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Unemployment is rising again.

This updated chart from Calculated Risk tells the story:

Mish provides the following summary of the new job numbers:

Check out these Grim Job Details courtesy of Bloomberg.

  • Payrolls increased 39,000, less than the most pessimistic projection of economists surveyed by Bloomberg News, after a revised 172,000 increase the prior month, Labor Department figures showed today in Washington.
  • The jobless rate rose to 9.8 percent, the highest since April, while hours worked and earnings stagnated.
  • The unemployment rate was forecast to hold at 9.6 percent, according to the median prediction of 83 economists surveyed by Bloomberg. Estimates ranged from 9.4 percent to 9.7 percent.
  • Overall payrolls were forecast to climb by 150,000, according to the survey median, with estimates ranging from 75,000 to 200,000.
  • Manufacturing payrolls dropped by 13,000 in November, the most in three months. Economists had projected an increase of 5,000.
  • The report also showed an increase in the number of long- term unemployed Americans. The number of people unemployed for 27 weeks or more increased as a percentage of all jobless, to 41.9 percent, the highest since August.

Mish’s view of the economy is gloomy:

The stock market is higher, but things are not improving, at least in the real economy. The stock market is up, because profits are up. Profits are up because of unsustainable stimulus spending, and because corporations are not hiring.

Moreover, China and India are overheating, and Europe is in shambles.

Looking ahead, there is no driver for jobs. States are in forced cutback mode on account of shrinking revenues and unfunded pension obligations. Shrinking government jobs and benefits at the state and local level is a much needed adjustment. However, those state and local government cutbacks will weigh on employment and consumer spending for quite some time.


Last month I said “Retail hiring is not sustainable. Nor is the rise in manufacturing. We might see a few more months of this (or not), but this is highly unlikely to be the start of something big or sustainable. I still expect to see the unemployment rate back up above 10% in this cycle. While today’s report may not be as good as it gets, it certainly is close to as good as it gets on a sustainable basis.”


Sticking with a message I said on August 18, 2009 “Expect to see the unemployment rate structurally high for a decade.”

Karl Denninger writes:

On the annualized basis the employment trends data has now turned downward again.


What’s worse, the employment rate is now threatening the lows:

That’s the important number as it comprises the tax base.

Our government has squandered the opportunity to do the right thing by forcing the bad debts into the open and closing the institutions responsible. Instead they have chosen to lard up more than $4 trillion in additional debt on the Federal Balance sheet on the backs of the American People with the claim that we can and will “grow out of it.”

No we can’t, no we’re not, and this BS dog and pony show crap along with the embedded lies in corporate and bank balance sheets must stop as the employment base has failed to turn around.

We’re playing Japan but do not have the buffering to do it and we no longer have the margin to add more debt in order to try to “stimulate” our way out.

That path was taken and now we know for a fact it has failed.

Mish and Denninger – who I both respect enormously – are against Keynesian stimulus. I am not really pro- or anti- any school of economics … I am simply for doing what will work and against doing what won’t work.

As I pointed out on August 11th:

“Deficit doves” – i.e. Keynesians like Paul Krugman – say that unless we spend much more on stimulus, we’ll slide into a depression. And yet the government isn’t spending money on the types of stimulus that will have the most bang for the buck: like giving money to the states, extending unemployment benefits or buying more food stamps – let alone rebuilding America’s manufacturing base. See this, this and this. [Indeed, as Steve Keen demonstrated last year, it is the American citizen who needs stimulus, not the big banks.]


Keynes implemented his New Deal stimulus at the same time that Glass-Steagall and many other measures were implemented to plug the holes in a corrupt financial system. The gaming of the financial system was decreased somewhat, the amount of funny business which the powers-that-be could engage in was reined in to some extent.

As such, the economy had a chance to recover (even with the massive stimulus of World War II, unless some basic level of trust had been restored in the economy, the economy would not have recovered).

Today, however, Bernanke, Summers, Dodd, Frank and the rest of the boys haven’t fixed any of the major structural defects in the economy. So even if Keynesianism were the answer, it cannot work without the implementation of structural reforms to the financial system.

A little extra water in the plumbing can’t fix pipes that have been corroded and are thoroughly rotten. The government hasn’t even tried to replace the leaking sections of pipe in our economy.

In truth and in fact, the government’s policies are not only not working to stem the rising tide of unemployment, they are making it worse.

Forget the whole “Keynesian” versus “deficit hawk” debate. The real debate is between good and bad policy.

The following articles provide details:

Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

7 Responses to “Forget “Keynesians” Versus “Deficit Hawks” … The Real Fight is Between Economic Policy Which WORKS and Policy Which DOESN’T WORK”

  1. cognos says:

    Yeah, prices are still in deflation.

    Fed has done too little (since “nominal” levels are always and everywhere a monetary phenomenon, see MF) to get price level higher.

    They should be QEing another $T or 2. But this won’t matter, 2011 will be full recovery year. Classic pattern. Housing is a BIG deal. Did you except the bursting of a Real-estate bubble to be easy? But it’s mainly over, back to work.

  2. me says:

    Tax cuts for the rich didn’t do much for employment the last decade. What works is to create jobs in THIS country, not India or China. The disinvestment in this country has crippled this country and we have a very very long road to slog and I suspect that road will soon become cluttered with social unrest.

  3. KJ Foehr says:

    You respect Denninger enormously? Wow, you just lost credibility in my eyes, whoever you are. Perhaps you are Karl?

    Oh, and you forgot the free-marketeers. That is still the relevant debate — free-market ideologues versus free-thinking people who are trying to find ways to save us from their “flaw”, as Greenspan put it.

    ALAN GREENSPAN: “Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to — to exist, you need an ideology. The question is whether it is accurate or not.
    And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.”


    The deficit debate is a more recent development, thanks to the rise of the Tea party movement, and one which may result in inadvertently (ignorantly) throwing gasoline on the economic fire created by the free-market excesses of the past 30 years that led to bad policy and poor enforcement of existing regulations.

    Policy does not drive the economy or employment; ideology / economic philosophy was and still is the driver of both, imo.

  4. rip says:

    Where’s Frankie when you need him?

    IMHO We are doing an almost exact instant replay of the late 30′s when Roosevelt rolled over to fiscal restraint. WWII Saved him.

    BSO has no cajones. At least Clinton did the stare down against Gingrich. Not this time.

    The only hope for bi-partisan progress is to only allow Bush tax cut continuation on his terms.

    Otherwise, no continuation. Sounds like a perfect campaign platform to me.

    And to pretend a “compromise” that includes extending unemployment and certain other tax thingies, is pure and simple BS.

    There is no trickle down. Corps are logging record profits and off-shoring, and not hiring here.

    Continuing the Bush tax cuts will not affect unemployment one iota. But it will ship a lot more tax free money off-shore. To Caribbean escape pods and foreign tax havens.

    So exactly who’s zooming whom? BSO did follow the Clinton model. Talk Dem, act Rep. Corporatocracy.

    Elites: + another $4T. Sheeple: -$4T or more depending on how they loot SS and Medicare. LOL. Thanks gov.

  5. FrancoisT says:

    “Wow, you just lost credibility in my eyes”

    Wow! We’re in a world of misery right there. Sad indeed!

    GW is totally right: as long as trust in the system is not restored with MEANINGFUL fixes, ie. bond and stockholders of financial institutions take it in the huevos, recognize losses of the big banks and tough shit if they die (the key is to be ready for orderly liquidation) and FIRE THE MOTHERFUCKERS who led us to this crisis.

    You can’t reboot the market psychology without restoring trust.

    But that will require the forceful removal of a lot of Serious People from the corridors of power: Rubin, Bernanke, Geithner, Summers, Dimon and BLanksfein comes to mind…as a start.

  6. censeo says:

    Yes. It is time to stop waving the ideology flags. Especially when they are used as foils for self-interest. (So, no to KJ Foehr; or maybe no; I don’t get where he is going.)

    Economics: the dismal science. It’s an unachievable attempt at a science, just as is psychology. Theories and principles are good and necessary bases. Then you have to do something – some things; anything other than posturing, which is what Washington is doing, and what Wall Street is doing.

    It doesn’t matter whether or not you agree with Keynes; he was addressing a system and situations of his time. And Adam Smith: free markets, laissez-faire, invisible hand… . He is cut-and-pasted just as social conservatives cut and paste the bible. And the “We the people,” people slice and dice the constitution.

    ‘Guest Author’ says, “The real debate is between good and bad policy.” WTF? No one’s got a policy, and there is no debate going on. All I see is posturing. I see a lot of five year olds saying: That toy is mine, you can’t play with it because it’s mine, and I’m taking it home anyway.

    What we’ve got here is a failure to communicate.

  7. The author referred to the “unsustainable stimulus spending.” This has been the pundit mantra for at least 30 years. Either the debt is “unsustainable,” or the deficit is “unsustainable,” or some part of federal spending is “unsustainable” (Social Security, Medicare, Medicaid, the military).
    But what is the evidence any part of federal spending is “unsustainable”? No evidence ever is provided. We get intuitional wisecracks like, “You want to give everyone $1 million,” or “Remember Zimbabwe,” or “That’s nuts,” but never have I seen evidence that the federal deficit is too high or is unsustainable.
    If such evidence exists, I’d love to see it. But I predict all I’ll see is intuition and wisecracks. What a way to run a science!

    Rodger Malcolm Mitchell