The US economy added 148,000 jobs in September, fewer than expected, according to new numbers from the Labor Department, which were released Tuesday—more than two weeks late due to the government shutdown. The jobless rate fell from 7.3 to 7.2 percent, but as in previous months, the drop in unemployment is mostly due to the fact that fewer people were seeking work last month, and thus were not officially counted as unemployed.
The percentage of Americans who are working remained unchanged, at only 63.2 percent, the lowest labor force participation rate since 1986. As economist Dean Baker of the Center for Economic and Policy Research said Tuesday, "This continues the pattern that we have seen throughout the recovery as the unemployment rate falls mainly because workers leave the labor market. The unemployment rate is now down by 2.8 percentage points from its 10.0 peak in October of 2009. However, the employment rate is up just 0.4 percentage points from its low point hit in June of 2011."
The unemployment rate for blacks and Hispanics remained disproportionately high. The jobless rate for African-Americans fell one percentage point in September to 12.9 percent; for Hispanics, the number dropped three percentage points to 9 percent.
The leisure and hospitality industry lost the most jobs since December 2009, a stark change from recent months which have seen gains in low-wage service sector jobs. Retail employment increased 20,800. Here's a chart showing September gains and losses by sector, via Quartz:
There was some mildly positive data in the jobs report. Part-time employment dropped 594,000, suggesting that the surge in part-time employment earlier this year was an aberration. That's good news for the Obama administration, which has been trying to convince Americans that Obamacare's requirement that employers offer insurance to people who work more than 30 hours has not caused employers to cut hours.
In other lukewarm news, average hourly earnings increased three cents in September. And construction payrolls increased 20,000, which could ease some economists' fears that home building was leveling off.
As the Times reports, the dual battles over funding the government and raising the debt ceiling likely worsened the employment situation, "because hundreds of thousands of federal workers and contractors were furloughed and also because anxiety and uncertainty over the budget battle caused consumer confidence to plummet." But we won't see those effects until next month's jobs report. Economists estimate the shutdown cut about 0.6 of a percentage point off fourth-quarter GDP.
More shenanigans over the budget and debt ceiling this winter, not to mention a possible extension of the deep budget cuts known as sequestration, could dampen the economy further. "It’s clear that the conservatives’ long march to austerity spending cuts has sapped aggregate demand from the recovery," says Adam Hersch, an economist at the liberal think thank, the Center for American Progress. The stagnant economy and Congressional spats have led economists to predict that the Federal Reserve will likely delay scaling back it's stimulus program.
Hersch says the report is "a stark reminder that it’s time for Congress to focus on the real economic challenges facing ordinary Americans: jobs, incomes, and the public institutions critical to our economy."
On Sunday, Sen. James Inhofe (R-Okla.) said that if Obamacare had been fully in place this year, he probably would have died of a heart attack. That's not true.
After going in for a routine colonoscopy a few weeks ago, Inhofe’s doctors found that his arteries were dangerously clogged, so they immediately took him to the ER, the 79-year-old senator told Aaron Klein on his WABC radio show Sunday. He suggested that if he had been living a part of the world with "socialized medicine like Obama is trying to impose upon America," he never would have gotten the life-saving surgery: "A person can find out, here in the US, that he has this emergency situation where he has got to have immediate heart surgery. And if you are in a country other than the US, a lot of them, you can't get it done. In my case, with my age, that would have been about a six-month wait. Because I hadn't had a heart attack," Inhofe said.
"It's preposterous and couldn't be further from the truth," says Ethan Rome, executive director of Healthcare for America now, a non-profit that backs Obamacare. "When people in authority say such ridiculous things," he adds, "It's a dangerous thing because people will take him seriously." Here's what the senator got wrong:
1. Obamacare is not socialized medicine. "Obamacare bears no resemblance to Canadian-style socialized medicine," says Jonathan Gruber, an MIT economist who helped craft the massive health care law. Obamacare expands private health insurance coverage for most people, and in states that are allowing it, the law also expands one of our existing public health programs, Medicaid.
Sen. Ted Cruz (R-Texas) has compared his fight to defund the Affordable Care Act to the fight against Nazi Germany. He sees it as his duty to provide "relief to the millions of people who are hurting because of Obamacare." The uninsured in his own state will tell you a different story.
Stacy Anderson, from Fort Worth, runs her own business selling sweaters online. She says she has not had health insurance for the past seven years because the sweater business is not too lucrative. "It cost more than I made some months," she says. Anderson says she was just diagnosed with skin cancer, though it is not life-threatening. "I've had it, apparently, for the entire seven years I've been uninsured," she says. "It will be nice if I can buy health insurance and get it treated."
Jeffrey Coffey is a 49-year-old from Austin who earns a living as a musician. He says has insurance, but notes that the $361 monthly premium is "way expensive" on his $22,000 salary; he says he pays more because he has asthma. Coffey says he applied for cheaper plans numerous times this year, but was turned down. "Getting rejection letters is depressing," he says. When Coffey buys insurance on the exchange, he estimates he will able to get coverage for $160 a month, a $200 savings. "But so far I haven't been able to log on to the website," he adds.
Andrew (who prefers his last name not be used) is a BFA student at Texas State University in San Marcos. He's in his mid-30s and has gone without insurance for years because it's too expensive. He has also avoided doctors for fear that he'd be diagnosed with a chronic condition, and insurance companies would "blacklist" him when he finally applied for coverage. Andrew says he no longer has to worry about that when he signs up for insurance through the exchanges this month. Andrew and his wife, a pre-K teacher, want to have a baby soon, and he says that Obamacare makes it "much more affordable for us to plan when and where we will start a family. I no longer need to worry that, god forbid, if one of us gets sick, we will be dropped from our insurance."
3.5 million uninsured Texans will finally get coverage under Obamacare. (One million more could have been covered if Gov. Rick Perry had agreed to the law's expansion of Medicaid.) Texas has the highest percentage of uninsured citizens in the country; of the 25 million people in Texas, one in four don't have health insurance coverage.
It went unnoticed amidst the debt ceiling fight, but last weekend, Democratic and Republican leaders in the House selected the lawmakers that will negotiate with the Senate to hammer out a final version of the farm bill, the massive bill that funds agriculture and nutrition programs. The main stumbling block for months has been how much money the bill should devote to food stamps; the House wants to strip $39 billion from the program, and the Senate wants to cut just $4 billion. The fact that Republicans in the House named one of the most anti-food stamp members of Congress to the committee that will decide the future of food stamps does not bode well for the program.
Rep. Steve Southerland (R-Florida) has been leading the GOP effort to slash the food stamp program, called the Supplemental Nutrition Assistance Program, or SNAP. "For the past six months, Southerland... [has] delivered 45 speeches about food stamps... and presented his idea to 13 governors," Eli Saslow wrote in a profile of the congressman in the Washington Post last month. Southerland, who fought for the $39 billion worth of cuts and another provision that imposes new work requirements on food assistance recipients, told state human service secretaries last year that food-stamp reform is "what I'm about."
Usually, only agriculture committee members negotiate the final farm bill; Southerland is on the leadership committee, not the agriculture committee. His appointment to the committee that's ironing out the final deal is a sign the House intends to fight tooth and nail to keep the deep food stamp cuts.
Passage of a final bill is already a year overdue. In June, the House failed to pass its measure because both Republicans and Democrats opposed it: Democrats thought the food stamp cuts were "heartless," while conservative Republicans thought they didn't go far enough. In September, the House split food stamps from the rest of the agriculture bill and passed the harsh cuts separately, with zero Democratic votes. The House plan would cut 3.8 million people off the program next year.
The Treasury Department issues U.S. debt, and lots of it. So you would think that America is deeply indebted to its bondholders. Yet increasingly, it is the U.S. monetary authority, the Federal Reserve, and not private investors, who buys this debt.
So a simple solution to the impasse is as follows: Federal Reserve Chairman Ben Bernanke should simply cancel the Treasury debt that it owns. The government can just forgive the government's debt.
This wouldn't solve the debt problem entirely. The Federal Reserve doesn't own all U.S. government debt; it owns only roughly $2 trillion of it. (Well $2,076,927,000,000.00, as of last Wednesday, but who's counting?)
Yet canceling this debt would give the government substantial room under the debt ceiling to manage its finances. It would end the debt ceiling standoff in Congress, and it would prevent a default.
That's probably not going to happen, though.
Fed Chairman Ben Bernanke could lend to the Treasury Department: That might entail breaking the law, but it could be a better option than Armageddon. As the New York Post noted last week:
Some Washington insiders and Wall Streeters are talking about a second option to avoid a default: looking to Bernanke to lend money to the Treasury.
But, it turns out, under normal circumstances, lending to the US Treasury is illegal under the Federal Reserve Act.
But Cullen Roche, founder of the Orcam Financial Group and an expert on monetary policy, believes that in this emergency Bernanke could play a get-out-of-jail-free card.
“If the options are default or no default then I think the Fed should exercise what’s called the ‘exigent circumstances’ clause [of the Federal Reserve Act] and lend directly to the US Treasury,” said Roche.
“They did this with Bear Stearns and AIG [in the 2007-2008 financial crisis] so I think saving the US government is a bit more important than those two entities.
The Fed could keep lending to banks even if Treasurys plummet: If the Fed can't prevent default, then it can at least soften the blow. The Fed makes short term loans to US banks and takes US Treasurys as collateral. But if Treasurys drop in value, they may no longer qualify as adequate backing. The Fed could choose to continue lending to banks nonetheless, something the Fed considered at the height of the 2011 default scare. As Charles Plosser, the president of the Philadelphia Federal Reserve Bank told Reuters in 2011, "Do we treat [Treasurys] as if they defaulted and don't lend against them?" Or, he asks, "Do we treat them as if they didn't default, in which case we would be saying we are pretending it never happened?"
It could prop up the price of Treasurys: If the federal government hits the debt limit and has to stop paying interest on a portion of it's debt, the value of Treasurys will decline. But as Marcus Stanley, executive director of Americans for Financial Reform explains, "the Fed could support the price of that debt on the assumption that the government would eventually continue to pay it off." That would mean the Fed could buy Treasurys from anyone on the market for a reasonable market price instead of the depreciated price.
As Stanley notes, "When you have power to print money, you really have a lot of things you can do."