Monday, November 09, 2009

HORSERACE, BARACK OBAMA

Ten Percent Unemployment Surprised a Lot of People

There’s no shame in a bad prediction; last Monday, I predicted Jon Corzine would win reelection with caches of late, suspiciously appearing votes. I predicted Conservative Doug Hoffman would win easily.*

But we’ve all seen the rapidly worsening chart comparing the Obama administration’s prediction of the unemployment rate against the actual continually increasing unemployment rate.

Last week, the national unemployment rate vaulted past 10 percent, a scenario that some very smart folks — no sarcasm intended there, really — were pretty confident would not come to pass.

Back in August, Nate Silver wrote:

After getting the July numbers, however — which included downward revisions to the reported job losses for May and June — the situation would now seem to be much less ambiguous: the jobs picture is steadily brightening, and within a couple of months, the economy will in all likelihood begin to actually create jobs. . . . In order for unemployment to hit 10 percent, a net of roughly 1 million more people would need to become unemployed, assuming no change in the size of the labor force (which is a big assumption and one we’ll examine in a moment). This almost cetainly won't happen.

He’s not alone. There’s Larry Summers, earlier in the year:

Summers said he expected further job losses but Obama's economic stimulus package should help limit the rise in unemployment. Asked if he thought the unemployment rate could top 10 percent, he said, "I don't think so."

"I think while we're going to see some substantial job losses, frankly what is important about the president's program here is that it is going to contain what would otherwise be just a vicious cycle, people spend less, therefore they earn less," said Summers, who served as treasury secretary under President Bill Clinton.

Ben Bernanke, chairman of the Federal Reserve, said in May he thought it would top out “in the 9s.”

White House Press Secretary Robert Gibbs, in February:

SCHIEFFER: Some have said that unemployment may actually get to 10 percent. With this stimulus now passed, do you believe that we will not get to 10 percent unemployment?

GIBBS: You know, the economic team believes that this bill will help us stay away from those double-digit economic unemployment numbers. So we're certainly hopeful of that.

Fundamental to all policy debates is this sense that “If we do X, Y will result.” But the connection between X and Y is often asserted and impossible or near-impossible to prove. Up on Capitol Hill, we’re promised, again and again, that the health-care bill will make care better, help the uninsured, keep costs down, not add to the deficit, and not lead to rationing. But a lot of the same folks said we wouldn’t reach 10 percent unemployment.

HT: Seeking Alpha.

*On the other hand, I said John Garamendi would win by 9 percent (he won by 10 percent) and predicted Maine would narrowly reject its new law permitting gay marriages. In Virginia, I didn’t just get the winners right, but got the percentages almost completely right, and I indeed predicted the Yankees to win in 6.

UPDATE: The Associated Press, writing back in February:

Even if the recession ends by fall — a best-case scenario — the job market would remain feeble for some time. Economists predict 2 million to 3 million or more jobs will disappear this year and the unemployment rate probably will climb to 10 percent or higher by the spring of 2010.

11/09 10:59 AMShare