Here is a graph with an estimate of the impact of the preliminary estimate of the annual benchmark revision. (ht John)But it's not just Calculated Risk. The following is from yesterday's Paul Krugman editorial.
Click on graph for larger image.
The dashed line is an estimate of the impact of the large benchmark revision (824 thousand more jobs lost).
The graph compares the job losses from the start of the employment recession in percentage terms (as opposed to the number of jobs lost).
Instead of 7.2 million net jobs lost since December 2007, the preliminary benchmark estimate suggests the U.S. has lost over 8.0 million net jobs during that period.
Stocks are up. Ben Bernanke says that the recession is over. And I sense a growing willingness among movers and shakers to declare “Mission Accomplished” when it comes to fighting the slump. It’s time, I keep hearing, to shift our focus from economic stimulus to the budget deficit.Krugman goes on to point to a recent study that shows that after prolonged periods of greater than normal unemployment, the economy itself has a much harder time recovering. Then he adds:
No, it isn’t. And the complacency now setting in over the state of the economy is both foolish and dangerous.
Yes, the Federal Reserve and the Obama administration have pulled us “back from the brink” — the title of a new paper by Christina Romer, who leads the Council of Economic Advisers. She argues convincingly that expansionary policy saved us from a possible replay of the Great Depression.
But while not having another depression is a good thing, all indications are that unless the government does much more than is currently planned to help the economy recover, the job market — a market in which there are currently six times as many people seeking work as there are jobs on offer — will remain terrible for years to come.
Indeed, the administration’s own economic projection — a projection that takes into account the extra jobs the administration says its policies will create — is that the unemployment rate, which was below 5 percent just two years ago, will average 9.8 percent in 2010, 8.6 percent in 2011, and 7.7 percent in 2012.
This should not be considered an acceptable outlook. For one thing, it implies an enormous amount of suffering over the next few years. Moreover, unemployment that remains that high, that long, will cast long shadows over America’s future.
Wait. It gets worse. A new report from the International Monetary Fund shows that the kind of recession we’ve had, a recession caused by a financial crisis, often leads to long-term damage to a country’s growth prospects. “The path of output tends to be depressed substantially and persistently following banking crises.”So the problem is that the stimulus has been inadequate and that while it has stopped us from sliding into a repeat of the Great Depression of the 1930's, it is not enough to keep our economy from being crippled by the financial recession for many years, even for decades.
The same report, however, suggests that this isn’t inevitable: “We find that a stronger short-term fiscal policy response” — by which they mean a temporary increase in government spending — “is significantly associated with smaller medium-term output losses.”
Why don't we hear just how "iffy" the economy is? The news media and the politicians can't sell bad news. If they try they'll quickly be replaced by alternatives that say when most of the public wants to hear.
The news media cannot sell advertisers to buy ads on shows or in papers that report mostly bad news. So the business news the public gets is all about "Economic Happy Talk" or as we in the Army used to call it, "Happy, Happy Bullshit." What passes for economic news is primarily salesmen standing up and trying to sell the financial products.
The politicians in charge have exactly the same problem. If they provide realistic but negative evaluations of the economy to the public they will quickly be replaced by someone who promises a quick turnaround. So we can[t expect Ben Bernanke or Tim Geithner to level with the public.
Then there is the "Loyal" Opposition. They have committed themselves to a strategy of total obstructionism. This is a non-violent method of making the nation ungovernable unless they are called in to govern. (Terrorism is the violent form of the same strategy. The anti-abortion groups, the more radical militia and the Neo-Nazi groups are waiting in the wings to conduct this strategy.) But they are after power. Economics is secondary to their desire to gain political power.
So there it is. The American economy is in the worst shape it has been since the 1930's because of macroeconomic mismanagement by the conservative government and the right-wing politicians. Because of political constraints the government cannot take many of the actions needed to prevent the economic situation from continuing to get worse, or even to tell the public that recovery will not automatically start in the near future. And the right-wing and libertarian politicians who have created the mess will not let the government actively fix the mess they created because are waiting for the economic failure that will return them to power. This will allow them to loot the economy for their own benefit.
Forget the stock market. It is being propped up by government stimulus money. Just watch the unemployment rate to see what is really happening. And don't feel to happy about a one or two month improvement. Until workers start taking home more money the consumption sector will not improve on its own, and until that happens, the economy will remain on government life support or it will be falling.