State of the Union: A Day Late, and a Buck Short
On the eve of Obama’s election to the presidency, while pondering how long the recession would last, we wrote:
“The data point to watch will be unemployment. The real danger economically, socially or politically speaking, in the ’30s was loads of young men without jobs.
“Unemployment leapt up to 25% in a very short amount of time between the stock market bust in 1929 and 1934…the end of the official recession.”
Today, we follow up the now president’s State of the Union address with puzzlement: Why all the emphasis on jobs now? Why not a year ago, when we were shedding more than half a million jobs a month?
The not-so-stunning answer: The White House and Congress thought they already had unemployment licked.
We went back and looked at the proposed budget for fiscal 2010 the president submitted to Congress a year ago. We were floored by one of its built-in assumptions – an unemployment rate peaking at 8.1% in 2009 and falling to 7.2% in 2010.
Actual result: A peak of 10.2% in 2009, sitting at 10.0% right now. Just a wee bit off the mark. Much higher if you dig into the stats at all, a la John Williams.
The Congressional Budget Office ran its own numbers at the same time. Its forecast performed better, but “better” in this case is a relative term. CBO figured on a peak of 9.0% occurring in 2010.
A forecasting track record like that in our line of work means you lose readers, and, if you lose enough of them, your job. In Washington, you get to go Congress!
Of course, neither Congress nor the president can do anything about the jobs picture – except make it worse. Hence, in our opinion, the blown forecast. (Oy. The law of unintended consequences is the sneakiest of the lot!)