June 02, 2012
NYC Letter: The "Bad Luck" Economy Redux
Day 1,225 of CHOPE
D-minus 231 Days
Check Out The Obamaclock!
The Friday jobs report belied the "robust recovery inching along" fairy tale. Now we are back to the "bad luck economy" story line.
MISERABLE MAY JOBS REPORT SUGGESTS
U.S. IN RECESSION RED ZONE
By James Pethokoukis
June 1, 2012 (AEI) - The econ team at Barclays Capital sums things up nicely (bold for emphasis):The May employment report suggests that the labor market recovery has lost significant steam in recent months. In our view, this raises the likelihood that the Fed will embark on a renewed round of policy easing, although market developments and the tone of other economic data in the coming weeks remain important. … In the establishment survey, payrolls rose just 69k, well below the 150k we and the consensus had expected and the weakest since May 2011. The details were equally soft, not least the 38k downward revision to April (to 77k from 115k), which followed an eight-month sequence of upward revisions to the previous month. By sector, goods-producing firms cut 15k jobs, with a 12k rise in manufacturing more than offset by a 26k drop in construction. This can no longer be put down to weather effects to any significant degree so it would appear that construction employment prospects remain very weak … The picture of lost momentum was also evident in hours worked data. The workweek fell one tenth to 34.4 hours and aggregate hours worked rose just 1.0% 3m/3m, down from 3.0% in April. … Bottom line: A clearly soft report that suggests a loss of momentum in the labor market recovery across jobs, hours worked and the unemployment rate.
So what is the true state of the labor market?
- [T]he participation rate usually falls during recessions. Yet even if you discount for that and the aging issue, the real unemployment rate would be 9.5%.
- We continue to be stuck in the longest period of 8% unemployment or higher since the Great Depression, 40 consecutive months.
- And, as the above chart shows [See here, Figure 1A.] — originally from Obama economists Christina Romer and Jared Bernstein in January 2009 — the current 8.2% unemployment rate is 2.5 percentage points above where Team Obama predicted it would be right now if Congress passed his trillion-dollar stimulus plan. [Current unemployment is 1.7% above where Team Obama predicted it would be right now if Congress didn't pass the stimulus plan.]
- The median duration of unemployment rebounded to 20.1 weeks in May, and 42.8% were unemployed for longer than a half year.
The big question now: Does this report suggest the U.S economy is heading into recession, especially given the sharp slowdown in global economic activity from Europe to India to, perhaps most worrisome, China?
Consider this: Last year, the U.S. grew at just a 1.7% pace. Research from the Federal Reserve finds that that since 1947 when year-over-year real GDP growth falls below 2 percent, recession follows within a year 70 percent of the time. We are firmly within the Recession Red Zone.
The political implications are clear: If the White House wasn’t already in a panic about the spring swoon, it sure is now. Another Recovery Bummer. If you punch in a mild recession into the highly regarded Fair-Yale forecasting model, Mitt Romney wins 53-47 over Obama in the two-party vote share. But given the example of Jimmy Carter, who suffered a mild recession in his 1980 reelection year, the Fair model might be underestimating the damage to Obama from a double dip.
And the jobs bad news came on top of growth bad news.
Q1 GDP REVISED DOWNWARD TO 1.9%
BLOG May 31, 2012 (Hot Air)
Obama blamed the dismal numbers on challenges posed by Europe and the spike in gasoline prices earlier this year, yet stressed that the true roadblock are House Republicans who have refused to pass measures to improve infrastructure, boost local government employment, back tax breaks to help hiring and clean energy, and refinance mortgages at cheaper rates for homeowners.
Mr. Obama trots out "challenges posed by Europe" only for bad economic news. News with any sunshine potential -- or at least not obviously damning -- is attributable to the policy genius of Team Barry. Europa gets no mention as an impediment. Europa's crises are not new, but Mr. Obama only thinks to mention them when he has to explain his own poor performance.
Alan B. Krueger, chairman of Obama’s Council of Economic Advisors, said in a statement that the nation’s economic woes "were long in the making and will not be solved overnight."
"We are still fighting back from the worst economic crisis since the Great Depression," Krueger said, putting the best spin on the numbers by adding, "Today we learned that the economy has added private sector jobs for 27 straight months, for a total of 4.3 million payroll jobs over that period. The economy is growing but it is not growing fast enough."
"There is much more work that remains to be done to repair the damage caused by the financial crisis and deep recession that began at the end of 2007," he said. "It is critical that we continue the President’s economic policies that are helping us dig our way out of the deep hole that was caused by the severe recession."
... Austan Goolsbee, the former chairman of the White House Council of Economic Advisers, stressed that the economy simply hasn’t improved at a fast enough pace to spur hiring.
... White House spokesman Josh Earnest stressed to reporters at a Friday briefing that "the longer term trends still indicate that we have an economy that is adding jobs. It’s readily apparent we’re not adding jobs" at a fast enough pace.
As we have argued elsewhere (and here and here), that the economy isn't growing fast enough, hasn't improved fast enough, that jobs aren't being added at a fast enough pace are not excuses, they are admissions that Team Barry cannot get the job done.
Team Barry has constantly oversold a strong recovery. They oversold it before it arrived. They oversold it when it was supposed to arrive (and this). They continue to oversell it when it has yet to arrive.
When bad news persists, Team Barry reminds us things "won't be solved overnight". To which Allahpundit at Hot Air remarks:
Anyone want to try defining "overnight" for me, just so that we have a rule of thumb going forward? On Inauguration Day, I would have accepted "2009" or even "his first two years in office" as plausible answers. Instead, five months out from election day, somehow dawn still has yet to break. His braintrust is now actually on the cusp of arguing, in all seriousness, that it’s unfair to judge him on what’s happened in the jobs market over the course of his entire first term.
"Won't be solved overnight." Mr. Obama took that winning message on the road Friday, attending a record six-in-one-day fundraisers to beg for money to be re-elected to a second term of excuses.
The 4-year overnight.Posted by Damian at June 2, 2012 11:45 PM