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Saturday, October 22, 2016

Deficit Hawks Should Curb Their Enthusiasm About Jobs

With our best job reports looking like Clinton’s worst, now isn’t the time to pivot to deficit reduction.

Steven Pearlstein is concerned there’s too much emphasis on getting unemployment down and not enough on pivoting to deficit reduction in the states. Krugman has a good response; I want to focus on two specific parts of Pearlstein’s post. The first:

There are some on the left who also cling to the view that the economy is stuck in a depression — lest it undermine their critique about the woeful inadequacy of fiscal stimulus and the desperate need for more.

Let’s start with some basic facts: Monthly job growth was over 250,000 in just over half of the months during Bill Clinton’s presidency. In the other half, the slow months, the average job growth was around 154,000 per month.

Knowing that is what healthy job growth looks like, the meek jobs numbers we are seeing — last month’s was 243,000, and the high end estimate for this month is 250,000-300,000 — looks like it may be approaching a period of solid growth. But with so much potential downside (Iran, Europe, etc.), why would we want to stop expansionary monetary and fiscal stimulus?

Steven Pearlstein notes, “The data points for this optimism are to be found in recent reports on private payrolls (averaging just under 200,000 jobs per month for the past year).”

Notice the “private” payrolls — total job growth is actually 160,000 averaged when you take into account the shedding of government jobs through 2011. Which is to say our economy at its strongest looks close to the Clinton economy at its weakest.

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