First of all, if Jimmy Hoover Obama has any honor, he will do as LBJ did in March 1968 and announce that he is no longer seeking renomination to a second term. One-and-fifteen football coaches typically do not spend a lot of time telling the fans how they hope to improve their record in the next season. In researching pre-WW2 economic indicators, I came across a quote by Prof. Geoffrey Moore that the 1937 recession came on very fast with little warning. Politically-induced contraction can strike literally overnight. Beyond that, I have little to say beyond what Profs. Thoma, Krugman, and DeLong, and Armando, Digby, and Riverdaughter have already said.
In the meantime, since I haven't spent much time on this lately, let me bring you up to date on some employment metrics, in anticipation of this Friday's July jobs report.
First, here is an updated scatterplot graph showing the relationship between initial jobless claims and private nonfarm payrolls for the last five years. Red is the descent into the recession, blue is from the monthly nadir for jobs in March 2009, and pink is the last two months :
Currently expectations are for 75,000 private jobs to have been added in July. Initial jobless claims did decline in July, but if we are descending into a double-dip, expect the pink line to be extended to the left over the next few months.
In a similar vein, here is the updated Thumbcharts graph comparing the YoY 6-month average of initial jobless claims with the YoY average of jobs (i.e., comparing 0-6 months ago with 12-18 months ago). This relationship has held up rather well in the last few months:
Since this graph tells us that the YoY jobs metric is likely to remain very positive, it suggests that outright negative numbers should not be expected yet.
Next, here are updated comparisons of real retail sales and GDP with nonfarm payrolls.
Here are real retail sales:
Real retail sales have not made significant improvements in the last few months, but they haven't turned negative either. As they have a 60 year record of leading the jobs numbers, I would not expect anything worse than a stall in job growth at this time.
Here is the YoY% comparison, to the same effect:
But on the other hand, here is GDP compared with jobs:
GDP also has a well-known relationship with jobs, for example see Prof. Menzie Chinn's discussion of Okun's law as applied to the recent GDP revisions. The GDP numbers predict an entirely different, and worse, scenario, of continued deterioration in the jobs picture (Note: since this graph measures YoY% change, deterioration might just mean "less positive" numbers than a year ago, vs. outright losses.)
In fact, since the beginning of the year a very sharp divergence between GDP and real retail sales has developed. Here is the graph:
It is difficult to reconcile this divergence, but I suspect it has to do with energy costs and with the sudden stall in manufacturing after the Japanese tsunami.
The above relationships give us differing results. I would put the range of reason anywhere between about -60,000 jobs to +140,000 based on what we know now, with the most likely range between 0 and +80,000.
10 comments:
I do wish you'd stop comparing Obama to Jimmy Carter, though not for the reason you might think.
Had Obama decided to go the Carter route on energy the moment he came into office, energy efficiency, public transit, revamped agriculture, and other related policies might be kicking in about now, bringing to bear economic resilience to high oil prices. As high oil prices are a clear ceiling on economic growth, and by all accounts will continue to be for the foreseeable future, this was and is the fundamental issue that needs to be tackled to help everything else.
The irony, of course, is that in an interview before he became president, he said as much - that if there was only one issue he could tackle, it'd be energy, because it'd have such broad reaching effects.
GDP decline may also be due to a seasonal low in agricultural trade balance, magnified because the BEA annualizes the data. 3Q agricultural trade is the peak and will favor GDP. Both have much more impact on the GDP than on consumer spending.
I'm also kind of annoyed with the "Jimmy Hoover" nickname. Not because it is offensive, or mean-spirited, or apt, but because it is artless and clumsy. I am embarrassed for you every time I read it.
It sounds like something Rush Limbaugh would come up with. I wish you'd quit it.
anon @1:15, I agree. It's sad really.
There are plenty of political/economic blogs out there where adults act like 4 year olds, in the middle of a temper tantrum. I read(maybe past tense) this blog because it was different. It was more more mature, and smarter. If that's no longer the case, I'll look somewhere else.
anon at 2:28 p.m.
There's the door. Toodleoo.
I don't see how calling him Jimmy Hoover Obama on an economics blog is any different than calling him Adolf Stalin Obama on some Tea Party blog. It's the kind of childish semantics you would expect to see on Dkos or a Glenn Beck forum.
Anon at 8:57 p.m.:
If reading two lines of opinion about the debt ceiling before a strictly numbers-oriented post about the jobs picture offends you so much, you are welcome to stop reading me. I will not be backing down or changing my mind.
Read this. Your economic analysis is great, but you are mistaken to pin this problem on Obama:
http://www.boomantribune.com/story/2011/8/2/214920/4633
Look what labor has to say: only the chest-thumping EX-leader of the SEIU will go on record giving Obama a lot of advice and calling him weak:
http://abcnews.go.com/Politics/labor-steamed-debt-deal-blame-obama/story?id=14217019
Whenever somebody high profile like Krugman, or whoever, does a smack-down on Obama, that's what it is: "I am rhetorically slapping you down, and I'm a bad ass and you are not."
The farther away from the actual locus of power you are (which is the case with Krugman and bloggers, but NOT with unions, or OFA activists who in my experience haven't even heard of Dkos) the more frustrating it is to know things and not be able to change things (at least for most politically oriented people), and so there's a need to put down the father figure who putatively has all the power, and in the act of that criticism, raise oneself up.
I think there is that dynamic going on all the time. And by the way, this little reply is my own verbal smackdown of your political critique of Obama.
Truth hurts, guys.
It will boil down to "it's the economy, stupid", as it always has, and I hope that Obama has enjoyed this term because it is the only one he will have.
We can't afford, literally and figuratively, another round of Republican rule but that's what we're going to get, barring a miracle.
I see no miracles on the horizon.
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