An Era Of Diminished Expectations
The Bureau of Labor Statistics reported that the United States economy had a net gain of 117,000 jobs, and upwardly revised job reports for May and June. The headline unemployment rate dropped by a tenth to 9.1%. The New York Times front page headline states that US Posts Solid Job Gains Amid Fear. It's story has the more accurate headline US Posts Stronger Job Gains Amid Fear.
Today the talk will be how things are not as bad they seemed. This is the Era of Diminished Expectations. While certainly a +117k jobs number in July is better than the May and June numbers, it is simply not good enough. Indeed, it is a sign, in my estimation of continued economic weakness. But because our expectations have been diminished, a number that would have been worrisome in May, now is cause for relief. This is bad for policy. It leads to government doing nothing about the jobs situation. It is bad politically for the President because people do not vote today on his reelection, or even this November. The President will come out today at 11 and tout this number. Sure, he'll say we have to do better, but he will say we are on the right track. We aren't. More. . .
In April, the BLS reported 244,000 jobs gained. The head of the President's Council of Economic Advisors Austan Goolsbee said then:
Today’s employment report shows that private sector payrolls increased by 268,000 in April, the strongest monthly growth in five years. [. . .] Despite headwinds from high energy prices and disruptions from the disaster in Japan, the last three months of private job gains have been the strongest in five years. While the solid pace of employment growth in recent months is encouraging, faster growth is needed to replace the jobs lost in the downturn. We are seeing signs that the initiatives put in place by this Administration – such as the payroll tax cut and business incentives for investment – are creating the conditions for companies to add new jobs and foster the industries of the future. We will continue to work with Congress to find ways to reduce spending, so that we can live within our means without neglecting the investments in education, infrastructure, and clean energy that will strengthen our economy.
(Emphasis supplied.) The President will no doubt say something similar today. It was wrong then. It is wrong now. It was more plausible then though. 244,000 is more than 117,000.
The economy is in terrible shape and likely to get worse. There is no better sign of this than the cheer a jobs report showing 117,000 jobs gained provides us.
This is an Era of Diminished Expectations.
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