Belmont Club

Where on the curve?

Innocent Bystanders has been following unemployment figures as they emerge in comparison to the administration’s predictions. The most updated chart is on his latest post.


The methodology is simple: he has been tracking figures as announced from the time of his original post on the subject compared to numbers projected by Christina Romer and Jared Bernstein describing the American Recovery and Reinvestment Plan.  It seems that the projected impact of the stimulus package on employment has been overstated by Obama’s analysts. But perhaps that is a case of mis-estimation inherent in all forecasting exercises. Maybe the actual employment curve will have a slightly different shape from the projected. But what is really interesting to consider whether the empirical data is describing a different kind of curve altogether. ‘Where are we on the curve’ is a slightly different question from ‘what kind of curve are we on?’

The BLS announced that:

Nonfarm payroll employment fell by 345,000 in May, about half the average monthly decline for the prior 6 months, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The unemployment rate continued to rise, increasing from 8.9 to 9.4 percent. Steep job losses continued in manufacturing, while declines moderated in construction and several service-providing industries.

A casual reading of the BLS summary suggests that while the absolute unemployment rate has increased, the rate at which it is happening has slowed, though to what extent that is due to the probability that nonessential personnel have already been shed and that companies are now down to shedding muscle instead of fat is an interesting one to consider. In the Obama projections, job losses should start to peak in late 2009 and hold steady or start declining into 2010.  For so long as that basic scenario holds, we are still in Kansas. But if by the end of 2009 the losses are still rising, what should one conclude? What effects are we seeing here, if any? What would one expect to see if the Obama plan were working and what would expect to observe if it were not?

Open thread.

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