“We WILL recover”
6 October
Here’s the President on August 7 in the Rose Garden:
This morning, we received additional signs that the worst may be behind us. … Today we’re pointed in the right direction. We’re losing jobs at less than half the rate we were when I took office.
In a September 24th conference call with the Governors, Vice President Biden said:
In my wildest dreams I never thought [the stimulus] would work this well …
Last Friday was Jobs Day, and the monthly employment report was generally regarded as bad news. Last Friday the VP said:
… today we learned we still have a whole lot more work to do, and a long way to go before we get there.
We just learned that unemployment fell by 263,000 jobs last month, and the unemployment rate ticked up one-tenth of 1 percent. And now — now it’s true that this reflects an improvement of overall things based on the results of our policy. The first quarter of this year, we were losing jobs at an aWeverage of 700,000 jobs per month, month after month. In the quarter that ended this week, the loss was 250,000 jobs per month, two-thirds less.
But we also have known all along that the recovery was going to take a long time.
… We don’t think that “less bad” is good. “Less bad” is not our measure of success. One job lost is one job too many, and it’s still too much pain. There’s still too many hard-working Americans without a paycheck, still too many families struggling to get by.
And while the fears of a depression have been replaced by forecasts of recovery, the kind of recovery the President and I are working to create will not have been achieved — and as Christy was saying a moment ago — until we’re standing here and announcing substantial positive numbers, a positive growth rate in jobs.
… And I believe we’re doing the right things to move things in the right direction.
… And we’re up against — we are committed, as we go through, there will be peaks and valleys in this process. This is not a straight line to recovery, but we are recovering. We will recover.
The Administration made a mistake taking a premature partial victory lap in early August. The President should not then have said the economy was “headed in the right direction” when it wasn’t, and the Vice President should not have declared the stimulus is working when he cannot prove it by showing job gains, but instead only claim that job losses would have been worse without the stimulus.
I have hit this point before, but it’s important, and the shift in tone is noticeable, so I’m going to cover it again. Let’s look at some graphs. (Cool chalkboard formatting is on temporary hold, to return later.)
Here’s the graph the Administration was mistakenly using to drive their oscillating message:
The yellow oval is when the President said “we’re pointed in the right direction.” You can see the green line is pointed up, which is good, right? (Wrong)
The red oval is last Friday. Because this line is pointed down, the Vice President reverted to the future tense: “We don’t think less bad is good. We will recover.”
But this graph shows the change in employment from one month to the next, so it’s the level of the graph that matters, not the slope of the line. If the line on the above graph is moving up, things are “less bad.” Things only become “good” when this line, the change in employment, crosses the horizontal axis into positive territory. That’s when the U.S. economy is creawting net new jobs.
The slope of this line shows the rate of change of the rate of change. You can understand why an elected official or his advisors would want to declare good news at the yellow oval. but they should not have done so.
Let’s look at the graph that matters, showing the levels of employment. How many people are working? We’ll start with the historic perspective, going back to January 2001:
On the above graph of levels, the slope of the line provides useful information: an upward slope means the economy is creating jobs, and a downward slope means the economy is losing jobs. You can see the U.S. economy has been losing jobs since this graph peaked in December 07. Now let’s zoom in on 2009:
Check out the slightly different slopes of the three line segments indicated by arrows. The purple arrow shows a segment that slopes downward slightly less than the yellow arrow. A mathematician would say the shift from yellow to purple was an inflection point, shifting the curve from convex to concave.
This is what led the President in early August to say the economy was “pointed in the right direction.” The red arrow shows the worse news of last Friday’s jobs report, with a line that slopes downward slightly more sharply. The curve shifted back to a convex shape, in which the slope was more sharply downward than in the prior month.
If you’re saying to yourself, “That’s ridiculous! They’re all going down, and the differences in slopes are almost too hard to see!” then you’ve got my point.
The line that represents how many people are working continues to decline. That’s what matters. Trivial changes in the slope of the line are not worthy of Presidential comment. When he does comment on them, he creates a faulty impression and exposes himself to the risk that the number will again change and force him to change his message, as the Administration had to do last Friday.
This becomes crystal clear if you return to the historic graph that shows 2001-2009. The changes in the downward sloping line over the past few months look and are trivial.
As long as the level of employment continues to decline, things are still bad. Third quarter GDP numbers will probably look pretty good, as the drags from housing and business investment wear off, inventory numbers get a temporary boost, and the stimulus spending kicks in.
But consumer spending is 70% of GDP, and the most important determinants of whether people increase their consumption are (1) do they have jobs and (2) are their paychecks going up? As long as employment continues to decline, we’re not out of the woods. Remember that the economy needs to create about 100K – 150K jobs per month to keep up with population growth and keep the unemployment rate constant. The scary part is that the Administration’s own forecast shows a gloomy employment picture through this year and into next year with the unemployment rate in the high 9’s through 2010. Good thing no one can predict that far into the future.
The President jumped the gun in early August when he and his team started taking an optimistic tone toward the employment picture. The employment picture will recover, but we’re not there yet.
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Another great post. I now understand why so many politicians claim that a decrease in the rate of increase in some government program is a "cut" in spending.
Well, I knew that anyway, but it looks like the problem is not limited to government spending rates.
These graphs depict the inexperience or incompetence of the current administration more graphically than anything I have seen. As usual, you have reduced dry statistics to "ordinary guy" relevance. Here's hoping that this motivates the right people to start prioritizing the economy. Much of what you have thoughtfully described on this website should be part of the required high school curriculum. Thanks and keep up the good work.
Google "Lying with Statistics" yields 7,500,000 hits.
I think that number is about to increase.
Thank you for your great work Keith!
The administration's forecasts don't even look close! At the slope shown in your graph, (what would cause a major inflection???), the unemployment rate at the end of the first quarter of 2010 would become 10.4%. So much smoke, you can no longer see the mirrors.
keep up the good work with showing factual data rather the imagery. I can't believe Obama and Biden believe all this tuff they are trying to put over on the American people. I sometimes wonder if Axelgrease and Glib Gibbs are running the WH.
Nice post. I agree, "less bad" ain't great. Of course some of consumer behavior is perception. Perhaps this is what they attempt to manipulate with such proclamations, however, my more cynical side sees simple base politics. Besides, juicing consumer spending patterns only increases the threat that greater over-extension will lead to more stress down the road as those bills come due.
One thing I would add based on our unique focus is that all current legislative versions of Health Care Reform are structured as a tax on employment (mandates, payroll taxes etc), something our economy does NOT need at this juncture. Moreover, there is likely some limit to the Chinese and Gulf States willingness to float exploding deficit spending on our part. I think the public inherently understands this, but the proponents are effectively drowning out or ignoring these concerns.
I think if the total employment graph could separate out tax-paying company & self-employment from gov't jobs, the decline in tax-paying jobs would look even worse.
You're doing great, thanks.
good post. can you point me to where you got the job creation figures/graph? thanks!
The President jumped the gun in early August when he and his team started taking an optimistic tone toward the employment picture. ____It only took 4 years for nonfarm payrolls to recover to the same level as of the date that your former boss was sworn to the oath of office. Of course, you never adopted an optimistic tone in that time period, did you? ____ Golly, in 8 years, 1.864 million jobs (a grand total of 19,400 jobs per month) were created. The shape of the 2009 chart will look different when the fantasy jobs created by the BLS birth/death model in the first quarter are reversed in the March 2010 employment report. Perhaps job losses were running at the 1 million mark per month. So Obama & Biden understated the less bad direction, yes.