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Most Economists In Survey Say Fed Bond-Buying Has Helped Recovery

Most Economists In Survey Say Fed Bond-Buying Has Helped Recovery

By Jim Puzzanghera, Los Angeles Times

WASHINGTON — Most business economists believe the Federal Reserve’s controversial bond-buying stimulus program has helped boost the recovery, but differ on the effects of the health care reform law and other policies by President Barack Obama and Congress, according to survey results released Monday.

Nearly 70 percent of respondents in the semi-annual survey of the National Association of Business Economics said the Fed’s program, known as quantitative easing, has been a success.

A majority — 57 percent — described the central bank’s monetary policy as “about right,” while 37 percent said it was “too stimulative.”

There was less agreement on policy moves from the White House and Capitol Hill.

About 39 percent of respondents said fiscal policy, which has included tax increases and automatic federal spending cuts, was “too restrictive,” while 21 percent thought it was “too stimulative.” Almost 4 in 10 — 37 percent — described it as “about right.”

There also was disagreement on the effects of the Affordable Care Act, with 42 percent saying they thought it would have no significant effect on economic growth. Three in 10 respondents said it would reduce growth, while 18 percent said it would boost economic activity.

The Congressional Budget Office recently said the health care reform law would cause some people to work less, reducing employment by the equivalent of 2 million full-time jobs in the next decade.

“Respondents … generally agree about monetary policy, but there is no clear consensus about most fiscal issues,” said Jay Bryson, global economist at Wells Fargo Securities and chair of the NABE’s policy survey committee.

The Fed began its third round of bond-buying in September 2012, when the unemployment rate was 8.1 percent. The rate in January was 6.6 percent.

With the unemployment rate dropping, Fed policymakers began tapering the $85 billion in monthly purchases, reducing them by $10 billion in December and again in January.

But the economy has shown signs in recent weeks of slowing again, with lackluster job growth the past two months.

AFP Photo/Timothy A. Clary

Job Growth Remains Weak In January; Unemployment Rate Falls To 6.6 Percent

Job Growth Remains Weak In January; Unemployment Rate Falls To 6.6 Percent

By Don Lee, Tribune Washington Bureau

WASHINGTON — Job growth was sluggish in January for the second straight month, the government said Friday in a report likely to heighten concerns that the economy and labor market recovery may be faltering again.

The report could also give the Federal Reserve second thoughts about continuing to pull back on its stimulus program aimed at holding down long-term interest rates.

Employers added a net 113,000 new jobs in January, far below many analysts’ expectations that hiring had bounced up to 180,000 or more after the surprisingly weak performance in December.

Job growth averaged 194,000 a month last year and 186,000 in 2012, according to revised figures released Friday.

Economists had largely dismissed the poor December jobs report, chalking it up to unusually cold weather, and some were expecting the Labor Department on Friday to revise higher the initial December tally of just 74,000 new jobs. But that figure was adjusted upward by only 1,000. November’s job growth was revised up by 33,000, to 274,000.

Despite last month’s sluggish job growth, the nation’s unemployment rate again edged lower, to 6.6 percent in January from 6.7 percent in December. That is the lowest since October 2008. The jobless figure has dropped sharply since October when it was 7.2 percent.

The unemployment rate is calculated using a separate survey of households, which sometimes doesn’t match up with the payroll job counts that come from a survey of employers. Based on the household survey, the employment picture for January looked considerably brighter. Unlike previous months, workers did not drop out of the labor force in January, according to this survey.

However, analysts put more weight on the larger survey of payroll job changes. By that measure, the last two months suggest that the economy and jobs recovery are slowing again, which could complicate the policy decision-making for the Fed.

The Fed has begun withdrawing its bond-buying stimulus on the thinking that the economy had finally reached a sustained level of improved growth, but a series of weaker-than-expected economic data of late — including figures on car sales, manufacturing and trade — have shaken confidence.

Weather did not appear to be a major factor in the January job numbers as construction showed a very strong rebound, adding 48,000 to its payrolls over the month. Manufacturing also turned in a solid January, increasing employment by a net 21,000. The industry that includes hotels and restaurants added 24,000 jobs.

But the rest of the private service sector had a dreadful month. The retail industry lost 12,900 jobs in January and, for the second straight month, the once-booming healthcare sector was flat. Adding to the hiring woes, federal, state and local governments all cut back for a total loss of 29,000 jobs.

Temporary-help businesses, considered a harbinger of future hiring, added a net 8,100 jobs in January. The average hourly work week, another leading indicator, was flat at 34.4. Average hourly earnings for all private-sector employees went up 5 cents from December to $24.21. That was up 1.9 percent from a year earlier, just a little ahead of inflation.

AFP Photo/Matt Sullivan

Over 600 Economists Agree: It’s Time To Raise The Minimum Wage

Over 600 Economists Agree: It’s Time To Raise The Minimum Wage

When President Barack Obama reiterates his request that Congress raise the minimum wage during his fifth State of the Union address on Tuesday night, he will have a group of over 600 economists in his corner.

The 602 economists — including seven Nobel laureates and eight former presidents of the American Economic Association — have signed an open letter calling on President Obama, House leaders John Boehner (R-OH), Eric Cantor (R-VA), and Nancy Pelosi (D-CA), and Senate leaders Harry Reid (D-NV) and Mitch McConnell (R-KY) to raise the minimum wage to $10.10 per hour by 2016, and index it to protect against inflation thereafter.

“Senator Tom Harkin and Representative George Miller have introduced legislation to accomplish this,” reads the letter written by Economic Policy Institute president Lawrence Mishel and Harvard University professor Lawrence Katz. “The increase to $10.10 would mean that minimum-wage workers who work full time, full year would see a raise from their current salary of roughly $15,000 to roughly $21,000.”

President Obama has already signaled his support for the Harkin-Miller bill, as have Minority Leader Pelosi and Majority Leader Reid. Republican leaders have consistently opposed such a move, however; when President Obama proposed raising the minimum wage to just $9 per hour in his 2013 address, Speaker Boehner scoffed, “When you raise the price of employment, guess what happens? You get less of it,” and rhetorically asked, “Why would we make it harder for small employers to hire people?”

According to the PhDs who signed the EPI letter, however, Boehner is flatly wrong.

“In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market,” the letter reads. “Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front.”

Economics experts are not the only Americans who believe that the minimum wage should be increased; poll after poll find that raising the minimum wage has broad bipartisan support, and could be a key issue in the 2014 midterm elections.

The full EPI letter and list of signatories can be read here.

Photo: Jeffrey Simms Photography via Flickr

Economists: Obama Plan Would Save At Least 250,000 Jobs

Bloomberg News surveyed a wide range of economists — many of whom work at Wall Street investment banks where the executives have flocked to donate to Mitt Romney’s presidential campaign — and they generally seem to agree that the Obama jobs plan (don’t call it a stimulus!) would help stave off a “double-dip” recession:

President Barack Obama’s $447 billion jobs plan would help avoid a return to recession by maintaining growth and pushing down the unemployment rate next year, according to economists surveyed by Bloomberg News.

The legislation, submitted to Congress this month, would increase gross domestic product by 0.6 percent next year and add or keep 275,000 workers on payrolls, the median estimates in the survey of 34 economists showed. The program would also lower the jobless rate by 0.2 percentage point in 2012, economists said.

Economists in the survey are less optimistic than Treasury Secretary Timothy F. Geithner, who has cited estimates for a 1.5 percent boost to gross domestic product. Even so, the program may bolster Obama’s re-election prospects by lowering a jobless rate that has stayed near 9 percent or more since April 2009.

That’s not to say the economic climate forecast looks sunny for Obama. Even if the bill miraculously passes a Republican Congress that has come out against to the tax cut portions of the plan (specifically, a payroll tax cut that would mostly spur lower-income people to buy), businesses might still be scared to hire. And while the right may blame regulations or taxes, there’s an even simpler explanation: What kind of company wants to expand when the federal government is constantly on the brink of shutdown because the House can’t pass regular spending bills, and the European banking system is still teetering on the verge of collapse?