The automatic fiscal stabilizers are far too aggressive as they do their thing to abort this recovery.
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> (email exchange)
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> Nice data on shrinking deficit due to private sector growth and not “cuts” in governments
> spending.
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Smallest budget deficit in 5 years is great news
Lots of talk on how the expiring unemployment benefits will alter January jobs numbers.
Size of labor force?
Participation rate?
Will they suddenly accept low paying service sector jobs?
Go on disability?
Etc. etc.
In theory total jobs should be about the same, as this type of thing for all practical purposes doesn’t cause anyone to increase head count. It can, however, put downward pressure on labor should these people ‘substitute’ for whoever would have been hired otherwise, but a lower rate of pay.
Time will tell. But in any case, it’s a cut in govt spending that thereby gradually results in fewer jobs than otherwise:
Extended Unemployment Aid Likely to End (WSJ) A financial lifeline for people who have exhausted their state unemployment benefits is on the verge of coming to an end, after Republicans and Democrats clashed in budget talks over how to cover the cost of extending emergency benefits that have aided workers since the financial crisis. The program, which provides aid for the long-term unemployed, was left out of a budget deal announced by Republican and Democratic negotiators Tuesday night. Democrats and the White House sought an extension of the plan, but the $25 billion cost have reduced the chance it will be continued. Top Democrats in both the House and Senate acknowledged the benefits would expire at the end of the year. The White House estimates that 1.3 million people will lose emergency federal jobless assistance on Dec. 28, with another 1.9 million people losing the aid in the first half of 2014.
Looks like the general drift to lower growth rates may still be in progress.
Headline retail sales year-over-year with 3 mo moving average:
Longer term chart:
And auto sales chart shows how they sagged during the October govt. shutdown with lost sales subsequently recovered, but on balance relatively flat for 2013:
Lots of noise in claims data this time of year, but, again, claims are about separations, not new hires, though correlation has been pretty good:
Of course all they have to do is pay interest on all reserve balances…
Fed Moves Toward New Tool for Setting Rates (WSJ) An experimental bond-trading program being run at the Federal Reserve Bank of New York could fundamentally change the way the central bank sets interest rates. Fed officials see the program as a potentially critical tool when they want to raise short-term rates in the future to fend off broader threats to the economy. Launched this year, it is still in a testing stage and isn’t expected to be fully implemented for years. The Fed would use the facility to raise short-term interest rates by borrowing in the future against its large and growing securities portfolio. When it does want to raise rates, it will use securities it accumulated through its bond-buying stimulus programs as collateral for loans from money-market mutual funds, banks, securities dealers, government-sponsored enterprises and others. The rates it sets on these loans, in theory, could become a new benchmark for global credit markets.
Budget Deficit in U.S. Narrows as Job Gains Bolster Revenue
By Kasia Klimasinska
December 11 (Bloomberg) — The budget deficit in the U.S. last month narrowed more than economists forecast as rising employment and a rallying stock market boosted revenue to a November record.
Spending exceeded revenue by $135.2 billion, compared with $172.1 billion in November 2012, the Treasury Department said today in Washington. The median estimate in a Bloomberg survey of 17 economists was for a $140 billion gap. Receipts rose 12.8 percent to the highest ever for the month, while spending fell 4.8 percent.
Declining unemployment has helped reduce the countrys deficit as a share of gross domestic product by more than half in the past four years to $680.3 billion in fiscal year ended Sept. 30 from a record $1.42 trillion in 2009. The Congressional Budget Office has projected the shortfall will shrink further this year and next as stronger economic growth lifts individual and corporate taxes.
Weve seen spending come down and tax receipts outperforming, based off of a little bit better economic growth, said Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. As long as we maintain a pace of job growth that is consistent with what weve seen over the last couple of months, that trend of increase in revenue should continue.