I was recently asked how some of the key economic indicators are trending right now from the perspective of the president's record. So I crunched some numbers.
Caveats: Election-relevant opinions on the economy are not yet formed, but since I expect 2012 to be a slight improvement over 2011 (with some real risk factors, like Europe, oil, and fiscal drag from fading stimulus), things that look good now could look a little better by the end of 2012. Others, as I point out, might not.
And, of course, there's the argument as to how much this has to do with stuff the president... um... actually did, as opposed to what you'd expect anyway. Normally, that's a strong caveat and presidents get all kinds of undeserved praise and blame. But that caveat should be dialed back, I'd say pretty significantly, given the interventions of the administration, not to mention the Federal Reserve.
All told, I think the president's team will be able to make the argument that things are getting better. Too slowly, for sure. And there are some treacherous holes in the argument -- particularly sagging real wages amidst soaring profits. But see for yourself.
[Data caveat: picking the right dates to compare here is more art than science. I tried to pick ones that made sense to me... you're welcome to suggest others. Also, since we don't have December 2011 data yet, I can't use comparisons for the last quarter or month of the year, but I don't think this should matter much, with one exception noted below.]
Employment: When the president took office in January 2009, employment was absolutely cratering. Now it's growing, and, in the private sector, has been since the spring of 2010. The figure shows average monthly job losses and growth in the first six months of the administration and over the most recent six months. The swing from huge negatives to positives, albeit small positives, is notable and helpful to the president.
Unemployment: Here, timing and the choice of dates matters. As the table below shows, averaging over a few months, the unemployment rate is about where it was in the first half of 2009. But what probably matters more in terms of how people experience the jobless rate is the recent trend, and here, from the president's perspective, thing look better. The November jobless rate of 8.6% is significantly off its peak of 10.1% in October of 2009. I suspect it will drift down a bit further in 2012, though there's a wildcard here: if job growth picks up, it could draw more people back into the labor force, and that puts upward pressure on the unemployment rate.
This problem -- the fact that people who've given up looking for work don't show up in the unemployment rate -- is not present in the EMPloyment rate: the share of the population working. That's fallen over the past couple of years and has been basically flat-lining for a year. It's probably the most pessimistic labor market indicator out there, and is a reliable sign that labor demand remains weak.
Similarly, the persistently and historically high shares of long-term unemployment are flashing the same thing -- people stuck in joblessness with not enough opportunities to find work.
On the other hand, unemployment insurance claims have been consistently falling in recent weeks, and that suggests possible improvements to come. Based on claims, private sector job growth, and the tick down in the unemployment rate, my guess is that labor demand will slowly improve next year.
Growth: Though it's not something people tangibly feel the way they do unemployment or job growth, you've got to look at the path of real GDP. Like employment it was falling fast when the president took office, 3.7% per year through the first half of 2009.
Here, the Recovery Act and Fed policies of that year seemed to make a real difference. The economy, led by housing, credit, and labor markets was a downright mess in early 2009, yet following the aggressive interventions of those early days of the administration's tenure, the loss rate of GDP was cut sharply, from -6.7% is 2009Q1, to -0.7% in the second, to +1.7% in the next quarter.
Clearly, this growth didn't translate into jobs for a while -- there's always a lag, one which has gotten longer in recent business cycles (and was no longer in this one than in the last two "jobless recoveries"-see figure B here). And, as shown in a moment, GDP growth has not reached paychecks the way we need it to. But while growth doesn't insure better outcomes for the middle-class, nothing good happens without it (it's necessary, not sufficient).
Note that I assume 3% real GDP growth for the current quarter. At this point, we can make a pretty good guess at the initial GDP estimate for 2011Q4, and most analysts have it coming in above 3%.
Profits, prices, and wages: The next figure shows one of those treacherous holes I referred to above. Real weekly wages are down in real terms. The figure shows the year-over-year changes in the real weekly earnings of blue-collar, non-managerial workers (it's a good proxy for the median, or middle-class wage). It was already falling slightly in 2009 (Dec/Dec) but is falling faster now (down 1.5%, Nov10-Nov11).
Part of this do with faster inflation, as seen in the bars of the left side of the chart.
The other pothole indicator for the president is the increase in profit shares of GDP along with the decline in compensation shares. The figure shows these movements from 2009 compared to now, and while they don't look like big changes in the figure, they're actually quite significant-these variables usually move pretty glacially.
Profits as a share of GDP are way up and compensation/GDP is way down. Now, it's not like high profits are a bad thing, and they often recover before wages. But their distribution is highly skewed, and they clearly signal the return of rising income inequality, a major concern for a lot of people today, myself included.
The decline in the compensation share is a symptom of the weak job market, high unemployment, and weak wage growth. It's why a lot of families still feel squeezed while flush corporations sit on trillions in cash.
Like I said, we're a long way out and all of these indicators will change in ways we can't foresee. The president has some strong trend reversals to point to, though while the trend is his friend, the levels still bedevil. And the distribution of growth -- profits up, wages down -- doesn't help either. Of course, here he has a very strong case to make that the Republican's game plan will only make that problem a lot worse.
Stay tuned.
This post originally appeared at Jared Bernstein's On The Economy blog.
Diane Francis: The Recipe for a Stable Economy in 2012: Less Debt.
How can REAL GDP be 2.4%?
We have about 2% right now and inflation of nearly 4%. He must mean -2.4%. Yes we're shrinking.
http://www.breitbart.com/article.php?id=CNG.708e02122a0745a94d1e4949e69f7399.761&show_article=1
http://www.breitbart.com/article.php?id=CNG.708e02122a0745a94d1e4949e69f7399.191&show_article=1
CLINTONOMICS (the guy who raise taxes with ZERO GOP VOTES and balanced budgets) NOT REAGANOMICS
RENALDO MAGNUS saved America. EVEN Clinton benefited from Renaldo.
Clinton was smart to have capitulated to Newt and the Repub Revolution. He looks good for having done so. But don't be fooled, He was Big Gov Lib spender at first in 1992.
This president is a failure and is destroying the bill of rights. It is third party time
There is a pattern of increasing regulation, threats of increased taxation, and punitive behavior (Boeing, Gibson Guitar) towards those that do not toe the administration line, and undeserved rewards (Solyndra, GE) to those who do. Anyone who puts money at risk in Obama's economy is taking a huge chance. Sitting on trillions? Good for them. Place the blame squarely on Obama.
Gov use to enforce the rules of fairness, making sure the field was competitive. Now, with Obama, Crony Capitalism is at its peek, and the average or upstart Biz doesn't stand a chance.
Vote for the Kucinich, Warren, Grayson CPC progressives in the primaries and the dems in the general.
The nation is healing, the economy is healing. The biggest concern right now is the wheels coming off the Euro. Assuming the Fed saves the Euro, which Europe is unable to do for itself due to selfish, 17-way shortsightedness, everything will be fine. Having once again had their dissipated ineptitude exposed, the Eurozone nations will despise us even more, but so what?
Wouldn't it be great if this New Year's Eve, that all of We The People could look at each other, give a handshake or hug, and appreciate what We The People have done to heal our country? Won't there be enough time between now and election day for the perpetual political class to talk down the nation and the economy?
Happy New Year, all, and the best of everything in 2012 to you and yours.
Can't wait until everyone gets wind of the fact that he destroyed companies, and jobs, for personal advancement. That'll go over well with average Americans.
Don't even get me started on the SOCIAL ISSUES.
The public sector is not willing to increase spending and the private sector cannot increase spending. Spending = income and that is what drives aggregate demand, which is what creates jobs and grows the GDP. Net exports might improve, but that is unlikely as well, given the state of the world's economy.
The private sector is burdened with record levels of debt, which the majority (not all ) is related to asset purchases that have been dramatically deflated. i,e, housing. They cannot retire that debt by selling the asset as the proceeds is way less than the debt obligation.
There is massive unemployment, underemployment and poor and those with jobs are facing falling wages and uncertainty.
The monies that are being earned have a significantly higher portion going towards retiring and servicing debt, not spending in the economy. This will drive aggregate demand downwards, as spending = income.
This will take 10-20 years to right itself and even longer if the Federal government continues to push the austerity canard.
(See the Japanese experience)
If anyone seriously expects economic growth, then they should expect the Federal government to expand their spending in employee rich projects etc. That as we know, will not happen as the ideologues rule the day.
The President may benefit from certain percentages as unemployment, as millions abandon even searching for work, however, the overall economy will be worse for the 99%.
It has nothing to do with being conservative, liberal, or anything else.
It is simply the way economies work. Your comments demonstrate your ignorance on the matter.
Every dollar in existence is there because the US government spent it. They are the sole issuer of US dollars.
The government has never taken money from the private sector and reduced jobs, ever, and your comment makes absolutely no sense.
You don't have any police, politicians, health & safety inspectors, national guard, dot, librarians, teachers, doctors, nurses, army, navy, marines, airforce, roads, highways, stop lights or side walks in your world?
Interesting .....
http://market-ticker.org/akcs-www?get_gallerynr=2321
Debt (and Deficit) have been sky rocketing since 2008. Bush left the Debt at 10 Trillion. Obama now is at 15T, and he wants to increase the Debit limit by another 1.2T to 16.3T.
http://www.cbsnews.com/8301-503544_162-57350320-503544/obama-delays-request-to-hike-debt-ceiling/