That is the question that is posed in today's Wall Street Journal.
During 2011, the Gross Domestic Product (GDP) grew at 1.7%. Estimates are that the GDP for the first quarter of 2012 will be less than 2%. Given this, how did the unemployment rate fall by such a large amount?
Jon Hilsenrath of the WSJ offers us a couple of hypothesis as to why unemployment fell substantially without any significant economic growth. One hypothesis is based around productivity changes...
A less sanguine explanation could be a dangerous productivity slowdown. It might be the case that the workers being hired aren't improving their productivity as much as workers had before. If they aren't as productive, companies need more of them.
The hiring sounds nice, but a productivity slowdown would be bad in the long run for everyone. Less productivity means slower growth in the long run, an economy more susceptible to inflation shocks, slower growth in inflation-adjusted incomes and less government revenue to work down big deficits.
Robert Gordon, a Northwestern University professor who tracks productivity closely, says he sees "clear signs everywhere" that a productivity slowdown is happening. Last year, productivity—measured as the output of workers for every hour they work—grew just 0.4% and has grown at a 0.9% annual rate over the past seven quarters. Productivity did spurt higher in 2009—during this stretch of fear-induced firing—but over a longer stretch it shows additional signs of slowing. Worker productivity has grown at an annual rate of 1.7% since 2004, down from 2.6% growth in the decade before that.
Another is an hypothesis that comes from Christina Romer, the former Obama chief economic advisor who predicted with the $800 billion plus stimulus package unemployment would not exceed 8% (more on this shortly), who claims that company's panicked in the 2008-9 financial crisis and 'over-fired' workers. Now, according to Romer, they are reversing their course and returning to more 'normal' staffing levels.
But neither of these hypothesis offer the real answer.
The real answer comes to us via Zerohedge...
The answer is simple Jon, and is another one we provided a month ago - basically the US is now effectively "printing" jobs by releasing more and more seasonally adjusted payrolls into the open, which however pay progressively less and less (see A "Quality Assessment" Of US Jobs Reveals The Ugliest Picture Yet). After all, what the media always forgets is that there is a quantity and quality component to jobs. The only one that matters in an election year, however, is the former. As for whether Okun's law is broken, we suggest that the New York Fed looks in the mirror on that one.
Let's take a look at the graphic released by the Obama White House during their argument in favor of the stimulus that reflected the trend lines for unemployment - if the stimulus recovery plan was passed - and if the stimulus was not passed....and showing the current unemployment information...
The 'current' rate of 8.3% is 2.3 points higher than what the Obama White House projected unemployment would be at this stage of the 'recovery'. But is that really the case?
The real unemployment rate today sure isn't 8.3%...
1. If the size of the U.S. labor force as a share of the total population was the same as it was when Barack Obama took office—65.7% then vs. 63.9% today—the U-3 unemployment rate would be 10.8%.
2. But what if you take into the account the aging of the Baby Boomers, which means the labor force participation (LFP) rate should be trending lower. Indeed, it has been doing just that since 2000. Before the Great Recession, the Congressional Budget Office predicted what the LFP would be in 2012, assuming such demographic changes. Using that number, the real unemployment rate would be 10.4%.
3. Of course, the LFP rate usually falls during recessions. Yet even if you discount for that and the aging issue, the real unemployment rate would be 9.5%.
4. Then there’s the broader, U-6 measure of unemployment which includes the discouraged plus part-timers who wish they had full time work. That unemployment rate, perhaps the truest measure of the labor market’s health, is still a sky-high 14.9%.
5. Recall that back in 2009, White House economists Jared Bernstein and Christina Romer used their old-fashioned Keynesian model to predict how the $800 billion stimulus would affect employment. According to their model—as displayed in the above chart, updated—unemployment should be around 6% today.
6. As Ed Carson of Investor’s Business Daily points out, it’s been a whopping 49 months since the U.S. hit peak employment in January 2008. The average job recovery time since 1980 is 29 months, not including the current slump.
7. And how long might it take to get back to the 4.4% unemployment rate that existed under President George. W. Bush? Well, let’s say the goal was to get back to that rate in 5 years. And let’s assume the LFP rate returns to the CBO trend. According to a jobs calculator created by the Atlanta Fed, the U.S. economy would have to generate about 225,000 jobs a month, every month, for the next 60 months to hit that target. But few economist think we’ll see sustained job growth like that, especially since it assumes the economy would avoid recession during that span.
Indeed, JPMorgan just cut its GDP forecast for this quarter to 1.5% from 2.0% and says there is “some downside risk” to its second-quarter forecast of 2.5%.
Despite the bleatings from the Obama campaign - and their surrogates in the mainstream media - the economy is clearly not in a robust recovery. It would not be overstating the conditions to say that what recovery we are seeing is despite the Administration's policies and agenda.
Major media elements are highlighting renewed concerns over President Obama's re-election campaign given the latest data published from today's Washington Post / ABC News poll. This poll is reflecting a 4 point drop in the President's job approval rating primarily driven by economic concerns including the soaring price of gasoline (which is hitting $3.80 per gallon as the national average price for unleaded regular).
The poll is showing that the President's overall approval rating is 50% disapprove and 46% approve of his job performance.
On specific issues, the President also is having some real challenges...
Economy - 59% disapprove; 38% approve
Iran - 52% disapprove of his handling of Iran; 36% approve
Deficits - 63% disapprove of his handling of the deficit situation; 32% approve
Gas Prices - 65% disapprove; only 26% approve
Energy Policy - 48% disapprove of his energy policy; 38% approve
...and the poll is split 49% - 49% when asked if the economy has or has not begun to recover.
What is most surprising in this poll, like all polls, are deep within the bowels of the poll information - the sampling. Many polls today are skewed via the sampling. Some are very obvious in their skewing of the sample which has a real impact on the data from the poll. We saw this most recently in a NBC News / WSJ poll that significantly oversampled liberal democrats to claim the President's approval rating was back above 50%.
The sampling info on this poll is generous towards the President - 31% self identified as Democrats, 27% as Republicans, 36% as Independents, and 6% as 'Other'. Based on other information, this appears to be at least a 4-6% oversample of Democrats - maybe slightly higher...and the poll data shows a 4 point increase in the sample of liberals than used in the same poll in January 2012.
With this oversample - the disapprove numbers are quite likely higher than than they are reflected here. That cannot bode well for the President's re-election campaign.
President Obama is keenly aware that the economy and in particular gasoline prices are going to have a major impact on his re-election bid - just as they had a major effect on the re-election bid of President Jimmy Carter in 1980.
Facing this pressure, the President has taken to touting his efforts to address the energy crisis in this country by focusing on the reduction he claims to have led to the amount of oil the US is importing - a 1,000,000 barrel per day reduction.
But what are the details here? Are the President's domestic energy policies causing this large reduction of foreign oil imports? Or is the reduction a reflection of the continued anemic economic performance of the United States?
According to the President, it's the former.
Among the accomplishments cited are new auto efficiency standards requiring an average of 54.5 miles per gallon by 2025, an increase in domestic oil production of 120,000 barrels a day last year and the approval of 29 onshore renewable energy projects — 16 solar projects, five wind farms, and eight geothermal facilities.Huh?
A new CAFE standard that doesn't take place until 2025, 13 years from now, is paying dividends in reducing our oil imports today?
A domestic oil production increase of just 120,000 barrels per day is offsetting 1,000,000 barrels per day of imported oil? Not to mention that the President owns NONE of this domestic oil production increase...which are entirely generated by production on private or state administered lands. Production has fallen on federally administered lands.
Then we have the crony capitalist renewable energy projects- none of which have been completed yet. For example one of these, a massive solar energy project in the Mojave Desert in California is on indefinite hold because of environmentalist concerns the construction of the project will damage the habitat of the desert tortoise. None of these projects is offsetting the electrical power generation capacity we are losing now from EPA regulations which are forcing the closure of dozens of coal fired electricity generation plants.
As the Investors Business Daily notes in their editorial today, 'Obama's Energy Policy Running on Empty'...
President Obama may think gasoline is the "fuel of the past," but for families facing record prices, it's very much a today thing. Unfortunately for them, Obama has no credible ideas for getting prices down tomorrow.
As gas prices continue to break records, Obama's running around the country trying to convince the public he's doing everything he possibly can.
He claims to have sharply increased oil production, but adds that the U.S. can't affect the global price of oil because we sit on so little of it. The only real solution, he claims, is to invest in the "fuels of tomorrow."
It's all bogus, as we've pointed out many times. The recent production gains have nothing whatsoever to do with Obama, but resulted from advanced drilling techniques on private lands or from offshore leases granted long before he entered the White House.
Whenever Obama's had a chance, he's tried to cut off supplies to appease environmentalists — the latest of which is his killing of the Keystone XL pipeline.
Saying the U.S. can't do anything about world prices is false as well, resting on the phony claim that we have only 2% of the world's oil. In fact, we're awash in oil, with enough to meet all our needs for 250 years if the government would stop roping so much of it off.
As with President Jimmy Carter in 1980, the combination of a dismal economy, major foreign policy missteps, and the embracement of the decline of the United States, President Obama is facing a November 2012 accounting of his first term that belies 'Hope and Change' and is more around 'Misdirection and Malaise'.
Tomorrow is another primary / caucus day for the GOP Presidential contenders with races in Alabama (50 delegates); Mississippi (40 delegates); Hawaii (20 delegates); and American Samoa (9 delegates).
The latest polls from PPP show extremely close races in both Alabama and Mississippi. In the former, Mitt Romney has 31%, Newt Gingrich30%, Rick Santorum 29% - all within the margin of error. In Mississippi, Newt Gingrich is at 33%, Mitt Romney 31%, Rick Santorum 27%. In both polls, Ron Paul is a very distant 4th - 7-8% support.
Gingrich has to do strongly in both in order to have any hope of keeping his campaign alive in terms of votes - but even that will not help him long term. Rick Santorum cannot afford to lose to either Gingrich or Romney. Romney, slated to do well in Hawaii and American Samoa, is positioned to do well in both southern conservative states.
The focus is on delegates. I was breaking out the calculator to start some analysis, but Lawhawk at 'A Blog For All' beat me to it - and covers the points I was intending to make here...
There are 2,286 delegates at stake and it takes 1,144 to win the nomination. Thus far, Romney has won 455 and Santorum has won 199 to Gingrich's 117. Ron Paul has won 64. That means that 1557 delegates remain to be divided up. Even if Rick Santorum wins 60% of the remaining delegates, he'd fall short by 11 (11.2) to capture the nomination. He'd only manage 1,133.2 if he wins 60%. He hasn't done that well in the popular vote overall, and he would have to do so much better than he has to date that it's inconceivable.I doubt we're going to see a brokered convention in Tampa. Romney is still moving towards being the nominee and is the only candidate who is focusing more of his message on President Obama and his policies than on his opponents in these primaries.
The math is even worse for Gingrich. He'd have to win more than 66% of the delegates remaining.
The Derrick Bell / Barack Obama / Critical Race Theory issue is not settling down very much despite CNN's Soledad O'Brien's demand for people to 'stop tweeting me' on the issue and declaring the CRT / interview kerfuffle dead, and that she's 'moving on'... Sounds like she's trying to implement the first rule of hole digging - stop digging...
Patterico is highlighting some new information coming from Breitbart.com's Big Government regarding the connections between Derrick Bell, Barack Obama, and Obama pastor Jeremiah Wright - where Derrick Bell spoke at Wright's church and advocated his critical race theory from the pulpit.
Both Joel Pollak and Ben Shapiro are making this claim - and Shapiro writes:
And that is why Obama’s association with Jeremiah Wright was so dangerous for him. Wright was a big backer of CRT. Bell spoke at Wright’s church. The problem was that Wright was a CRT supporter with the fiery passion of the critical race theorists, and without the gentle soothing language that Obama was so careful to cultivate. And so it was extremely important for Obama to disassociate from Wright, and CRT, as soon as possible during his 2008 presidential run. The conflict between Obama’s belief in CRT and his political need to move away from CRT is obvious throughout his 2008 Wright-under-the-bus speech. First, he disowns Wright’s “profoundly distorted view of this country – a view that sees white racism as endemic, and that elevates what is wrong with America above all that we know is right with America.” He pays lip service to the Constitution. Then he proceeds to talk about all that is wrong with America and little that is right with it, to bash the America that arose under the Constitution, and to suggest that “we’ve never really worked through” the problem of race in America.Will Bell and Wright be thrown under the bus for this campaign season?
Hat Tip to Patterico for picking this up and asking the question for more info / proof.
Did Eleanor Clift, appearing this weekend on PBS's McLaughlin Report, have a Soledad O'Brien moment (or three) or did Soledad O'Brien have an Eleanor Clift moment as her bias was in full view in the interview on Derrick Bell / Critical Race Theory?
Clift, a reliably vapid source of moonbattery on the McLaughlin Report, made three stunningly clueless statements - and was called on two of them by fellow panelists.
In the first, Clift defends Iran's nuclear program prompting Rich Lowery (National Review) to scold her - 'You are okay with Iran getting a nuclear weapon?'
The second has publisher / panelist Mort Zuckerman smacking down Clift's assertion that Israel is rushing to war by saying - 'That's nonsense to say Israelis don't think through consequences of war...'
The third laughable moment came when host John McLaughlin asked 'Is the Press in Love with Obama' - to which Clift responded, 'No' - before adding that the press is 'disappointed in Obama'.
Disappointed? Only because he hasn't been hard left enough...but even then that disappointment has an expiration date - as Ann Coulter has said, 'Liberals would drink Obama's bathwater...'.
'Occupy Jesus' Evangelicals give OWS a taste of its own medicine...
More disturbing information coming from Syria highlighting the butchery being practiced by the pro-government forces - reports that pro-government gunmen have massacred 47 women and children in Homs...as artillery, tanks, and helicopter gunships continue to pound cities, towns, and villages in northern Syria. The Syrian opposition is going to appeal once again to the UN Security Council for action as the Assad regime continues its violence against civilians. Given neither Russia or China have changed their viewpoint towards the conflict in Syria, it is likely the UNSC will continue to be blocked from taking any action against the Assad regime. As for the Obama Administration - it's more of 'leading from behind' as the focus remains on stopping Israel attacking Iran and dealing with Afghanistan.
On This Day in History
1609 - Bermuda becomes an English colony
1789 - US Post Office established
1912 - Girl Scout organization is founded - Happy 100th Birthday Girl Scouts!
1933 - President Franklin Roosevelt conducts the first of his nationwide 'fireside chats'.
1938 - The 'Anschluss' took place as German troops enter Austria.
1947 - The 'Truman Doctrine' is announced - as President Harry Truman asks a joint session of Congress for assistance for Greece and Turkey to forestall communist domination of these two countries.
1993 - Janet Reno is sworn in as first female Attorney General of the United States
1999 - Hungary, Poland, and the Czech Republic, all former members of the Warsaw Pact, become members of NATO.
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