October 06, 2012
The Washington Post once again reminded readers why so many people are praying for the day that the paper shuts its door. Its lead editorial touted the September jobs report as though this was great cause for celebration.
The piece begins by saying that President Obama asked to be evaluated based on the economy’s performance, it then tells us:
“Friday’s employment report gave Mr. Obama a reason to crow. Having hit a high of 10 percent in October 2009, the jobless rate fell in September to 7.8 percent, the level it was when Mr. Obama took office amid a historic wave of job losses. More important, it fell even as the labor force grew; previous rate declines partly reflected worker discouragement. The percentage of adults with a job rose from 58.3 percent to 58.7 percent, wages by 0.3 percent.”
Huh? It took us almost 4 years to get to an unemployment rate that is still higher than at any point in the last recession and equal to the peak in the 1990-91 recession and the Post thinks that President Obama has reason to crow? In fact, most of the improvement has been due to people dropping out of the labor force. Even with the jump in September, at 58.7 percent the employment to population ratio stands much closer to its low of 58.2 percent reached last summer than the pre-recession peak of 63.3 percent. (The picture is slightly better using an age-adjusted EPOP, as Paul Krugman constructed, but the story is very much the same.)
No one expects an economy to remain permanently depressed. The fact that we are still seeing unemployment rates and other measures of labor market weakness that are consistent with a severe recession almost 5 years after the recession began is really really bad news. If the Post applied the same performance standards to teachers as it does to our economic policy makers, no teacher in the country ever would have been fired for not being competent.
Much else in this column is annoyingly wrong. For example, the piece tells us that wages rose 0.3 percent in September. Yes, this was after two months of essentially zero growth. The monthly data are extremely erratic. (Doesn’t anyone there know this?) Over the last year the average hourly wage has increased by 1.8 percent, roughly enough to keep pace with inflation, meaning that workers are getting none of the benefits of the economy’s productivity growth.
It then does another pitch for supporting the bailout of its rich Wall Street friends:
“Unemployment probably would have been worse but for some of Mr. Obama’s policies, such as the financial-sector rescue, a government-funded auto industry restructuring and, yes, many elements of the $814?billion stimulus package he pushed through Congress over much Republican opposition. That’s a fact, even if only the auto bailout is popular enough for Mr. Obama to tout in the campaign.”
Don’t you love the “that’s a fact” line? Wow, a fact in a Washington Post editorial!
Don’t worry, the world is not coming to an end. This is a Washington Post fact, not a real world fact. To get the Washington Post’s fact, they assume that the banks were allowed to collapse and then no policy was ever put in place to pick up the pieces. The government just lets the economy stumble along in depression indefinitely, Herbert Hoover on tranquilizers. I’m not kidding, here’s the paper to prove it.
Suppose as an alternative, we let the market deal with the Wall Street banks (i.e. put them into bankruptcy) and then we responded by reorganizing the banking system and flooding it with liquidity. In principle that could get the economy back on its feet and we would have eliminated the enormous albatross presented by Wall Street in a one fell swoop. Would we still have recession level unemployment and a sputtering economy? The Post has no answer to that question. They would rather that people not even think about such alternatives.
There is one other especially annoying inaccuracy in the WAPO editorial. It tells readers that:
“Neither investment nor business confidence — Mr. Obama’s other two benchmarks — have fully rebounded. The former remains about $100 billion below its pre-recession quarterly peak of $1.7?trillion.”
Serious people separate out structures from equipment and software. The reason is that the building of structures has a separate dynamic. We had a boom in non-residential construction before the downturn. This meant both that the pre-recession levels were unusually high and also that we had considerable overbuilding that would depress demand for years later. We continue to have very high vacancy rates in most categories of non-residential real estate. This means that builders will not undertake construction no matter how much confidence they have in the economy.
On the other hand, if we look at the equipment and software component of investment we see that it is about $20 billion, or 1.5 percent, higher than its pre-recession level. That’s not great, but given the large amounts of excess capacity that still exist in many sectors of the economy, this is pretty good. In other words, the story about business confidence holding back investment doesn’t seem to have much basis in reality.
Now that is a fact.
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