Krugman: "I’ve been ruminating over economic prospects for next year, and I’m getting scared."

[RedEarth]

December 4, 2008, 9:07 am
Worries about next year
I’ve been ruminating over economic prospects for next year, and I’m getting scared.

Two points:

1. The economy is falling fast. We’ll see what tomorrow’s employment report says, but we could well be losing jobs at a rate of 450,000 or 500,000 a month.

2. Infrastructure spending will take time to get going — a new Goldman Sachs report suggests that projects that are “shovel-ready” are probably only a few tens of billions worth, and that a larger effort would take much of a year to get going. Meanwhile, it’s very questionable how much effect tax rebates will have on consumer demand. So it may be hard for stimulus to get much traction until late 2009 — and that’s even if Congress goes along, which may be a problem given all the bad analysis and disinformation out there.

So here’s what I’m wondering: will it, in fact, even be possible to pull the economy out of its nosedive before unemployment goes into double digits? I’m starting to wonder.

http://krugman.blogs.nytimes.com/2008/12/04/worries-about-next-year/

[Skink]

1. Remember that column about looking back on the crisis of 08.

Krugman wrote that sometime around Febuary. Things have gotten much worse than even he anticipated back then. Now he's worried about 09.
:scared:

[sandnsea]

2. If we were in recession a year ago

Then what the hell do you call what we're in now?

I think it is bad, bad, bad. Worse than I ever dreamed it could get in this country.

[Hawkowl]

11. Bush Depression

This is what you should call it. Unfortunately, I think your imagination will be tested some more and we will see things get much worse in 2009. Hopefully that will be the bottom.

[ananda]

3. Unemployment is way past double digits.

It's twenty percent or more by now.. in real numbers.

[marketcrazy1]

4. we are already in

double digits though i doubt 20 percent my view is 10 to 14 NOW ( in real numbers ) 20 percent will hit by spring 09. IMO!

[Hawkowl]

8. I concur

I think we will see reported unemployment hit 15% next year.

[Citizen Number 9]

17. Not much rational basis to that

The unemployment rate would have to rise on the order of 1% a month which represents substantially more than a million jobs lost per month, every month. That's about 3 times more than we're losing now. It would represent a stunning disaster.

I think it will be bad enough if we get to 10% and maybe 11% in 2009.

[Hawkowl]

18. Rational?

Ha! The assumption that people acted "rationally", is what finally made me leave grad school and give up on economics as a profession.

I don't see unemployment increasing in a linear fashion as you suggest. I see a geometric progression fueled by the Fed unable to use monetary policy, and congress' inability to get a proper stimulus package passed. Nobody in charge seems to understand that to mitigate this Bush Depression, WAGES and JOBS need to be preserved and created. Notice in the talks about "bailing out" the automakers (when all they are really asking for are loans like Chrysler got in 1979), everyone is insisting that the UAW take wage cuts. Wage cuts will deepen the recession by cutting the purchasing power of the consumer which represents 70% of the economy. With credit to the consumer undergoing MAMMOTH contractions vis a vis the drying up of home equity loans, installment loans and credit card limit decreases and fee increases I wouldn't be surprised to see consumption dropping 5% per month for the next 6 months. Yes, I think we could see consumption down by 30% for June 2009 compared to June 2008. This could, unfortunately, easily translate into a U3 of 15%.

I don't think people really grasp the interconnectedness of the sectors of the economy and the truly massive fuck-up that Wall Street has perpetrated upon us--And Paulson, Bush, and the complicit congress are still enabling. The economy is in a deep, deep hole and we have yet to stop digging.

[Citizen Number 9]

30. A geometric progression would end in what?

A complete and total crash?

What would the common ratio be in the unemployment numbers we have seen so far?

[northernlights]

33. it's already over 12%

An economist admitted that on the msm news last night while talking about the 530,000+ new applications for unemployment.

When you count in the people that have fallen off of unemployment and partimers that need to be working fulltime, it's 12.5%.

Then they discussed how retailers didn't do "as much" extra hiring for Christmas. Which was laughable, because when they said the employment numbers for retailers, it was clear that retailers didn't do hire *any* temps for Christmas...they started laying off their permanents!

And now the msm economists talking about those kinds of losses monthly for the next 5-6 months. We're on a sharp downward spiral and heading fast into freefall.

The final discussion was whether it would be a V-shape, a U-shape or a flatline recession that could last for years. Of the 2 economists, one felt we were on a track for a flatline.

Read great depression, because that's what he meant.

[RedEarth]

9. An October article in Slate dealing with the unemployment rate and

how the published figures are too low...bottom line the U6 number is more accurate than the published U3 number.

The unemployment rate seems low. That's because it's not counting all those underemployed workers.
By Daniel Gross
Posted Wednesday, Oct. 22, 2008, at 3:59 PM ET

It's hard to overstate the poor numbers coming out of Wall Street in recent months. But could it be that we're overstating the gravity of the situation? As job losses have mounted and consumer confidence has plunged, policymakers, news organizations, econo-pundits, and even some of my Slate colleagues have noted that the unemployment rate, which rose to 6.1 percent in September, seems to be at a nonrecessionary, noncatastrophic, low level. The unemployment rate is still below where it was in 2003; and between September 1982 and May 1983, the last very deep recession, it topped 10 percent. (Go here for a chart and historical data).

But maybe the employment data are much worse than they seem. In the past year, the two key measures of employment—the unemployment rate and the payroll jobs figure—have been poor but not awful. The unemployment rate has risen from 4.5 percent a year ago to 6.1 percent. And in the first nine months, 760,000 payroll jobs were lost. This is unwelcome but not catastrophic. So why do things feel so bad? It's not because, as Phil Gramm suggested, we're a nation of whiners. And it's not a matter of columnists and spin doctors shading the numbers to make things look worse.

.........

To compile the U6, the BLS takes the number of unemployed, plus all marginally attached workers, plus all of those employed part-time for economic reasons, and then calculates that total as a percentage of the sum of the entire civilian labor force plus marginally attached workers.

The U6 in September rose to 11 percent, its highest level since the data series started in 1994 and significantly higher than it was in the last recession, in 2001. The ratio between the U6 and the official unemployment rate has remained relatively steady over the last several years. But that means that as the unemployment rate has risen, so too has the portion of the population suffering from other types of work deficits. Three years ago, when the unemployment rate was 5.1 percent, an additional 3.9 percent of the labor force fell into one of those other underutilized categories. Last month, with the unemployment rate at 6.1 percent, an additional 4.9 percent of the labor force was underutilized. (See charts comparing the unemployment rate and the U6 rate.) Add it up, and more than 10 percent of American workers are essentially not contributing full-time to their families' well-being and to that of the economy at large. The unemployment rate may still be historically low, but the underutilization is historically high.



http://www.slate.com/id/2202879?nav=wp

[GliderGuider]

6. ShadowStats unemployment figure is 16%

If the official number doubles to 12%, the real number will be at least 30%

It's well past time to be getting scared.

[Hydra]

12. Blame it on the "wait and see"ers

I've been harping on this since the turnaround in congress in 2006. We can't keep shedding jobs to make things "profitable"- no one will be able to buy the goods and services produced by those companies "trimming down" and forcing their workers to take up the slack of the lost workers.

Disaster Capitalism is called that for a reason.

[leftofthedial]

25. Actual unemployment, measured by independent economists rather than gummint propagandists,

was over 12% before this latest couple of disastrous quarters.

It is pushing 20% by now, certainly well into double digits.


What happens to the middle class? This is the Armageddon of the class war.

[Hannah Bell]

31. per the widest measure, u-6, which measures (via survey) unemployed,

discouraged workers who stopped looking, & under-employed (part-time wanting more hours), it's 11.8% in october.

http://truecost.wordpress.com/2008/11/21/whats-the-real-unemployment-rate/

[ryanmuegge]

5. He says it may be hard to get Congress to go along with a stimulus plan. WHAT?!

That's the reason the country elected the Democrats for (an alternative to supply-side economics)! I can't say I'm surprised, though.

[tomp]

24. No, we elected them to get out of iraq...no, wait, that was 2006...nt

[Hawkowl]

7. 2009 is already lost

Their is ALWAYS a tremendous lag between the passage of an economic stimulus package and the results form its implementation. Typically takes from 9-12 months. And since we have a historically sociopathic president coupled with perhaps the most incompetent congress ever, we were doomed before the Bush depression ever got started. This Bush Depression is what economists refer to as a "structural recession", meaning that the entire structure of the economy has to be changed. It's not like we need a slight breather then we can continue in our old habits. The economy started under Greenspan and Clinton is dead and not coming back.

Unemployment will accelerate, the stock market will sink to even lower lows, the Fed will cut the interest rate to zero and pump even more massive amounts of cash into the world to attempt to prevent deflation. The Fed is about to become powerless in regards to monetary policy, meaning it will be up to congress and Obama to preserve jobs and prevent a truly wicked stag deflation cycle. IF president Obama and our incompetent congressional leadership can make exactly the right moves, things should start to turn around in 2010.

If Obama and the congress were to listen to everyone calling for letting the auto makers disappear along with their millions of jobs, the U.S.A.'s recovery would not occur in Obama's first term.

[nashville_brook]

10. non-shovel infrastructure wouldn't take so long to ramp up -- healthcare, education, childcare

just sayin'.

[anigbrowl]

29. True...it would take longer

You what's a great job right? Being a nurse. You get paid fat money because there simply aren't enough of them. As a result, college nursing programs are jammed right now because lots of people have noticed that it's a well-paying job. But it takes time to train and graduate nurses. OK,you could decide to build a new nursing college, but you can't just set one up in a tent or something.

Of course these things are important and we should be considering every option...it's just not an instant fix as you suggest.

[formercia]

13. Put the military to work on infrastructure

just like the ancient Romans did. That's how they built much of their infrastructure. A lot of it still stands today.

Teach them skills they can really use on the 'outside.'

[Art_from_Ark]

15. The military does work on infrastructure

in the form of the US Army Corps of Engineers

http://www.usace.army.mil/

[formercia]

19. You're right

I knew that. I was talking about combat and other non-engineer types. I should have clarified my point.

[JohnWxy]

14. you should send this to the guys in Congress spending time grilling the big-3. A lot of

grandstanding after their grants to Wall street.


recommended.

[CoffeeCat]

16. (((scary))) Not too long ago, Krugman....

...was saying that he thought unemployment would remain static in the coming months.

Now, Krugman sounds like a doomsayer.

Do you kinda get the feeling that the economy is like a snowball, careening down a giant, snowy hill--gathering
exponential negativity with every day that passes?

A few months ago, it was just a snowball. Then, it started to roll downhill and become a bigger problem, but
many were able to look the other way.

Things are picking up now. Can you feel it?

I think it's getting more and more evident that this really is a massive disaster that is only getting
bigger, more out of control and much, much worse.

I really, really hope that I have protected my family, and that we are somewhat prepared. I really do.

[Pale Blue Dot]

21. Nobody, including Krugman, wanted to face reality.

The reality is that by September it was too late to do anything to save us. All the trillions we've spent since then are just making matters worse. Krugman, whom I used to respect, is just as culpable in this mess as the neocons, IMO.

[CoffeeCat]

26. That really pisses me off...

...about Krugman, from a personal perspective.

My husband has insisted that the economy is just in a slump and that it will "bounce back."

Hubby cited Krugman's articles and his positive comments on unemployment, as evidence
to support his "bounce back" theory. I mean, how in the hell could I win an argument when
my husband is quoting a Nobel prize-winning economist???? My husband also listens to Warren
Buffet, who, of course, wants everyone in the stock market.

I feel like I'm standing on the shores, looking at a 100-foot wall of water--while those
around me are playing sand volleyball.

I'm about ready to lose my mind. People like Krugman are making it really difficult for
average citizens to be prepared for the coming crisis, because they look to him for
guidance, and it wasn't too long ago that he was forecasting sunny skies.

I'd like to melt down his Nobel into a Care Bear.

[Hannah Bell]

32. When I found Krugman singing one tune about Social Security when Clinton

was president, & a different one when Bush was, I stopped paying much attention to him.

Seems a lot of people here think he's trustworthy. I think he's a semi-flack.

[Pale Blue Dot]

20. We cannot save ourselves, we can only make things worse.

We need to STOP SPENDING MONEY WE DON'T HAVE. We can't buy our way out of a problem that began because of massive debt.

[Greyhound]

22. I think we've burned that bridge and all that is left is more spending

on a whole new scale. If we spend in the areas that pay dividends, infrastructure, social structure, and bottom-up stimulus, we can dig out of this.

OTOH, that would make large campaign contributors unhappy, so I don't see that happening anytime soon.

[Pale Blue Dot]

23. I disagree with your premise.

We CAN'T dig ourselves out of this, no matter what we spend the money on. Our national, local, corporate and personal debt is simply too high. We can continue to try to postpone the inevitable, but at this point I think it is far wiser to accept our fate and work from that point.

[PATRICK]

27. Not being any sort of expert

with any sort of faith in manufactured numbers vis a vis real value, the "feeling" I have or intuition gleaned from many posts on DU- forget MSM sappy murk- is that we are on a greased fast track. The lessons learned from 1929 are being exploited and ruined by Bush early in this new depression. Hoover had years leaving people in the palpitating swamp of ruin before FDR and the War arrived. Obama is on the cusp of trying reinstate New Deal values that are currently on autopilot big time with a derelict pilot at the controls.

In other words years of massive depression have yet to be experienced and the wads of cash are being expended up front with less impact on the future than New Deal style programs involving at least laying the groundwork for future infrastructure. ALL the people at the top, with no exception among those with influence or actual power, are trapped and participating in this dynamism. What I hear is similar to the appalling "debates" and ruinous or inadequate actions regarding a physical reality problem- climate change.

Numbers are numbers, not intractable occupied foreign lands or the weather. The battle being waged there is not very comforting regarding our ability to handle REAL world problems. Namely the money is being tossed about in total disequilibrium like it was an actual ship on an actual sea(Panic?). No one is supposed to win or change the system or hold too many to account. On no level is that working but the game goes on hoping to level off and raise the ships again on a fundamentally unchanged global capitalist dominance. Emerging populist governments, most notably in Latin America are virtually ignored, until and unless they clear the markets and replace the bankrupt powers that be. We are far from that here, so far that populist progressivism here seems as fanciful in its bowing to the current system as any discredited myth out there.

It is more likely that building for the future is still to be done in getting people control and reason based on reality not market based patriotic myth for a future beyond the ruins. Already the ugly head of "bipartisanship" is rearing its head to turn progressive possibility and responsibility into the sickening image of NYS political deadlock in a time of utmost crisis. The "power bloc" of the DINO RINO center, savagely bypassed by Bush, is already moving to nicely destroy the present and the future. This is the best we can do now, but we are not in the best of all possible worlds- simply one that we can take a role in- an immense and hopefully not temporary big improvement from Bush neo-fascism.

This is going to be a roller coaster from Hell until something besides the discredited markets prevails
or the system dismally, tyrannically reasserts its mad parallel path to a disintegrating world environment. The front priming intended to ward off the worst effects of a depression repeat may create another historical creature altogether, one defrauded of good future groundwork and evasive of evident
necessity for big reforms. It may fare no better than Iraq and the New American Empire, the staked Nosferatu of our age.

[Greyhound]

28. I'm interested in how you arrived at your conclusion and what you propose we do.

I could theorize, but it seems that we are unlikely to have a discussion without a common frame.