Three Economic Facts from December That Prove "Uncertainty" Isn't the Problem
In recent months, as the United States approached the so-called “fiscal cliff,” lawmakers and business executives argued that the supposed uncertainty brought on by the cliff’s combined automatic spending cuts and tax increases was depressing America’s economic growth. It has made a convenient narrative for chief executives who want to cut government spending and corporate taxes and institute policies more favorable to their companies.
Even in the wake of the deal to avert the fiscal cliff, which adds certainty to tax rates if not to spending cuts, CEOs are making the same argument. There is only one problem: it doesn’t appear to be true. Three indicators from December — job growth, holiday sales, and housing — prove that the uncertainty argument doesn’t hold water:
JOBS REPORT: The economy added 155,000 jobs in December, according to the Bureau of Labor Statistics’ monthly report released this morning. That was in line with projections and equal to the monthly average over the last year. Hourly earnings also rose, and the unemployment rate remained constant from November. In all, it offered no indication that the supposed uncertainty surrounding the end-of-year fiscal cliff drove down hiring over the month.
HOLIDAY SALES: Holiday sales over Thanksgiving weekend rose 13 percent in stores and online, not far from the 16 percent rise over the same weekend in 2011. And despite forecasts in mid-December that holiday sales were slumping, retailers reported a 4.5 percent jump that actually beat earlier projections. Auto manufacturers, meanwhile, had their strongest sales month since 2007.
HOUSING: Housing prices continued to rise in October (the latest data available) according to recent reports. The S&P/Case Shiller index showed that prices rose 0.7 percent, beating the 0.5 percent increase projected by economists. In the 20 cities the index follows, prices rose 4.3 percent from October 2011. The December jobs report also showed that 30,000 construction jobs were created last month, another indication that the housing market has rebounded. “The housing turnaround continues,” the Washington Post’s Jim Tankersley tweeted. “It’s driving job growth now.”
Of course, “uncertainty” is really just the CEOs’ way of asking Congress for corporate tax cuts and massive spending cuts. But their preferred budget policies have done plenty to slow down the economy. The public sector shed another 13,000 jobs in December, and it has lost more than 600,000 jobs since the end of the recession. Nonpartisan agencies from the Congressional Budget Office to the International Monetary Fund, meanwhile, have warned Congress about the perils of further spending cuts.