sarbanes-Oxley requirement for internal-control inspections took effect, 104 companies that have had issues with their anti-error, anti-fraud procedures, including StoneMor, would have been exempt from auditor scrutiny of those procedures if the JOBS Act had been in effect at the time. The review doesn't mean the JOBS Act would have led to missed problems at 104 companies. Not all flaws with a company's internal controls lead to financial problems, and many such problems could be found even if outside auditors aren't required to look. Under the JOBS Act, companies will still have to have their own management assess internal controls and disclose any weaknesses they find, as they do now...But to the extent eligible companies take advantage of the legislation's provisions, investors may not find out as much in the future about companies' ability to prevent financial errors and fraud." Michael Rapoport in The Wall Street Journal.

@SteveRattner: Write it down -- we will regret passing the JOBS bill.

@deborah_solomon: How long will it take before JOBS Act is as disparaged as Gramm-Leach-Bliley and Commodities Modernization Act?

Top op-eds

1) KRUGMAN: The Fed should worry less about inflation. "At this point, inflation is once again running a bit below the Fed's self-declared target of 2 percent. Now, the Fed has, by law, a dual mandate: It's supposed to be concerned with full employment as well as price stability. And while we more or less have price stability by the Fed's definition, we're nowhere near full employment. So this says that the Fed is doing too little, not too much. Indeed, some Fed officials -- notably Charles Evans, the president of the Chicago Fed -- have tried to make exactly that case. To be sure, more aggressive Fed policies to fight unemployment might lead to inflation above that 2 percent target. But remember that dual mandate: If the Fed refuses to take even the slightest risk on the inflation front, despite a disastrous performance on the employment front, it's violating its own charter. And, beyond that, would a rise in inflation to 3 percent or even 4 percent be a terrible thing? On the contrary, it would almost surely help the economy." Paul Krugman in The New York Times.

@RTMcNeely: Frustrating thing about Fed is its performance and rhetoric in absolute terms is horrendous but in relative/comparative terms is decent.

2) ZINGALES: Ending the double mandate could protect the Fed's independence. "This politicization of the Fed reached a new peak in recent days, with at least one senator saying he would seek to block the confirmation of two new board nominees...It might be too late to reverse the politicization of the Supreme Court, but Congress can still use its power to save the Fed, namely by passing laws that restrain the central bank's activism. The first step would be the elimination of the double mandate. Unlike the European Central Bank, which is in charge only of price stability, the Fed has two main legislated goals: promoting full employment and promoting stable prices. This gives the Fed too much flexibility, pushing it to substitute for the government in designing economic policy. The temptation to act in this way is particularly strong when Congress is divided and paralyzed. It is precisely this substitution that makes the Fed politically vulnerable. The central bank can be independent or activist; it cannot be both. Independent is better." Luigi Zingales in Bloomberg.

3) BROOKS: Ryan's budget isn't so different from Obama's. "The Ryan budget would cut too deeply into discretionary spending. This could lead to self-destructive cuts in scientific research, health care for poor kids and programs that boost social mobility. Moreover, the Ryan tax ideas are too regressive. They make tax cuts for the rich explicit while they hide any painful loophole closings that might hurt Republican donors...Obama exaggerated the differences between his budget and the Ryan budget. There are, indeed, real differences, but in the short term they are not a chasm. In 2013, according to Veronique de Rugy of George Mason University, the Ryan budget would be about 5 percent smaller than the Obama budget, and it would grow a percent or two more slowly each year. After 10 years, government would be smaller under Ryan, but, as Daniel Mitchell of the Cato Institute complains, it would still take up a larger share of national output than when Bill Clinton left office. Obama exaggerated these normal-sized differences into a Manichaean chasm." David Brooks in The New York Times.

4) DYER AND LILLY: The time to tackle sequestration is now. "Once again, Congress is in the midst of a legislative session threatened by a problem of its own making and is uncertain about how, when or where to solve it. In nine months, a law on the books, the Budget Control Act of 2011, will wreak havoc not only on the operations of federal government, but our entire economy, if lawmakers do not agree on an alternative approach to cutting the budget. Unfortunately, no one in Washington seems to be particularly concerned...How much economic damage will be inflicted before this lame-duck miracle occurs, should it take place? Too few are thinking about the potential damage to government services and the economy if sequestration were implemented. We negotiated on opposite sides of major budget confrontations for more than a decade, and we think the federal government needs to begin weighing these questions now, rather than after the November elections. There is too little time, and too much is at stake." Jim Dyer and Scott Lilly in The Washington Post.

5) GRAMM AND MCMILLIN: Raising taxes on the rich can't fix inequality. "Nowhere is the political debate over income inequality more detached from reality than the call for the top 1% of American income earners to pay their 'fair share.' The Organization for Economic Cooperation and Development (OECD) data on the ratio of the share of income taxes paid by the richest taxpayers relative to their share of income show that the U.S. has the world's most progressive tax burden. The top 10% of earners in the U.S. pay 35% more of the income tax burden than in Sweden and 22% more than in France. These figures--from the 2008 OECD publication 'Growing Unequal?'--include all household taxes imposed on income at the federal, state and local level, including social insurance taxes. In an eternal irony unique to large welfare states, it is the expansion of government in the name of the poor and middle class that always costs poor and middle-class families the most." Phil Gramm and Steve McMillin in The Wall Street Journal.

Folk interlude: Iron and Wine plays "Naked as We Came" live on WFUV.

Got tips, additions, or comments? E-mail me.

Still to come: Retail sales jump; the FTC wins another round; Apple fights antitrust charges; clean energy loans start again; and robots play "Come Together."

Economy

Retail sales growth beat expectations. "Warmer weather, an earlier Easter and demand for spring fashions propelled same-store sales growth last month at many major U.S. retailers...March sales were helped by unseasonably high temperatures in many parts of the country, and Easter this year falls two weeks earlier on the calendar than in 2011, providing a boost for spring apparel and seasonal goods. Appealing new styles also played a role, analysts said, with shoppers more willing to pay full price for fresh merchandise. Retailers were also able to move older stock at sale prices...The 18 retailers tracked by Thomson Reuters posted a 6.9% rise in March same-store sales when a 5.3% gain was expected. The number compares with 1.7% growth a year ago. One drawback of the March momentum is that it will likely take some steam out of April sales, several retailers said. " Karen Talley in The Wall Street Journal.

Malls got some promising data. "The rebounding economy is providing a slight boost to U.S. malls and shopping centers, which in the first quarter registered their first declines in vacancy in years. But analysts aren't yet ready to declare a turnaround...Vacancies at shopping malls declined to 9% in the first quarter from 9.2% in the fourth quarter of 2011, marking the first quarterly decline for malls in more than a year, according to Reis, which tracks the top 80 U.S. markets. Still, the vacancy rate remains close to the 10-year high for malls of 9.4% set in last year's third quarter. Meanwhile, average lease rates at malls increased 0.2% in the first quarter to $39 per square foot per year, marking a third consecutive increase, according to Reis. Vacancy rates at strip malls and other neighborhood shopping centers, which have been the hardest-hit sector of the retail real-estate industry, declined for the first time since 2005, falling to 10.9% in the first quarter from 11% in the fourth quarter of last year, according to Reis." Kris Hudson in The Wall Street Journal.

Brian Sack is leaving the Fed. "Brian Sack, a top Federal Reserve staffer who played a key role implementing many of the central bank's policies in the wake of the 2008 financial crisis, will resign from his job later this year. As head of the Federal Reserve Bank of New York's markets group, Mr. Sack, 41 years old, managed a controversial expansion of the Federal Reserve's securities portfolio over the past three years and designed strategies for the central bank to eventually unwind its holdings. He occupies the most high-profile staff job at the central bank and has the ear of top officials. The markets group implements Fed policy by buying and selling securities in trades with private financial firms, and Mr. Sack briefs top officials at each Fed policy meeting on the state of the markets and the workings of central-bank policies. A New York Fed spokesman said it was Mr. Sack's decision to leave and that he didn't immediate have plans for another job." Jon Hilsenrath and Kristina Peterson in The Wall Street Journal.

Banks could benefit from the crackdown on offshore tax havens. "The world's tax havens are being forced to clean up their acts. As regulators clamp down on money flows around the globe, governments, even those that prided themselves on the strength of their secrecy laws, like Switzerland, are facing pressure to share banking information and change their policies. Now, private banks and wealth managers are scrambling to convert so-called black money -- assets that have not been disclosed -- into accounts that are above board. The shift may provide opportunities for the industry. As more funds become legitimate, analysts say financial institutions will be able to sell extra wealth management products to affluent people and enter markets that had previously been off limits...So far, countries have collected about $18.7 billion in additional taxes from more than 100,000 wealthy individuals...The situation has left private banks scrambling to bolster their risk management practices and educate wealthy clients on the new regulatory environment." Mark Scott in The New York Times.

@matthewstoller: This is the first recovery since WWII in which residential real estate did not lead or even participate. Cannot over-emphasize.

History interlude: The original pitch for "The Muppet Show.".

Health Care

The FTC won another victory in its campaign against healthcare monopolies. "A federal judge temporarily halted the merger of two Rockford, Ill., hospitals in a victory for the Federal Trade Commission, which is targeting deals it says create local health-care monopolies. Judge Frederick J. Kapala of U.S. District Court in Rockford sided with the FTC's argument that the combination of St. Anthony Medical Center and Rockford Memorial Hospital could increase the cost of care in the city. The FTC 'has shown that the merger would likely lead to higher prices,' Judge Kapala wrote. The FTC's case goes to an FTC administrative law judge, who is set to hold an initial hearing April 17...The FTC also is fighting hospital deals in Toledo, Ohio, and Albany, Ga., saying that mergers can lock up local markets, leading to higher prices for patients and insurance companies with few other places to turn." Eric Morath in The Wall Street Journal.

Health reform repeal would hurt hospitals. "Earlier Thursday, Moody's put out a report looking at how for-profit hospitals would fare should the Supreme Court overturn the health reform law. The short answer: Their credit ratings would get slammed...In discussions about repeal, much of the focus is on health insurance companies. They are, after all, the ones who stand to be most directly impacted by the repeal of a requirement to buy insurance. But the outcome of the Supreme Court decision matters a lot for hospitals. They have already made significant investments preparing for its implementation -- and are hoping the new law would salvage their ailing business model...If the law falls now, it could be a bit of a double-whammy: Not only would costs of uncompensated care continue to rise, but all those investments in productivity -- catalyzed by the health overhaul -- would no longer reap much of a financial reward." Sarah Kliff in The Washington Post.

Domestic Policy

Apple will fight antitrust charges against its ebooks pricing. "Apple Inc. (AAPL) and two publishers are preparing to fight the U.S. Justice Department in court if necessary over pricing agreements for digital books, according to two people with knowledge of the matter. Apple, Pearson Plc (PSON)'s Penguin Group, and Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH, want to protect the so-called agency model that lets publishers -- not vendors --set e-book prices, said the people, who declined to be identified because they weren't authorized to talk publicly. The Justice Department is probing whether Apple's interaction with publishers over pricing hampered competition in the market for electronic books. The government is seeking a settlement that would let Amazon.com Inc. (AMZN) and other retailers return to a wholesale model, where retailers decide what to charge customers, the people said." Andy Fixmer, Sara Forden, and Edmund Lee in Bloomberg.

Injuries dropped for young farm workers. "Young people working on farms are suffering fewer injuries, according to data from a new U.S. Department of Agriculture report that could provide ammunition to opponents of an Obama administration push to restrict child labor in agriculture. Workers under age 20 had 3,191 nonfatal injuries on farms in 2009, the latest year for which figures are available, down 36% from 4,964 injuries in 2006, the USDA said in the report issued Thursday...The new data come as the Department of Labor considers the first changes in four decades to rules for children working on farms, long one of the most-dangerous places in America for kids to work. The proposal would bar children 15 and younger from tasks including driving farm equipment and working in tobacco fields. Children under 18 would no longer be allowed to work in grain elevators and livestock feed yards." Bill Tomson and Mark Peters in The Wall Street Journal.

Robots are cool interlude: Drexel's HUBO robots play a rendition of The Beatles' "Come Together."

Energy

The U.S. is relaunching a clean energy loan program. "Six months after the expiration of a federal loan guarantee program that backed $16 billion in loans to solar, wind and geothermal energy projects, the Energy Department has decided to offer a smaller set of similar guarantees by tapping another pot of money appropriated by Congress last year. The department said Thursday that it had sent letters to potentially eligible companies inviting them to apply for the new money. Under the other program, which was passed as part of the 2009 stimulus legislation, about three dozen companies that had applied for loan guarantees were told that they would not receive guarantees because the department had been unable to finish reviewing their applications before the program expired on Sept. 30, 2011. Now, the department is saying that the companies can reapply under a loan guarantee program established under the Energy Policy Act of 2005 that is still in force." Matthew Wald in The New York Times.

Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.

Get The Washington Post, your way.
Want to stay on top of the latest news, features, commentary and more? Here's how:
Mobile:	Alerts:	Social Media:
Applications Web site	E-mail SMS RSS Feeds	Facebook Twitter
SEND TO A FRIEND	UNSUBSCRIBE	NEWSLETTER CENTER	GET HELP
Washington Post Digital E-mail Customer Care 1150 15th Street NW Washington, D.C. 20071		©2012 The Washington Post Privacy Policy