Following the first installment of a year-end interview on the global outlook, I turn in the second installment to the domestic economy.
Part 2. The US Economy
Q – As economic adviser to President Clinton, you oversaw one of the most prosperous periods in recent U.S. history. How do you assess the economic strategy of the Obama administration? What would you have done differently were you an adviser?
Once again this morning, the BLS employment release tells conflicting stories depending on whether one looks at the unemployment rate or job growth. The U.S. unemployment rate fell from 8.3% in July to 8.1% in August, continuing the gradual three-year downward trend (from its 2009 peak at 10 %). Political economy equations often say that the direction of movement of the unemployment rate in the period preceding a presidential election is the main economic determinant of whether the incumbent is re-elected.
The BLS this morning reported U.S. job gains of 163,000 in July, which is good news in the eyes of the financial markets. The jobs data had been disappointing over the preceding three spring months. Before that, during the winter months, employment growth was strong.
In terms of perceptions and politics, pundits will say that today’s report is good news for Obama’s re-election prospects, just as they said the spring jobs numbers were bad news for the President. But my interest is in economics and reality, rather than perceptions and politics. From a longer-term perspective, a few important facts have not been adequately discussed.