An AP story in the St. Louis Post-Dispatch:
President can’t always control unemployment rate
[...] Presidents don’t have much control over either the number of new jobs or the number of people looking for work. The labor force has more than doubled since 1953.
Likewise, the number of new jobs created in a year is determined by expansions and contractions in the business cycle — cycles that begin years, even decades, before a president takes office.
A year ago, of course, the articles in the paper seemed to assume that the president was somehow able to control the unemployment rate, that for some reason Bush et al. preferred that things go south. Though, it must be said, that we were also hearing about the ‘disastrous Bush economy’ even while the economy was booming.
Further down in the article:
Is there anything presidents can do to create jobs?
One thing: Build infrastructure.
“We built a lot of infrastructure in the Eisenhower, Kennedy, Johnson era,” [Colgate U economic historian Michael] Haines said. “I’m sure the interstate highway system created an incredible amount of employment. We can do it again.”
This ignores the distinction between productive jobs and just jobs. You could always hire two guys, one to dig a hole and the other to fill it in again: two jobs created! Few ‘job-creation’ schemes are quite that useless, but most of them have a significant amount of futility built in; almost always, if the work being done under the scheme were work that people particularly wanted done, someone would be making money off it.
Do we need another Interstate Highway System? What else could we build that would require that kind of initial outlay without being money down the tubes? I can’t think of anything. I hear a lot about ‘crumbling infrastructure’, but I just don’t see it. I hear a lot about the need to ‘invest in schools’, but I can’t help but notice that most public school systems already spend more than all but the most elite private schools. I hear about making sure that everyone has the ‘opportunity for a college education’, but I note that graduation rates are already falling off because we’re already sending people who aren’t suited to it off to college.
Comments
Were the stories last year more geared towards the previous administration massaging the unemployment numbers to make them look better or meant to imply the President through his direct actions can affect the amount of people employed?
The stories about the ‘Bush economy’ weren’t about anything in particular. George Bush was president, they generally ran, therefore everything must be going to hell. Though to a certain extent the media find a way to paint everything as going to hell, all the time, since otherwise there’s no ‘news’. It will be interesting to see what they do in the coming months.
As to the more general issue of ‘massaging’ numbers: Nicole and I argue about this all the time. Most of what people decry as ‘massaging’ is really about what you’re looking for. Unemployment and inflation numbers are both heavily massaged.
The unemployment numbers are an attempt to track the relationship between the supply of and demand for labor; nothing else. The major ‘massage’ during the Bush administration involved, I think, starting to count members of the military as part of the workforce, all of them obviously employed. This would have the effect of depressing the unemployment rate a bit, but in doing this it brought the results of the calculations closer to reality.
CPI (inflation) numbers are calculated by adding together the prices of a whole bunch of consumer goods, and then doing some complicated multiplication on them. The problem is that you can’t always buy exactly the same thing.
The last ten laptop computers I have bought have all cost within a hundred bucks or so of $2,600. In 1991, this meant a 25 MHz 68030, a 640×400 screen, 4 MB of RAM, and an 80 MB hard drive. In 2008, it meant a dual-core 3.0 GHz CPU, 1440×900 screen, 4 GB of RAM, a 320 GB hard drive, wireless networking, Ethernet, USB, Firewire, a DVD drive, a much better operating system, etc., etc., etc.
You obviously can’t say that I got the same thing for my $2,600 in 1991 and 2008; the real price of the capabilities I bought in 2008 were much, much lower than they were in 1991. So you have deflation in computer prices, as you do with nearly all electronics. The CPI calculations take care of this by means of adjustment multipliers called ‘hedonics’. If we assume that my old PowerBook 145 was 1/10 as good as my new MacBook Pro, then the capabilities of the MacBook Pro would have cost $26,000 in 1991, so there’s been 90% deflation in the price between now and then (this is all oversimplified, but I think the underlying concept is accurate).
There are two problems with this:
It’s impossible to really say how good the PB145 was compared to the MacBook Pro. To begin with, it depends on the use to which I’m putting the computer; the PB145 ran Nisus Writer perfectly adequately; if that’s all I want to do, then what’s really going on is that I’ve grossly overbought in 2008. The true hedonic adjustment is different for every consumer.
The CPI does not care that I still had to lay out $2,600. As it happens, with laptop computers you currently can buy these ‘netbooks’ for $260 with capabilities that easily surpass the capabilities of $2,600 laptops of 1991. If you want to forego airbags, reliability, comfort, etc. though, you cannot buy a new car built to the specifications of 1991. You have to pay for the reliability and so forth. In the long run, you are better off paying twice as much for a car that’s three times as good; but you may not be able to afford to pay twice as much in the first place. The CPI does not attempt to measure this.
My argument for the CPI at least is that there should be several different measures.
The first would be exactly what we have now, which attempts to measure the overall health of the economy via-a-vis the value available for money.
There would then be three different ‘monthly outlay’ figures, which would simply attempt to measure the amount of money it cost in a given month to live a certain kind of lifestyle: from poor to rich, these would be A, B, and C. The imaginary ‘A’ person would make minimum wage or a little above; ‘B’ would make whatever the median income in the US is; and ‘C’ would be just as far from ‘B’ as is ‘A’, but in the other direction. Concoct a list of what these people would buy, and then price that stuff every month and publish the numbers. The current CPI doesn’t adequately take into account the fact that the poorer you are, the less ability you have to push back against inflationary pressures, because a greater proportion of your purchases comprise outright necessities.
After watching Skint, I wouldn’t be surprised to see group A buying gold jewelry. Or is that just a British thing?