links for 2010-07-01
Winston Churchill Liveblogs World War II: July 2, 1940

At 58.5%, the Employment-Population Ratio Is Back to Where It Was Last November...

"Getting worse more slowly" is not "better." There is no "upturn." There never was.

Earlier this week David Leonhardt said that the Obama administration would have fought harder and more publicly for aid to states and other programs to boost demand had some of it's members not been so confident of the strength of the "upturn."

There seems to be a great confusion here: a number of people who cannot tell the difference between second derivatives and levels.

Stock prices are lower now than they were at the start of the "upturn" late in 2009. Bond yields are lower than they were at the start of the "upturn" late in 2009. And the employment-to-population ratio has gone nowhere since the start of the "upturn" late in 2009.

St. Louis Fed: FRED Graph

St. Louis Fed: FRED Graph


I get the sense that the combination of echo-chamber and spin-doctor has led the Obama Administration to aim for economic policies appropriate for an 80th percentile scenario--for an outcome better than 80% of the possibilities. But the appropriate economic policies are those that would deal with a 20th percentile scenario.

I know that the question "what policies should we have ready to put in place if unemployment is still well above 9% in the summer of 2010?" was asked in November 2008. I'm now starting to think that nobody listened to the answer...

Background: David Leonhardt writes:

Just How Bullish Is the White House?: I do think there is some uncertainty and even debate within the White House about the strength of the current upturn. You can look at the positive signs.... Or you can look at the recent causes for concern.... There is not a huge White House divide on these issues, but the entire economic team is not in exactly the same place, either.... Clearly, President Obama and his advisers are worried enough to support the additional stimulus measure that the House has passed and the Senate has so far resisted passing. Yet if the administration strongly held the more negative view of the economy, it probably would have pushed harder, earlier and more publicly than it has for additional stimulus. The jobs report on Friday should help us figure out whether the administration has made a mistake.


Betting That Cutting Spending Won’t Derail Recovery: [R]ecovery has continued... has the potential to create a virtuous cycle. Higher profits and incomes can lead to more spending — and yet higher profits and incomes. Government stimulus, in that case, would no longer be necessary. An internal memo from White House economists to other senior aides last week... argued [that, the economy’s strengths, like exports and manufacturing, “more than make up for continued areas of weakness, like housing and commercial real estate.”... The reasons for the new American austerity are subtler, but not shocking. Our economy remains in rough shape, by any measure. So it’s easy to confuse its condition (bad) with its direction (better) and to lose sight of how much worse it could be. The unyielding criticism from those who opposed stimulus from the get-go... are able to shout louder than the data. Finally, the idea that the world’s rich countries need to cut spending and raise taxes has a lot of truth to it. The United States, Europe and Japan have all made promises they cannot afford...