Economics, Pethokoukis

Back to 8%? | Why the October unemployment rate might be a November surprise


There’s little time left in the 2012 presidential campaign for a momentum-shifting “game changer.” But tomorrow’s job report might be just such an event. The major — and somewhat mysterious — drop in the unemployment rate last month, to 7.8% from 8.1%, gave a much-needed political boost to the Obama campaign. On the surface, it showed a labor market suddenly gaining Wolverinesque healing abilities. It also stripped GOPers of great talking point.

But what if the data tomorrow show the September number to be an anomaly? It could happen, says Stephen Oliner, an AEI economist and former Federal Reserve senior adviser:

Payroll employment likely continued to grow slowly in October, posting a gain of about 125,000. In the separate survey of households, I expect the puzzling surge in employment that was reported last month to be followed by a decline in October. Similarly, I anticipate that the unemployment rate will move back up to 8 percent after the surprising drop in September. Overall, the report will portray a labor market that remains weak.

Washington watchers like Greg Valliere of Potomac Research, for instance, think such a result would boost Team Romney. As Valliere put it in a research note this mornning, “But momentum is fickle, and it could shift once again after release of tomorrow’s unemployment data. …  A weak number could give Romney a boost in the campaign’s final weekend.”

The consensus, according to a survey by Reuters, is for gains of 125,000 with an unemployment rate of 7.9%. So Oliner’s forecast is right in the zone. Given a) slow GDP growth and b) the chill in business investment and confidence, an employment surge would be a shocker.

But keep in mind that job gains of 125,000 or 150,000 or even 175,000 do little if nothing to close the 13 million job gap between where where employment should be and where it is. We are only getting trend jobs growth, just enough to deal with population growth –but not enough to close the yawning chasm. The Long Recession grinds on.

17 thoughts on “Back to 8%? | Why the October unemployment rate might be a November surprise

  1. If the Oval Office incompetent lies and engages in a coverup of terrorist/al-Quaeda activities in Benghazi, then can you really trust him with monthly jobs data?

    Obama is corrupt and dishonest, its in his DNA. In any event, much has already been said about the cockeyed, twisted and tortured jobs numbers recently inflicted upon America.

  2. James, first, we’re not in a recession. We are in a steady, methodical and planned recovery. Anything less or more will lead to a real Jacksonian style recession.

    We’re also not an isolated economy. We’re not even an independent economy. So, secondly, the moderate growth we are seeing in all major indicators suggest that any change in the BLS unemployment number will be very slight in either direction.

    Finally, growth is growth. Accept it. Help it. The constant naysaying and negativity is itself a ‘drag’ on the enthusiasm factor. Your words can have an impact.

    • Steady, methodical, and planned recovery, huh? I’ll grant ‘steady’. A rock at the bottom of a pool is ‘steady’. But the rest? God help us if this is what passes for ‘methodical’, ‘planned’, or ‘recovery’.

        • Well, I have a PhD in probabilistic risk analysis, specializing in nuclear power, with masters and undergraduate degrees in engineering. I’ve done a tremendous amount of economic analysis, and have worked in real industries. And I say you are wrong.

          Jacksonian. The economics of the 19th century aren’t applicable, especially when you have a nutcase running an economic policy reminiscent of 1930′s Italy. (By the way, minor in history…)

          • Wow! You’re still wrong. Everything about the economy of the Jackson era matches in more ways than you’re willing to investigate to that of the the 2006 -2012 period. No other time frame analysis is even comparable.

            The lesson of the Jacksonian period was that wild and dramatic efforts to make ideological changes to the current system will fail. It failed then, and it will fail today.

            The states, and Jackson for that matter, thought that their borders separated and insulated them from the economic, fiscal, financial and policy problems, challenges and successes of the other states. In reality, they were inextricably intertwined and interconnected. Jackson exaserbated the problem and made it last far longer than it should have by his inability to think outside the box.

            If you do understand risk, then you know that to neglect relevant data is an invitation to error. The way to minimize risk is to include data. So studies presented based on a limited and narrow dataset will not be valid.

            There are several points to be learned when you include the revelant data: 1) Slow and steady is better than fast and wrong, 2) Romney’s goals will be a prescription for fast and wrong just like Jackson, 3) no solution to long term economic sustainability can succeed without more open, honest, direct, coordination and cooperation between the affected intertwined economies of the entire world, 4) the US economy does not and will never again be independent from those of the rest of the world, and finally, 5) Obama’s slow, steady and consistent progress forward, though slow, will get us bact to our potential without increasing the chance of Jacksonian Recession afflicting us for a very long time.

  3. In his article “A Slow but Steady Climb to Prosperity” in today’s Wall Street Journal, Alan Blinder argues that “The U.S. economy is improving.” I wish he were right, but the data—even much of the data he mentions—do not support that view.

    First, he admits that real GDP growth—the most comprehensive measure we have of the state of the economy—is declining; that’s not an improvement.

    Second, he admits that, according to the payroll survey, job growth isn’t faster in 2012 than 2011; that’s not an improvement either.

    Third, he mentions that the household survey shows employment growth is faster, but that growth must be measured relative to a growing population. If you look at the employment to population ratio, it is the same (58.5%) in the 12 month period starting in October 2009 (the month he chooses as the low point) as in the past 12 months. That’s not an improvement.

    Fourth, he shows that the unemployment rate is coming down. But much of that improvement is due to the decline in the labor force participation rate as people drop out of the labor force. According to the CBO, unemployment would be 9 percent if that unusual and distressing decline–certainly not an improvement–had not occurred.

    He then goes on to consider forecasts, saying that there are promising signs, such as the housing market. The problem here, however, is that growth is weakening even as housing is less of a drag, because other components of GDP are flagging.

    If you want to look at forecasts, consider the Fed’s (Federal Open Market Committee’s) forecast for real GDP growth in 2012. It is a depressing picture of a worsening outlook, meeting after meeting, not an improving outlook.


  4. silver fox 0 minutes ago

    “Greece is running out of cash.The current strategy is really not working and
    there is substantial political risk,” Thanos Vamvakidis, head of European G10
    currency strategy at Bank of America Merrill Lynch, told CNBC Thursday. …..” now there’s information that can help you. The moron in the white house wants to do what they are doing ……..what are you thinking? Don’t blame me……you voted for him.

  5. Planned and methodical recovery?? Really? So this entire jobs growth, with a total of 60% of those jobs paying 7.25 per hour, and the general work environment of our country moving to a part time work force, to be exempt from the ObamaCare tax, is planned and methodical, well in that case we are definitely on the road to socialism/communism that Obama and the liberals preach through the biased media.

    • Slow and steady is far better than fast and wrong. Any dramatic changes to the current path will give us a Jacksonian style ten year long recession. That’s historical. Is it not true that starting somewhere, anywhere, is better than not starting at all?

      We’re not going to get back to the potential inherent in GDP anytime soon. So forward progress, as all the major indicators are showing, is a much preferred option to no forward movement, or even worse, going backward.

      Romney’s goals (not plans) will take us backward. His goals are reminiscent of the failures of Jackson.

      • You must be a cum laude grad of a “public” university. And probably graduate school too. It takes a lot of real work to write something as stupid, ill informed and just ignorant as you have.

      • Tim Williamson needs to tell us why the reagan massive recovery did not result in a 10 year recession. The writer Williamson exposes himself as a perfect waste of reading.

        • The “Reagan Recovery” was triggered by a 1300 basis point cut in interest rates, after Paul Volcker DELIBERATELY put the brakes on the economy to bleed the inflation out it. A rhesus monkey could have “engineered” the same “recovery.”

          I find this idolatry of Reagan increasingly laughable. We are witnessing the creation of a new cult.

  6. “Planned Recovery”… did you get an econ degree from the USSR? Or did you write for Pravda? The Keynesian run a muck has taken a singular economic shock and ordinary recession that should have ended 3 years ago into a four years of non-recovery like Moses lost in the desert.

  7. Poor Jim.

    While he feverishly works at an attempt to discredit today’s figures, the poor man’s steaming heaps of fiction have been laid waste by those sharp upward revisions.

    More wasted work. But not for the AEI. It pays people to produce this “analysis.”

    Knock yourselves out.

    If Obama wins, let me remind everyone here that any future economic succcess has already been credit by Mr. Pethokoukis to a “cyclical” recovery, and not one whit to “policy.”

    I do hope people in this country grow up one day.

  8. Tim -
    Take a look at the blue states vs the red states. Red states are in general doing much better – significantly better – since they tend to avoid the nanny state efforts of places like California (where I live). They also take advantage of natural resources, and have greatly reduced regulation.

    Two things makes todays world much different than Jacksons – one is communications, the second is energy use. Communications has exploded in ways that the government has, as yet, been unable to suppress. Not so with energy. When energy sees deregulation or minimal intrusion (no, I’m not talking love canal policies – which by the way, was created by government greed, and not the waste company, which did everything correctly) it explodes, and the economic fallout assists everyone. If we focused on using our own resources, we would see a huge repatriation of dollars that have, up to now, been heading to kleptocratic islamic regimes. The increase in jobs and wealth would follow.

    Are we interconnected? Yes, but states like California can’t become greece because they can’t print their own money or go nuts in the way the greeks (or italians, or spaniards, etc) have. Yes, Europe is going to go through a zombie apocalypse. But we don’t need to.

    In reference to your specific points…

    1) Slow and steady is better than fast and wrong

    Someone should have told the Democrats that when they did the stimulus and Obamacare. So I would agree with you.

    2) Romney’s goals will be a prescription for fast and wrong just like Jackson

    Why, just because you say he will? Look at Rand Paul’s Penny Plan. He posits that we need to (a) get rid of baseline budgeting, which is killing us as a nation, and (b) reduce the overall growth of government by 1%, on average, per year, for a decade. You would likely say “omigodwhatwillthatdotothegdp?” I would say that there are good economic theories that state that the government spending part of gdp is actually a drag. I think that the relief of people in the economy to the feds turning around and treating their budget/deficit like every family in America must, will more than make up for the government portion of gdp loss.

    3) no solution to long term economic sustainability can succeed without more open, honest, direct, coordination and cooperation between the affected intertwined economies of the entire world

    Yes, the EU had worked out very well. More please! The US already has this. It has been said that when the US sneezes, the rest of the world catches the flu. I think that’s still true, and a recovery in the US will have positive effects even among the EU zombie economies.

    4) the US economy does not and will never again be independent from those of the rest of the world

    WHo says we need to? But there are things we can be independent on. Transitioning to a natural gas economy, with the additional oil reserves that we have, would allow us, for the first time in a long time, to have more stability in energy prices. NG is not as easily transported internationally, and so would be more stable, which would translate to more stability in the rest of the economy (including the production of new auxiliary and fallout jobs).

    Among the worst thing of the “new” PV systems are that they cost more NPV than a natural gas electron stream, and that unlike ng, the amount due comes due almost immediately, with that money going to international players (such as china). The NG economy supports domestic jobs, over a very long time, and is so immensely more stable and growth orientated. I should mention that its NG, pushing out coal naturally, instead of through govt mandates, that has helped lead to us going to Kyoto protocol co2 emissions levels…. Not that I think that’s important.

    And finally, 5) Obama’s slow, steady and consistent progress forward, though slow, will get us bact to our potential without increasing the chance of Jacksonian Recession afflicting us for a very long time.

    Hahahahaha. Sorry. Too funny. I tried to give a respectful response, but you really think that trillion dollar bribes to his union constituency, taking over 1/6th of the economy, stifling energy job creation, and throwing huge regulatory burdens on the economy is neither slow nor careful.

    But I tried to give a good respectful response to the rest of your comments. You deserved that. As I mentioned earlier, you are quite wrong. Just ask my wife, a refuge from the former soviet bloc. She knows. And so does anyone else who have had to live in that sort of economy – which is where Obama would like to take us.

    As Biden’s former portage said in that recent book, they are both economic illiterates.

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