Italy credit rating in trouble; Don't be fooled about US jobs growth; Life after Pol Pot

1 Italy credit rating in trouble (Phillip Inman & Dominic Rushe in The Guardian) The gap in fortunes between Europe and the US widened on Friday after the unemployment rate in the US tumbled while Italy suffered the humiliation of another downgrade in its credit status.

Beating the expectations of most analysts, the US economy added 236,000 new jobs in February as the unemployment rate edged down to 7.7%, its lowest level since December 2008. The figures cheered US stock markets, with the Dow Jones Industrial Average rising 67.58 points, or 0.5%, to 14,397.07 – its sixth-straight daily gain, and a new record high.

Italy was downgraded by ratings agency Fitch, amid continuing uncertainty over whether its squabbling politicians will be able to form a government after last month's inconclusive election. Germany added to the eurozone's woes after a survey showed production stagnated in February. In the UK official figures showed construction output dived in January by more than first thought.

Several analysts have argued that a spate of good news from the US means a sustained recovery is under way. It was the 29th consecutive month that the US added jobs. On average, 183,000 jobs were added each month in 2012, with about 195,000 a month on average in the past three months.

2 Don’t be fooled about US jobs growth (Dean Baker in The Guardian) More than five years into the downturn, it doesn't take much to get people excited about the state of the economy. The Labor Department's February employment report showing the economy generated a better than expected 236,000 jobs and the unemployment rate had fallen 0.2 percentage points to 7.7% was sufficient to get the optimists' blood flowing. Unfortunately, they are likely to be disappointed.

First off, if the 236,000 jobs number sounds good to you, then you probably are not old enough to remember the 271,000 number reported last February, or the 311,000 number reported in January of 2012. The strong winter job growth in 2011-2012 was followed by a dismal spring, in which job growth slowed to a trickle. While most economic measures implied that the economy had suddenly shifted from hot to cold, the more obvious explanation was that unusually good winter weather in the US northeast and the midwest had pulled hiring forward. This is likely part of the story this year, as well. 

The drop in the unemployment rate is also not as good news as it may initially seem. The Labor Department reported that 130,000 people left the labor force during the month – so they are no longer counted as unemployed. 

A big hit to the economy will be from the sequester, which will pull roughly $80bn in federal spending out of the economy. The forecasts from the Congressional Budget Office and others show the sequester slowing growth by 0.5-0.6 percentage points. The economy has not even begun to feel the impact of these cuts, most of which will not start to make their effects felt until April.

In short, we have an economy that had been growing at a not-very-healthy pace through the second half of 2012 – and which is virtually certain to be slowed by contractionary fiscal policy through the rest of 2013. Unless there is a rapid reversal of policy, the 7.7% unemployment rate is likely to represent a low we may not see again for some time. While the economy is not likely to fall into a recession and send the unemployment rate soaring, the economy is not growing fast enough to meet the need for jobs from a growing labor force. As a result, unemployment will be going in the wrong direction for the rest of the year.

3 Life after Pol Pot (Jonathan Power in Khaleej Times) Cambodia has lain for too long under the black umbrella of its past. But Cambodia is waking up, has looked the evil one in its eye and, re-born, found its strength.Cambodia has been to hell and back — two million of its people killed out of population of 8 million, with 500,000 of them executed, the consequence of a fanatical communist movement, the Khmer Rouge, led by Pol Pot and a group of henchmen now being tried in the UN War Crimes Court. (Pol Pot himself is dead.)

The Khmer Rouge violently took power in 1975 and fell in 1979. They wanted a classless society. They abolished money, property and religious practices. Family relationships were criticised and people were forbidden from even showing the slightest affection. The workday in the fields was 12 hours long without pause. Torture and the bullet were the instant punishment for deviance. Anybody educated was singled out for death.

In the late 1970s, the neighbouring Vietnamese, despite having in the early 1970s supported the Khmer Rouge, fought their way into Cambodia and in January 1979 overthrew the Khmer Rouge, capturing Phnom Penh.

In the 1980s ninety per cent of the people lived in poverty. Today it is only 20%, a remarkable achievement. It is one of the largest poverty reductions in the world, says the World Bank representative — far better than its neighbour, Thailand. Nutrition rates are up. So are hygiene and the availability of clean water. Most children are now inoculated and infant mortality has fallen fast. Unemployment is very low. Cambodia is fifth in the world in terms of attaining the Millennium Development Goals (that measure social progress).

But educational improvement goes too slowly. Corruption is pervasive. Manufacturing is only just getting under way. In July there will be a general election. Hun Sen will win. He has the organisation and the money. Perhaps then he will loosen up a bit more. A prosperous democracy could be, if he willed it, not too far away.