Editore"s Note
Tilting at Windmills

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September 7, 2007
By: Kevin Drum

SEEING RED....I see that Atrios had exactly the same reaction as me to today's bad job news. Usually, Wall Street reacts jubilantly to weak job reports because it means a slacker job market, less pressure to raise wages, less inflationary pressure, and therefore a reduced chance that the Fed will increase interest rates. This attitude is so short-sighted as to call into question Wall Street's collective sanity (Q: When does the stock market perform the best? A: When employment is up and the economy booms), but there you have it. That's the usual schtick.

But not today. This time they seem to have gotten the message that a lousy jobs report means....the economy isn't doing so well. I guess when their own jobs are in danger, the monthly employment report hits home a little harder than usual.

Kevin Drum 12:18 PM Permalink | Trackbacks | Comments (39)

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Comments

Oh, to have the safest job in the world -- sitting in Mommy's basement, parroting Rush Limbaugh's lies. Congrats, Al and Eggy!

Posted by: Gore/Edwards 08 on September 7, 2007 at 12:25 PM | PERMALINK

When you look at the stock market's immediate reaction, you're looking at the thinking of traders, not investors. Traders themselves are guessing the longer-term investor's reactions. So what you see is often counter-intuitive, the opposite of what you might expect.

Posted by: bob on September 7, 2007 at 12:28 PM | PERMALINK

Our economy has been kept afloat by massive Iraq War credit card spending but even that isn't enough to stanch the effects of the utter loss of the manufacturing sector. With housing in the toilet, the construction industry is down and is going to stay down.

The way out of this mess is to get to work rebuilding our collapsing infrastructure (roads and bridges, rail roads, and powerlines) and converting our economy to alternative fuels. In addition it wouldn't hurt if we started manufacturing and selling something besides weapons to the rest of the world.

I don't know if we can talk our elected representatives into making the kinds of decisions they will need to make to reinvigorate the economy. We need to try.

Posted by: corpus juris on September 7, 2007 at 12:41 PM | PERMALINK

Friday cat blogging:

http://www.thesun.co.uk/article/0,,2-2007410737,00.html

Posted by: Trypticon on September 7, 2007 at 12:44 PM | PERMALINK

People praise "the market" as being all knowing. But it certainly seems short-sighted, given that the US economy has been growing in large part because of government deficit spending -- i.e., money "borrowed" from China.

Posted by: Gore/Edwards 08 on September 7, 2007 at 12:47 PM | PERMALINK

Question is, how did this slip past the Queen of Hearts, Elaine Cho?

Heads will roll.

Posted by: thethirdPaul on September 7, 2007 at 12:47 PM | PERMALINK

The good news is that the Army has plenty of job openings. Must be willing to relocate, and some travel involved.

Posted by: Nemo on September 7, 2007 at 12:51 PM | PERMALINK

Nemo- don't forget the awesome term life insurance!

Posted by: Northzax on September 7, 2007 at 12:53 PM | PERMALINK

To second the observation first regarding traders versus investors (never mind the frequent confusion between "the market" meaning the economy, and "the market" meaning that small subset of the economy that is publicly listed. IE London, NY, etc.

Of course, in a hot economy, poor job figures often mean decreased pressure on wages and thus inflation. Entirely rational, if cold hearted, to bet positive on this.

In a weak economy, or one perceived to be on the slide, entirely rational, equally cold hearted, to say Bollocks, they're right fucked now and sell.

People praise "the market" as being all knowing. But it certainly seems short-sighted, given that the US economy has been growing in large part because of government deficit spending -- i.e., money "borrowed" from China.

No, at least not actual persons literate in economics and market economies.

Rather, similar to the observation regarding democracy (worst system except all others), markets are more efficient in the long run than directed economic action for reasons such as tending to be self-correcting (one can only be a money losing idiot for so long, ceteris paribus, unless you have the State to extort taxes to subsidize you and impoverish the masses in the name of the collective good).

Regardless, these posts always warm my heart as every once in a while I question whether the Left has entirely lost its economic illiteracy, as the American right seems to have gained it.

Posted by: The Lounsbury on September 7, 2007 at 1:04 PM | PERMALINK

Republican spin ... The unemployment rate didn't change and there was job growth in healthcare, hospitality and retail.

Posted by: ET on September 7, 2007 at 1:14 PM | PERMALINK

I'm confused, is this Double-Plus Ungood or not?

Posted by: elmo on September 7, 2007 at 1:19 PM | PERMALINK

Kevin, I put my 12-month recession odds at 50-50.

Nemo: The Army ain't as bad as the Navy. Literally, they're on Monster all over the place.

Posted by: SocraticGadfly on September 7, 2007 at 1:26 PM | PERMALINK

Wall Street cares more about inflation than unemployment, because wealthy people hold more fixed income investments than equity investments. Look at George W. Bush's personal portfolio - he holds mostly debt instruments, including government bonds and notes.

The little guys are the ones who hold equities - in the vain hope of becoming rich. The wealthy hold debt, to preserve the wealth they already have.

Wall St. could give a flying f*ck about if Joe Lunchpail lost his job a the local factory or not....

Posted by: The Conservative Deflator on September 7, 2007 at 1:28 PM | PERMALINK

Greenspan compares turmoil to 1987, 1998. The Bubble Boy ought to know.

Posted by: SocraticGadfly on September 7, 2007 at 1:34 PM | PERMALINK

Lounsbury, sorry, but "the market" isn't anywhere that rational. Adam Smith's "invisible hand" is based on discredited Enlightenment Deism.

Posted by: SocraticGadfly on September 7, 2007 at 1:39 PM | PERMALINK

Posted by: The Lounsbury: No, at least not actual persons literate in economics and market economies.

There are three sure ways to lower IQ:
1. Brain trauma
2. Watching lots of TV
3. Studying economics

Posted by: Luther on September 7, 2007 at 1:44 PM | PERMALINK

I just can't understand the response of the market to the job loss. We were expecting it - duh - the mortage companies all announced huge layoffs and of course home building is down.

I have no idea who the nuts are that are pulling the market buy/sell levers, but I sure am getting tired of them.

Posted by: optical weenie on September 7, 2007 at 1:45 PM | PERMALINK

Luther: There are three sure ways to lower IQ:
1. Brain trauma
2. Watching lots of TV
3. Studying economics


I'm the TriFectorator!

GWB

Posted by: thersites on September 7, 2007 at 1:52 PM | PERMALINK

yes lounsbury, it's all the market. it's self correcting. i guess that's why about once a month, generally coinciding with fomac meetings, it hovers, doing little until that puff of smoke arises from washington some time around 2 p.m.

Posted by: mudwall jackson on September 7, 2007 at 1:54 PM | PERMALINK

Adam Smith's "invisible hand" is based on discredited Enlightenment Deism.

Well, I suppose it's mildly comforting to hear that the modern right has any use for a single Enlightenment idea, since they're doing their damnedest to kill all the rest of it.

Posted by: latts on September 7, 2007 at 1:55 PM | PERMALINK

Kinda like the old saw about comedy and tragedy.

You slipping and falling down is comedy; me slipping and falling down is tragedy.

Posted by: Cal Gal on September 7, 2007 at 2:01 PM | PERMALINK

Cal Gal, jackie Mason said it better: "Tragedy is when I stub my toe. Comedy is when you fall down a manhole and die."

Posted by: Tyro on September 7, 2007 at 2:15 PM | PERMALINK

Cal Gal: "Kinda like the old saw about comedy and tragedy."

Wenn es Republikanern geschieht, Schadenfreunde wird zugelassen immer Demokraten.

Posted by: Johann von Goethe, who'd be really pissed off were he alive today on September 7, 2007 at 2:32 PM | PERMALINK

Today's reaction to the abysmal jobs report is not a one-off event or a read-react moment. No doubt, their are significant ramifications from such a disappointing number but it is not base upon your "I guess when their own jobs are in danger" foible.

No offense Kev but in the future, please, stick to what you know (politics) and leave what you don't (finance) to those who do.

Posted by: ny patriot on September 7, 2007 at 2:32 PM | PERMALINK

you have the State to extort taxes to subsidize you and impoverish the masses in the name of the collective good

The invasion and occupation of Iraq is a good example of the State subsidizing business interests at the expense of the collective good. This extortion of taxes is done by a capitalist political economy, despite supposedly democratic elections that expressed the electorate's desire to withdraw from Iraq. Regardless of the politics, those in power do whatever the hell they want to enrich the few at the expense of everyone else. I guess the political economy expresses itself by determining who the few enriched will be, but regardless of ideology and who those chosen few are, it is always at the expense of the collective good.

Posted by: Brojo on September 7, 2007 at 2:44 PM | PERMALINK

It is a bit of a surprising reaction. But there's a lot of moving parts.

Besides, the day isn't over. I wouldn't be surprised to see a late rally, finish up about 20 points.

Posted by: IMU on September 7, 2007 at 2:47 PM | PERMALINK

Sorry, I was looking at the NASDAQ. I take it back. It won't rebound that much.

Posted by: IMU on September 7, 2007 at 2:50 PM | PERMALINK

Yes, Kevin, please leave finance to those, such as Ricard Josephberg, the financier who was just sentenced to 50 months in Federal prison. Quite the tax consultant, to boot. Knows nanny law backwards, as well.

Lots of comedy coming from the Laffers out there.

Posted by: thethirdPaul on September 7, 2007 at 2:54 PM | PERMALINK

leave what you don't (finance) to those who do

Would these people who know about finance be the same people who predicted that the job-stats would show 110,000 new jobs created?

Posted by: Tyro on September 7, 2007 at 2:54 PM | PERMALINK

Touche Tyro!

Posted by: optical weenie on September 7, 2007 at 3:09 PM | PERMALINK

The effects of the recession should be felt before the Nov 08 election. More & more Republicans go down to defeat.

Posted by: Chief on September 7, 2007 at 7:12 PM | PERMALINK

It wasn't the number of jobs, but the types. Real estate and construction. More proof of a housing bust. And with two back months restated, means that any financial type would think markets are too high today.

Posted by: orion on September 7, 2007 at 7:48 PM | PERMALINK

" In response to today's report, the White House noted that the economy had still produced 1.6 million jobs during the past 12 months and that the unemployment rate remained low"

That's about 133,000 jobs per month on average. I seem to recall comments during the 2004 campaign that the economy needs 250,000 jobs per month to keep up with population growth.

I also seem to remember promises that Bush's tax cuts, the Jobs and Growth Budget, iirc, would produce many more jobs than it actually has produced. I know I've seen charts of that--the number of jobs that the WH predicted as a result of Bush's 2003 Tax act versus the actual jobs generated. I'd love to see that updated. My own sense is that the economy sucks right now, unless you are a brazillonaire.

Posted by: PTate in FR on September 7, 2007 at 8:47 PM | PERMALINK

PTate in FR,

What are you doing in France...and are you enjoying your time there?

Posted by: nepeta on September 7, 2007 at 9:08 PM | PERMALINK

I would say that shipping our jobs across the pond has caught up with us.

Posted by: consider wisely always on September 7, 2007 at 9:21 PM | PERMALINK

Posters here have mentioned taking pitchforks down to the to government to show them who is boss. Not a good idea for obvious reasons. But the ultimate pitchfork is for you and 100 million of your best friends to stop paying bills. You have to cooperate in order to keep this planet destroying, mad machine turning.

Posted by: slanted tom on September 7, 2007 at 10:43 PM | PERMALINK

Well, when Shrub gets back from that OPEC meeting with the Austrians, he'll whip the economy back into shape.

Posted by: thethirdPaul on September 7, 2007 at 11:23 PM | PERMALINK

I seem to recall comments during the 2004 campaign that the economy needs 250,000 jobs per month to keep up with population growth.

I believe the number is closer to 140,000

Posted by: Tyro on September 7, 2007 at 11:55 PM | PERMALINK

It wasn't the number of jobs, but the types. Real estate and construction. More proof of a housing bust. And with two back months restated, means that any financial type would think markets are too high today.
Posted by: orion on September 7, 2007 at 7:48 PM
-------

We are starting the third phase of the economy dominated by boomer house spending:
1) In the '90s it was the DIY craze "Home Improvement".
2) The last several years boomers started getting arthritis and hired undocumented workers at Home Depot to build the new Rock Garden.
3) Now the boomers are starting to retire and are tapped out and were hoping to flip their McMansion and make a killing-oops.

Posted by: Doc at the Radar Station on September 8, 2007 at 11:56 AM | PERMALINK




 

 

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