I’ll Ask Again: Better Off?
What is 4:1? The ratio of people who stopped looking for jobs as compared to those who found one in August.
James Pethokoukis:
– Nonfarm payrolls increased by only 96,000 in August, the Labor Department said, versus expectations of 125,000 jobs or more. The manufacturing sector, much touted by the president in his convention speech, lost 15,000 jobs.
– Since the starts of the year, job growth has averaged 139,000 per month vs. an average monthly gain of 153,000 in 2011.
– As the chart at the top shows, the unemployment rate remains far above the rate predicted by Team Obama is Congress passed the stimulus. (This is the Romer-Bernstein chart.)
– While the unemployment rate dropped to 8.1% from 8.3% in July, it was due to a big drop in the labor force participation rate (the share of Americans with a job or looking for one). If fewer Americans hadn’t given up looking for work, the unemployment rate would have risen.
– Reuters notes that participation rate is now at its lowest level since September 1981.
– If the labor force participation rate was the same as when Obama took office in January 2009, the unemployment rate would be 11.2%.
– If the participation rate had just stayed the same as last month, the unemployment rate would be 8.4%.
– The Labor Department also said that 41,000 fewer jobs were created in June and July than previously reported. The change in total nonfarm payroll employment for June was revised from 64,000 to 45,000, and the change for July was revised from 163,000 to 141,000.
– The broader U-6 unemployment rate, which includes part-timer workers who want full-time work, is at 14.7%.
The fact that this thoroughly useless bozo is still running even in the polls is proof positive this country is doomed.
The crowd last night reminded me of that for Goebbel’s infamous 1943 “Total War” speech after defeats at Stalingrad and North Africa made the Reich’s fate plain to see. Google it-the video is online-the demonic preaching to the deluded.
I’d be completely willing to afford no blame to Obama for the unemployment rate, the deficit, or any of the other many problems he blames on Bush and House Republicans, provided that he in return acknowledges that all of his stimulus spending had no positive impact on the economy.
Ah, yes, the halcion days of September 2008. Of course a week later Lehman Brothers went under taking a good chunk of my 401k with it and causing financial chaos across the globe. If only we could go back!
Dan, you’ve got that wrong. The stimulus spending had an effect. Just look at where the DOW is now compared to when Obama took office. The problem is that he ignored the impact of the housing crash on consumer spending so here we are. You guys criticize all the wrong things. Interesting article on this… “Cautious Moves on Foreclosures Haunting Obama” http://www.nytimes.com/2012/08/20/business/economy/slow-response-to-housing-crisis-now-weighs-on-obama.html?pagewanted=all During his first two years in office, Mr. Obama and his advisers repeatedly affirmed this carefully calibrated strategy, leaving unspent hundreds of billions of dollars that Congress had allocated to buy mortgage loans, even as millions of people lost their homes and the economic recovery stalled somewhere between crisis and prosperity… Mr. McCain surprised Mr. Obama during their second debate in October 2008 when he proposed investing $300 billion in such a program, echoing prominent Democrats. Some economists argued that debt reduction would hasten recovery not just by preventing foreclosures, but by spurring consumer spending, the nation’s primary economic activity. Mr. Obama, leading in the polls, dismissed the idea as a “risky” giveaway to mortgage companies. “Taxpayers shouldn’t be asked to pick up the tab for the very folks who helped to create this crisis,” he said at a rally two days later in Dayton, Ohio. After the election, top economic advisers led by Mr. Summers told the president-elect that debt reduction was not the best policy. Mr. Obama hoped to secure about $1.1 trillion from Congress to arrest the recession — a stimulus package of about $750 billion and the second half of the $700 billion Troubled Asset Relief Program bailout fund Congress had created in September. In a blueprint delivered at a mid-December meeting in Chicago, the advisers recommended that nearly all of the money be used to stabilize the financial system and for a package… Read more »
Russ,
Sure the stimulus had an effect. Check out the money supply numbers now vs 2008. Using the DOW as an example isn’t a good metric as that money had to go somewhere.
And don’t count on consumer spending to increase economic growth. The days of relying on consumer spending for 70% of GDP are long gone.
America’s living standard has been artificially high for too long. There’s a correction in the works.
Russ – Prove to me that the stimulus spending raised the Dow and that it wouldn’t have risen on its own over 4-5 years. Prove to me that the stimulus spending wasn’t a drag on its recovery. You can’t. Keynesianism is a religion, and you are a member of its church. According to the faith, if the economy grows, the stimulus worked; if the economy stalls, more is needed. It is not testable. It is not falsifiable. There is no counterfactual. Besides, the stated purpose was not to raise the Dow, the stated purpose was to create jobs and keep unemployment low. Why should I believe the central planners when all of their projections have been not just wrong but severely wrong?
It has been a long time since Economics 205, but I fear for an economy where “consumer spending,(is) the nation’s primary economic activity”
“Keynesianism is a religion,” Perhaps Lord Keynes’ most famous quoteis “In the long run,we are all dead”.
Seriously, Keynesian economics was developed at a time when metrics, such as “Money Supply”, were in their infancy. “UnemploymentRates” were essentially speculative because it is largely taken from unemployment compensation rates, that was also in its infancy. There may have been advances. Much of its appeal is that assigns a role to government in “managing” the economy. Without doubt, government has a role but it is not necessarily the role assigned by Keynes. Keynesianism blossomed in the age of “technocrats” in government. Sounds a little antique now, doesn’t it?
Much of the “stimulus” was designed to prevent the failure of local governments. I am not sure that they should not have been allowed to fail.
Keynesianism draws a large support base from the perennial “bootlegger-baptist” alliance of those who directly benefit from the spending (unions, corporations) and those who maintain a naive faith in central economic planning and the benevolent autocracy of an expert-led government (“progressives”). The underpinnings of the whole idea are actually quite hollow when examined, e.g., Q: “Why is demand low?” A: “It just is.” If you believe there may be a reason behind people’s reluctance to invest beyond the “animal spirits” Keynes describes, then the entire rationale for the interventionism crumbles. I just keep asking what numbers would indicate that stimulus has failed, and I never receive anything resembling a response.
It has been some time since I studied Economics,and do not recall all that much (I rarely make reference to “M2”). I do recall the introductory course, taught by Captain Thorne (sounds like a character from a novel). One of his statements “A service economy means we are all shining each other’s shoes”, has stuck with me. My early youth was spent observing agriculture and manufacturing, both of which take low value resources and produce a high value. The impression was indelible.
As Dan points out, Keynes acknowledged the effects of psychology in Economics; although he may not have used the term. Certainly, it is not all metrics. If you are uncertain about the future, “risk preference” is low. You base your action on prior experience. This, in spite of what the metrics may tell you. (this is the “public” as opposed to “technocrats”)
I think marketing people have a better handle on what the public knows, or fears. “New Coke” may provide an analogy between the marketing people and Economists. When Pepsi won the “Pepsi Challenge”, Coke introduced a sweeter “New Coke” to huge fanfare. It flopped (I was one of those who secreted cases of “old” coke in my basement). They failed to understand that it was only the first taste of sweeter Pepsi that went down well. That sensation did not last to the bottom of the can. The “public” knew this.
When candidates compare themselves to the sainted Mr. Roosevelt, it is well to remember that modern theory suggests that his actions prolonged the “Great Depression”. Our recovery might better be laid at the feet of Mr. Hitler and Mr. Tojo. Or, was WWII “Massive Stimulus”?
“Russ – Prove to me that the stimulus spending raised the Dow and that it wouldn’t have risen on its own over 4-5 years.” What a ridiculous comment. No one can “prove” why the market does anything. But if it’s not apparent that truck loads of cash at least benefited the largest banks or that another Lehman type crash of a major player would have hurt the market, there’s no sense in me trying to convince you. I’d add that I’m sure most folks are pretty skeptical about the idea that more forclosures in this economy are good for the recovery. Keep in mind, I was not in favor of those Bush initiated bailouts, but it’s nonsense to say “the stimulus had no effect.” Here’s Mike Whitney writing about the NY Times article: http://www.counterpunch.org/2012/09/07/how-obama-scuttled-the-recovery/ Obama also wanted to modify loans, to tweak the interest rate or extend the life of the loan, instead of reducing the principal which would have prevented millions from losing their homes, but would have also dug into the windfall profits of crooked bankers. So, he nixed the idea outright. Is there any doubt whose interests were being served?… Can you believe it? Obama repeatedly torpedoed the one measure that the experts agree would have kept more people out of foreclosure and stabilised prices after promising that he would support it! Incredible! This is what it means to be a “creature of the banks”; only the interests of big finance matter. Everything else is dismissed as claptrap… So now the economy is in the toilet, (and probably headed for recession) mainly because Obama and Co. didn’t have the balls to stand up for what’s right. That’s not to say that the carpetbagging Romney would be a better choice for president. He wouldn’t be. But let’s not… Read more »