The LA Times reported that Obama advisers had predicted “that with the stimulus spending, the U.S. unemployment rate this year would not exceed 8%. It now stands at 9.4%.” But the Times did not note an adviser's explanation for the initial projection.
In a June 9 article, the Los Angeles Times reported that “an early target” of gauging the impact of the stimulus has been “missed,” adding that the current unemployment “figure is higher than [economic advisers] Christina Romer and Jared Bernstein had said it would be even if the stimulus package had not been adopted.” As the Times reported, in a January 9 report, Romer and Bernstein had predicted “that with the stimulus spending, the U.S. unemployment rate this year would not exceed 8%. It now stands at 9.4%.” However, at no point did the article report that during a June 8 press briefing, Bernstein responded to a question about the initial projection by saying: "[W]hen we made our initial estimates, that was before we had fourth-quarter results on GDP, which we later found out was contracting on an annual rate of 6 percent, far worse than we expected at that time."
Moreover, the Times did not merely leave out that point, it also uncritically quoted economist Kevin Hassett, director of economic policy studies at the American Enterprise Institute, baselessly suggesting that the “stimulus plan was harmful.” The Times quoted Hassett stating: “The actual unemployment rate is worse than their baseline -- suggesting that their stimulus plan was harmful. And yet, despite that, they're asserting it has been successful. That shows an incredible amount of gall.”
By contrast, in a June 8 article, The New York Times reported Bernstein's remarks on his initial estimates:
Mr. Bernstein, addressing reporters on Monday at a contentious White House briefing, conceded that his forecast had been “clearly too optimistic.” He said it had not taken into account figures from the fourth quarter of last year, because those numbers were not available at the time. But he said unemployment would be higher were it not for the economic recovery package.
“Job losses would have been deeper,” Mr. Bernstein said. “The unemployment rate would have been -- by our estimate, by the end of next year would have been between one and a half and two points higher than it otherwise will be.”
From Bernstein's June 8 press briefing:
Q Yes. In January you and Dr. Romer issued your recommendation for the stimulus. It turned out to be rather optimistic, I think it's fair to say. You said without the stimulus, the unemployment rate would be just over 8 percent. Obviously it's 9.4 percent. How do you explain that, and have you factored in whatever overly optimistic view you had then when you talk about 600,000 jobs now?
MR. BERNSTEIN: The answer to the second part of your question is yes, and I'll elaborate then in a second. On the first part of the question, when we made our initial estimates, that was before we had fourth-quarter results on GDP, which we later found out was contracting on an annual rate of 6 percent, far worse than we expected at that time.
To elaborate a bit on the second part of your question, the important thing to realize is that our estimate, whether it's 600,000 jobs over the second hundred days or 3.5 million over the life of the plan, that's the difference between what we believe would occur in the job market in the absence of this plan and what we actually observe in the job market. In the absence of the -- were this plan not to be implemented as I've described and as Dr. Romer and I articulated back then, in the absence of the plan, job losses would have been deeper from whatever level they started. Job losses would have been deeper, the unemployment rate would have been, by our estimate, by the end of next year would have been 1.5 and 2 points higher than it otherwise will be.
So those estimates that we are touting today and the estimates that you hear us talk about, that's the difference between what would have happened to the job market, the unemployment rate were this plan not in effect, and the actual outcomes of jobs. And that gap, that difference between actual and the expectation, absent the plan, that's where the estimates come from.
Q Jared, getting back to Jake's question. When you put together the report in January you projected with the stimulus an unemployment rate of about 8 percent right now. It's a percentage and a half point higher than that. Why did that happen, and what should the country conclude from the inability to be able to properly calculate in January, whatever it is that happened in the economy that made you miss the mark by 1.5 percentage points?
MR. BERNSTEIN: Well, first of all, let's be very clear about this point. Our forecast at that time was right in the middle of every other forecast, and in fact, if we had had a forecast that was much worse than that, we would have been an outlier. We also would have been correct, it turned out. But the point is that the contraction of the economy in the fourth quarter -- you should recall back then that was -- the magnitude of that contraction was far larger than was expected. And so at the time our forecast seemed reasonable. Now, looking back, it was clearly too optimistic.
What I will say, though, and I don't want to lose sight of this, is that the American Recovery and Reinvestment Act, in our view, according to our analysis, will lead to an unemployment rate by the end of next year of 1.5 to 2 points lower than would otherwise be the case. And that is the direct result of the kinds of programs and projects we're talking about today, putting literally millions of people back to work who in the absence of this program would not be getting fully employed.
From the June 9 Los Angeles Times article, "Obama confronts doubts on stimulus, vows faster spending":
Results of the stimulus spending are difficult to measure, and so far the promised federal money has been slow in coming. As of May 29, just over 100 days since Obama signed the bill into law, only about 6% of the funds had been spent.
And on the jobs front, an early target was missed: Two of the president's top economic advisors put out a report Jan. 9 predicting that with the stimulus spending, the U.S. unemployment rate this year would not exceed 8%. It now stands at 9.4%. That figure is higher than Christina Romer and Jared Bernstein had said it would be even if the stimulus package had not been adopted.
“A lot of this is hokum. All along, [Obama's] job numbers have kept changing according to the political environment,” said Peter Morici, a professor of international business at the University of Maryland.
Kevin Hassett, director of economic policy studies at the American Enterprise Institute, a conservative-leaning think tank in Washington, put it even more bluntly: “The actual unemployment rate is worse than their baseline -- suggesting that their stimulus plan was harmful. And yet, despite that, they're asserting it has been successful. That shows an incredible amount of gall.”
Obama has said the stimulus package has saved or created 150,000 jobs already and continues to pay off. Those numbers appear to be elastic, though: On a Sunday-morning news show, his senior advisor David Axelrod said the plan “has produced hundreds of thousands of jobs.”
Any figure involves guesswork, the administration has conceded.