Obama Declares Mission Accomplished! UPDATED

The Obama administration is out touting the Stimulus as causing a recovery, or at least averting a worse disaster. Is it time for Obama to declare Mission Accomplished? Perhaps he should have instead applauded the ability of the US economy to pick up from a deep drop, and kept himself out of the story. He risks jumping the shark. 

Let's first give him his due. We can all debate who gets credit when - my view in general is the prior administration gets tagged for the first year of the new one, so Bush was still to blame until a month ago!  Yet the chart he put out is pretty interesting. It shows monthly job losses bottomed in January (the last red bar is actually Jan 2009) and began recovering. We are still losing jobs, just not as fast. A curmudgeon might note that the worst months started in Nov 2008 when Obama was elected, arguing businesses anticipated a change an policy and fired faster; but more likely it shows decisions made previously taking effect. 

 

You will see a lot of Keynesian cheerleaders out, such as Brad Delong arguing the $100M a day interest cost of the Stimulus is really only $40M a day given the hypothetical Keynesian Multiplier effect (you'll have to follow his logic to get there). Obama still claims he "saved" 2M jobs even as 8.4M have been lost so far, and well more than 2M have been lost since his blue bars above began shrinking towards zero monthly losses. His people can find only about 600K of them, most in Q4, which is similar to a hard estimate by the CBO of 640k new or saved jobs, although the CBO can "find" a possible million more by using those vaunted Keynesian multipliers in their estimates. 

UPDATE 2/18: The Stimulus claims turn out to be preposterous. Obama's web site claims 1.2M jobs "funded". Funded, not saved, and certainly not created. Andrew Cline comments:

The administration switched from jobs "created or saved" to jobs "funded" for accuracy's sake. Or maybe to stop the mockery. Either way, it's a telling methodology.  

Cline dissects the claims from the site itself: of 634K jobs "funded" through Q3, 601K were funded by grants to State offices, meaning it went "save" government jobs and suppliers to government. What happens when the life-support runs out? These are "Cash4Clunker jobs," not permanent jobs, and not private sector jobs of the sort necessary for a sustainable recovery. No surprise that CBS/NYT poll finds only 6% of Americans believe the Stimulus created any jobs. 

In any event, this switch to jobs "funded" at least politically helps them hold on to the dwindling circle of faithful, giving them hope that their vote wasn't just a change for the worse. It provides Obama a better position to be in then their original claims of how the Stimulus would keep unemployment below 8%:

 

The problem with this cheerleading is it is premature. The data remain mixed. We seem to have what Forbes calls Two Economies: we have continued drop in employment and long-term unemployed that does not appear to be turning; and we have recovery of spending among the employed that is helping GDP. Total employment to population is not yet turning - it isn't even flattening. See chart:

 

John Mauldin has taken to calling it the Statistical Recovery - in the case of unemployment, the chronic unemployed who drop out mean the statistical base of potential employed shrinks faster than job losses, so the rate improves! 

UPDATE 2/18: We might do better in the next two years. The Stimulus is shifting from saving government jobs to *finally* funding infrastructure. Only about $20B for infrastructure was let out in 2009, but $160B remains to be released. Also, one of the innovations in the Stimulus, the Build America Bonds, seem to have worked pretty well to allow muni bonds to continue flowing for public works and infrastructure. About $64B were issued in 2009, 3x the amount of Stimulus for infrastructure. While infrastructure spending leads only to modest job growth (much of the work is mechanized) and these can be temp jobs, it can build a better foundation for future economic growth (assuming it is spent on wise projects, not just slush jobs). 

My take is we have a W that starts as a V. Evidence of the V is mounting, including a continued increase in industrial production. The infrastructure spend in 2010 should help add an estimated 1.4% to GDP. We shall have to wait a couple of quarters to see if the balance of GDP growth is still inventory rebalancing or the start of a real recovery. ECRI has been bullish on the V for a bunch of months (they publish a leading indicator index) but now they see growth "throttling back" by summer 2010, the Summer of Disillusionment. They do not yet see a double dip. 

Japan too claimed their stimulus "saved" them from a depression, but they still haven't found a recovery going on twenty years. Let's hope all the cheerleading does not put lipstick on bad policies that lead to a twenty year flat patch. 

Comments

[betterdays]

God help the USA..In the next 2 years we are riding to uncharted areas. Saw the movie "THE Road" ..THE USA in 2020???
USA isn't the next Greece , we are just like Greece. USA can't never payback it's expanding debt that will in 2018 consume 70 % of this year's total USA budget ,just in interest expense on the USA debt
Reggie Bush got tackled by the mean bulls..He will be back in action next will a sharp downturn in the market

[dogismyth]

Listen to Obama. He is sending you and others a strong hidden message. You may not like or believe in his "hope", and most do not, but he made the same proclamation last year in February. And where did that lead us??

Its just a game of political football, the typical lies and rumor mongering, twisting the facts, faux inflationary actions, and the like. Get use to it...its a political season and Dems will do ANYTHING to retain power. Generally, I do not see a difference between the Dems and Repubs, but in this case there is one. And, I repeat, they will do ANYTHING to retain power. If the market crashes, you can kiss your arse goodbye. So let them have their way, and retrofit the market to sail into election season. Its always easier when you're lubed ya know.

[Virginia Jim]

Confucious say, "The more jobs lost, the fewer jobs subject to being lost." The real story is in the true unemployment rate at 17% (including underemployed and disenchanted). Saved or created jobs. Pure BS reminiscent of Mao. Heck, Obama's State of the Union referenced a 5 year plan...just like the Red's 5 year plans.

I slipped. I did not count the number of times the Narcissist in Command referred to himself..."I" and "we." This guy is pathological. Recall this little pep talk in which he referred to himself 132 times.

http://www.youtube.com/watch?v=I9UIpW_3P5s

http://www.screencast.com/users/Virginia_Jim/folders/Jing/media/6b181aee-f825-45cd-b840-b3045a99b217

[joe]

The real job of a president is to give a convining pep talk - and if he is wrong - you have any idea just how screwed we all are??

I think - I see no signigicnt event - and the damn market is likely to bounce in preidtable range for a very long time now.

Do you have a take on the bonds or not Yelnik?

Joe

[joe]

You know what- it dosen't even matter.

I know there is no count that means anthing in the bond price action lately.

[yelnick]

Joe, on bonds, I am working on it, but try as I can I do not see a near term scenario where rates drop.

[joe]

Better than me man - cause I get no scenario at all - nothing - It really looks like it is going to be static - and I think everything will be static in some range for some time,

Joe

[trendlines]

Your comments are spot on Yelnick. 'Mission Accomplished' is a pretty dangerous statement, but that is the nature of the universe. A bear market president, under pressure, with waning popularity WILL turn myopic. That is his destiny.

[trendlines]

I think a reversal is at hand after a spike up. How far down it will go is anybody's guess.

http://trendlines618.blogspot.com/2010/02/s-consolidation-ahead-update.html

[bob m]

Gold ran up but stalled and stocks fading here. Is the reversal at hand? I could use a good 100 point drop to get me to break even and then some. I don't know if the bear are being lured in or the bulls?

[cloudslicer]

Dear Mr President,

Lets be kind and assume that the recovery is because, not despite the government stimulus. What part of the 1+ trillion dollar plan worked and what part didn't? How do I measure success and failure?

[bob m]

Hey Cloudslicker,

I heard IRS checks will be delayed for lack of funds - I define THAT as a measure of failure.