Dale Franks’ QandO posts
Today’s news of 131,000 jobs lost last month comes as no great surprise. What should also come as no great surprise is that the official unemployment rate of 9.5% continues to seriously underestimate the actual rate of unemployment.
Civilian population: 237,890,000
Historical Average Labor Force Participation Rate: 66.2%
Proper Labor Force Size: 157,483 000
Actually Employed: 138,960,000
Real Unemployment Rate: 13.3%
Using the same method of calculation, the unemployment rate in June 09 was 11.4%. Over the past six months, the rate had varied as follows:
Since April, 495,000 payroll jobs have been lost.
I looked at an iPad, and played with it a bit. I think I'd rather wait for an Android tablet. #
You know, there's an easy way to keep the nasty Muslims from building the Ground Zero mosque: Buy the property from them. #
.@ewerickson The really horrible thing about liberty is that some people will use their rights to do things you don't like. Liberty is bad. #
The other angle you can take on Sharron Angle's press comments is that she just wishes she got the same supine press as Democrats. #
Construction spending for June was higher than expected, increasing by 0.1%. #
The ISM index came in at a better than expected 55.5. In general, a figure higher than 50 indicates an economic expansion. #
In this podcast, Bruce, Michael and Dale discuss the possibilities of Revolution, Secession, and Constitutional conventions.
The direct link to the podcast can be found here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2009, they can be accessed through the RSS Archive Feed.
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I FINALLY found a replacement for Claq Qui snus. "Nick and Johnny" Strong is very similar, despite the silly name and packaging. Good stuff. #
Eric Buell Racing has leaked a picture of their 1190RR race bike. But the bike appears to have turn signals & radiator fans. Mystery! #
When you accuse someone of stupidity, it’s probably wise to avoid saying something stupid yourself while doing so. Sadly, E.J. Dionne fails to avoid that trap.
Our discussion of the economic stimulus is another symptom of political irrationality. It’s entirely true that the $787 billion recovery package passed last year was not big enough to keep unemployment from rising to over 9 percent.
But this is not actually an argument against the stimulus. On the contrary, studies showing that the stimulus created or saved up to 3 million jobs are very hard to refute. It’s much easier to pretend that all this money was wasted, although the evidence is overwhelming that we should have stimulated more.
Very hard to refute? That’s nonsense on stilts. Mr. Dionne may be so smart that rays of light emanate from his brow, but the paragraph above is an extraordinarily foolish position.
First, any statement of any jobs “created or saved” requires that we perform the impossible task of modeling how the economy would have performed in an alternate universe where a different policy mix was applied. We literally have no idea–nor any way to construct a testable hypothesis–that models how the economy would have reacted in the absence of the stimulus. Even the Congressional Budget Office, while rather supinely delivering a report that ostensibly supported the administrations claims about job creation, was careful to note:
…it is impossible to determine how many of the reported jobs would have existed in the absence of the stimulus package.
Second, the methodology was extremely suspect. In making its predictions of post-stimulus recovery, the administration simply plugged in an assumption about the multiplier effect of government spending. They assumed that X amount in spending would result in Y% increase in aggregate demand, resulting in Z jobs. What the CBO did in checking up on that prediction, was to plug essentially the same assumptions into their model, which, unsurprisingly, “confirmed” the predictions. Even the CBO seemed a bit embarrassed about that.
But the CBO, to its credit, has been fairly forthcoming about its methods and their limitations. In response to a question at a speech earlier this month, CBO director Doug Elmendorf laid out the CBO’s methodology pretty clearly, describing the his office’s frequent, legally-required stimulus reports as “repeating the same exercises we [aleady] did rather than an independent check on it.” CBO tweaks its models on the input side, he says—adjusting, for example, how much money the government has spent. But the results the CBO reports—like the job creation figures—are simply a function of the inputs it records, not real-world counts.
Following up, the questioner asks for clarification: “If the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis, right?” Elmendorf’s response? “That’s right. That’s right.”
In other words, the CBO’s regular, legally-mandated reports, are estimates based on an economic model that doesn’t actually take inputs from the real world. They simply take the same estimates the administration used to create their predictions, then apply them to the monthly spending report, coming up with a number of jobs “created or saved” that is, unspurprisingly, exactly what the administration predicted.
Please note: this has no actual relationship to the number of real-world jobs that exist. The only thing the CBO reports prove–by its own admission–is that it is possible to replicate the administration’s predictions by duplicating the assumptions.
So, not only is it untrue, as Mr Dionne asserts, that “studies showing that the stimulus created or saved up to 3 million jobs are very hard to refute,” the CBO director explicitly refutes that notion by agreeing that “[i]f the stimulus bill did not do what it was originally forecast to do, then that would not have been detected by the subsequent analysis.”
But, let us say, arguendo, that Mr. Dionne is right, and the $787 billion did, in fact, create 3 million new jobs. The price tag then, comes to $262,333.33 for each job created. That seems like a relatively steep price.
Happily, we know more or less precisely how many people are employed in the country, and how the size of the labor force has changed. We know this, because the Bureau of Labor Statistics releases those figures on a monthly basis, and they are publicly available at the BLS web site. If we assume March 2009 to be the first month of the stimulus, we see that there were a total of 140,854,000 Americans over the age of 16 employed, including farm employment. As of Jun, 2010, there were 139,119,000 Americans working. That tells me that there are 1,735,000 fewer Americans working today, than there were when the stimulus was passed. If we exclude agriculture, and look at only non-farm payrolls, we see that there were 132,070,000 people employed in March, 2009, vice 130,470,00 in June, 2010. Again, that’s a net loss of 1,600,000 payroll jobs.
I’m not seeing any net job creation there.
In at least one sense, though, Mr. Dionne is quite right. Since the administration’s claims of 3 million jobs “created or saved” is empirically disprovable, they can tout them as much as they’d like, even in the face of 1.6 million jobs actually disappearing under the stimulus. After all, they can always say, “There would have been 3 million fewer jobs if we hadn’t acted. And if you don’t believe me, prove me wrong!” It is, after all, so comforting to be able to take refuge in an unfalsifiable hypothesis.