What are we to make of the most recent jobs report, which shows that (a) unemployment increased from 9.5 percent to 9.6 percent and (b) nonfarm payrolls fell by 54,000 last month? If you’re White House press secretary Robert Gibbs, you tweet, “Don’t be fooled — the economy added 67,000 private sector jobs, 8th straight month of added private sector jobs, job loss came in Census work.” Picking up on this, David Mark, Politico’s senior editor, writes this:
At the White House Friday morning President Obama praised the private sector addition of 67,000 jobs in August, the eighth straight month of job growth. “That’s positive news, and it reflects the steps we’ve already taken to break the back of this recession. But it’s not good enough,” the president said. And Christina Romer, outgoing chair of the president’s Council of Economic Advisors, said the jobs figures were “better than expected.” Do they have a point about a slowly-but-surely improving jobs situation?
The answer is “no.” To understand why, it might be helpful to put things in a wider perspective.
For one thing, the so-called underemployment rate, which includes workers who are working part-time but who want full-time work, increased from 16.5 percent to 16.7 percent. During our supposed “Recovery Summer,” we have lost 283,000 jobs (54,000 in June, 171,000 in July, and 54,000 in August). And for August, the employment-population ratio — the percentage of Americans with jobs — was 58.5 percent. We haven’t seen figures this low in nearly three decades. As Henry Olson of the American Enterprise Institute points out, “Since the start of this summer, nearly 400,000 Americans have entered the labor force, but only 130,000 have found jobs. … America’s adult population has risen by 2 million people since [August 2009], but the number of adults with jobs has dropped by 180,000. The unemployment rate declined slightly despite these numbers, from 9.7 percent to 9.6 percent, because over 2.3 million people have left the labor force entirely, so discouraged they are no longer even looking for work. ”
Keep in mind that all this is occurring during a period when job growth should be considerably higher, at least based on past post-recession recoveries. Former chair of the Council of Economic Advisers Michael Boskin points out that “compared to the 6.2% first-year Ford recovery and 7.7% Reagan recovery, the Obama recovery at 3% is less than half speed.” Bear in mind, too, that today’s jobs report comes a week after the GDP for the second quarter was revised downward, from 2.4 percent to 1.6 percent. Economists generally agree that the economy needs to grow 2.5 percent to keep unemployment from going up, and a good deal better than that to begin to bring it substantially down.
What all this means, I think, is that we’re not in a recovery at all, at least not in any meaningful sense. And those who insist otherwise are (to amend a phrase from Daniel Patrick Moynihan) Defining Recovery Down.
The most recent GDP figures also have harmful fiscal ramifications. For example, estimates for the deficit this year (more than $1.3 trillion) are based on both the Congressional Budget Office’s and the Obama administration’s assumption of roughly 3 percent growth. If growth is well below that, government revenues are going to be lower than estimated. And so this year’s deficit and net increase in the debt are going to be worse than even the (already quite troubling) projections. Meanwhile, the Federal Reserve has very few, if any, arrows left in its quiver. It has done just about all that can be done.
The narrative the Obama administration is trying to sell is that we were on the edge of another Great Depression but avoided it and are now, in the president’s oft-repeated phrase, “moving in the right direction.” If we persist in following Obama’s policies on spending, taxes, and regulations, Obama assures us, we will build on this recovery and turn a sluggish one into a strong one. At the end of Obamaism lies the land of milk and honey.
This is wishful thinking. The economy right now is sick and, in some important respects, getting sicker. And the president is pursuing policies that are not only not helping; they are downright counterproductive.
Robert Gibbs can tweet away, but he cannot tweet away reality.
