Thursday, July 16, 2009

CBO: ObamaCare won't reduce health care costs

The Congressional Budget Office again hands the Democrats a massive dose of reality:
The health reform bills released so far would increase government spending on health care without sufficiently reining in health care costs.

And at least initially they aren't likely to significantly lower premiums for the majority of Americans with employer-sponsored health insurance.

That's the sobering takeaway from testimony Thursday by Congressional Budget Office Director Douglas Elmendorf.
Although ObamaCare won't reduce health care costs, it will increase taxes (although last year the Obama campaign promised they wouldn't do such a thing) and it will increase the national debt, so that's a benefit, right?

ObamaCare will also fine people who don't buy health insurance, regardless of how expensive health insurance gets.

Tuesday, July 7, 2009

Do the leading economic indicators suggest a recovery?

Here is a look a several important leading and coincident economic indicators. Leading indicators help forecast the future of the economy several months in advance. Coincident indicators reflect the current state of the economy.

Leading Indicators

The most reliable leading indicator is the slope of the Treasury yield curve. The slope is typically measured by the spread between the 10-year Treasury bond yield and the 3-month Treasury bill yield. An inverted yield curve (long-term rates lower than short-term rates) suggests a recession within the next year. Meanwhile, an upward sloping yield curve (long-term rates perhaps 1.0% or more higher than short-term rates) suggests a growing economy within the next year. I don't have a graph of the yield curve, but the spread is currently 3.33%, which suggests we are headed for a recovery.

New capital goods orders are a sign of a near-term recovery or decline. Here is the year-over-year percent change.

New building permits are another leading indicator. Due to the fact that we still have a housing bubble, I don't expect permits to turn around before the recession ends. Expecting housing to lead us out of this recession is like expecting technology to lead us out of the 2001 recession.

Coincident Indicators

While leading indicators forecast the future of the economy and thus tick up before a recovery, coincident indicators reflect the current state and thus should not tick up until the economy is actually recovering.

Year-over-year non-farm payrolls are still dropping like flies.

Year-over-year industrial production is still plunging.

Yet the year-over-year change in consumer sentiment is surprisingly strong, probably caused by the recently rising stock market (or vice-versa).

Monday, July 6, 2009

Has Obama's fiscal stimulus package been effective so far?

Back when President Obama was arguing for the fiscal stimulus package, his economic team created a graph forecasting the effects of the fiscal stimulus. The blue lines below show the expected unemployment rate with and without the fiscal stimulus. The maroon dots show the actual unemployment rate so far.

The fact that the unemployment situation is substantially worse than expected didn't prevent President Obama from bragging back in late May that, "In these last few months, the American Recovery and Reinvestment Act has saved or created nearly 150,000 jobs."

It is impossible to empirically measure how many jobs have been saved, so the "saved or created" numbers Obama uses are complete fabrications based on the White House's own shifting macroeconomic estimates. No matter how bad things get, Obama can always claim—without evidence—that things would have been worse, therefore he saved jobs. The gullible news media have been falling for it.

That said, the bulk of the stimulus package takes effect in late 2009 and in 2010, so we should not expect it to have had much economic impact yet.

Sunday, July 5, 2009

ADP Employment Survey graph

Here is Automatic Data Processing's measurement of the monthly job losses during the recession. Compare this with Friday's graph of the government's job loss numbers.

Unlike last month, ADP and the government are in close agreement this month. ADP says 473,000 job losses in June and the government says 467,000 job losses.

Friday, July 3, 2009

Job losses jump

Job losses and the unemployment rate are key signs of economic decline or recovery. There is mixed news on the employment front. Job losses jumped unexpectedly, but the rate of increase in the unemployment rate slowed:
The battered U.S. labor market took a step backwards last month as employers trimmed more jobs from their payrolls in June, according to a government report Thursday.

There was a net loss of 467,000 jobs in June, compared with a revised loss of 322,000 jobs in May. This was the first time in four months that the number of jobs lost rose from the prior month.

The June job losses were also far worse than the forecast of a loss of 365,000 jobs by economists surveyed by

The unemployment rate rose for the ninth straight month, climbing to 9.5% from 9.4%, and hitting another 26-year high. Economists had been expecting that the unemployment rate would hit 9.6%.

Nearly 3.4 million jobs have been lost during the first half of 2009, more than the 3.1 million lost in all of 2008.
Job losses since the recession began:

The unemployment rate over the past five years:

The reason they can disagree is because they are measured differently. The job loss number is probably more reliable than the unemployment rate.

Thursday, July 2, 2009

Leading Economic Index graph

The Conference Board Leading Economic Index attempts to forecast upcoming changes in the economy. Notice the slight uptick over the past two months.

Economist and blogger Rebecca Wilder notes more signs of recovery here and here.