After every jobs report, I update the jobs forecast and chart Team Obama put out in January 2009 that projected the future unemployment rate if Congress passed his stimulus plan. It shows the unemployment rate far higher today than what Obama economists predicted back then, 8.2% vs. 5.7%.
But some people think the comparison unfair. After all, the economic downturn turned out to be far worse than the White House or anyone knew at the time. The Commerce Department:
The revised estimates of GDP that were released on July 29, 2011, as part of the annual revision of the national income and product accounts (NIPAs) indicate that the depth of the 2007–2009 recession was deeper, and the subsequent period of expansion was somewhat less robust.
The revised estimates show that for the period of contraction from 2007:Q4 to 2009:Q2, real GDP decreased at an average annual rate of 3.5 percent; in the previously published estimates, it had decreased at a rate of 2.8 percent. The cumulative decrease over the six quarters of contraction is now estimated as 5.1 percent, compared with 4.1 percent in the previously published estimates; both the revised and previously published estimates of GDP show that the recession was the deepest contraction since the beginning of BEA’s quarterly real GDP estimates in 1947.
The overall pattern of quarterly changes during the downturn was similar in both the revised and previously published estimates, though the revised estimates show larger decreases for 2008:Q4 (-8.9 percent compared with -6.8 percent) and for 2009:Q1 (-6.7 percent compared with -4.9 percent). The contributions of specific GDP components to the contraction were similar in both the revised and previously published estimates. (See the briefing on results of the 2011 NIPA annual revision.)
So the White House says its forecast was overly optimistic only because their economists, Christina Romer and Jared Bernstein, were basing it off incomplete data—not because the stimulus didn’t work as well as expected.
I have two responses to that. First, deeper downturns should be followed by stronger rebounds.
Second, this White House has continually overestimated the strength of the recovery—as the charts above and below indicate (based on official White House forecasts). This says to me the problem isn’t the data going into the forecast model, the problem is the forecast model built on Keynesian assumptions about the impact of government spending and temporary tax hikes. Obama simply has the wrong model for growth.