Our great, horrible, indifferent labor market

The Great:

The 4-week moving average of layoffs came out today at 287,750.  Total civilian employment in September was 146,600,000.  The ratio of the two, i.e. the chance of being laid [off—ouch that might have been my most embarrassing mistake ever] during a given week if you had a job, was below 2 in 1000.  That’s only happened once before in all of American history–April 2000.  (We don’t have data going all the way back, but the ratio was considerably higher in the booming 1960s, and I’m confident layoffs were much more common in earlier decades for which we don’t have data.  (“Gilded Age” bosses could lay off workers whenever they wanted.) And it seems very likely that we will soon break the April 2000 record, maybe this month.

Update: a bit higher than 2 in 1000 because not all layoffs put in unemployment claims.

The Horrible:

Total employment has barely budged in 7 years, while the employment population ratio has plunged much lower.  We are even seeing a lower employment/population ratio in the key 25-54 demographic, compared to seven years ago.  The U-6 unemployment rate is a very high 11.8%

The Indifferent:

The unemployment rate (U-3) is 5.9%, slightly above the Fed’s 5.6% estimate for the natural rate.

Thanks President Obama, you’ve given us a European labor market.  Workers with good jobs need not fear layoffs; the rest will have to be satisfied with part time work or unemployment.

Of course I’m half joking about Obama.  But just how good is his economic record?  The Washington Examiner has an article that quotes me.

The newest talking point of President Obama and his supporters, such as Paul Krugman, is that we are doing better at job creation than other developed countries.  I don’t think we are doing as well as Australia/New Zealand/Canada/Britain, but it’s surely true overall for one very obvious reason.  The eurozone.

Let’s examine that Obama/Krugman claim more closely.  Everyone seems to agree that since 2010 the US has done considerably more austerity than the eurozone.  No debate there.  And the huge divergence between the US and the eurozone has occurred since 2011.  The initial recession and initial recovery were quite similar in the US and eurozone.

The GOP Congress did exactly the opposite of what Obama wanted on austerity, and the result was that we grew dramatically faster than the eurozone.  That’s Obama’s success?  The big difference was of course monetary policy.  Obama’s comparing us to a region ruled by a central bank that is more incompetent that the central banks of the 1930s (Krugman has some graphs on that point.)

So yes, we are doing better than the eurozone.  Does Obama deserve credit for the fact that our monetary policy was less incompetent than the ECB?  That doesn’t even pass the laugh test.  Even Obama supporter Matt Yglesias says he’s been horrible on monetary policy.  He left multiple seats empty, when he had 60 votes in the Senate in 2009.  He’s doing the same today.  He never appointed a single person to the board who favored the sort of expansionary monetary policy that I favor, that Yglesias favors, that DeLong favors, that Krugman favors, that Christina Romer favors, and that any progressive with half of brain favors.  He almost picked bubblephobe Summers to head the Fed, and had to be stopped by a storm of protest that began here and then spread through the progressive blogosphere.  (Yes, some progressives always opposed him for other reasons; I’m talking about his monetary policy views.)

President Obama may or may not be a good President.  I think he’s been above average on foreign policy.  I’m willing to concede the Obamacare (which I opposed as a missed opportunity) did some good things like the Cadillac tax on health plans and helping the uninsured.  I think the financial reform was a missed chance, but others disagree. I’m disappointed with his record on drugs and civil liberties.

But there can’t be any serious question about the fact that he did NOTHING effective to help the economy.  The US recovery is less than the old trend rate of growth.  Has that ever happened before?  The Fed’s been less inept than the ECB—that’s all.

And the supply-side?  Even his supporters would admit he did nothing there.  They might disagree with the view that a heavy dose of extra regulation, higher MTRs, and no Keystone pipeline slowed the recovery.  But no one claims those actions sped up the recovery.  And the fracking boom (“drill baby drill”) fell on his lap.

Just a few months ago Obama called for an “emergency” unemployment benefit of up to 73 weeks, much longer than during the President Clinton recovery, all because the labor market was doing so poorly nearly 6 years after he was elected.  And now a few months later they are touting their success in creating jobs—unbelievable.

It will be interesting to see how many liberals agree with him.

HT:  TravisV



54 Responses to “Our great, horrible, indifferent labor market”

  1. Gravatar of John Hall John Hall
    9. October 2014 at 09:47


  2. Gravatar of ssumner ssumner
    9. October 2014 at 10:14

    John, Thanks, I fixed it.

  3. Gravatar of W. Peden W. Peden
    9. October 2014 at 10:34

    “The unemployment rate (U-3) is 5.9%…

    Thanks President Obama, you’ve given us a European labor market.”

    There are many, many countries in Europe that would LOVE to have unemployment at 5.9%. In fact, do that in Europe and people start talking about your “jobs market miracle”.

  4. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    9. October 2014 at 10:38

    The Krugman piece is hilarious. He starts out by claiming that Obama ‘faced scorched-earth Republican opposition from Day One.’

    From those 40 Republicans in the Senate who didn’t even have the votes to filibuster! But later on in the Rolling Stone article he says;

    ‘In 2009, it looked, briefly, as if we might be about to get real on the issue of climate change. A fairly comprehensive bill establishing a cap-and-trade system to limit greenhouse-gas emissions actually passed the House, and visions of global action danced like sugarplums in environmentalists’ heads. But the legislation stalled in the Senate, and Republican victory in the 2010 midterms put an end to that fantasy.’

    How many days is that? But that’s not even the worst sophistry in the piece.

  5. Gravatar of Ray Lopez Ray Lopez
    9. October 2014 at 10:49

    All this is very well and good if you assume that the US decline in long-term employed people is not structural. If you assume it’s structural then it’s not Obama’s fault, or anybody else, except maybe Father Time. The 2008 Recession was the proverbial straw on the camel.

  6. Gravatar of maxk maxk
    9. October 2014 at 10:52

    I agree with you (and with Yglesias) on your main point: Obama was very poor on pushing for monetary solutions to the recession. He didn’t argue for monetary expansion. He didn’t push to fill empty Fed seats at all, let alone with governors who would favor expansion.

    On the other hand, what would Mitt Romney have done?

    An article in the Atlantic from Sep 2012 quotes a Romney fundraising email:

    “This past week, the Federal Reserve announced it would print $40 billion every month to prop up this administration’s jobless recovery — that’s money we can’t afford for jobs we will never see.”

    Sure, Obama didn’t nominate governors who would have pushed for more aggressive monetary solutions. But he also didn’t actively push against Bernanke’s actions. He didn’t call it “monetizing the deficit”. He didn’t make remarks about how Bernanke would be “treated” if he visited Chicago.

    I blame Obama for not doing more on monetary policy. But I also give him credit for not actively fighting against it.

    I think you give Obama more power over the economy than he has. As you’ve pointed out yourself in the past, it’s difficult for monetary policy to move far beyond the stance of the average economist. It would have been great if Obama had had the vision of FDR in this area.

    On the other hand, I can readily imagine the strident response from the right if Obama had actively pushed for aggressive monetary expansion. Not clear to me that that obviously makes it easier for the Fed to be expansionary.

  7. Gravatar of Mark Mark
    9. October 2014 at 11:05

    “i.e. the chance of being laid during a given week if you had a job, was below 2 in 1000.”

    Thanks for the afternoon laugh Scott 🙂

  8. Gravatar of David R. Henderson David R. Henderson
    9. October 2014 at 11:24

    LOL. Great catch. I would put the chance at more like 100 in 1000.

  9. Gravatar of ssumner ssumner
    9. October 2014 at 11:26

    W. Peden and Patrick, Good points.

    Ray, I think it is partly structural, and that those structural changes are partly caused by an expansion of the welfare state, which Obama supports. Much of the difference between the US and Europe is structural, and Obama prefers the European “structure.”

    maxk, Please tell me you don’t believe Romney’s campaign utterances tell us anything about what he would have done on monetary policy. Obama opposed the Cadillac health plan tax, he opposed the abuses of Bush’s War on terror. He opposed making health insurance mandatory. He said we should defer to states on the war on drugs. That’s all cheap talk.

    But yes, Romney might have done a poor job on the economy. And how is that related to this post? FDR would have done a lousy job if elected in 1928, does that mean Hoover didn’t?

  10. Gravatar of Brian Donohue Brian Donohue
    9. October 2014 at 11:27

    Over the past 30 years, the only times we’ve had sensible, grown-up government is when we’ve had political gridlock. But no one ever talks about this because Team Gridlock doesn’t have a pennant, slogans, bumper stickers, anything really. Yay team!

  11. Gravatar of Brian Donohue Brian Donohue
    9. October 2014 at 11:29

    …and since both teams seem pretty clueless about monetary policy (to Austrians, it’s horror, to Keynesians, it’s weak tea, and nobody but you seems to remember Friedman), I can think of a lot of ways that monetary policy over the past five years could have been a lot worse.

  12. Gravatar of ssumner ssumner
    9. October 2014 at 11:33

    Mark, Wow, Obama was even worse than I thought!

  13. Gravatar of benjamin cole benjamin cole
    9. October 2014 at 11:42

    Excellent blogging.Obama’s monetary policy has been weak – – and when do we get out of Afghanistan?

  14. Gravatar of maxk maxk
    9. October 2014 at 11:47

    You’re saying that Obama shouldn’t get any credit for the relative better job performance of the US than of the Eurozone, since he didn’t support monetary expansion and was completely indifferent to it. I’m saying, well, he at least gets credit for not actively supporting worse policies, for not objecting to the expansionary policies that the Fed did take, for keeping Bernanke (as Romney for example wouldn’t have).

    And I’m saying that if Obama had more strongly supported expansion (as you say he should have), that would have engendered more resistance to expansion from the other side. I think you need to at least acknowledge that resistance and once in awhile mention how wrong it was.

  15. Gravatar of Scott Sumner Scott Sumner
    9. October 2014 at 12:15

    Maxk, I see you are new to this blog. I’ve criticized the hawks 1000s of times. But Romney’s not President right now, and I’d prefer to evaluate the performance of the President.

  16. Gravatar of Liberal Roman Liberal Roman
    9. October 2014 at 12:51

    The recent return of volatility in the market has me coming back to this blog. Scott you have written that at this point the aggregate demand problem is all but solved in this county. But do the big moves in the market due to perceived tightening by the Fed have you rethink this position. It seems that even at this point, the Fed still has a lot it can do to boost growth.

  17. Gravatar of Bonnie Bonnie
    9. October 2014 at 13:48

    And Republicans who indignantly exclaimed that they “would fire Bernanke in a second,” and called his QE programs treasonous bubble-machines are in much better shape on monetary policy? I don’t disagree with anything you’ve said about Obama, but he’s not as incompetent as they.

  18. Gravatar of Luis Pedro Coelho Luis Pedro Coelho
    9. October 2014 at 14:02

    “Everyone seems to agree that since 2010 the US has done considerably more austerity than the eurozone.”

    Everyone? In the eurozone, there is a large group of people that say that the economy would be better if we had had large stimulus like the US.


    Btw, speaking of Eurozone employment. I’m in Paris right now and couldn’t help thinking a few times that “if they hired a few more people, the service wouldn’t suck so much.” So many businesses feel understaffed.


    It’s slightly funny to see Europhile progressives go all “at least, we’re better than Europe”.

  19. Gravatar of Gordon Gordon
    9. October 2014 at 14:39

    Scott, I know this is primarily an economics blog but I couldn’t help but wonder at the reasons for your assessment that Obama’s foreign policy has been better than average. The Middle East peace process has collapsed. The UAE with help from Egypt has conducted bombings in Libya without informing the U.S. which would’ve seemed unthinkable over the last few decades. Our allies quietly grumble that they feel the U.S. has become untrustworthy as a partner on international issues. Finally, the president has escalated drone and missile strikes in Pakistan and Yemen since taking office. While Americans approve of such actions, the rest of the world believes this just fosters greater enmity towards the U.S. given the thousands of innocent people killed in these strikes.

  20. Gravatar of Vivian Darkbloom Vivian Darkbloom
    9. October 2014 at 14:48


    “Btw, speaking of Eurozone employment. I’m in Paris right now and couldn’t help thinking a few times that “if they hired a few more people, the service wouldn’t suck so much.” So many businesses feel understaffed.”

    I’m puzzled by this observation. First, I was in Paris last week and observed nothing like it (true, the service is sometimes lousy–as it is elsewhere in the world—but this is not normally due to understaffing).

    Even if your observation about “understaffing” is correct, I’m puzzled by the apparent connection drawn here between “austerity” and or “stimulus” and this particular alleged problem of “understaffing”. Since we’re talking about “businesses”, I presume we mean the private sector. If understaffing actually exists, this must mean that demand for the services exceeds the supply of labor; but, is that a problem of “austerity” or “lack of stimulus”? I don’t get it. A more likely explanation would be that the onerous French social taxes on employers and the difficulties in firing an employee once he or she is hired is the cause–or that overall wages are too high–would be the cause of “understaffing”. This has nothing to do with “austerity” or “lack of stimulus”, unless one defines sticking to the status quo high taxes as “austerity”, but that is not my understanding of the term.

    Also, the fact that “everyone” (likely intended as hyperbolic license in the original) “seems to agree that since 2010 the US has done considerably more austerity”, strikes me as correct. Nota bene that comment was made as to 2010 and afterwards. The fact that a large number of people in Europe may think that more stimulus would have helped does not make that statement wrong. I’m sure a “large number of people” also think that more European austerity would have helped.

  21. Gravatar of Vivian Darkbloom Vivian Darkbloom
    9. October 2014 at 15:15

    “Scott, I know this is primarily an economics blog but I couldn’t help but wonder at the reasons for your assessment that Obama’s foreign policy has been better than average.”

    I was going to ask the same question. If I knew what the foreign policy was, I would be in a better position to judge.

    But, I have observed two things about the articulated foreign policy::

    1. A major policy statement to the US public and the world that the United States will not readily rely on military power to resolve foreign conflicts and/or protect our interests abroad;

    2. A statement that if Syria uses chemical weapons, they would cross a “red line” which would trigger a US response. (That was later ignored).

    What other “foreign policy” are we referring to?

    As the first policy statement above, one could reasonably agree that in *conducting* foreign policy the US will not be quick to militarily intervene. What I’m puzzled by is why on earth the President of the United States would articulate this as a policy *statement* rather than keeping potential adversaries guessing? Someone should teach Obama that in poker sometimes it helps to keep your cards a bit closer to the vest.

    As to the second statement, to again to use the poker metaphor, it doesn’t appear to me that he understands how the game works. If your bluff is challenged that doesn’t mean that you place your cards face down rather than play the strong cards that are in your hand.

    This foreign policy doesn’t strike me as very credible. More importantly, it doesn’t appear that our adversaries view it as credible.

  22. Gravatar of Major.Freedom Major.Freedom
    9. October 2014 at 15:56

    The unemployment reality is much worse than this. Almost 1 in 4 citizens are now on (no work) disability welfare. None of these people are of course counted towards the unemployment figures, despite the obvious fact that a substantial percentage are work capable and are just mooching off the system.

  23. Gravatar of ThomasH ThomasH
    9. October 2014 at 15:59

    You are right about Obama and the economy, especially monetary policy, but “En el pais de los ciegos, el tuerto es rey.” The other party wanted [not all as colorfully as Gov Perry] — and partially got — generally less expansive monetary policy and was even less inclined to have governments borrow for projects that have positive net present values at current borrowing rates.

  24. Gravatar of Liberal Roman Liberal Roman
    9. October 2014 at 16:26

    @Gordon & Vivian

    He is above average if you stop viewing the world as a problem the US needs to solve. If you still view it that way. That every atrocity and wrong that happens anywhere in the world (and especially the Middle East) must be met with a US military response, then yes he has been a disaster for you.

    But for me, I am enjoying the neo-cons like you squirming and bitching. By now, other lesser Presidents would have already invaded Lybia, Tunisia, Egypt, Syria, Iraq again and possibly launched strikes against Iran. Call me crazy, but I am glad we didn’t get involved in most of these conflicts. Even now, I am not very happy that we got involved in this conflict with ISIS. They obviously baited us into it by capturing some Americans and chopping their heads off. ISIS is a regional problem and if the Arab governments of the region think ISIS is a problem, they most certainly have enough $$$ and weapons to deal with it. But like everyone else, they are acting in anticipation of a US bailout. And people like you are welcome to oblige them.

  25. Gravatar of Liberal Roman Liberal Roman
    9. October 2014 at 16:28

    Oh and I forgot to mention Ukraine. President McCain would already have us on the verge of a nuclear war if he was in power now.

  26. Gravatar of Gordon Gordon
    9. October 2014 at 18:00

    So I criticize the president’s escalation of drone and missile strikes outside of any declared war zone yet I’m the one being called a neo-con? I also object to his civil rights abuses so I guess that makes me a neo-con as well. I was a life long Democrat but gave up on that a couple of years ago. Neither Democrats or Republicans are interested in honest debate. Neither party can claim any moral high ground and neither is trust worthy. But the Democratic party has taken more and more to the strategy of shrilly vilifying anyone who doesn’t agree with their actions so as to distract the public from the issues. And I’ve always found such tactics to be reprehensible and insulting.

  27. Gravatar of TravisV TravisV
    9. October 2014 at 18:27

    “Here Are 5 Things Traders Are Talking About Amid Today’s Major Selloff”


  28. Gravatar of maxk maxk
    9. October 2014 at 18:35

    “So yes, we are doing better than the eurozone. Does Obama deserve credit for the fact that our monetary policy was less incompetent than the ECB? That doesn’t even pass the laugh test.”

    I just think that’s way too strong. As you say, the Fed under Bernanke was much less incompetent than the ECB. Obama reappointed Bernanke and supported the Fed actions, at least to the extent of not actively opposing them. Sure Obama should have gone farther and didn’t. But in that quote above, you’re not blaming Obama for not going farther. You’re ridiculing the idea that he should get any credit for the monetary policy that he oversaw (however weakly).

    You say he didn’t push the policy that “any progressive with half of brain favors”. But if you can blame him for not taking one alternative path (pushing a more expansionary policy), why not give him credit for not taking another alternative path (pushing a more contractionary policy)? I bring up Romney and Rick Perry just to illustrate that the second alternative was not completely ridiculous.

  29. Gravatar of Don Don
    9. October 2014 at 20:05

    Obama has been very weak on monetary policy. He still is. However, assuming all decisions are a political optimization, then he must be getting political benefit outside of the wages and jobs for Americans. Perhaps looser money would lead to a stock market boom and that would expand the wealth gap. Perhaps a more vibrant economy would make it harder to push through expanded govt. programs. Perhaps a falling dollar would hurt those huge donors from Wall St. My point is that optimal monetary policy involves more than just inflation and unemployment (dual mandate) for a politician.

  30. Gravatar of MattP MattP
    9. October 2014 at 20:35

    I realize Scott is not a foreign policy expert/analyst (neither am I for that matter), but I do think Obama’s performance in this area has been lackluster. IMO, he’s certainly much better than McCain and Romney would have been. That isn’t really saying much though.

    For instance, the Afghanistan surge looks to have been a failure (Benjamin Cole may have been alluding to this above). This outcome was predicted by many commentators at the time, but Obama decided to go with it anyway. After all, the conventional beltway “wisdom” appeared to have mandated it. In addition, I suppose it didn’t help that he essentially campaigned on an expanded role in the conflict.

    Debates over foreign policy definitely cut across ideological lines today. I’m certainly left-of-center and find myself agreeing with The American Conservative’s Daniel Larison a great deal more than I do Democrats like Hillary Clinton. Micah Zenko and Paul Pillar often provide great commentary as well.

    On a different note, I wanted to take issue with Krugman for focusing intensely on Obama and the US presidency in general. The President clearly plays a major role in American politics and governance, but I am of the opinion that the manner in which we assess individual presidents is fundamentally flawed. President’s often seem to be given an excessive amount of praise when things are going right and a disproportionate share of the blame when things go wrong. Americans would likely be better off if they paid closer attention to the performance of their local representative and stayed abreast of broader economic trends.

    Obama isn’t even out of office yet, so I also tend to think these kinds of judgments are a tad premature.

  31. Gravatar of SG SG
    9. October 2014 at 21:23

    More adventures in monetary policy free-association from the NYT editorial board:

    “There is a lot governments and central banks could do to avoid another recession. For example, a recent I.M.F. report showed that increasing government spending on public investments like roads, ports and railways can help stimulate the economy immediately and for several more years. If done right, such spending could generate benefits that more than offset the costs, particularly in developing nations like Brazil and India, which suffer from high inflation in part because of the high cost of transporting food and other goods on traffic-clogged roads.


  32. Gravatar of Lorenzo from Oz Lorenzo from Oz
    9. October 2014 at 21:29

    But Andrew Sullivan assures us that Obama saved us from a second Great Depression.

  33. Gravatar of Vivian Darkbloom Vivian Darkbloom
    10. October 2014 at 01:49

    “He is above average if you stop viewing the world as a problem the US needs to solve….But for me, I am enjoying the neo-cons like you squirming and bitching.”

    Your reflexive need to put people in putative political classifications appears to be affecting your reading comprehension skills. And, your comment is not at all responsive to my criticism. Here’s what I wrote:

    “As the first policy statement above, one could reasonably agree that in *conducting* foreign policy the US will not be quick to militarily intervene.”

    My objection is not to the use of restraint. My objection, as I think was clearly stated, is that of making a major policy statement of non-intervention. It was also a criticism of drawing a red line and then failing to act. These signaling mistakes seem to actually be causing much of the recent problems in Ukraine, Syria, Iraq and elsewhere. It’s one thing to show restraint in “solving all the world’s problems”; it is quite another to contribute to the creation of them in the first place. Even Obama’s former Defense Secretaries (Gates and Panetta) have expressed the same concerns. I don’t think either of them are “neo-cons”, whatever that term means (I’m sure it was meant to try to echo “neo-nazi”, but I’m immune to these types of rhetorical flourishes which generally indicate that the person flinging them has little of actual substance to say ). If you want to address those points rather than “squirming and bitching”, feel free.

    Since this blog is primarily about monetary policy, I wonder how Scott and the other folks here would react if Bernanke and Yellen were to follow the same signaling approach to monetary policy as Obama has to foreign policy. That is, announce to the world that despite the tools the Fed has at it’s disposal, it won’t be inclined to use them and when it does espouse resolve contradict this when the time comes to back that resolve up with action. As I said, this is a serious problem of credibility (and, to borrow from Panetta and Gates, leadership).

    Now, if I were to make the best defense of Scott’s “above-average” assertion, it would be that the average is very low. On that, I’d agree. But, I still have serious doubts as to Obama’s relative standing in a class of those very poor students.

  34. Gravatar of Luis Pedro Coelho Luis Pedro Coelho
    10. October 2014 at 01:52

    @Vivian: our hotel was obviously understaffed as were the restaurants. I agree that the problem is structural, though, not demand.

  35. Gravatar of BC BC
    10. October 2014 at 04:03

    Considering that Obama tried to nominate Larry Summers to head the Fed, maybe we should be glad that he has left so many other seats unfilled. Maybe, his greatest contribution to the economy is that he has failed to put more bubble-poppers on the Fed.

    Similarly, on the supply-side, he has not succeeded in adopting all the European-style policies (more regulation, higher taxes, etc.) that he favors. By failing to make us more like Europe, he has allowed us to outperform Europe.

  36. Gravatar of ssumner ssumner
    10. October 2014 at 05:35

    maxk, You have no idea what Romney would have done, and it has no bearing on Obama’s performance.

    Liberal Roman, Good question. First of all, I’d say we aren’t at full employment yet, although we are getting close. And second, it’s possible that we could be derailed by some event, like a sharp global slowdown–and that could impact the US. Of course US stocks are often multinationals, and hence may be directly impacted by global growth, even if we don’t slow.

    I would add that monetary policy can push the economy beyond full employment.

    Bonnie, That’s right.

    Luis, Well, I suppose there are always a few people who have never bothered to look at the data.

    Gordon, Yes, but in foreign policy there is bad and horrible. Bush II, Nixon and Johnson were horrible. Being merely bad like Obama and Clinton and Reagan makes you above average. But I’m no expert on foreign policy (are there any experts?) so my views shouldn’t count for much.

    Vivian, I certainly agree he’s made serious mistakes, such as the red line in Syria. However I think foreign policy should be transparent. If Bush’s policy toward the border in Kuwait had been transparent in 1990, Kuwait never would have been invaded. Also see my answer to Gordon.

    maxk, Even Democrats who are strong supporters of Obama, and who think he’s done a fine job overall, think he’s done a poor job on monetary policy. Bush’s Fed did much better. If the GOP was back in office they’d favor monetary stimulus, like they always do. Talk is cheap when you are out of power. Remember that Obama favored the filibuster, or the debt ceiling nonsense when he was a senator? That sort of talk means nothing about what he’d favor when in power.

    I also think you misunderstood my claim that he done a poor job as implying someone else would have done better. I think most people would have done a poor job. But’s that’s also true of his successes. Most people would have passed financial sector reform after 2008. Government policy has lots of inertia.

    MattP, I agree.

    SG, That’s laugh out loud funny.

    BC, Yup.

  37. Gravatar of Scott Freelander Scott Freelander
    10. October 2014 at 05:43


    You are being much too generous toward Obama on foreign policy, where he’s gotten some big things wrong, is too indecisive, and too timid.

    You aren’t being generous enough about Obamacare, which while it may only be a shadow of the reforms we could have had, still seems to be making a substantial positive difference in the lives of many millions of Americans, without the cost run-ups, on average, that so many conservatives predicted. I think your ideas for healthcare reform are much better, but with Washington these days, we have to take what we can get.

    Obama’s record on civil liberties is tragic and frankly unforgivable.

    His record on the economy is awful, and the word “tragedy” applies here too.

    Overall, I would say that he was not only a terribly wrong person for president at this time, but he would be terribly wrong at any time. He just isn’t a good president, and I’m a liberal who voted for him.

  38. Gravatar of Vivian Darkbloom Vivian Darkbloom
    10. October 2014 at 06:17

    “Vivian, I certainly agree he’s made serious mistakes, such as the red line in Syria. However I think foreign policy should be transparent. If Bush’s policy toward the border in Kuwait had been transparent in 1990, Kuwait never would have been invaded. Also see my answer to Gordon.”

    Scott, I think you are helping make my point about the faulty signaling. What I think you are suggesting regarding Kuwait is that if Bush I had been clear that Kuwait was a sovereign country with fixed borders under international law and thus that an invasion of Kuwait would not be tolerated, we could have prevented that war. In other words, he should have drawn a red line (and stuck to it, if needed). That may well be so. But, as I recall, Bush I never made a major foreign policy speech to West Point cadets in which he announced the United States would be reluctant to use military force to stop such shenanigans. Had he done so, do you think this would have encouraged or discouraged Saddam’s aggression? If you want to follow a policy of weakness, my suggestion is that perhaps you not be so “transparent” about it.

    And, has this recent “transparency” encouraged or discouraged the recent troubling events in Ukraine, Syria, Iraq, etc?

  39. Gravatar of Vivian Darkbloom Vivian Darkbloom
    10. October 2014 at 06:21

    Also, Scott, I was hoping that you would have responded to my analogy to monetary policy because on that you surely can claim to be an expert. What if Janet Yellen were to tomorrow make a major policy speech in which she announced that, despite the powerful tools available to the Fed, from now on the Fed will be reluctant to deploy them. That would be very “transparent”. But, is that good policy? Why should a different signaling approach apply to foreign policy?

  40. Gravatar of Frustrated Frustrated
    10. October 2014 at 06:24

    I am a long time reader of this blog and I believe it to have the best economic analysis that I have read. Indeed, I’m challenging a current democratic member of the House of Representatives as an Independent candidate and finally got to have a quasi-debate with them and brought up many similar points in this thread…abysmal employment-population ratio; slowest recovery growth ever in post-world war II era.

    I know I’m going to lose but I thought at least I could influence her with ideas that I’ve picked up from here and the rest of the econoblogosphere.

    Nope. All fell on deaf ears.

    It’s all about protectionism and the trade deficit to her; blah blah blah. She actually thinks they’ve done a good job. As you’ve said about the fed before, also applies to congress; they’re just not as hungry as the unemployed.

    And the Republican challenger and all the republican comments on the website call me a Socialist go figure.

    We’ve got two political parties that are completely out to lunch.

  41. Gravatar of Steven Kopits Steven Kopits
    10. October 2014 at 06:26

    US employment policy, as a statistical matter, is worse than that of Japan, Germany or the UK. US employment to population ratios for the 15-74 age cohort is now below all those countries.

    I would further draw attention to Germany, which saw increasing employment to population ratios from 2005 straight through the recession. The Hartz IV reforms of 2005 are due credit. This suggests that labor force participation rates are primarily driven by public policy, as well as GDP growth.

    See the graph: http://www.prienga.com/blog/2014/10/6/employment-to-population-ratios

    In the US, the entire participation differential between the US and Japan can be explained by US disability policy, which has idled about 3 million working age people compared to the expected number using 2000 disability rates. This difference represents a participation rate of about 2 percentage points., that is, reforming our disability policy would be expected to increase the labor pool by 2 people in 100.

    That massive increase in student loans likely also affected participation rates, which dropped most acutely for the 15-24 age group. It is very hard to determine what the “right” level of post secondary education in the economy should be. It has been declining since 2012, expected down 1.4% this year after a 1.7% decline last year. Arguably, this decrease should lead to increased participation rates, but it is very, very difficult to make a forecast with confidence just now. There is no stable trend.

    Labor force participation policy for the post 55, and in particular, the post-65 age group will prove critical to long term economic growth. It is time to talk about vesting Social Security for persons who choose not to retire or retire late. That is, if you keep working, you or your estate will vest with a portion of the payments not made to you. In any event, it is fertile ground for exciting and innovative public policy. Like the Rolling Stones, the Baby Boomers may grow older without ever fading away. They are a huge resource, and we have to gear our economy to utilize them constructively.


    All these numbers and more can be seen in my demographics spreadsheet.

  42. Gravatar of ssumner ssumner
    10. October 2014 at 07:54

    Scott, Almost everything you say about Obama was much worse under Bush. All presidents fail, it’s just a matter of degree. (Except your “timid” remark, which may be a good quality in foreign policy)

    I recall people bashing Clinton when he was in office, and now the 1990s seem like paradise. In 2000 the voters threw the Dems out of power—why?

    On inauguration day 2001 the only paper that got it right was The Onion:

    “Bush: “Our Long National Nightmare of Peace and Prosperity is Finally Over.”

    Vivian, I think you misread me, I agree that Obama has been too vague, like many previous presidents. I just don’t see his failures as being very important, compared to certain previous Presidents. But again, I’m no expert on foreign policy. It seems to me people expect too much of the US. It’s not at all clear to me why issues like the Ukraine are something the US should address. I can certainly see an argument for doing so, but that begs the question of how? Obama’s relied on sanctions. Perhaps that’s too much or too little, but I’ve never seen a convincing model of foreign policy that I could use to determine whether it is too much or too little. Is there such a model? And he’s been appropriately clear on the Baltics, which are NATO members.

    In my view, the vast majority of cases of strife in the modern (post-WW2) world are caused by governmental incompetence. The two obvious exceptions are the Falklands war and Kuwait (1990). But otherwise it’s the corrupt and incompetent government in places like Ukraine and Iraq and Syria and Libya that breed violence. The fighting is just a symptom. I don’t know how (or if) the US can fix that problem.

    I suppose you could argue the Kurds are a reasonably competent government (like Kuwait and the Falklands), and thus it might be worthwhile to protect them from ISIS, so I can’t fault Obama for doing so. What me must avoid at all costs is a John McCain type foreign policy–i.e. highly emotional. Obama seems rather unemotional to me.

    Regarding money, I prefer good policy. But if the Fed is determined to have bad policy, I very much want them to be transparent about it. That will speed up the adjustment of wages and prices.

    BTW, There is an irony in your example—even making that announcement is unconventional policy.

    Frustrated, I feel your pain. But don’t give up, ideas eventually do have consequences.

    Steven, Good points.

  43. Gravatar of MattP MattP
    10. October 2014 at 08:12

    Vivian, the “credibility” argument you are championing has never struck me as being particularly credible itself:

    “Other major powers don’t assume that U.S. guarantees to its treaty allies in their region are less valid because the U.S. didn’t bomb a regime in a different part of the world. U.S. allies and clients don’t decide their involvement in later military interventions based on whether the U.S. has followed through on previous threats. They determine whether the specific intervention is one that they think they are in some way obliged to join or support. Likewise, U.S. allies don’t equate security guarantees that Washington makes to them with a president’s off-the-cuff warning to a minor dictator. Opting not to bomb Syria didn’t make U.S. allies any less confident of U.S. backing, nor does it appear to have made them any less inclined to join new U.S.-led military interventions.

    The House of Commons voted to reject intervention in Syria last year, and has now voted to approve a partial role in the war against ISIS. If Panetta’s “credibility” argument were the least bit true, we would expect there to be fewer governments supporting the current intervention than there were prepared to bomb Syria a year ago. Instead, we see the opposite. Even if almost all of the members of the current “broad coalition” are offering symbolic backing or token contributions, that is more than could have been said about governments supporting the abortive intervention in 2013, which at the end would have included the U.S. and France.”

    Read more: http://www.theamericanconservative.com/larison/panetta-and-the-zombie-credibility-argument/

    “The credibility argument was always a stretch. As I noted in a column earlier this year, there is a wealth of academic literature proving Panetta wrong. As Dartmouth’s Daryl Press writes in his book, Calculating Credibility, “A country’s credibility, at least during crises, is driven not by its past behavior but rather by its power and interests. If a country makes threats that it has the power to carry out””and an interest in doing so””those threats will be believed even if the country has bluffed in the past.”

    Read more: http://www.theatlantic.com/international/archive/2014/10/what-does-global-credibility-even-mean-obama-panetta/381175/

    Press’ claim seems far more plausible to me, but I’m obviously willing to consider what you have to say in response.

    Can you explain what “powerful tools” the United States could realistically deploy to markedly improve the situation in Syria or Iraq? Sustained (and expensive) counterinsurgency campaigns in Iraq and Afghanistan have had tragic consequences for the region. Even where our military involvement has been comparatively limited (e.g., Libya and Yemen) we are seeing instability and outbreaks of violence.

    Furthermore, we aren’t even sure how effective conventional counter-terrorism tactics like leadership targeting are:


    We could also listen to Justin Logan and stop obsessing over the Middle East:


  44. Gravatar of Vivian Darkbloom Vivian Darkbloom
    10. October 2014 at 09:13


    I don’t think your arguments are logically consistent.

    Consider the first quote and reference. Even though I think the conclusion is wrong about allies, the main purpose of “credibility” in this context is to defer adversaries and aggressors, not to encourage allies to join us when the going gets tough.

    The second point strikes me as wishful thinking:

    “If a country makes threats that it has the power to carry out””and an interest in doing so””those threats will be believed even if the country has bluffed in the past.”

    I guess the point here would be “sorry, but this time I *really, really* mean it and the belief in this will be undiluted by past failures. How many times are those failed bluffs supposed to work? Until you get to “really, really, really, really mean it”?

    So, it doesn’t matter if you draw a red line and then, when the time comes to enforce your ultimatum, you do nothing; i.e., it doesn’t at all affect the effectiveness of subsequent ultimatums? That’s a hard one to swallow. Again, here, for most readers, the analogy to monetary policy credibility should be instructive. It doesn’t matter if your signaling isn’t credible? Sorry, but I’ll go with Leon Panetta on that one and I think, based on his resume, that his “credibility”, not to mention the robustness of his arguments, surpasses that of Mr, Press. I’ve also got to laugh when I read quotes like this one:

    “As I noted in a column earlier this year, there is a wealth of academic literature proving Panetta wrong.”

    It takes a lot of self-delusion to think that in this particular arena “academic literature” is going to “prove” anything. These sorts of things are simply not susceptible to “proof” one way or the other. The best that one can do is to go with the better reasoned judgement. But, the fact that someone claims that it is “provable, makes me want to question that persons credibility, if not his sanity.

    “Can you explain what “powerful tools” the United States could realistically deploy to markedly improve the situation in Syria or Iraq?”

    You are asking the wrong question. The first question *should have been* what the “powerful tools” are that would have prevented this situation in the first place. That would be the most powerful and sophisticated armed forces in the world backed up by a credible foreign policy that makes potential adversaries and aggressors at least think that they will be subject to them if they cross certain lines, whether those lines are expressly drawn or not. What is not effective is announcing in advance that that power will be used only very reluctantly.

    In case you are wondering, I don’t think the initial incursions into Iraq the second time and into Afghanistan were wise. Those were serious foreign policy mis-judgements, in my view. But, that’s a different matter than the criticisms I’m now making about signaling of foreign policy; those were very poor decisions, yes, but for different reasons–in neither case were “red lines” drawn nor were actions preceded by unilateral expressions of American impotence.

    Leon Panetta, a loyal Democrat and apparently a patriotic American in the best sense, has a very good interview with Charlie Rose here:


    Watch the whole thing. I don’t think his views, which, for obvious political reasons, are expressed much more diplomatically and carefully than mine, are really that much different than what I’ve been arguing. This does not “prove” I’m right; but it rings very true to me, based both on logic and experience.

  45. Gravatar of MattP MattP
    10. October 2014 at 10:53

    Vivian, I don’t endorse the drawing of vacuous “red lines” either, but I also think you are overestimating the importance of signaling in this context.

    The academic literature may not definitively prove anything, but it is likely still a useful guide. If a large number of scholars question the centrality of signaling in determining the aggressiveness (or lack thereof) of international actors then I imagine they have reason to do so. I’m not well-read in this area and haven’t had the opportunity to review Press’ book, so my views are provisional.

    If America’s core national security interests are not threatened, the “power” you refer to should only be used very reluctantly. Those “serious foreign policy mis-judgements” have revealed the limits of American military power and have (rightly) increased the public’s skepticism of international intervention. Are you suggesting dictators and strongmen like Putin are more emboldened by a failure to enforce a misguided “red line” than they are by the clear factors impeding the United States from playing a constructive role in many of these conflicts?

    For example, Americans are strongly opposed to committing ground troops to Syria or Ukraine, so our ability to shape events is severely hampered from the get-go. Never mind the fact that Putin and the Russians have much more at stake in Ukraine than we do. The same can be said for the Syrian factions we find distasteful.

    In the grand scheme of things, Assad, ISIS, and Putin are only minor threats. We may not be willing or able to destroy/stop them, but with “the most powerful and sophisticated armed forces in the world” we can effectively manage them. I would actually contend that the United States has never been safer.

    What exactly gives Panetta credibility in your view? Is it his record or his resume? I don’t particularly care that he has held positions of power for decades, but it does look like his record is problematic in certain respects. IMHO, his reasoning is poor:

    “Of less concern to Panetta are not only the potential negative consequences from using force but also the actual diplomatic agreement negotiated by the US to completely destroy all of Syria’s chemical weapons. While he gives a perfunctory nod to this “important accomplishment” in his memoir, he complains that “hesitation and half-steps have consequences.”

    As for what those specific consequences are, other than vague platitudes about credibility and signals: your guess is as good as mine. For Panetta, the act of using force is seemingly more important than the actual tangible result achieved by using force.”

    http://www.thedailybeast.com/articles/2014/10/08/leon-panetta-is-what-s-wrong-with-dc.html (Also see the section dealing with Panetta’s position on the Afghanistan surge)

    “The bigger problem with Panetta’s critique is this: he assumes that the way to redeem Obama’s disengaged presidency is to arm more rebels, drop more bombs and keep wars going. This is consistent with the Republicans who chastise Obama for leading from behind.

    Not only is this advice substantively bad””yes, let’s have the Operation Fast and Furious administration trying to identify and arm moderate rebels in the Middle East””it misses a key point. In many cases, Obama has already given us the worst of all possible worlds: a president pursuing a half-heartedly interventionist foreign policy that he doesn’t seem entirely sold on himself.”


  46. Gravatar of TravisV TravisV
    10. October 2014 at 10:59

    JP Morgan: Right now, the US is a 1% growth economy


  47. Gravatar of Doug M Doug M
    10. October 2014 at 12:26

    An ulra-low layoff rate is not a good thing. It is stagnation.

    A dynamic economy means that new jobs are being created and destroyed every day. While it may be painful for those who have been laid off, if the economy is humming, they shouldn’t be on the sidelines for very long.

    Embrace the churn. The alternative is slow death.

  48. Gravatar of Gordon Gordon
    10. October 2014 at 14:02

    “Being merely bad like Obama and Clinton and Reagan makes you above average.”

    Okay, I was wondering if the bar was set pretty low for your average. Personally, I would say Reagan was worse than merely bad. He provided support to Saddam Hussein and the groups that eventually formed the Taliban. And he nearly caused the Soviets to launch a nuclear first strike against us in 1983. Though I will give him credit for learning from this nearly tragic mistake by working with Gorbachev to get us moved back from the brink.

  49. Gravatar of Morgan Warstler Morgan Warstler
    10. October 2014 at 14:48

    Doug, that’s part of my wacky theory and I know everybody think I get causation correlation wrong.

    But when JOLTS data showed 6M turns monthly 15 years ago, we made real jobs gains with growing labor participation. At 5M and now closer to 4M, we’re losing labor force and these job gains feel funky.

    My counter-intuitive take is that JOLTS turns measure market dynamics between incumbents and innovators.

    And much like Scott’s view that the Fed ought “do whatever it takes” to hit the NGDPLT, I think that regulations and tax law the whole ball of wax should be treated the same way to hit 6M+ churn per month.

    If it slows down, favor new market entrants with tax policy, reduce regulations on SMB owners, put your finger on whatever free market side of the scale is needed get people being fired, quitting and being hired with great frequency.

    6M+ churns is having good blood pressure, and we should treat it in and of itself as the cure.

  50. Gravatar of Doug M Doug M
    10. October 2014 at 15:53


    I know that this is a bit of theory is right up your alley.

    Half the jobs in 2030 will be for companies that do not exist today. (Maybe not half… but some significant percentage) And, I will wager that those businesses that appear in the next 15 years will be the innovators and the wealth creators.

    And, in order for this new growth to rise, some amount of the dead wood will need to be broken down.

  51. Gravatar of ssumner ssumner
    10. October 2014 at 17:49

    Thanks Travis, interesting link.

    Vivian, By the way, a while back I was criticizing Obama for his “line in the sand” in Syria, that he later abandoned, and got into an argument with a commenter who (wrongly) thought Assad gave up his chemical weapons.

  52. Gravatar of Daws Daws
    13. October 2014 at 00:29

    “However I think foreign policy should be transparent.”

    The stakes r too high and actors too irreconcilably opposed not to allow for significant ad-hoc features, imo

    several countries enjoy a future only for our frontin. the US would probably not really defend them from invasion or sustained assault by a nuke-armed power, but the ugly jackpot attached to that miniscule possibility often suffices. hence, Taiwan

    there r also non-MAD instances, including situations wherein circumstances change frequently enough to preclude doctrinal clarity

  53. Gravatar of Daws Daws
    13. October 2014 at 00:33

    hard to repeat the experiment, but it might b that Assad’s use of chem weapons would’v been more frequent or more deadly without an illusory need to conceal attacks or preserve US dove arguments for restraint

    lol @ “allies”. outside anglosphere we mostly defend moochers

  54. Gravatar of ssumner ssumner
    13. October 2014 at 14:55

    Daws, I think less transparent policies might lead to slightly more small conflicts. But transparency makes a megaconflict much less likely. My fear is that we will blunder into something big. Suppose the US believes it will defend Taiwan and China does not believe this. That could be a disaster. Suppose the US believes it will defend Estonia but Russia does not believe this

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