Arguing the Unemployment Rate
If you are going to talk about the unemployment rate, at least talk about the whole picture.
In the comment threads of a couple of posts here at OTB (here and here) a few commenters are making arguments about the political implications of the unemployment rate during the Obama administration (as well as policy/economics assertions). Now, there is little doubt that the economy and jobs in particular will be a major issue in this year’s presidential elections.However, if we are going to talk about the state of the economy, the efficacy of policy, and the like, let’s at least be honest about we are talking about.
There are two main issues that anyone who values legitimate argument (as opposed to people who simply want to make cheap political points) have to deal with. One is a general point: if one is going to evaluate the effects of policies, one cannot pretend as if those policies go into effect immediately. Any argument about policy effects cannot happen until after policies have been implemented. This fact has to take into account a) that it takes time to even pass and implement policies, and b) that it takes time for a given policy to go into effect once passed and implemented.
The second issue is a specific one on the employment question: if one is going to use the unemployment rate in an argument, one has to take into account the rate prior to a given point in time. One cannot simply pick an arbitrary date and then make claims.
To wit, if we look at the last decade plus we find the following:
Setting aside any question of policy or credit/blame, the bottom line for any conversation about the current unemployment rate, or what was reasonable to expect over the last several years, one has to acknowledge that rather remarkable (and steep) climb in unemployment from 2007 to early 2009. The trend (which I have highlighted with the red arrow) is pretty clear, as is the trend since the peak in mid 2009. Those trends matter and to pretend like all one needs to know to evaluate either economic health or the efficacy of policy is, as John Hinderaker asserted “that unemployment has increased on Obama’s watch,” is to be purposefully obtuse. It is true that the unemployment rate in January of 2009 was 7.8% and was 8.5% at the end of 2011 (the chart above graphs the year on the X-axis at mid-year), however to select those two points in time as if they tell the whole story is dishonest.
The fact is that the jobs situation during the Obama administration is a clear improvement over that during the second Bush term. One can argue that there were better policies that could have been pursued or one can ask questions about long-term unemployment as well as wondering about how to get unemployment down farther and faster. What one cannot do, and also be honest about the actual state of the economy, is to pretend like Obama policies were directly responsible for the trend prior to his assumption of office and before he was able to start implementing policies. Even if one hates those policies and thinks that they failed, one cannot ascribes time-travelling abilities to their effects.
What one needs to do if one thinks that the Obama policies were in error, is to demonstrate how other policies would have resulted in a better post-peak trend. This is, I will allow, difficult, because it is the realm of the counterfactual (and is, of course, why people like Hinderaker attempt the arguments that they do).
In short: any argument about economic policy that focuses solely on where we are without taking into full account where we came from is utterly disingenuous. Such an observation, by the way, is not about blaming Bush or about crediting Obama (a lens through which too many people peer). No, such an observation is about a call for honest discourse.
Update: a better graph here (with thanks to a friend’s e-mail).
Without a doubt Mr Hinderaker will publish a correction and thank you for your post.
I don’t care who shot John. Isn’t it possible to think that both the policies of the Bush Administration and that of the Obama Administration have been flawed?
Total civilian employment is down. I don’t care whether the current unemployment rate is a product of having changed the numerator or the denominator. I think that more people need to be working.
The only legitimate argument Romney has to make against Obama is that he could have done a better job in speeding the recovery. An argument that gets tougher to make as the economy continues to recover…and made tougher still when your policies are simply regurgitation of rote Republican policy …tax cuts and de-regulation for the richest amongst us. Of course that assumes a legitimate argument has to be made….a dubious assumption given the electorate.
We will see if and how the Obama campaign can shape the argument….Romneys work at Bain, his tax returns, his tax plan…all are very sharp implements Obama can use to shave away the plastic and bring Mitt into sharp relief. Romney has so far stated that Obama made the economy worse…then he claimed he didn’t say that…and now he appears to be saying that he could have done better. So perhaps it’s already taken form.
I didn’t argue otherwise.
@Dave Schuler, @Steven L. Taylor:
So, whose policies do you endorse? Anyone on the national stage, at all?
@Dave Schuler: At that point Dave, we’d be compelled to ask what your plan to increase total civilian employment would be.
(We might agree that Alex Tabarrok’s Launching the Innovation Renaissance is a good start, but I wouldn’t call it mainstream.)
The GOP used to get this. They sure got it back when Bush the Younger took office and the dot-come bubble burst (or finished bursting, I forget the exact timing). That wasn’t his fault.
Any honest person has to look back to 2008 and look into the abyss. Bush and Obama were both trying to plug a massive hole. Each pursued policies that were flawed, but were on the whole necessary (TARP, Stimulus). McCain would’ve been doing something similar, in all likelyhood.
I think the point Dave Schuler was making was that it is fair to criticize Obama if the for the unemployment rate going up from 2007-2008 if he supported the same bailouts that were thrust upon us during the Bush administration that contributed tot he current economic state. If he voted against all of the policies (which he did not), then he could argue that he was blame free.
The point is he was a Senator during the time period prior to January 2009 and supported and opposed policies that contributed to the unemlpoyment rate at its current state. While it is fair to point out that much if it took place prior to his ascendance to the presidency, it is unfair to hold him blameless for anything that happened prior to 2009.
I think this gets to you rmain point and I don’t think we disagree. Let’s look at the big picture and not just rely on lies, damned lies, and statistics.
“Everyone is entitled to his own opinion, but not his own facts.” – Daniel Patrick Moynihan
Good piece, Steven.
Steven, you crack me up. Oh, wait a minute, you are being serious. Well, Molly Hatchet wrote a song for you, tho I always thought the Allmann Brothers did it best
I don’t think that’s what Dave was saying, but either way, you still need an alternate plan. One that would both be economically reasonable and politically possible would be, of course, ideal.
Statistics like the rate of unemployment are strictly for wankers.
Professional fringe right whiners like Hinderaker wouldn’t vote for OIbama if the unemployment rate was zero.
Real Americans only worry about whether they and the people they know have jobs or not.
Very honest observation and I agree. Bush did have it tough with 911 he was pushed to react, and he did not think things through. Then to top things off the economy crash. He was extremely unlucky, and he will be blamed for it probably forever. Now the country is turning on Obama for this mess, that we will never know if he could have fixed it sooner if he had a congress behind him.
Let’s just note that if anyone says “I fault Obama for not doing the impossible,” that’s fine. He didn’t. On the other hand, saying you are going to vote for anyone else on the planet because Obama did not do the impossible … is quite possibly silly.
I always though Molly Hatchett covered the Allman’s.
Well I’ve learned my piece of worthless and invaluable minutia for the day.
Just got my tickets to the Allman’s at the Beacon Theatre in NYC…definitley one for the bucket list if you haven’t seen them there.
@ John Personna…
It’s not only that he didn’t do the imossible…but the estimates of the damage they were working with at the time were fatally flawed…and we all know the congress he has had to deal with, in which even votes on TP brands have to be passed by super-majorities…which Obama never had.
I think that overstates it a bit. Indeed, the unemployment rate steadily decreased thoughout the two Bush terms–until it began to explode in the third quarter of 2007 with the onset of the global financial crisis. It peaked under Obama and has gotten ever so slightly better.
Your overall point, though, is quite right: It’s silly to blame Obama for the continuation of a trend he inherited and that ceased quite shortly after he got into office.
Then again, it’s my longstanding position (going back at least two decades) that presidents are a much smaller variable in economic analysis than the news analyses–and the candidates themselves–would have us believe.
Congress is certainly not tackling anything like Alex Tabarrok’s list for growth. The simple pragmatism in patent reform is not only off the table … the SOPA and PIPA stuff is going in the opposite direction. They are burdens on innovation favored by the power players.
I suppose all the GOP guys are for SOPA and PIPA, right? Even as they talk about excess regulation?
Now to fault the Dems for something, I think their education plans have been pretty non-innovative. “Pell Grants for everyone” is demonstrably not working.
The Obama administration has made small moves toward the College Dropout Factories, but I think they (or congresscritters) ended up knuckling down to their lobbying.
My concert going days are long in the past, just can’t deal with the crowds. These days my musical experiences are limited to (small) festivals and going to the Tuesday night bluegrass jams at the Chat and Chew. But the Allman Brothers always put on a good show, I think I caught them 2 maybe 3 times. The ’70s are a little hazy now.
But you know what they say: If you can remember them, you weren’t there.
Though I believe “jobless recovery” was coined in that Bush era.
I think the Student loan reforms were a good move…perhaps small…but taken with the Pell grants…baby steps.
Well, that is a decent attempt at spin, I guess. Its not as if you have a lot of material to work with.
Bottom line is Bush was an utter failure at job creation – absolutely dismal. In the last 2 years of his administration we suffered vast job losses. Obama inherited the train wreck, and the situation began to improve fairly quickly. It has now improved to the point that even Fox News and the WSJ are forced to admit we are in a job recovery.
@Steven L. Taylor: At what point do you believe that Obama’s policies began to have an effect on unemployment? Let me take a wild guess. Obama’s policies only began taking effect when unemployment began to steadily decline, right?
@Septimius: I made no claim as to when the policies took effect, although typically one would need to allow at least a year as a rule of thumb.
I am only making two claims:
1. You cannot discuss or attempt to assess the unemployment situation without actually taking a broader view (you can’t just start in January 2009).
2. You cannot assess policies before they are implemented.
I am actually more interested in understanding the situation than in making simplistic partisan arguments. Indeed, my main goal is decent, reasonable discourse.
@Septimius: I will say this, too: economies are complex things and presidents get both too much credit and too much blame for the state of the economy at a given moment (like James, this has been my position for a rather long time). However, one does have to consider the real possibility that since Y (decrease in unemployment) happened after X (a number of policies) that X may have lead to, or contributed to Y.
This is reasonable, no?
@anjin-san: Almost all of the change in unemployment is a function of broader economic trends; the impact of public policy decisions by presidents is felt at the margins.
Bush came to office as the dot com bubble had exploded and there was a mild recession. Unemployment peaked around 6% around the time he took office and remained there for a bit before dropping off to around 4% for most of his term in office.
Then, the housing and financial market bubbles burst, sending the global economy into a tailspin. Unemployment skyrocketed by modern standards over the next three years, overlapping into Obama’s early months in office before plateauing. They’ve dropped quite slightly since but still haven’t gotten down to reasonable levels.
One can argue the extent to which Bush policies helped trigger the meltdown, although the cited de-regulation and whatnot have been fairly consistent US policy going back to the Carter administration. To the extent Obama deserves credit for the correction that’s accompanied his three years in office, it’s mostly a function of the unpopular stimulus package he helped get passed. Of course, Bush, too, passed a large, unpopular stimulus package as well as a smaller, less unpopular one. We can only speculate what would have happened in the absence of said packages.
I think the point Dave Schuler was making was that it is fair to criticize Obama if the for the unemployment rate going up from 2007-2008 if he supported the same bailouts that were thrust upon us during the Bush administration that contributed tot he current economic state.
I doubt that was Dave’s point. In any case, such a point assumes that the bailouts under the Bush administration contributed to rising unemployment. This is an assumption that does not have much to support it. I don’t think there are many people who believe the unemployment situation would have been better if the banks and auto industry were allowed to fail, mostly because such a belief makes no sense.
@Steven L. Taylor: Not in this case. First, there really was only one policy. There was the $800 billion Recovery Act, or stimulus, that Obama signed into law on Feb. 17, 2009, less than one month after taking office. There were a few marginal programs and the auto bailout saved some jobs, but at least 90% of the Obama jobs policy is the stimulus.
Second, the administration told us that the stimulus would create 4 million jobs and keep unemployment under 8%. Obviously, they were wrong. It’s been nearly 3 years. 4 million jobs have not been created and unemployment hasn’t been lower than 8.5%.
Even if you give the stimulus a year to be implemented, unemployment during the entirety of 2010 fluctuated between 9.4% and 9.9%. It has only been in the past 6 months that we’ve seen a steady decline. Most of the stimulus money was gone a long time ago.
The Bush/Greenspan policies were attempts to wring the last gasp out of a mature expansion. This is true both of tax cuts and low interest rates. Both were destructive. The tax cuts, with expanded spending, set us on this deficit path. The low interest rates gave construction jobs for a short time, and then boom.
So, there were fiscal and monetary errors. But, of those, we most often forget the President’s ability to shape monetary policy. That is huge in our system of state, market, capitalism.
Well over 1,000,000 jobs if you count downstream suppliers…but don’t let facts bother you.
You also neglect some other facts when you harp on the 8% prediction. First…the estimates of the Bush Contraction at the time were off by huge amounts. The Contraction of the last quarter of ’08 was estimated at around 3% when in truth it was closer to 9%. That’s a factor of three. 300%. The stimulus was designed for a condition 1/3rd of actual conditions. Can you understand how a prediction could be off by a couple points…2% more or less? Second all of those estimates came with huge caveats:
Essentially the facts you are quoting as evidence of Obama’s incompetence is really evidence of how f’ing piss poor the economy Bush left was, and how government and private sector statistics badly mis-judged the severity of the recession. A 9% crash in one quarter is not a normal recession.
@Hey Norm: I don’t count “downstream suppliers.” Even if GM and Chrysler had completely gone out of business and laid off every worker, competitors would have picked up that market share and the downstream suppliers would have sold to them. But if, as you claim, 1 million jobs were saved by the auto bailout, that’s 1 million jobs subtracted from the total that Obama claims were saved by the stimulus, making the stimulus an even bigger failure.
Even before the 2008 election, Obama was calling it “the worst financial crisis since the Great Depression.” Now, he wants to claim that he didn’t know how bad it really was. He doesn’t get to have it both ways. Either he was exaggerating his claims back then, or his policies were woefully inadequate to handle such a crisis.
(By the way, since you brought up Bush, I’m sure you extend him the same benefit of the doubt regarding his miscalculation on WMD in Iraq as you do Obama for his miscalculation on the financial crisis, right?)
Bullshit. What kind of logic is that? And your parenthesis just marks you out as a hack.
The Economic Stimulus Act of 2008 passed through the Senate on an 81-16 vote and then the House gave its approval by a margin of 380-34.
I don’t know whether this stimulus was the larger or smaller to which you were referring, but with vote totals like that I don’t think “unpopular” (or even “less unpopular”) would be my adjective of choice.
OK… you are officially stupid. Did you even read about the hearings? You know, the ones where Ford said “Do not let GM and Chrysler go out of business? ” Because, if they do, “we are f*cked????!”
Ford, as a profitable manufacture of cars, used those SAME “downstream suppliers”.
JESUS H. Fn’ CHRIST….
Never mind. You are beside the point.
Don’t take this as an insult. So am I.
My preferences have no particular ideology, consequently no political figures are interested in them—they won’t garner any votes.
I think that we have a near term problem, a middle term problem, and a long term problem. As I see it the near term problem is that too many people have not been working for too long. Our middle term problems include that there are too many barriers to starting businesses (and the jobs that come with new businesses) and people are preparing for the wrong jobs at too great a cost. Our long term problems are more structural in nature.
To solve the short term problems I think that we should replace our idiotic scheme of paying people not to work with a CCC-style jobs program from which we remove the requirement for Davis-Bacon wages. If we need to spend money to do it, so be it.
To solve the middle term problems we should come up with a common system of regulations similar to the Uniform Commercial Code. We should also stop picking winners and losers and stop subsidizing businesses, particularly big businesses. Maybe some creative solutions like exempting new closely held privately owned businesses from taxes. Solutions can’t be federal-only.
I’ve made any number of suggestions about educational reforms: support the stuff we want, don’t support the stuff we’re indifferent to; if a college degree is the future let a co-op of the states put a degree program online at low or no cost; subsidized apprenticeship programs; more emphasis on trade school (and serious oversight to ensure they’re actually teaching something).
To solve the long term problems we should rationalize our trade, immigration, intellectual property and healthcare laws. I believe we need to re-think letting China game our trade by buying Treasuries rather than goods. As long as their banks are opaque and owned by the state we’ve got a problem (and the Chinese are in violation of the agreements they made in joining the WTO). Our immigration policy is just nuts. Intellectual property is no better—Alex Tabarrok is on the right track there. I’ve believed in a single payer healthcare system for 30 years. Whatever the mechanism we need to reduce healthcare spending. I don’t think we can have a robust economy when more than a sixth of it is healthcare and two-thirds of that is subsidized. We also can’t reduce healthcare spending as we must be optimizing only 15% of it.
You do realize that 1/3 of that package came in the form of tax cuts, right? Hmm…perhaps they aren’t the magical things that conservatives tell us will actually stimulate the economy…
Of course Obama’s miscalculation didn’t lead to the deaths of tens of thousands of people and didn’t piss away $1 trillion…
Yes they would. Toyota, Honda, Nissan, Hundai, VW & Kia would have happily picked up that market share.
Even you must see why that is not a desirable outcome…
I appreciate the rehash, but you are not telling me anything I don’t already know. You are factually more or less correct, but you are also weaving partisan spin into your analysis. Well, its your blog.
Unpopular in the Foxverse? Sure.
Given the magnitude of the disaster we experienced in 2008 and the downstream problems that still need to be resolved as a result of the massive greed-fest associated with the real estate boom, where we are right now does not look all that bad. We avoided a depression, we are in a job recovery, and the stock market has regained much of the vast losses that followed the the bust. I know I have done well, I got back in the market the week Obama took office.
Bush took intelligence full of caveats and ignored them in order to make his case. His blunder cost us 4000 troops and over $2 trillion and the nations moral standing in the world.
Obama…given bogus information made his case with well stated caveats. We have created private sector jobs for 22 months…the market is 4000 points higher than Bush left…and GDP is at pre-Bush Contraction levels.
No equivalency…except for folks like you.
@Steven L. Taylor:
I did not see any accounting for the unemployed that have given up searching, which are not counted in the main statistic of 8.1%. Here is what the BLS said on the matter very recently. This number of 2.5 million people not even looking for the prior 4 weeks should be reflected in any discussion of unemployment. Here is an extract covering the matter from the BLS.
Economic Situation Release Friday, Jan 6, 2012 US Bureau of Labor Statistics
About 2.5 million persons were marginally attached to the labor force in
December, little different from a year earlier. (The data are not seasonally
adjusted.) These individuals were not in the labor force, wanted and were
available for work, and had looked for a job sometime in the prior 12 months.
They were not counted as unemployed because they had not searched for work in
the 4 weeks preceding the survey. (See table A-16.)
Among the marginally attached, there were 945,000 discouraged workers in
December, a decrease of 373,000 from a year earlier. (The data are not seasonally
adjusted.) Discouraged workers are persons not currently looking for work
because they believe no jobs are available for them. The remaining 1.6 million
persons marginally attached to the labor force in December had not searched for
work in the 4 weeks preceding the survey for reasons such as school attendance or
I’m sure you did the same analysis during the recovery from the early 2000s recession, right Mannning? Because, as I recall, there was a “jobless recovery” then too. I’m sure you blamed that on Bush, right? Sure you did.
Yes Manning…a lot of people are frustrated by the jobs outlook. You have that talking point down pat. Good for you.
Three years ago, in the last month before Obama took office, we shed 750,000 jobs. In the last quarter of ’08 GDP contracted at 9%. The climb out of a recession like that is predictably slow.
Please name for me one similar economy in a similar hole that has rebounded any faster.
FWIW, here’s a related concern. It’s one I voiced here over the last year:
Recovery at risk as Americans raid savings
I’ve argued the ultimate true measure of national economic health is the impact on family wealth. No matter what employment or wages are doing, if median net worth is increasing, people are doing well. Of course, if chronic underemployment had been masked by a draw-down of saved wealth, then things could be even worse than the headline numbers showed.
If true, this is f’ing insane:
The rules to allow people to tax shelter, and then borrow against, income sure gave the financial industry a way to profit. Rubes, less so.
I’ll resist the urge to quibble about those things, Dave. I think they’re mostly right.
Ultimately though it will come down to whether the next President and Congress can tell a good Story(*), or whether it will be a slow of low approval.
* – I believe in the value of aspiration narrative for reviving animal spirits.
@Rob in CT:
Actually, Old Sod, I did blame Bush, for that and a lot of other things. But the argument is on what to do now, today, going forward, not 3 or 11 years ago. The fixes we need we will not be able to accompliish with Obama at the helm and Peolsi and Reid in lead roles. They have only made the problem far worse. so far, and they are hell bent on spending an enormous tot more on the cuff, as it were.
With an acknowledged $16 Trillion national debt and growing, and the obligations from entitlements running at $75 Trillion over the next 10 years, I don’t see Obama gutting his so-called sterling achievement–Obamacare–or any other Democratic spending programs.
Rather, I see him and his cohorts printing more money and continued heavy borrowing to try to bolster the economy, only to see it take a much worse and hence truly catastrophic nosedive anyway, probably before 2014. It is unfortunate that we also have some people that don’t believe the nationalo debt is a problem. They say “We owe it to ourselves”. When 95% of the debt was held in the US, that was possible, but today almost 50% is held overseas, which is quite a different situation.
We have a revenue of about $2 Trillion per year, and a debt of $16+ going to $25 or even $30 Trillion. So our debt to income ratio is between 8 and 13.5 to 1. This is disaster for our economy.
Should be a debt to income betwee 8 to 1; 12.5 to 1; or 15 to 1, which no banker or rational lender would accept.
@mannning: Obamacare lowers the near and long term deficit, so it’s proves the opposite of what you claim. The Democrats passed a significant deficit reduction package, which is why they are the party that cares about lowering the deficit, while the GOP is the party of higher deficits.
I see you moved the goalposts from unemployment to debt, without batting an eyelash.
As for the debt issue: as you note, revenue < expenditure. You blame this on Obama. I see it as largely a pre-existing condition. He didn't cause the '08 crash. He did try to stop the bleeding, and that did cost money, adding to the debt. Doing nothing (or worse, cutting) would have led to a deflationary spiral which would have actually been worse for the budget (not to mention resulting in unemployment that was even higher than what we got).
Future revenue needs to rise and the projected expenditures need to be curbed, yes. The Democrats are on the record wanting to construct such a long-term compromise solution. They've tried once already to reach such a deal.
When the GOP decides it's more useful to work on such a solution than it is to obstruct in the hopes of winning an election, perhaps something good will come of it.
Until then, we're SOL.
a debt to income betwee 8 to 1; 12.5 to 1; or 15 to 1, which no banker or rational lender would accept.
And yet, people are still falling all over themselves to lend us money. Hmm.
The debt is a concern, yes. But it’s a medium-to-long-term concern. In the meantime, we have the unemployment problem.
@Rob in CT:
You seem to think that spending, deficits, debt, taxes, regulation overload, poor environmental decisions, outsourcing jobs, and entitlements, especially health, are unrelated to the job situation. They are.
It is folly to try to fix one of those in grand and glorious isolation to the others. This current administration gets a fail grade in long-term Macro-Economics 101, and in letting small businesses grow, instead of over-regulating them and creating uncertainty by overspending on new legislation with long-term spending commitments, and refusing to authorize job-producing private sector programs that would increase employment. That is where the jobs are (or were)–small businesses. Playing the richman-poorman card is shortsighted political gamesmanship that is laughable!
Furthermore, the recent pogo stick policies of an all democratic congress and presidency of propping up the economy artificially is unsustainable, as we will see in a year or two. We are almost “all in” as it were, and what happens when we cannot print more money? We default, and no one lends us money, stifling businesses and hence jobs. What happens if the US Dollar is dethroned from its current posture? We could not print money and use it then. What happens if we do print lots more? Heavy Inflation, which is on the way now. Then what happens to jobs? They go west. The problem is that virtually no politician wants to see our real situation for what it is, and then take the steps needed to fix it across the board, least of all Obama! Just about every step he takes, or wants to take, worsens the problem, except for his truly token efforts to move right on some issues.
I have not yet heard Steven’s reply to my suggestion that the unacounted for group be included in the unemployment stats for the sake of having a complete story.
@mannning: Quick response:
Sure, there is definitely something to be said for a metric that examines those factors. But, of course, the official unemployment rate does not do so. As such, as comparison over time would likewise have to include those factors.
So, yes, more information is good, but your couldn’t compare that number to past numbers without making the appropriate adjustments.