California Economic Recovery Stumbles, New Jobs Report Shows

Atlas is still shrugging.

At Los Angeles Times, "California employers drop 29,200 jobs in May."

California's employers halted hiring in May, shedding 29,200 jobs from payrolls in yet another worrying sign that the nation's economic recovery is foundering.

The state's unemployment rate fell to 11.7%, from 11.8% the month before, according to the state Employment Development Department, but the job losses are the most significant since September of last year. The unemployment rate can fall when the state loses jobs because people drop out of the labor force, either because they're frustrated or are leaving the state.

California has the second-highest jobless rate in the nation, after Nevada.

The jobs data comes among worrying signs in California and the nation. Home sales in California dropped 13.3% in May from a year ago, and prices dropped 10.4%. Stocks teetered this week amid renewed fears that Greece will not be able to service its significant debt burden. And debates in Congress led some economists to worry that the U.S. will default on its debt payments, which would create further financial problems.

Still, economists said the ups and downs in the job market are to be expected in a tepid recovery.

"This is completely consistent with what we expected in California — the recovery is going to be slow," said Bill Watkins, director of the Center for Economic Research and Forecasting at California Lutheran University.

Right.

To be expected, since this is the Obama Depression. They just don't call it that.

Progressives Take Aim at Bush Tax Cuts

No surprise Ed Schultz is mouthing talking points from the Soros-funded Think Progress smear machine. Schultz just came back from his suspension after attacking Laura Ingraham as a "right-wing slut." And here he is going off about exploding deficits and lost jobs, blah, blah. Is there a prize for being too obvious? The Anthony Weiner ethics disaster is just some foul topping for all the horrendous economic news of late, and Democratic prospects for 2012 are simply getting hammered. It's the smell of desperation, and it stinks.

[VIDEO TAKEN DOWN]

Here's Think Progress, "Ten Years Of The Bush Tax Cuts." And here's Joan Walsh, who just got beaten up on Twitter over her attacks on Andrew Breitbart and Weinergate, "Happy anniversary: Bush tax cuts turn 10." Folks can go back and forth on this forever. The truth is that higher taxes stifle initiative and entrepreneurship, and small businesses are among the hardest hit. Besides, no single variable explains current growth trends, least of all the first round up Bush tax cuts on 2001. As Mark Murray points out, "Judging the Bush tax cuts -- 10 years later":

Chris Edwards, the director of tax policy studies at the libertarian-leaning Cato Institute, has a different take on the Bush tax cuts.

Edwards says the 2001 cuts (which included lower individual tax rates) turned out to be less effective than the later ones enacted in 2003 (on dividends and capital gains). "Bush's cuts were half and half in my view."

He also contends that it's too simplistic to extrapolate from the last 10 years that tax cuts -- in general -- don't work. "So much goes on in the economy," Edwards said, referring to external events, trade policies, and spending. "Clinton's higher tax rate doesn't prove any kind of relationship."

The current crop of Republican presidential hopefuls are continuing to bet on lower taxes. In his speech at the University of Chicago today, former Minnesota Gov. Tim Pawlenty proposed decreasing individual income-tax rates to just two levels: 10% and 25%; 35% is the current top level. And he also called for a lower corporate-tax rate.

"Growing at 5% a year -- rather than at the current level of 1.8% -- would net us millions of new jobs," Pawlenty said. "How do we do it? In short, we create more economic growth by creating more economic freedom."

See also Martin Feldstein, at Wall Street Journal, "The Economy Is Worse Than You Think":

The policies of the Obama administration have led to the weak condition of the American economy. Growth during the coming year will be subpar at best, leaving high or rising levels of unemployment and underemployment.

The drop in GDP growth to just 1.8% in the first quarter of 2011, from 3.1% in the final quarter of last year, understates the extent of the decline. Two-thirds of that 1.8% went into business inventories rather than sales to consumers or other final buyers. This means that final sales growth was at an annual rate of just 0.6% and the actual quarterly increase was just 0.15%—dangerously close to no rise at all. A sustained expansion cannot be built on inventory investment. It takes final sales to induce businesses to hire and to invest.

The picture is even gloomier if we look in more detail. Estimates of monthly GDP indicate that the only growth in the first quarter of 2011 was from February to March. After a temporary rise in March, the economy began sliding again in April, with declines in real wages, in durable-goods orders and manufacturing production, in existing home sales, and in real per-capita disposable incomes. It is not surprising that the index of leading indicators fell in April, only the second decline since it began to rise in the spring of 2009.

The data for May are beginning to arrive and are even worse than April's. They are marked by a collapse in payroll-employment gains; a higher unemployment rate; manufacturers' reports of slower orders and production; weak chain-store sales; and a sharp drop in consumer confidence.

How has the Obama administration contributed to this failure to achieve a robust and sustainable recovery?

The administration's most obvious failure was its misguided fiscal policies: the cash-for-clunkers subsidy for car buyers, the tax credit for first-time home buyers, and the $830 billion "stimulus" package. Cash-for-clunkers gave a temporary boost to motor-vehicle production but had no lasting impact on the economy. The home-buyer credit stimulated the demand for homes only temporarily.

As for the "stimulus" package, both its size and structure were inadequate to offset the enormous decline in aggregate demand. The fall in household wealth by the end of 2008 reduced the annual level of consumer spending by more than $500 billion. The drop in home building subtracted another $200 billion from GDP. The total GDP shortfall was therefore more than $700 billion. The Obama stimulus package that started at less than $300 billion in 2009 and reached a maximum of $400 billion in 2010 wouldn't have been big enough to fill the $700 billion annual GDP gap even if every dollar of the stimulus raised GDP by a dollar.

In fact, each dollar of extra deficit added much less than a dollar to GDP. Experience shows that the most cost-effective form of temporary fiscal stimulus is direct government spending. The most obvious way to achieve that in 2009 was to repair and replace the military equipment used in Iraq and Afghanistan that would otherwise have to be done in the future. But the Obama stimulus had nothing for the Defense Department. Instead, President Obama allowed the Democratic leadership in Congress to design a hodgepodge package of transfers to state and local governments, increased transfers to individuals, temporary tax cuts for lower-income taxpayers, etc. So we got a bigger deficit without economic growth.

More at the link.

The bottom line is that the economy will continue to stagnate until the Democrats cut spending and lower taxes to spur entrepreneurship and investment.

The Other America: Mountain View Workers Struggle as High Tech Booms

Fascinating piece at New York Times, "In Mountain View, 2 Contrasting Economic Worlds Intersect":

At the Google campus on the outskirts of Mountain View, employees sip lattes under brightly colored umbrellas as others pass on company bicycles, laptops secured in the front baskets. This year the company will add substantially to its work force of more than 5,000 in that Silicon Valley city, and it has just leased nine acres to expand its campus.

But closer to downtown, Carolina Rivera finds herself in a decidedly less attractive environment — the crowded office of the Community Services Agency, where she is looking for a job. She has three children to support and has not found anything since her hours at an organic-food factory were reduced. Those like Mrs. Rivera find life difficult in Mountain View: the competition for work is fierce, housing is expensive and cuts in government services are pending as the city tries to balance its budget.

Mountain View, home to technology kingpins like Google, LinkedIn and Symantec, illustrates the disconnect between the current technology boom and the daily economic realities of many in Silicon Valley. The five biggest tech companies with headquarters in town are valued at more than $200 billion, but Mountain View, with a population of 74,000, faces a $2.6 million budget gap and has an unemployment rate of 7.7 percent.

“We really are seeing two very different economies emerging,” said Emmett Carson, chief executive of the Silicon Valley Community Foundation. “We have the Google campus; they’re expanding, they’re adding employees, they’re doing very well financially. But the nonprofit sector and local government have been stretched to the maximum.”

But these people are supposed to be progressive:

Part of the problem is that corporate campuses, with their own cafeterias, day care centers and other employee perks, are not always very integrated into the surrounding community.

“The industry doesn’t create a lot of demand for services,” said Terry Christensen, a professor at San Jose State University who specializes in Silicon Valley politics. “The Google campus, they pay their taxes, but their workers don’t necessarily use parks, police and other traditional services, so you get a disconnect between the businesses themselves and the people who work in them.”

Just as important, many local residents are simply not in the talent pool for high-tech jobs. The people looking for work at the Community Services Agency have skills in other areas, like housecleaning, gardening and washing dishes, and those jobs are scarce.

Actually, Google acts exactly as it should. It's an extremely successful business that creates a self-sustaining social support system. The trick is to create more Googles, that is, to expand the employment sector to include more companies providing goods and services to an expanding marketplace, which will increase the demand for labor and take the strain off local governments, which don't have the money to care for the sick and unskilled. The rub is that Googe and other progressive tech firms are left-leaning business organizations that operate according to a vision more like Milton Friedman's than Paul Krugman's. It's all in the messaging. New York Times is going off the reservation on this one.

Shopping at Wal-Mart

Out with the family, yesterday morning:

This is the Wal-Mart in Foothill Ranch. It's beautiful out there. That's Saddleback Mountain seen from the parking at the second picture below:

Turns out that Wal-Mart had its annual meeting on Friday, "Wal-Mart CEO pushes plan to keep retailer growing." And it announced a huge $15 billion stock buy-back: "Wal-Mart to Buy Back Billions More in Shares."

Cruising around the toy section:

I love Wal-Mart. Great selection of products, and of course great prices. And environmentally friendly? "Wal-Mart's motive is no secret: Going green saves it money." Well, better late than never, I guess.

Okay, here's the kid's Holy Grail, the Beyblades:

I wrote about Beyblades last November. They're still popular.

And it's back to the skatepark later today!

Hotel Maids Get Panic Buttons

At Jawa Report, "Dear Foreign Visitors to NY: Hotel Maids Are Not Meant to Be Laid."

And Wall Street Journal, "After Hotel Attacks: Panic Buttons."

The Pierre hotel has suspended a supervisor and agreed to equip all room attendants with panic buttons in the wake of two alleged sexual attacks on Manhattan hotel housekeepers in about as many weeks.

The decision came after meetings with union officials, who pressed for strengthened protection for workers.

"Let everybody in the world traveling to New York know that when they stay in a hotel room, the person cleaning that room is armed with a button that they can immediately press if you're stupid enough to get inappropriate," said Peter Ward, president of the New York Hotel & Motel Trades Council, which represents about 30,000 workers.

A Pierre spokeswoman, Nora Walsh, confirmed that the hotel will give room attendants the alarms—modeled after those used by some elderly people to alert a central security office—as soon as a system can be devised.

The Sofitel New York—where former International Monetary Fund chief Dominique Strauss-Kahn was accused of an assault—has also agreed to arm attendants with panic buttons, union officials said. Sofitel officials did not respond to requests for comment.

Well, I doubt if it's just visitors. See, FWIW, "Sex, Lies, Arrogance: What Makes Powerful Men Behave So Badly?"

Supreme Court Upholds Legal Arizona Workers Act of 2007

At Los Angeles Times, "'Business death penalty' for hiring illegal workers is upheld by Supreme Court." (Via Memeorandum. Also at New York Times, "Justices Uphold Law Penalizing Hiring of Illegal Immigrants.")

The Supreme Court on Thursday gave Arizona and other states more authority to take action against illegal immigrants and the companies that hire them, ruling that employers who knowingly hire illegal workers can lose their license to do business.

The 5-3 decision upholds the Legal Arizona Workers Act of 2007 and its so-called business death penalty for employers who are caught repeatedly hiring illegal immigrants. The state law also requires employers to check the federal E-Verify system before hiring new workers, a provision that was also upheld Thursday.

The court's decision did not deal with the more controversial Arizona law passed last year that gave police more authority to stop and question those who are suspected of being in the state illegally. But the ruling is likely to encourage the state and its supporters because the court majority said states remained free to take action involving immigrants.

Thursday's decision is a defeat for the U.S. Chamber of Commerce, several civil-rights groups and the Obama administration, all of whom opposed the Arizona law and its sanctions on employers. They argued that federal law said states may not impose "civil or criminal sanctions" on employers.

PHOTOS: "South O.C. Patriots Rally for Arizona!"

Gov. Jerry Brown Won't Ask for Income Tax Increase in 2011

Maybe he should hold off on tax increases altogether. Let the market work things out and continue to rationalize spending.

At LAT, "Gov. Brown to skip tax increase this year":

A surge in revenue has prompted Gov. Jerry Brown to scale back his proposal for more taxes, even as his administration on Friday announced its intention to close 70 state parks.

Officials familiar with Brown's plans said the revised budget he presents Monday will propose raising income tax rates on Californians for four years rather than the five he initially wanted. The higher rate would not take effect until 2012.

The governor will continue to push for a five-year extension of increases in sales taxes and vehicle fees that are due to expire by July 1, according to the officials, who spoke on the condition of anonymity because the plan has not been made public. Brown wants lawmakers to put some levies in place before July 1, to be ratified later by voters, the officials said.

How Long Will it Take for Jobs to Come Back?

I used to read chapters from Greg Mankiw's introductory economics textbooks in grad school, when I took seminars in international political economy. Mankiw blogs, but he's quite the opposite of Paul Krugman: more conservative and, especially, humble. We can see that in his essay yesterday at the New York Times, "Three Questions for America's Financial Future." On the jobs picture:

Looking ahead, an open issue is whether the recession will leave scars that prevent a return to jobless rates that were considered normal just a few years ago. A striking feature of today’s labor market is the rise of long-term joblessness. The average duration of unemployment is now almost 40 weeks, about twice what it reached in previous recessions. The long-term unemployed may well lose job skills and find their future prospects permanently impaired. But because we are in uncharted waters, it is hard for anyone to be sure.

Actually, one of my favorite writers of all is Victor Davis Hanson. A classicist and military historian, he's also unmatched on political and social commentary on issues ranging from culture to farming to immigration. See his essay from Saturday, "Thoughts on a Surreal Depression":

Here in Fresno County, in the heart of California’s San Joaquin Valley, the official unemployment rate in February to March ranged between 18.1 and 18.8 percent. I suspect it is higher in the poorer southwestern portions, especially near my hometown of Selma, about two miles from my farm.

Since 2000 we have both lost jobs and gained people, and the per capita household income is about 65% of California’s average, the average home price about half the state norm.

In some sense, all the ideas that are born on the Berkeley or Stanford campus, in the CSU and UC education, political science, and sociology departments, and among the bureaus in Sacramento are reified in places like Selma — open borders, therapeutic education curricula, massive government transfers and subsidies, big government, and intrusive regulation. Together that has created the sort of utopia that a Bay Area consultant, politico, or professor dreams of, but would never live near. Again, we in California have become the most and least free of peoples — the law-biding stifled by red tape, the non-law-biding considered exempt from accountability on the basis of simple cost-to-benefit logic. A speeder on the freeway will pay a $300 ticket for going 75mph and justifies the legions of highway patrol officers now on the road; going after an unlicensed peddler or rural dumper is a money-losing proposition for government.

The subtext, however, of most of our manifold challenges here in the other California are twofold: we have had a massive increase in population, largely driven by illegal immigration from Latin America, mostly from Oaxaca province in Mexico, and we have not created a commensurate number of jobs to facilitate the influx.

I often ask business people on the coast why there are not more industries in places like Selma other than agricultural related work that is locale specific. I would sum up their responses as something like the following: Our workforce does not have the educational and linguistic skills to justify, in global terms, the amount of wages and benefits necessary to employ them, hence jobs are mostly in service and government. Software engineering, computers, or Silicon Valley-like industry are out the question. But apparently so are large manufacturing jobs, despite an abundant workforce. As I understand employers, they seem to suggest that steel pipe, electrical wire, or radios would not be better manufactured or fabricated here, and yet still cost two to three times more than a counterpart assembled abroad.

In addition, they believe that the state government would look upon any employer of a large industry not as a partner that would alleviate unemployment and lessen county expenditures, but more or less a sort of target to regulate, advise, lecture, and chastise, both to justify the expanding government regulatory work force and to achieve a fuzzy sort of social justice. There are, of course, large plants and businesses here, but hardly enough to absorb the thousands entering the work force.

The result is about one in five adults is not working in the traditional and formal sense. A morning drive through these valley towns confirms anecdotally what statistics suggest: hundreds, no, thousands, are not employed. Construction is almost nonexistent. Agriculture is recovering, but environmentally driven water cut-offs on the West Side (250,000 acres), increasing mechanization, and past poor prices have combined to reduce by tens of thousands once plentiful farm jobs.

My dad moved to Fresno in the mid-70s and I graduated from Fresno State in 1992. If you ever want to get the feel of what it must have been like during the Great Depression, take some country drives around the Central Valley --- in towns even more remote than Selma --- and you'll be taken back into your own Grapes of Wrath experience. The Democrats make this bad enough, but it's a statist anti-entrepreneurial regulatory stranglehold that's killing employment and the quality of life for large segments of society. I'm noticing it even in parts of the O.C., where unemployment was less than 2 percent in 2000. Hope for the best, I guess, but prepare for the worst.

James B. Webb: The SpongeBob of 'Sophisticated' Political Analysis

JBW's back in the comments this weekend making an eminent ass out of himself. Hey, I can dig it. The lulz are precious.

Now, I've considered Donald Trump worthy for his blustery circus value --- it's been great political theater of late --- although I haven't given him much thought as a serious contender. He's soaking up media attention, which is discombobulating the GOP field. But JBW, now promoted to ace SpongeBob commenter status, gives me his Athenian wisdom on Obama's ill-advised attention to Trump and the birther issue:

One doesn't become president by being stupid, one does so by taking advantage of the stupidity of the other side, which your party has cultivated in spades in recent years.

Really. Stupid is as stupid does, then, since going after Donald Trump last night at the White House Correspondents' Dinner wasn't too smart. As Glenn Reynolds indicates, "Sucker":

You don’t punish Donald Trump by giving him attention. A more experienced politician would know that. Nor is building Trump up good for Obama — Trump has actually hurt him more than all the others combined. Because, you know, Trump has actually been willing to criticize him without being afraid of the Big Media retribution. The various traditional GOP candidates still have the old cringe-reflex where Big Media criticism is concerned.

Exactly.

Not only that, responding to Trump makes Obama look desperate and unpresidential. Dumb, in other words, like SpongeBob (and James B. Webb --- and scroll forward to about 2:30 minutes at the clip for JBW-level of sophistication.)

And speaking of JBW's "sophisticated" political analysis (from last year), if I were a betting man my ace commenter SpongeBob would owe me $100:

If however Don is so certain about Obama's dismal approval ratings translating into epic failure then I'll offer him this meager yet serious wager: $100 says that the Republicans fail to gain a majority in either house of congress this November.

Crack analysis!!

Well, maybe JBW should send that money to Obambi! He's gonna need it for reelection!!

Republicans Push to Widen the Field of Candidates for 2012

Following up my previous essay on GOP efforts to break away from Donald Trump's shadow, the New York Times has a piece along the same lines, "Republicans Are Pursuing a Wider Field for 2012 Race."

MANCHESTER, N.H. — Republican leaders, activists and donors, anxious that the party’s initial presidential field could squander a chance to capture grass-roots energy and build a strong case against President Obama at the outset of the 2012 race, are stepping up appeals for additional candidates to jump in, starting with Gov. Mitch Daniels of Indiana.

“I’m getting letters from all over the damn country, and some of them are pretty moving,” Mr. Daniels said in an interview last week at the Capitol in Indianapolis, where his friends believe he is inching closer to exploring a candidacy. He added, “It can’t help but affect you.”

The first contests of the primary are about eight months away, and most of the candidates have yet to fully open their campaigns. But some party leaders worry that Republicans are making a bad first impression by appearing tentative about their prospects against Mr. Obama and allowing Donald J. Trump to grab headlines in the news vacuum of the race’s early stages.

“The race needs more responsible adults who can actually do the job,” said Fergus Cullen, a former chairman of the New Hampshire Republican Party.

RTWT at the link above.

Things definitely feel different this pre-primary season. A good comparison would be 2004, when folks might recall that Howard Dean had campaigned for over a year for the Democratic nomination. Dean was in fact widely expected to take either Iowa or New Hampshire on the strength of his antiwar message. We know what happened of course. The people spoke in Iowa and Dean when down in a screaming fit of fury immortalized in political lore as the "Dean Scream." Howard Dean was the antithesis of tentative, and look what it got him. So for Republicans in 2012, while it seems late in terms of the "invisible primary" of money, media, and polling, in fact there's still plenty of time for other candidates to throw their hats in the ring, and the field shaping up isn't as bad as the media makes out. Mitt Romney's going to be formidable, despite talk that RomneyCare is a killer (and I've even suggested RomneyCare's an albatross). All Romney has to do is denounce his own healthcare record in Massachusetts as a colossal mistake, make reference to polling there looking for a change, and then turn around and say never again! It might be tough in the primaries against fellow Republicans, but with a GOP Congress looking to repeal ObamaCare, Romney can ride his mea culpa on top of a wave of conservative opposition to big government. He's telegenic and an experienced campaigner, and the press will take him seriously, unlike Donald Trump.

Beyond that, I don't know much about Tim Pawlenty, although he looks pretty self-assured at the clip from New Hampshire above. We'll know more after a round of GOP pre-primary debates. Robert Stacy McCain reports on Herman Cain, by the way, who topped an AFP poll coming out of yesterday's event: "Herman Cain Wins 2012 Presidential Forum in Manchester, New Hampshire" (with video). I like what I've seen of Herman Cain, and at this point it's hard to figure out which would be a better ticket, Herman Cain and Allen West or Sarah Palin and Michele Bachmann, although I think this is still super long-shot territory.

But notice that discussion of Governor Mitch Daniels, who was Budget Director in the George W. Bush White House. Hmm ... Should he take the adoration seriously and enter the race, he'll likely end up an also-ran who leaves the grassroots wanting. The Times gives cursory discussion to Sarah Palin. Perhaps her moment to enter the race has passed (doesn't bother me, since I've long suggested she run in 2016). There's also mention of Chris Christie, Rick Perry, and Paul Ryan, and who knows, maybe one of them will surprise us (I like Christie)?

In any case, like I said, let's get on with the debates and see how things shake out. And keep an eye on the money. Michele Bachmann's been raising funds like the devil, and fundraising's one of the factors facilitating media coverage, so things can snowball for a candidate that way.

RELATED: Check the 2012 GOP primary calender at Frontloading HQ.

Republican Candidates Strain to Break From Trump's Shadow

See Los Angeles Times, "GOP candidates try to refocus."

It's pretty fascinating that Donald Trump's sucked up so much oxygen in a relatively short period of time.

Maybe these folks need to bulk up on the opposition research, because Trump's pretty vulnerable on precisely those issues that matter most to voters: the economy and jobs. See earlier at Los Angeles Times, "Trump's tower a sore spot on the Strip":

Reporting from Las Vegas - Speaking to Republican activists here, Donald Trump touted something other than his potential presidential bid and hit reality television show: Trump International Hotel and Tower, a gleaming luxury high-rise and his sole Las Vegas venture.

"It's one of the greatest signs of all time," Trump said Thursday of the building's marquee, rising 64 stories above Las Vegas Boulevard. "You drive down that Strip, what do you see?"

"Trump!" the crowd shouted in unison.

"We got it built, it's doing great and we're very proud of it," the real estate mogul said, in remarks that were otherwise laced with profanity and attacks on President Obama.

But the reality of Las Vegas' tallest residential building — which Trump described as "very, very successful" — is different from the hype.

Conceived as a high-end hotel-condominium development in Las Vegas' go-go years, the project opened in 2008 amid the economic meltdown. Most investors pulled out and demanded their deposits, leaving Trump and his partners holding the bag.

The casino-free building, wrapped in 24-karat-gold-infused glass, now rests in the boneyard of the Las Vegas Strip, a collection of vacant lots, barren scaffolding and silent cranes left over from abandoned resort projects.

These days, the 645-foot Trump tower might be a metaphor for his nascent campaign: lots of splash, little in the way of substance.

As Trump touts his own business acumen, his Las Vegas hotel makes it clear that he fell prey to the speculative fever that gripped the nation — and particularly wounded Nevada, a state that will play a key role in determining the Republican presidential nomination next year.

More at that link above.

Maybe there'll be more critical reporting on Trump's business success. So far only Michelle Malkin's had anything to say that contradicted's the fawning MFM reporting.

Also at Politico, "'Sorry' state of affairs at GOP forum."