Thirteen months ago, Christina Romer and the aggregated economic advisers of Barack Obama claimed that the stimulus package they demanded from Congress would curtail unemployment by stimulating the economy, keeping the unemployment rate under 8% in 2009 and forcing in down throughout 2010. Yesterday, Romer essentially admitted that her analysis had completely failed. Now, even with the 2009 Porkulus and another stimulus bill Obama will push for Congressional approval, the US economy will only generate an anemic 95,000 jobs a month in 2010 — not enough to keep up with population growth:
President Barack Obama’s top economic advisers offered a cautious forecast on Thursday that U.S. job gains for 2010 will average 95,000 a month, with analysts expecting hiring to expand by spring.
In a conference call with reporters on Wednesday, Christina Romer, the head of the White House Council of Economic Advisers, said that the administration’s projection is below the consensus of private Blue Chip forecasters, who envision a more optimistic monthly average of 116,000 jobs. …
The administration’s downbeat 95,000 monthly jobs projection follows a similar cautious forecast offered with the president’s proposed fiscal 2011 federal budget on Feb. 1. Romer and budget director Peter Orszag then projected that unemployment would remain high, at 9.8 percent late this year and 9.2 percent at the end of 2011.
“These job projections are very reasonable, but they are also very disappointing since they imply the unemployment rate will remain very high for a very long time,” said Larry Mishel, the president of the Economic Policy Institute, a liberal research group. “This is because we need to create at least 100,000 jobs each month in order to absorb new workers and keep the unemployment rate from rising. It suggests that policy is not being aggressive enough to drive down unemployment.”
The issue isn’t whether the policy is aggressive enough; it’s just that it’s not working at all. To compare, let’s take a look at that rather infamous Romer chart from her original analysis:
In this chart, we can see that Romer predicted that the Obama economic polices would have cut off the rise of unemployment by the third quarter of last year, and that they would generate sufficient new job growth to begin lowering the rate below 8% in 2009Q4. In 2010, Romer predicted those policies would take almost a full percentage point off of unemployment, and by the end of 2011 would have reduced it by about one and half points. Without Porkulus and the White House’s economic policies, Romer predicted a rise to 9% in 2010Q1 and flat growth for most of the year, with about a half-point reduction in 201oQ4 and a full point in the following year.
What does she predict now? Actually, a worse case than her previous worst-case scenario. Instead of taking one and a half points off of unemployment by the end of 2011 (which was roughly the case in both scenarios), we now will take just a half-point off by the end of 2011. Instead of being at 6.5% at that time (with Obama’s policies) or around 7.8% (without Obama’s policies, we’ll have an unemployment rate one and a half points above Romer’s worst-case scenario at the end of 2011.
Comparing the predictions of Romer to the actual performance, it seems clear that (a) Romer didn’t know what she was doing in that initial analysis that pressed for the Porkulus package, (b) the Obama economic policies have done more damage to the American economy than if he had just left it alone, or (c) both. Clearly, Obama needs a new set of economic advisers and a completely different direction in policy, or we’ll be flirting with double-digit unemployment for the next several years.
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