Getting Worse

The unemployment situation is getting worse than was expected, something we all knew anyway:

The White House says America’s employment picture is worse than the Obama administration had anticipated just a few months ago. The somber admission follows the latest jobless report showing the highest unemployment rate the United States has seen in more than 25 years.

U.S. unemployment jumped a half percent in May, to 9.4 percent prompting this comment by Austan Goolsbee, a member of President Barack Obama’s Council of Economic Advisors:

“The economy clearly has gotten substantially worse from the initial predictions that were being made, not just by the White House, but by all of the private sector,” said Austan Goolsbee.

Economists point out that the current jobless rate is already higher than the hypothetical rate that was used to calculate the health of banks and other financial institutions in so-called “stress tests” earlier this year. And, the upward unemployment trajectory is expected to continue in coming months, even if the overall economy begins to recover.

The funny thing about this (but not really) is how this will be spun. Republicans will frame this as a failure of the Obama administration, and in fact, if you check memeorandum, they already are. We’ll be told the stimulus didn’t work, we’ll be told the Obama team didn’t do enough, and so on. However, the only thing that won’t be mentioned is what the Republican plan was and is- do nothing. Also conspicuously absent from this critique will be any criticism from the left flank on the issue- from the Krugman wing and from others, that if this is a failure of the Obama team, it is a failure to do enough.

So, yes. The economic disaster that team Obama inherited is worse than predicted. And the Republicans still want to do nothing but fling poo.

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43 replies
  1. 1
    DecidedFenceSitter says:

    And the employment numbers are already worse than the “adverse” case stress tests, if I remember Calculated Risk. And being as it is easier to decry and destroy than build, the message that we actually need to do MORE will get drowned out.

    We’re so fucked.

  2. 2
    EnderWiggin says:

    OT, but John you need to check out the first 30 seconds of this weeks “This American Life” with is about the federal regulators that were asleep at the switch. I won’t ruin the reason why you need to check out at least the first 30 seconds, other than to point out that there are 12 models.

    http://www.thisamericanlife.or.....pisode=382

    Part of their amazing financial / economy shows, the same stuff that spawned the Planet Money podcast.

  3. 3
    Phaedrus says:

    Might the Repubs be right on this. Didn’t Krugman predict this exact scenario when he talked that half a stimulus might be worse than none at all?

  4. 4
    Zifnab25 says:

    I can’t link off my iPhone well, but I do remember certain GOP Senators proposing upwards of $3 trillion in tax cuts. Something about slashing the corporate rate from 35% to 25% and increasing military expenditures by 15%. So don’t say they didn’t have a plan.

  5. 5
    Scruffy McSnufflepuss says:

    Nothing’s wrong that repealing the capital gains tax and bringing back the gold standard won’t fix in a jiffy.

  6. 6
    SpotWeld says:

    I wonder if any Republican govenors will attempt to use the unemployment numbers are justifaction for a renewed effort to refuse stimulus money. (Something along the lines of “taking the money will only make things worse”.)

    It seems like an incredibly insane sort of thing to do.
    So.. Palin then?

  7. 7
    Bob says:

    If the R’s want to make the argument that Obama didn’t do enough, it might be true, but it’s not because he doesn’t want to do more. He has been hamstrung by national debt that was sinfully created during better times.

  8. 8
    Face says:

    I have a job, so therefore the economy is just fine.

    And another thing–I’m not sure John’s noticed, but really, nobody is listening to anything Republicans have to say lately. They can bitch and moan about deficits and unemployment and gay marriage, and Most Of America understands the hypocrisy and blowhardness of their positions. So who gives a fuck what they cry about?

  9. 9
    KCinDC says:

    And the reason the stimulus wasn’t big enough was that Republicans and Blue Dogs demanded that it be cut down.

  10. 10
    Ted the Slacker says:

    @Phaedrus: “Didn’t Krugman predict this exact scenario when he talked that half a stimulus might be worse than none at all?”

    Sort of, I think. My recollection is that he thought Obama would probably have to come back with another stimulus plan later this year, and he would hamstrung if he failed to distinguish between the (unpopular) bank bail-outs and the (popular) fiscal stimulus.

    I do however think he believed some fiscal stimulus was better than none, but he definitely doubted it was large enough.

  11. 11
    slag says:

    And the Republicans still want to do nothing but fling poo.

    And the media still want to do nothing but catch it and eat it up.

  12. 12
    Montysano says:

    Apparently the Dow Jones Industrial Average is a Balloon Juice reader, and is reacting accordingly.

  13. 13
    Balconesfault says:

    @Bob:

    He has been hamstrung by national debt that was sinfully created during better times.

    Not only created during better times … but there’s a pretty good argument to be made that the bubble that blew up was fueled in no small way into being bigger and badder thanks to that debt.

  14. 14
    Phaedrus says:

    @Ted – web search says you are right, it was others that put the “half a loaf is worse than none” label on his prognosis.

  15. 15
    Mike in NC says:

    Republicans still want to do nothing but fling poo.

    But in all fairness, what else do they know to do?

  16. 16
    PeakVT says:

    “The economy clearly has gotten substantially worse from the initial predictions that were being made, not just by the White House, but by all of the private sector,”

    Pointing at private sector economists and saying “they did it too” is an especially bad way to deflect criticism these days. There were plenty of reasons to expect U3 to go north of 10%.

  17. 17
    geg6 says:

    I haven’t read the article, but does anyone mention the fact that jobless figures always lag behind other economic indicators? Or that unemployment is the most difficult indicator to improve over the short term? Of course the unemployment numbers are going to keep going up and a decrease will take much longer than, say, a stock market recovery or a housing market uptick. That is how it always happens. As for the numbers being higher than the predictions, the predictions were always ridiculously optimistic, whether from Congress, the White House, the media, or any other independent economists other than Dr. Doom and Dr. Shrill. Neither I nor anyone I know finds any of this surprising in any way. Depressing and outrageous, yes. But not surprising.

  18. 18
    Scruffy McSnufflepuss says:

    @Mike in NC:

    But in all fairness, what else do they know to do?

    Thump their chests? Puff their fur up to appear larger to rivals?

  19. 19
    montcalm says:

    “Economists point out that the current jobless rate is already higher than the hypothetical rate that was used to calculate the health of banks and other financial institutions in so-called “stress tests” earlier this year.”

    this is something i hadn’t heard about before. it’s not entirely surprising considering how watered down and useless the stress tests ended up being, but still interesting, if only as an illustration of our governments lovey dovey relationship with the banks.

    in other news, at least one of your readers is contributing to those numbers – a coworker and i got our 2 month notices last week. hooray! :(

  20. 20
    Johnny B. Guud says:

    The economic disaster that team Obama inherited is worse than predicted

    In reality this may be true. But most people base their way of thinking on the perception, not necessarily the reality.

    In all fairness, the reality of the situation probably won’t be confirmed until months down the road. But people see that it’s been what, just about 6 months since the president took office? And the rush to vote on the stimulus is still somewhat fresh in people’s minds. Accordingly, they want to see some results—and they just aren’t there. Illusory “green shoots” notwithstanding.

    Obama realizes the political implications of all this—which is why he’s stepping on the gas with regards to implementing the stimulus funds.

    And in fairness to the administration, according to Joe Biden’s latest “stimulus report” only less than 10% (probably mistaken on the number), of the stimulus money has gone out, and most of that went to help various state budgets, unemployment benefits, etc. The “meat” of the stimulus, if you will, really hasn’t been implemented. And the government has all but acknowledged that most of the programs won’t be implemented until 2010 anyway.

    But again, perception trumps reality in politics, and the perception is that the stimulus isn’t working.

    My real concern is with the interest rate creep. Rates are headed higher and could stifle any economic activity and home purchases, in my humble opinion.

  21. 21
    Comrade Dread says:

    In truth, I don’t think the Republicans have any idea of what to do other than cut taxes and assume that this will magically save the economy.

    Of course, given that previous tax cuts have not brought the budget into balance, they will still be borrowing to keep the money flowing.

    As such, there is little substantive difference between borrowing a lot of money and distributing it from the Federal level, and borrowing more money under the guise of ‘free market’ ideals, save that the latter will probably result in less money being distributed overall as people horde the extra dollars they find themselves with (assuming tax cuts even apply to them.)

    So while the Democratic party plan may be bad, a Republican plan would likely be a lot worse.

  22. 22
    Lee from NC says:

    @Johnny B. Guud:

    Good comment though I do remember that several polls put the majority of people in the “give him a year to fix it” category. Not sure if that attitude is waning or not as more and more people lose their jobs.

    The only thing I’ll add is that none of this is unexpected. People like Krugman and Atrios have been saying all along that this thing is only going to get worse. Unfortunately, not enough people in position to do anything about it have been listening.

    I know John will say that the politics of the situation would not have let Obama and his team do more, but honestly I think most of his advisors could have fought harder for a bigger stimulus.

  23. 23
    Brick Oven Bill says:

    From from the New York Times:

    “Larry Summers is one of the world’s most brilliant economists,” said Mr. Orszag, who along with Mr. Geithner, successfully resisted Mr. Summers’s attempts early on to control their access to Mr. Obama. “He enriches any discussion he participates in, which is particularly valuable given the complexity and importance of the challenges currently facing us.”

    I have not met Mr. Summers, although I had a positive impression of him for daring to suggest that there are differences between the sexes during his tenure at Harvard. But I did get a chance to listen to him on C-SPAN. The impression that I cannot get out of my mind is that he sounds just like Mongo from Blazing Saddles.

    It is not too late to electrify the railroads. Another answer is to stop hiring college professors for executive positions.

  24. 24
    Da Bomb says:

    Krugman believed that stimulus wasn’t enough. He belived that the Obama aministration should have asked for more.

    Unfortunately, the reality of the situation is that with all the trouble that Obama had in trying to pass “a not enough” stimulus, there would be no way in hell that he would have been able to pass an even larger one. Theory completely placates to reality.

    And I have always read that unemployment is always a lagging indicator when it comes to economic growth and healing.

  25. 25

    Almost anyone, even us commenters right here on these pages earlier this year, could have predicted that employment would be a lagging indicator of the economic situation, and that it would be at least mid 2010 before normalcy were fully restored to that trend even under good conditions … which was why there was such urgency to get remediations passed and implemented when Obama took office.

    And the average American still gets this, pretty much, and probably thinks that the Republicans are a bad comedy act at this point. Who could have predicted that the GOP would latch onto the lagging numbers and try to blame the recession on Democrats?

    More power to them. The more ridiculous they are, the better. Nobody is afraid of their Big Bad Wolf act any more.

  26. 26

    It is not too late to electrify the railroads.

    It’s not too late for you to get some new material, Billious.

  27. 27
    Brick Oven Bill says:

    More from from the New York Times:

    Just after [Summer’s] 54th birthday on Nov. 30, when the new team was working in Mr. Obama’s transition headquarters in Chicago, Mr. Geithner brought a cupcake and the group sang “Happy Birthday.” As they ended, Mr. Summers rang out, “for he’s an unpleasant fellow,” instead of “for he’s a jolly good fellow.”

    This is one more reason I attempt to maintain a low profile. I do not want Tim Geithner and Peter Orszag bringing me a cupcake on my birthday, and singing for me.

    These guys are great though, what a hoot.

  28. 28
    RolloTomasi says:

    Employment rates are a lagging indicator , both in recession and recovery. We should see signs of improvement in the employment numbers in the winter of 09.

  29. 29
    slag says:

    Didn’t Obama ask for more only to have stimpak whittled down by the “moderates” in Congress? If only the Gods of Full Employment were appeased by the same sacrifices that appease the Gods of Bipartisanship.

  30. 30
    polyorchnid octopunch says:

    You forgot to add “Clown Shoes” to the keyword collection.

  31. 31
    Montysano says:

    Kunstler’s latest blog post is right on the money. Whatever happens with unemployment, foreclosures, etc. is somewhat beside the point. We are not going back to the world of 2005, with a 4000 sq/ft McMansion for every family, and two new SUVs in the driveway. That world is over. The bankruptcies of GM and Chrysler should tell us that. Obama is surely aware of this, but how best to break this news to the American public? After all, “the American way of life is not negotiable”.

    We are going to be much less wealthy. We are going to lead much simpler lives. We are going to consume less. This is not necessarily a bad thing, but it is the kind of news that has historically caused us to lurch forth and kill somebody.

  32. 32
    Jim Pharo says:

    I don’t think people have processed just how serious is the trouble we’re in. We have been created job-less people at an alarming rate for some time. That is translating, as personal savings are exhausted, the kindness of family and friends is dwindling, and assets are being liquidated, into more foreclosures and evictions — some of which will also contribute to the coming commercial real estate collapse.

    We may get to a point where the external indicators agree we have nowhere lower to go. But that won’t mean we start climbing back up. Our economy has been so distorted for so long that it will take a long time to get it right again.

    When was the last time housing was affordable? When could most families handle paying their own tuition bills, or health insurance premiums?

    Which industries are going to be creating new jobs in adequate quantity any time soon? (Search your heart and you’ll know it ain’t alternative energy, at least not in the next 5 years.)

    We are in serious trouble. This is not ordinary ebb-and-flow of the business cycle. Yes, the business cycle still exists, and yes it will eventually stop swinging negative and start swinging positive. But we’ve learned in the recent past that an economy that is in a statistical growth period can still be a hard place to find a place to live, educate the kids, and take care of the sick.

  33. 33
    DougJ says:

    The funny thing about this (but not really) is how this will be spun. Republicans will frame this as a failure of the Obama administration, and in fact, if you check memeorandum, they already are. We’ll be told the stimulus didn’t work, we’ll be told the Obama team didn’t do enough, and so on. However, the only thing that won’t be mentioned is what the Republican plan was and is- do nothing. Also conspicuously absent from this critique will be any criticism from the left flank on the issue- from the Krugman wing and from others, that if this is a failure of the Obama team, it is a failure to do enough.

    Spot on.

  34. 34
    Montysano (All Hail Marx & Lennon) says:

    @EnderWiggin:

    OT, but John you need to check out the first 30 seconds of this weeks “This American Life” with is about the federal regulators that were asleep at the switch.

    Listen to the whole thing. “This American Life” has become the best think on NPR.

  35. 35
    jcricket says:

    The funny thing about this (but not really) is how this will be spun

    The funny this is that this is always the GOP response to government failure. Government let hundreds die in Katrina? Defund FEMA. Government fails to secure proper level of funding for Social Security? Privatize it. Roads suck? Sell them to Germany. Can’t secure our food supply? Let private industry figure it out.

    The fact that it’s usually the Republicans poor governance (directly and through demonization) or their de-funding (tax cuts uber alles) of government that leads to crappy government to begin with.

    The solution, in nearly all cases, is a combination of better funding, better enforcement where government already is, and, overall, more government. Yes, I said it. In most cases we need higher taxes and more government to carry out the functions the American public has largely agreed should be the function of the government.

    BTW – it’s not as if the private sector is some magical wellspring of good ideas – does the last set of bubbles, or military contractor scandals show anyone anything?

  36. 36
    jcricket says:

    We have been created job-less people at an alarming rate for some time

    To job-less I’d like to add “under-jobbed”. Tons of the employment that’s come out of the two previous recoveries (mid 90s and 2002+) paid like 1/3rd of the previous jobs that a lot of people held.

    So when a factory goes under, and is replaced by “service industry” jobs, for most people that means going from $24/hour with benefits to $16/hour with partial or no benefits. Yet the employment indicators go up and everyone considers us recovered.

    It’s the logical extension of the last 30 years of wage stagnation. I’m no communist, but it’s pretty clear the utra-rich-shareholder class isn’t tricking down to anyone (maybe trickling on, but not down). The only reason they’ve been able to increase their wealth is the 95% of us who fuel their companies by buying their shit keep binging on credit. This shit is broken, and until the masses wake up, and realize the concern-trolling of companies and the ultra-rich is to be 1000000% ignored (“oh noes, innovation will be killed if we tax the rich more, or corporations will move away”). We need some policy changes not written “by rich people for rich people” before we can expect the poor and middle class to have their “lot” improved.

  37. 37
    JGabriel says:

    John Cole @ Top:

    However, the only thing that won’t be mentioned is what the Republican plan was and is- do nothing. Also conspicuously absent from this critique will be any criticism from the left flank on the issue- from the Krugman wing and from others, that if this is a failure of the Obama team, it is a failure to do enough.

    John, I’m not sure what you mean here – it’s kind of awkwardly phrased. Are you saying that Krugman, et. al., won’t be criticizing Obama for not doing enough? Because Krugman, et. al., have been criticizing Obama plenty on precisely that basis.

    Or are you saying that criticism from the left won’t be included in mainstream(tm) media critiques?

    Please clarify?

    .

  38. 38
    liberal says:

    @jcricket:

    In most cases we need higher taxes and more government to carry out the functions the American public has largely agreed should be the function of the government.

    Noted exception: the military, which could be cut 75% (not even including the wars in Iraq and Afghan.) with no ill effect aside from flooding the labor market with ex-servicemen.

  39. 39
    Ruemara says:

    @jcricket:

    As someone who’s been under-employed for 5 years now, I will continue to blame ex-president GWB for this mess. As I’ve been staring at my unemployed mate over the morning tea for approximately a year now, I will be blaming GWB even more vociferously as our savings and retirement funds get tapped and dwindle. I also can point to multiple people who have had their jobs retained as opposed to dropped outright thanks to teh ebil stimmulus, so KAN I HAZ MORE SOSHILIZM, so I can finally earn more than 20k$ per annum?

    I now look back with a bemused nostalgia when I was underpaid in a good econ and felt rich. Oh 90’s, pls come back!

  40. 40
    Robertdsc-iphone says:

    So if the White House were to produce a second stim pack consisting of jobs programs, what would people do? Are we going to have laid-off software people laying rebar for bridges? I know people can change careers, but what sectors need people that the unemployed can fill adequetely?

    Separately, my biggest issue with the stim pack put out at the start of the term was that it was overly reliant on tax cuts for everyone under 250K. Keeping campaign promises is nice, but I’ve read that tax cuts are not as beneficial as other methods.

  41. 41
    Neo says:

    Barry made himself the quarterback, halfback, fullback and wide receiver of his team, and now you want to blame the guys on the bench when the score comes up badly.

  42. 42
    Yutsano says:

    Separately, my biggest issue with the stim pack put out at the start of the term was that it was overly reliant on tax cuts for everyone under 250K. Keeping campaign promises is nice, but I’ve read that tax cuts are not as beneficial as other methods.

    Blame the Blue Dogs for that, specifically Ben Nelson. It was also seen as a sweetener to get Collins, Snowe, and Specter to sign on to cloture. Or better yet blame Harry “Milquetoast” Reid for letting it get so damn watered down it was almost worse than doing nothing. Seriously, someone had to have been snowjobbed into thinking he was a boxer at one point in his life.

  43. 43
    terry chay says:

    @EnderWiggin:

    I second this John. I know how you like to mention ratings agencies, the second half of the program is devoted to them.

    http://www.thisamericanlife.or.....pisode=382

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