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« That's our Rep! | Main | Not sure if it would be a good thing or a bad thing »

The New Normal

The Obama administration notoriously predicted an 8% unemployment rate if we did nothing (despite cries from lefty economists that it would be higher). And of course, we now have 9% unemployment with the stimulus. Ezra Klein interviews one of the economists that the Obama administration based their predictions on, and asked why he got it wrong:

"In late 2008," he told me, "the economy was falling apart, but no one knew to what degree. We didn't yet know we were losing three-quarters of a million jobs a month. We just didn't have that data yet." So far, you'll recognize his response as fairly standard: Good forecasting requires good data, and good data about the economy was hard to come by in November of 2008. But what Zandi said next chilled me a little, as it's a stark reminder of not only how far we've fallen, but how complacent we've become.

"Nowadays," he continued, "nine or 10 percent unemployment sounds normal. But we'd had so many years of around five percent unemployment that we just couldn't believe it would go that high." In other words, the unemployment we're experiencing now was so hard to imagine in 2008 that most forecasters didn't even consider it as a serious possibility until they actually saw it happening to the economy. But three years later, we don't like nine percent unemployment, but fairly few people have their hair on fire about it. The Obama administration is talking about winning the future; John Boehner is saying that if his policies cause further job loss, then "so be it." We've acclimated. We're moving onto other issues. And that's a bad thing.

By fnord12 | March 2, 2011, 2:59 PM | Liberal Outrage


Comments

Also don't forget that the 9% is mostly because people fell off of the unemployment rolls by becoming "permanently unemployed;" which is to say that they've stopped counting them because it would be too depressing to do so.

As Keith Olbermann asked every night before he was taken off the air, "Where are the jobs?"

I use the U3 number because that's the apples to apples comparison to the 'around five percent unemployment' figure in the quote. You're looking at U4, which normally tracks a notch above U3 but you're right that there's a higher discrepancy now, maybe half a percentage point more than usual.

http://en.wikipedia.org/wiki/File:US_Unemployment_measures.svg