The Department of Labor announced today the economy shed another 190 thousand jobs in October, pushing the unemployment rate to 10.2 percent and the running Obama jobs deficit to 5.7 million. Earlier in the week the Obama Administration released figures purporting to show the Obama stimulus had saved or created 640,000 thousand jobs. Only in Washington can jobs be saved by the thousands while being lost by the millions.
So far in his term in office, employment has dropped by about 3.5 million jobs, yet Obama repeatedly promised he would create 3.5 million jobs if only we would elect him President and give him control over the nation’s economic policies beginning with the enactment of a massive economic stimulus package. The President’s jobs promise means total employment should be at least 138.6 million by 2010, leaving him with a total deficit to close between now and December of 2010 of 7.7 million jobs. By his own standard, these results attest that Obama’s policies are failing.
Fortunately, the economy’s natural recuperative powers spurred by powerful, effective stimulus from the Federal Reserve mean the recession may be ending in the sense that overall output and incomes are stabilizing and the recovery may be on the horizon. Last week’s report that the economy grew at 3.5 percent at an annualized rate was certainly good news, though efforts by the Obama Administration to spin this as suggesting the stimulus legislation was working were nonsensical.
Even assuming the recovery is finally at hand, however, job losses are likely to continue for many months, and even Christina Romer, Obama’s Chairman of the Council of Economic Advisers, admits the unemployment rate is “unlikely to end 2010 much below” the current level of 10 percent.
If Chairman Romer’s predictions prove accurate, and they’re likely more than a little optimistic, all we may have to show for President Obama’s 3.5 million jobs creation promise is another $787 billion in national debt.
On August 6, Christina Romer, the chairman of the President’s Council of Economic Advisers, gave a talk entitled “So, Is It Working? An Assessment of the American Recovery and Reinvestment Act at the Five-Month Mark.” United States Court of Appeals for the Seventh Circuit judge Richard Posner has posted a response a The Atlantic, reading in part:
Let me make clear at the outset that I support the stimulus, though I wish it had been better designed. … Romer argues in her talk that by the end of the second quarter of this year, $100 billion of stimulus money had been spent. That is a suspiciously round number, and it is unclear how it was arrived at; but let us assume it is accurate. She then argues that this small expenditure–about two-thirds of one percent of the Gross Domestic Product–is responsible for the fact that the decline in GDP fell (on an annualized basis) from 6.2 percent in the first quarter of the year to 1 percent in the second quarter (though the latter figure is likely to be readjusted upwards).
This assertion is groundless. No one has the faintest idea what effect the stimulus has had. My guess is that it has had some positive effect, because of its confidence-enhancing character that I mentioned earlier and because some of the $100 billion–though no one seems to know how much–has been spent rather than saved. But it is impossible to determine the net impact of the stimulus on GDP or employment because so much else has been happening to stimulate an economic recovery. Some people have had to dissave–turn savings into expenditures–because their income has fallen (maybe because they have become unemployed) below the level necessary to cover their basic expenses. Some people have had to replace durables that wore out. Foreign demand for U.S. products has risen some. (Dissaving, replacing durables, and export growth if the domestic currency loses value are standard nongovernmental spurs to recovery from a depression.) And the government has been doing a lot to stimulate recovery besides the stimulus–has in fact expended or guaranteed trillions of dollars in an effort to increase the amount of lending, which is essential to economic activity.
Disentangling the various factors that are responsible for the reduction in the rate of decline of output in the second quarter is probably impossible, but in any event has not, to my knowledge, been attempted–and certainly not in Romer’s talk.