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August 05, 2011

Obama Ally Goldman Sachs Reduces Growth, Employment Forecasts Again

They already did lower their forecasts recently -- in mid-july.

Following another week of weak economic data, we have cut our estimates for real GDP growth in the second and third quarter of 2011 to 1.5% and 2.5%, respectively, from 2% and 3.25%. Our forecasts for Q4 and 2012 are under review, but even excluding any further changes we now expect the unemployment rate to come down only modestly to 8¾% at the end of 2012.

Contrast that to the White House's own previous projections:

Starting in 2011, with Obamanomics fully in gear and the recession over, growth would take off. GDP would rise 4.3 percent in 2011, followed by … 4.3 percent growth in 2012 and 2013, too! And 2014? Another year of 4.0 percent growth. Off to the races, America.

America is BACK!, baby.

Less than three weeks later, it's time for another downward revision.

We have lowered our forecast for US real GDP growth further and now expect real GDP to grow just 2%-2½% through the end of 2012. Our forecast for annual average GDP growth has fallen to 1.7% in 2011 (from 1.8%) and to 2.1% in 2012 (from 3.0%). Since this pace is slightly below the US economy’s potential, we now expect the unemployment rate to be at 9¼% by the end of 2012, slightly above the current level.

2. Even our new forecast is subject to meaningful downside risk. We now see a one-in-three risk of renewed recession, mostly concentrated in the next 6-9 months.

Because 2.5% is the level at which it is believed you actually add jobs above population growth -- and Obama's economy is no longer projected to hit even that just-breaking-even point, except in late 2012 -- their unemployment figure has been bumped from 8.75% (old projection) to 9.25% (new projection) for the 2012 elections. That's a half-percent uptick.

That would also mean there will be no real change in the unemployment figure from now until the elections (apart from 0.1% changes up and down, mostly due not to more jobs, but to more people so discouraged they've given up even seeking work and hence have removed themselves from the official count of the unemployed.

As is usually the case, there is far more than meets the eye to the Labor Department’s report that the economy added 117,000 jobs last month and the unemployment rate fell to 9.1 percent.

Let’s start with the reality that fewer people actually were working in July than in June.

According to a Bureau of Labor Statistics breakdown, there were 139,296,000 people working in July, compared to 139,334,000 the month before, or a drop of 38,000.

But the job creation number was positive and the unemployment rate went down, right? So how does that work?

It’s a product of something the government calls “discouraged workers,” or those who were unemployed but not out looking for work during the reporting period.

This is where the numbers showed a really big spike—up from 982,000 to 1.119 million, a difference of 137,000 or a 14 percent increase. These folks are generally not included in the government’s various job measures.

Actually it may be worse than even that. The article notes the Bureau of Labor Statistics employs a "birth-death" business model, assuming a certain number of new businesses are started, but are not included in the numbers because no one knows to contact those businesses. So they make up some number of employees they assume are at currently-unknown businesses.

The writer calls this "voodoo," and I'm thinking it's just that. Even if that model holds in a normal economy, 1, it's just a guess, and 2, this is not a normal economy.

And if you think Obama's bureaucrats have revised that model's numbers down to reflect the harsh reality of our situation, I have a bridge in Brooklyn you might be interested in. Nice river views, "charmed by the decades."

And even all this assumes no actual double-dip -- which even the New York Times (!!!) now contemplates may be already occurring.

If this is the beginning of a new double dip, it will have two significant things in common with the dual recessions of 1980 and 1981-82.

That's all I can quote, because the rest of the article argues the second-dip is all the fault of Republicans, because, see, they started arguing about the debt limit and therefore took away that Keynesian magic that had gotten us growth rates as high as zero point four percent in the first quarter 2011 (before Republicans did anything to change anything).*

The New York Times has exited Look What Obama's Done For You mode and entered It's Their Fault mode.

That's a leading economic indicator right there.


* A commenter has pointed out that 0.4 was actually the grade point average of one of the guys from Animal House, maybe Flounder. Telling.

Oh, and where's Obama's transcript?



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posted by Ace at 03:38 PM

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