By Ian Swanson - 03/03/10 11:00 AM EST
The White House is bracing for an ugly unemployment report on Friday that is expected to be worse because of the three winter storms that hit the East Coast last month.
Goldman Sachs predicted the economy will lose as many as 100,000 jobs in February due to blizzard-like conditions that kept employers and prospective hires from getting to the office.
Economic officials on Monday were already spinning expectations for the report, saying it would be important to look past February’s figures to the “underlying trends,” according to White House economic adviser Larry Summers.
“The blizzards that affected much of the country during the last month are likely to distort the statistics,” Summers told CNBC.
Weekly figures suggest job losses are continuing. Unemployment claims jumped up 22,000, to 496,000 for the week of Feb. 20, and the four-week average of claims also rose by 6,000.
Teasing out the impact of severe storms on national hiring trends is a complex endeavor, but the Goldman Sachs report said storms and cold weather can both delay hiring. It looked at past snowstorms in making its estimate, particularly the 1996 snowstorm that shut down much of the East Coast.
The negative impact of the bad weather will be partially offset by U.S. Census hiring, likely about 30,000 in February. That will continue to be a positive trend going forward.
Still, even with the Census hiring, the impact from the storm suggests job losses of between 50,000 and 100,000 in February. Goldman leans toward the higher end because the highest-impact February storm hit early in the month, similar to the pattern in 1996.
The good news? The forecast is for higher temperatures on the East Coast next week, and companies that put off hiring because of the bad weather will be looking to catch up.
Webb targets bonuses
Sen. Jim Webb (D-Va.) wants to take a bite out of the bonuses paid out by Wall Street.
He’s proposing a 50 percent tax on bonuses above $400,000 that were paid to executives of financial institutions that received $5 billion or more in bailout money. Only bonuses paid in 2010 for work in 2009 would be covered, according to Webb’s office.
The tax would hit big banks like Goldman Sachs as well as executives at Fannie Mae and Freddie Mac.
Public anger over Wall Street bonuses is on the rise after banks reported high profits and a new round of bonuses at the beginning of the year.
Goldman Sachs, for example, is paying out $16.2 billion in salaries and bonuses for 2009. That means employee bonuses will average around $500,000, though some will make much more than that figure and some much less.
Under Webb’s measure, a $1 million bonus would be hit with a $300,000 tax. The first $400,000 of the bonus would be exempt from the tax, which would be applied to the remaining $600,000.
Webb is offering the measure as an amendment to tax legislation on the Senate floor this week.
Bank lobbyists expect to be on the defense from similar proposals all year. It could hit a peak if the financial regulatory reform bill gets to the Senate floor.
“It’s easy to demagogue the banking industry right now,” said Scott Talbot, senior vice president for government affairs at the Financial Services Roundtable.
Webb isn’t up for reelection until 2012, but co-sponsor Sen. Barbara Boxer (D-Calif.) faces a competitive challenge this year.
Webb defended his proposal, saying it was not an example of “class warfare.”
“It is reasonable to ask those who are benefiting on Wall Street to help pay back the taxpayers whose investment made the success of these institutions possible,” Webb said.
Dozens of freshman Democrats in the House could be haunted this fall by a vote they never took.
Congress approved the $700 billion bailout of the financial sector in October 2008, a month before the election.
Since then, the bailout has stabilized the banking system, but public anger is high, with some voters seeing it as an example of the government helping Wall Street at the expense of middle-class taxpayers.
“It’s clear that people don’t distinguish between these things,” said one Democratic strategist who believes the TARP will continue to hurt Democrats in the fall.
He noted that the defense for the stimulus and the TARP is that things would be worse without either. Objectively, that’s true, the Democratic strategist said. But it’s not a particularly compelling argument for angry voters.
Two Democrats, Reps. Alan Grayson (Fla.) and Harry Teague (N.M.), are in seats rated “lean Republican.” Ten other members of the class are in toss-up races.
Still, Grayson, for one, hasn’t experienced any issues with TARP on the campaign trail, according to his spokesman, Todd Jurkowski. Grayson also has been very vocal in speaking out against the bailouts.