This post is jointly written with Anton Strezhnev, a very bright Georgetown undergraduate.
One of the challenges in forecasting elections is that economic data are often inaccurate when first released. Some of the adjustments are substantial. Just to illustrate this point, the image below (source) shows the change from original issue to current estimate in a composite index of economic performance: the Chicago Fed National Activity Index (CFNAI).
The Federal Reserve Bank of Philadelphia has released its latest forecasts for unemployment over the next several years, and the news isn’t good. By the fourth quarter of 2012 –- election time –- unemployment is expected to be at 8.7 percent. Worse, unemployment isn’t expected to dip below 8 percent until 2014. This could change if growth speeds up over the next year, but the prospects for that aren’t good. For the unemployment rate to drop by any amount, real GDP needs to grow by at least 2 percent. To see a significant reduction in employment, GDP growth needs to reach 4 percent or higher.
Wednesday’s Washington Post deserves some kind of perverse award for advocacy journalism—in this case, for advocating the proposition that dire economic consequences will ensue if the congressional Super Committee fails to cut a deal for drastic deficit reduction. This is, of course, one side of an argument.
Those on the other side, including myself, have argued that austerity in a deep recession makes no economic sense and that as a matter of politics, the Obama administration would be far better advised to let the automatic sequester formula take effect, knowing that it would have to be reopened because of Republicans’ horror of deep defense cuts and the expiration of the Bush tax cuts.
The recession officially ended nearly two and a half years ago, in June 2009, but for the generation of young adults who’ve been trying to take their first steps into adulthood, its effects could shape the future for decades to come.
It’s Friday! Which means another round of bad news for the economy. In this case, the Commerce Department has revised its assessment of economic growth for the second quarter. At the time, economists had estimated 1.3 percent growth for the quarter – sluggish, but an improvement over the first quarter, when the economy grew by an anemic 0.4 percent. The revision shows 1 percent economic growth for the second quarter, a sharp drop and lower than the decline expected by economic analysts.
In his first week on the presidential campaign trail, Governor Rick Perry of Texas discovered the answer to a question that's long puzzled me: How do you get mainstream political reporters to care about monetary policy and central banking? All it takes, it turns out, is the threat of a little violence. "If this guy prints more money between now and the election," he told an Iowan who asked a question about Ben Bernanke, "I dunno what y'all would do to him in Iowa, but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion."
Texas Governor Rick Perry gives his opinion of Fed Chairman Ben Bernanke:
“If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion.”
The problem with economic commentary posting that DC is insulated from the recession and that said insulation gives policy-makers an unrealistically rosy view of the economy is that it basically ignores that an entire segment of the city isn’t insulated from the recession. So here’s Catherine Rampell:
In every state, a majority of residents think the economy is getting worse. In the nation’s capital, however, a full 60 percent of people think the economy is getting better.
My post at Greg's today, about that fact that both parties' austerity plans will likely hurt the economy:
From the point of view of helping the economy recover, this is idiotic. For Republicans, of course, increased unemployment and lower GDP increase the possibility of Obama being a one term president. The reason few people are stating the obvious — that there’s something oddly masochistic about harming the economy at time when so many are unemployed — is that both sides are pushing plans that could damage the recovery. That’s because we’re trapped in a Beltway Deficit Feedback Loop, where no one’s talking about unemployment and everyone’s talking about the deficit.
At least, that's what I would ask David Brooks, who managed to write an entire column on unemployment among adult men without mentioning the economic collapse of 2008. His explanation for the 20 percent of American men (between the ages of 25 and 54) who don't work? It's structural (oh, and they're lazy too):
Part of the problem has to do with human capital. More American men lack the emotional and professional skills they would need to contribute. According to data from the Bureau of Labor Statistics, 35 percent of those without a high school diploma are out of the labor force, compared with less than 10 percent of those with a college degree.
The big takeaway from Federal Reserve chairman Ben Bernanke's historic press conference was that the focus, both of questions asked and Bernanke's own remarks, addressed a situation that would be the exact opposite of the one we're in now.
What is our current situation? We have seven million people out of work since the crisis (on top of the number of those who would have been out of work without the crisis). The employment numbers have plummeted for all groups, regardless of education or age. Current estimates say it will take years, 2014 or beyond, before the country approaches a normal unemployment rate.
As an addendum to yesterday's post on investor confidence in the United States, it's worth noting this recent Gallup survey, in which they gave investors a list of possible situations that could affect the investment climate, and asked which were hurting or helping the United States. Of the choices, deficits and unemployment ranked the highest:
This week progressives opposed to the GOP austerity agenda cut proposal gained some great talking points, first from a leaked Goldman Sachs study that projected the plan would decrease the GDP by 2 percent and raise unemployment by 1 percent, and then from a Moody’s Analytics report from Mark Zandi that projected it would destroy 700,000 jobs.
Matthew Yglesias economic development is at the root of unrest throughout the Arab world -- and helping countries manage economic growth well should be our concern going forward.
As the world's eyes remain fixed on political change in the Arab world, it's worth looking back to where the crisis began -- unrest over higher food prices in grain-importing countries -- to get a sense of the fundamental challenges facing the region. In the short term, the run-up in food prices was mostly driven by bad harvests in Russia and Australia. In a deeper sense, however, raising prices for both food and other commodities such as oil are all driven by a fundamental shift in the world's pattern of economic growth.
Today, Heather Boushey, my colleague at the Center for American Progress, has a piece in Slate talking about how despite the fact that there has been steady job growth in the economic recovery from the "he-cession," women are the big losers. While men have experienced steady gains in employment (private-sector manufacturing, for instance, has seen growth in the recession), women actually lost jobs in the summer of 2010. Boushey provides some reasons this might be: