A few more thoughts on the shocking 10.2 percent unemployment rate

November 6, 2009

Some quick hits:

1) Remember in the early 1980s 7 straight quarters of avg. GDP growth of roughly 7% (!) lowered jobless rate by only 2.5 percentage points. Hard to see economy booming like that between now and Election Day 2010.

2) Healthcare has added nearly 600k jobs during recession. Good thing Congress is leaving that sector alone. Oh, wait …

3) Obama’s lost year: 2009 may end with no HC, capandtrade, financial reform — just a $787b stimulus that didnt prevent 10.2% unemployment. That is going to be the economic assumption of the average voter, I would think.

4) Dem conundrum: the worse economy gets, more people distrust government. Bad economy was supposed to increase desire for “economic security” …this was reflected in Virginia vote, certainly

5) Will WH actually try and focus on fact that the economy lost 29k fewer jobs in Sept. vs. Oct.? Lead balloon.

6) It’s not that the recession is worse than WH thought, it’s that their model of how the economy works is dysfunctional.

7) End of the Affair? You can be sure liberals (like Krugman) are hugely second guessing Obama decision to not press for LARGER stimulus

4 comments

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Health care is virtually non-tradable, since its consumers are almost all domestic. It’s not desirable for HC to be a linchpin of an economy, regardless of what happens with insurance reform. The aging population will keep it a bright spot for investors, however.

Posted by Mike | Report as abusive

Extending unemployment benefits is a form of stimulus; they just don’t use that word.

Posted by StevenKs | Report as abusive

I guess my prediction was accurate, 10% unemployment in the 4th quarter. I could see it edging up close to 11% by early 2010. However, based on job loss distributions, there is a clear trend towards positive employment. I would say by 2nd quarter of 2010, there will be the first net gain of jobs.

As has been mentioned, the losses seem to focus mainly on areas such as construction and manufacturing. While some may argue that these will be difficult to recover, I tend to think otherwise. Since these are cyclical sectors anyways, with the ability to quickly ramp up production when needed, they conceivably could recoup losses quickly.

However, this is assuming that there are no further shocks to the system. Also, the commercial property market will weigh on the economy for years, just as it did in the late 80′s and 90′s. In a way this is a good thing, because even before the crisis there was too much excess capacity, and there needed to be a forced halt to construction so as to decrease vacancy.

The final caveat, that could really throw a wrench into the recovery is the success of small businesses. With the collapse of CIT, and still frozen lending, one of the primary catalysts of innovation and growth will continue to struggle. Past recessions have usually been followed by the creation of new business. If the small business environment does not improve, it will certainly weigh heavily on any recovery.

Posted by Greg | Report as abusive

“Remember in the early 1980s 7 straight quarters of avg. GDP growth of roughly 7%”

Ah yes, the Reagan years. Remember getting that growth by tripling the national debt?

Posted by gordo | Report as abusive