May 10 2009
Stimulus Watch: Obama Economy Not Stimulating Job Creation
Update: It’s even worse than the bottom line numbers indicate. Apparently, even with such small amounts going to actual projects and being spent, the Department of Transportation can’t keep track of the money:
Counties suffering the most from job losses stand to receive the least help from President Barack Obama’s plan to spend billions of stimulus dollars on roads and bridges, an Associated Press analysis has found.
Although the intent of the money is to put people back to work, AP’s review of more than 5,500 planned transportation projects nationwide reveals that states are planning to spend the stimulus in communities where jobless rates are already lower.
…
The early trend seen in the AP analysis runs counter to expectations raised by Obama, that road and infrastructure money from the historic $787 billion stimulus plan would create jobs in areas most devastated by layoffs and plant closings. Transportation money, he said, would mean paychecks for “folks looking for work” and “folks who want to work.”
It was all bogus PR promises. And now that the reality is hitting, that there will be no job relief, it is time to hold Obama and the Congressional Dems accountable for their failures. – end update
This is an update to my previous post discussing how the Obama- Democrat stimulus plan is not producing any new jobs. I have been tracking the ‘shovel ready’ jobs promised by the Democrats in February, and as of the end of April there has basically been no job creation from the stimulus plan (click to enlarge):
Coming on 3 months into the stimulus job creation effort the amount of money out the door verses allocated for these 6 entities is 0.03%:
- $105.336 billion as been budgeted (left columns)
- So far $12.739 billion as been obligated to programs and projects (12.1%) (middle columns)
- Only $0.031 billion has gone into the economy to create jobs (right columns)
Worse, the news media is trying to spin April’s unemployment numbers as a ray of hope. But when you look at the trajectory of the unemployment it is clear that the unemployment numbers are all bad, without any rays of hope for months to come (click to enlarge).
I detect very little  (if any significant) slowing down in this chart. For that to happen you would need to see a leveling off, but unemployment is clearly still shooting upward. For things to be not getting bad as fast (forget ‘getting better’) the chart needs to look like a trajectory profile, where the top of the hill is being reached. For things to be actually turning around you need to see the unemployment dropping.
And how is that going to happen with the country’s economic output shrinking?
The fact still stands. Obama and the Democrats have failed to stimulate job growth. The stimulus money, as shown in the graph above, is stuck in the ponderous government bureaucracy. People are hurting and the Dems are fumbling.
Update: I am not the only one looking at the economic data and realizing there are no silver linings in these dark clouds:
You know the economy is in trouble when 539,000 jobs lost in a month is cause for celebration. Muted optimism was in the air on May 8, as the U.S. Labor Dept. reported that job losses slowed for a third straight month, even as the unemployment rate rose to 8.9%. Investors took that and other relatively positive reports and pushed stock prices up 2% on Friday.
In fact, most economists expect the unemployment rate to keep climbing, with the more pessimistic ones heralding a peak of 11%. That’s because unemployment is a lagging economic indicator, which means the jobs market won’t change course until a broader economic recovery is well under way. So if slowing job losses aren’t the right place to watch for signs of an employment rebound, what signs should we be examining? Economists use a range of leading indicators, whose message is still sobering: Don’t expect substantial jobs growth for at least another year.
I don’t think it will be that quick. I work on federal programs and that stimulus money stuck in the bureaucracy will not be hitting for at many months to come and will trickle out, blunting any confidence building impact it was meant to have when it was rushed to a vote in mid February.
If it were not for the one time hire of over 60,000 people for the census, the number of unemployed would have hit over 600,000 again this month.
Isn’t the big portion of stimulus money due to be spent in 2010… an election year? Am I wrong or right on that?
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And could one say… The Dems have deliberately timed it that way for maximum effect just before we vote?
Don’t expect substantial jobs growth for at least another year.
Just in time for the Bush tax cuts to disappear. Oh, and I’m sure The One will looking for new tax revenue about that time, too.
And when will inflation bite?
The recovery in earnings so far is all bookkeeping changes. The elimination of “mark to market” requirements has allowed the marking up of the values of certain assets making the books look better than they had without any real changes going on. Also, the banks were told not to take all the mark up at once but to spread it out over several quarters. This will give the appearance of a smoothly improving asset situation where no real changes have taken place. And once those changes are completely incorporated, they will need to either come up with some new slight of hand in the bookkeeping, or they are going to need real growth. So far I am not seeing anything indicative of any significant changes in the general macro economic situation short of these bookkeeping changes.
Median home prices are still in decline. Sales are still in decline. Q1-2009 saw Chicago housing sales down 37% from Q1-2008 with prices down 27%. Mortgage lending is a huge portion of our financial system and if the value of mortgages held by lenders is declining and fewer people are taking out new mortgages, then the asset base of the lenders is still eroding overall. They have a huge base of assets whose value is in decline and with few new mortgages being written, the portion of these older mortgages is an increasing percentage of their portfolio. It appears that they are hoping for normal payoff attrition to stabilize things but when a home gets too far under water, people are going to start walking away from them.
Who wants to continue paying on a $500,000 mortgage for a home that is now only worth $250,000 and may never appreciate to break-even value in the owner’s lifetime? The home becomes a financial liability and is best walked away from because paying off the mortgage means borrowing $50 to buy a $20 bill.
crosspatch:
But the thing is a lot of those prices still need to come down. I used to be a realtor and prices are still above 2005 levels. The problem is that prices got so high that down was the only way they could go if people were going to buy them.
Terrye, I think a lot depends on the particular market. Some markets didn’t inflate like California, Florida, Arizona, Nevada and Oregon did but they all seem to be in decline now.
The Midwest held up well but is now in free fall.
What bank is going to lend money, even with 20% down, on an underlying asset that is losing collateral value at nearly 30% a year? Would you write a mortgage that is guaranteed to be under water a year from now even with a 20% down payment?
.. but there were 66,000 new government bloodsuckers hired last month
AJ, read this at “Instapundit.com”, the “Galt effect” started before Obama was elected, as people were nervous about his monetary policy. They remembered the Carter era, then revenues decreased slowly to the Treasury, this time there was an avalanche.
HEMORRHAGING FEDERAL RECEIPTS: Is there a “Galt effect?â€
Posted at 6:13 pm by Glenn Reynolds
Kathie,
One thing that is guaranteed to stop business spending in its tracks is to promise “change”. Business isn’t going to spend a dime until they know exactly what the consequences will be down the line. What will Obama provide incentives for? What will he penalize? Until legislation gets written and signed, business can not form a strategy for expansion. Obama’s promises of “change” without laying out exactly what those changes will be have resulted in a “wait and see” approach from business. And so far they seem to have a lot to be worried about. If a business comes on difficult times, will government take them over, regulate their compensation and kick out their executives after gaining a 51% share of the company in exchange for a “bailout”? Actions such as those would make business very nervous about going out on any limbs and leads to “circle the wagons” behavior.
I would look for some signs such as companies moving more of their production and possibly even their corporate headquarters out of the US. If the government attempts draconian measures, business will flee. Government can not make up for capital flight. Business will abandon the country, unemployment will rise, and either taxes will go up or the economy will inflate as government simply prints money instead of taxing it out of the economy. The net impact is the same. If you tax it out, there is less money in people’s hands to spend. If you roll the presses, the money they do have is worth less than it was before. In the end the average Joe has just as much spending power in either scenario. Fewer dollars, or more dollars that buy less per dollar.
The worst case scenario is deflation. That means that any outstanding debt because larger in real terms with every passing day and more difficult to pay back. That is what we are seeing now. Series I savings bonds pay exactly 0% interest right now because the economy deflated in the first quarter.
For many people, their home is the largest factor in their net worth. A person’s net worth is their primary collateral and their nest egg for retirement. In a deflationary economy, the value of those assets declines each month. Multiplied by the number of homes in this country, billions in wealth is destroyed each month. If you own your home free and clear, the value of that holding is dropping. And what happens if someone loses half the value of their home before they sell it and then the economy goes into inflation? THOSE are going to be the people left holding the bag.
At this moment in time a home is no better investment than a car. It is probably losing value from the moment you buy it. In 2010 and 2011 there is another wave of mortgages due to adjust. In 2011 the first of the boomers reaches 65. This is by no means over with. There are two more shoes yet to drop.
Until business of confident that they have a clear picture of what the future is going to bring, they are not going to invest. Federal minimum wage increases set for June will put the brakes on small business hiring … and probably already has. Decreasing home values is reducing the primary source of wealth that individuals often use to start businesses or make big ticket purchases. And we will have the start of a wave of retirements during the Obama administration at a time when the “social security trust fund” went to net cash outflow a decade earlier than had been anticipated.
By the time the 2012 elections come around, all those chickens should be roosting in Washington.
Cross………you forgot to add cap and trade and socialized medicine to the list of economy killers. I’m not sure how Obama and his talking heads continue to convince the public that they are investments. I was taught that money that could be invested was money not needed for every day bills. In other words extra money. Where is this extra money coming from?
It is funny how the Democrats called Corporate American and oil industry “EEEVVVIIILLL” and managed to do a good job convincing the Americans; yet, the Americans are in for a hard, harsh lesson the importance of a health, booming Corporate America and the necessity of the oil industry. Too bad that the oil industry doesn’t talk much about their efforts in keeping Earth clean nowadays.
Yeah, CP forgot to mention that Obama’s efforts to shut down the coal and oil industries through his push on green energy program isn’t good for this country.
Many jobs in the oil industry have been moved from this country to abroad.
Gateway Pundit had a few great posts about the OTC talking about how green energy can never replace fossil oils.
Interesting…
Obama’s new 2010 budget includes the extension of the Bush tax cuts, permanently update the AMT and continues with 2500 college credits.
All good but won’t help much.
This president wants to take youur money and/or wants you to have less. Whether you stop making as much or you pay more taxes, he wants your money. He wants you to drive pantywaist cars while the chinese are buying suv’s left and right. He wants you and America to be less in the world.
Retribution, revenge, whatever you want to call it, it is covertly hostile to America.
Democrats: the party of less.
Couldn’t be more opposite of America. Guess what, you global socialist democrats: you’re damn right WE SAY NO!
I heard another report on the news today that gives cause for pause. It seems a large portion of the stimulus money went to parts of the country with low unemployment (ie 3.4%}; while other areas with high unemployment (13.4%) didn’t get it because they didn’t have those quick ready to go projects on hand. So, did it really help the parts of the country that were hurting the most?
Via Power Engineering International
The next few weeks will see more than a billion dollars in stimulus funding begin to flow from the federal government to individual states.
This initial burst of money will speed up the pace of federal stimulus spending as funding plans are reviewed and approved by the U.S. Department of Energy, according to a report from the National Association of State Energy Officials (NASEO).