“Are
We There Yet?” - Straight Line Extrapolating the Unemployment Trend: Four More
Years Of Economic Pain
The Annoying Question
Just like the annoying kids in the back seat, Americans want to know: “Are We There Yet?”, and: “How Much Longer?”. After a harrowing 4 years trip (so far) since Bear Stearns and Lehman and the bottom dropping out of US unemployment, these questions are neither childish nor immature though certainly still very annoying. All who are trapped in the burning careening electric car that is the US economy want to know the answers, yet almost nobody wants to talk about it. Why not?
Just like the annoying kids in the back seat, Americans want to know: “Are We There Yet?”, and: “How Much Longer?”. After a harrowing 4 years trip (so far) since Bear Stearns and Lehman and the bottom dropping out of US unemployment, these questions are neither childish nor immature though certainly still very annoying. All who are trapped in the burning careening electric car that is the US economy want to know the answers, yet almost nobody wants to talk about it. Why not?
The Obama SOTU Answer
A better subject for Obama’s 2012 SOTU was a shopping basket full of small-ball shiny little Saul Alinsky amateur fix-it ideas, a narrative believed by no one, doomed for the scrap heap. The intent was only to distract the fickle eyeball from the grim economic realities that refuse to go away anytime soon. Shiny new taxes on the rich: the Buffet Rule (which if implemented would yield tax revenue sufficient to run the government for a whole 18 days), and mass refinancing of mortgages, wiping out more 1 per center fat cats and driving banks even further into insolvency. Focus instead on Warren Buffet’s secretary, whose salary was $200K - $500K, who owns two homes, and who can only be accused of being a tax moron for paying the 35%. Obviously she lacking the wit of either Warren Buffett or Mitt Romney or anybody with half a brain for the great American sport of legal tax avoidance. This is the person touring America as Obama’s argument for raising taxes to sustain the government for another 18 days. Admirable.
A better subject for Obama’s 2012 SOTU was a shopping basket full of small-ball shiny little Saul Alinsky amateur fix-it ideas, a narrative believed by no one, doomed for the scrap heap. The intent was only to distract the fickle eyeball from the grim economic realities that refuse to go away anytime soon. Shiny new taxes on the rich: the Buffet Rule (which if implemented would yield tax revenue sufficient to run the government for a whole 18 days), and mass refinancing of mortgages, wiping out more 1 per center fat cats and driving banks even further into insolvency. Focus instead on Warren Buffet’s secretary, whose salary was $200K - $500K, who owns two homes, and who can only be accused of being a tax moron for paying the 35%. Obviously she lacking the wit of either Warren Buffett or Mitt Romney or anybody with half a brain for the great American sport of legal tax avoidance. This is the person touring America as Obama’s argument for raising taxes to sustain the government for another 18 days. Admirable.
Straight Line Extrapolation
The truth is that it is not very difficult or even controversial to make very clear and simple extrapolations of current data trends to answer those persnickety childish questions of “when the Great Recession will end”. This is the same question as: “When will the jobs lost since the beginning of the recession be restored.” We don’t even need a computer to answer this – a straight edge ruler will suffice. No regression analysis needed. No higher mathematics. No Apple genius bar. Just data.
The truth is that it is not very difficult or even controversial to make very clear and simple extrapolations of current data trends to answer those persnickety childish questions of “when the Great Recession will end”. This is the same question as: “When will the jobs lost since the beginning of the recession be restored.” We don’t even need a computer to answer this – a straight edge ruler will suffice. No regression analysis needed. No higher mathematics. No Apple genius bar. Just data.
The Trajectory Followed By All
Recessions
Figure 1 shows a chart of per cent job losses (relative to peak employment) for the 11 post WWII recessions, from beginning to end of each recession. All 11 recessions show the identical same pattern, a fall into a pit, followed by a recovery back to the zero baseline. This is the economic version of Newton’s law of gravity: what goes down must come back up. Not a complicated behavior, and easily tracked. Note that while all 11 recessions show the same behavior – down then back up – the depth and duration of fall and recovery from each hole is not the same. But it is indubitably clear from all 11 cases that once we pass the bottom, it is relatively easy to project how long it will take to recover back to the zero baseline. What could be simpler and clearer?
Figure 1 shows a chart of per cent job losses (relative to peak employment) for the 11 post WWII recessions, from beginning to end of each recession. All 11 recessions show the identical same pattern, a fall into a pit, followed by a recovery back to the zero baseline. This is the economic version of Newton’s law of gravity: what goes down must come back up. Not a complicated behavior, and easily tracked. Note that while all 11 recessions show the same behavior – down then back up – the depth and duration of fall and recovery from each hole is not the same. But it is indubitably clear from all 11 cases that once we pass the bottom, it is relatively easy to project how long it will take to recover back to the zero baseline. What could be simpler and clearer?
Recovery Of Current Great Recession
Abnormally Slow
Applying this to the red line of Figure 1, showing the current unemployment path for the Great Recession, we see that we are way past the bottom and are on the path back to recovery, so it is reasonable to try to predict the time to recover. Note however that the current recession’s red line shows an uncharacteristic slow recovery slope, as compared to all previous 10 recoveries. Who to blame for this? Those who blame Obama, saying he has “made it worse”, can well point to this unusual retrograde singular behavior as justification for their claim..
Applying this to the red line of Figure 1, showing the current unemployment path for the Great Recession, we see that we are way past the bottom and are on the path back to recovery, so it is reasonable to try to predict the time to recover. Note however that the current recession’s red line shows an uncharacteristic slow recovery slope, as compared to all previous 10 recoveries. Who to blame for this? Those who blame Obama, saying he has “made it worse”, can well point to this unusual retrograde singular behavior as justification for their claim..
Pessimistic Straight Line Results:
Almost 4 More Years Of Winter
But even a slow recovery eventually gets there, and so we can utilize the data, such as it is (along with a straight edge ruler), for our sophisticated analytical prediction of the time to recover. Looking at Figure 1, we have placed the ruler down so it lies exactly on top of the last 2 years of the red curve, matching it closely, and then have drawn a line (light blue dashed line) out to where it meets the zero axis. How much more time does it take to get to recovery? The answer is: 3 years, 11 months, until December 25, 2015.
But even a slow recovery eventually gets there, and so we can utilize the data, such as it is (along with a straight edge ruler), for our sophisticated analytical prediction of the time to recover. Looking at Figure 1, we have placed the ruler down so it lies exactly on top of the last 2 years of the red curve, matching it closely, and then have drawn a line (light blue dashed line) out to where it meets the zero axis. How much more time does it take to get to recovery? The answer is: 3 years, 11 months, until December 25, 2015.
Optimistic Accelerated Recovery Result:
2¼ More Years To Go
But perhaps this is overly pessimistic, since all the previous recessions show an acceleration in the recovery towards the zero axis in their last few months. So we have drawn a similar accelerated curve (red dotted line). According to this extrapolation, it will take an additional 2 years 3 months, until April 25, 2014.
But perhaps this is overly pessimistic, since all the previous recessions show an acceleration in the recovery towards the zero axis in their last few months. So we have drawn a similar accelerated curve (red dotted line). According to this extrapolation, it will take an additional 2 years 3 months, until April 25, 2014.
Conclusion
The result of very straightforward extrapolations of current unemployment data is that it will take an additional 2¼ to 4 years to come out of the current Great Recession. We should not be misled that even if Ron Paul is elected, and even if he succeeds in cutting the federal budget by a trillion dollars in a year, that the time to recover will be less than 2 years. Nor should we expect that if Obama is re-elected that the time will be shorter than 4 years. Indeed, a re-elected 2nd term Obama, doubling down on Saul Alinsky policies with no electoral restraints, will likely push the time to recover significantly beyond 4 years.
The result of very straightforward extrapolations of current unemployment data is that it will take an additional 2¼ to 4 years to come out of the current Great Recession. We should not be misled that even if Ron Paul is elected, and even if he succeeds in cutting the federal budget by a trillion dollars in a year, that the time to recover will be less than 2 years. Nor should we expect that if Obama is re-elected that the time will be shorter than 4 years. Indeed, a re-elected 2nd term Obama, doubling down on Saul Alinsky policies with no electoral restraints, will likely push the time to recover significantly beyond 4 years.
Californians in the greater Los Angeles area,
including Sherman Oaks, North Hollywood, Studio City, Toluca Lake, Burbank,
unfortunately face an even worse prospect for recovery than its 47 sister
states. Unemployment in California fell from 11.8% to 11.3% in the last month, 3
points worse than the nation’s average, and the state faces a deficit in excess
of $9 Billion. Gov. Jerry Brown proposes
to attack the deficit the same way as Obama, with higher taxes. There must be a cheery uplifting way to close this
piece. The economic law of anti-gravity? What goes down must come up? Wait, I’m
thinking…
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