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The political impact of slowing job losses

"Today’s unemployment report was good news," writes Paul Krugman. "But in a real sense good news is bad news, because this month’s not-too-bad number deflates the sense of urgency." That seemed a bit churlish to me, but then I read Bruce Bartlett making pretty much that exact argument, so maybe Krugman has a point.

I guess the point to make here is that slowing job losses is not the same as restoring a healthy level of employment. It's the precursor to that, but employment growth has a tendency to follow economic conditions, and there's no reason we should accept a long period of high unemployment when we can end it more quickly.

To put this point a bit more sharply, we could have let the financial crisis drag on for quite a bit longer because ending it would've been expensive. But we didn't, because not ending it actually cost more. There's not been a nearly proportionate effort to attack unemployment, even though the economic analysis pretty much comes out the same way. The stimulus was a good idea, but the recession was worse than we thought, and we should bring the two into line.

By Ezra Klein  |  December 4, 2009; 12:22 PM ET
 
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Comments

"the recession was worse than we thought"

I'm not selling apples and pencils from a street-cart by the side of the road, in a grainy world leeched of all its color. The recession has been far less bad than we were lead to believe, largely thanks to the stimulus.

Posted by: adamiani | December 4, 2009 12:37 PM | Report abuse

If Dems and President take heart in one good report (which can be revised downward next month very well too); then no one can save them and 2010 & 2012 will be their Waterloo. Krugman trying to warn here implicitly for such complicity is fine, but Dems and Administration are already late and they better do right things to address unemployment head on.

Posted by: umesh409 | December 4, 2009 12:39 PM | Report abuse

I agree with umesh it would be better to proceed on the assumption that the jobs growth is fleeting until proven otherwise.

adamiani I get what you're saying but it sounds silly.

Posted by: bmull | December 4, 2009 1:25 PM | Report abuse

If anything I feel like this could push action by decreasing the chance of downside risk. As the stimulus showed, if you pass a giant bill but we still lose jobs, you'll perversely be blamed for "doing too much." But if jobs are growing anyway then you can take credit for the results even if the programs you ultimately pass are meaningless!

I mean I don't think they WILL be meaningless, but given the selfish thought processes of many of our centrist Senators, I wouldn't be surprised if this is convincing.

Posted by: NS12345 | December 4, 2009 2:03 PM | Report abuse

Read it and weep!
This new Rasmussen Reports poll is going to encourage Republicans who are already running on a 2010 promise to cancel whatever stimulus spending they can.

The survey found 62 percent of voters say tax cuts will create jobs and fight unemployment. Only 21 percent say spending can do that. This cuts against the long-standing economic theories that have guided the White House and Democrats since the beginning of the Obama administration. More good news for Republicans; 51 percent believe canceling the rest of the stimulus money would create more jobs, and only 32 percent — rather less than the Democrats’ base vote — want to keep spending it.
http://www.rasmussenreports.com/public_content/business/economic_stimulus_package/november_2009/to_create_jobs_voters_say_cut_taxes_and_stop_spending

Posted by: obrier2 | December 4, 2009 2:53 PM | Report abuse

The problem is that there's a huge difference between slowing the bleeding and repairing the damage. We need to stop the bleeding and repair the damage aggressively. Direct support to state governments is the best way to stop the bleeding of jobs.

Washington economic wonks live in a fantasy world where small businesses will magically "create" jobs. I speak as a long-time serial entrepreneur when I say that small business owners can't even CONSIDER hiring full-time employees until they can see a clear 6-month cash-flow projection that will enable them to hire with a clean conscience.

Larry Summers and Tim Geithner are hopelessly out of touch with these small-business realities.

A little more sunlight and oxygen would enhance the debate immensely.

Posted by: statmore | December 4, 2009 4:12 PM | Report abuse

"so maybe Krugman has a point."

Paul has been just about 100% right on these issues since we went off the cliff. He was usually right before that as well. :)

John

Posted by: toshiaki | December 4, 2009 4:34 PM | Report abuse

"Read it and weep!"

It's Rasmussen. They've cooked their books for the GOP this whole cycle.

Beyond that, the public doesn't really have an idea of what works. Of course they're going to say "tax cuts" are good. They've been trained to for 30+ years.

That doesn't mean they're actually good.

John

Posted by: toshiaki | December 4, 2009 4:36 PM | Report abuse

the good news here is that employment is lagging.

the bad news is that there are no signs of demand improving, and without demand improving, we could simply stay at this equilibrium point for quite a while (and there's good reason to expect that anyhow due to changes in how companies think about their workforce: the last two recessions produced "jobless" recoveries, and this one will too).

it is precisely because demand is still weak that government spending is needed to provide that marginal demand. my own first choice is that the federal government should subsidize a state sales tax holiday at 2007 levels of revenue.

this would both function as a critical counter-cyclical revenue sharing program but would also provide demand-side stimulus by putting a whole range of goods and services "on sale," and as we've seen, "on sale" can, in fact, stimulate consumers even in today's constrained spending environment.

this wouldn't be enough - i personally still favor a major public works program in hardening potential terrorist sites such as water supplies, bridges, etc. against attack - but it would be easy to implement....

Posted by: howard16 | December 4, 2009 4:45 PM | Report abuse

hoping that what we're seeing is an inflection point...

Posted by: zosima | December 5, 2009 2:18 AM | Report abuse

It's one month's data, and it could be readjusted downward next month. It's waaaaaay too early to know what this means.

But please please PLEASE let it be real. Hoping we move into positive territory very soon.

Obrier - the public IS down on stimulus today, but that's because it doesn't know anything about it other than: (1) the government is spending a lot of money that'll have to paid back some day, and (2) unemployment is still horrible and getting worse.

If people start going back to work, their view of the stimulus is going to change and their willingness to trust the current team will rise as well.

But that's all in the "if" category for now. Which is why I desperately hope Dems are listening to Krugman (and that Romer is reminding them every day of the Roosevelt recession in 1938).

Posted by: Sophomore | December 6, 2009 10:31 AM | Report abuse

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