President Obama’s Unemployment Problem

June 27, 2012

In 2009 when the President was settling into office one of the first bills he and the newly elected Democratic congress threw together in haste was the Recovery Act.  This $787,000,000,000 bill was aimed at providing 3 years of recovery funds to encourage job growth and rescue a declining economy.  Of course spending $787 Billion is never taken lightly in congress (by most people) and it was a hotly contested proposal.  The President had his staff draw up some projections based on their modeling of how the economy would act in the future in the presence and absence of the bill being passed. (i.e. with and without stimulus to the economy).  The bill was passed and unemployment was supposed to decline to around 6% by now.  Instead the actual unemployment rate released by the government is 8.2%.

Here is what they came up with, and I’ve included the actual unemployment rate over the same period.


The president predicted, naturally, that stimulus (red line) would lower unemployment vs. not passing the bill (grey line).  The problem it turns out, is that the President over expressed how well the economy would act in the next few years.  The bill was passed and we should be cruising along on the red line by now.  Real unemployment (black line) shows that the President was way off, even with the stimulus bill being passed the unemployment rate stayed far above estimates for unemployment without them acting.

This is just an example of the miscalculation that has steered the President into believing all sorts of fictitious information about how the economy would perform.  In fact it marks a trend whereby the President continually takes the best estimate he can find for how the economy is doing (regardless of it’s accuracy).  When we hear about Job creation we hear about 27 months of the private sector job growth.  Now, all job growth (public and private) hasn’t been positive for 27 straight months.  And the term positive doesn’t account for population changes and graduates or those 18+ entering the labor force, job growth in that context is drastically under-performing.

Which get’s us to the point.  Instead of speeches full of rhetoric where we talk about how things are doing.  People should examine the numbers every once in a while.  Pay attention to more than just the 8.2% unemployment rate and look into what politicians are predicting and actually saying when they convince people that bills will lower unemployment numbers, will they?