When he was running for president last year, candidate Barack Obama warned that the economy was in bad shape, but he underestimated just how bad it would get. June unemployment levels of 9.5% are not only the highest in 26 years, but they are substantially higher than either Obama or most of the nation’s economists were forecasting last winter.
Last November, in fact, the consensus of economists was that U.S. unemployment would reach 7.7% by the end of 2009. As recently as March 2009 — as the following table shows — most economic forecasters were saying unemployment would hit 9.2% at the end of 2009. It sounded like a dire forecast, but once again turned out to be too optimistic, considering that level was surpassed in May, with unemployment still trending up and expected to peak above 10%. This deterioration is not a failure of Obama’s recovery package: rather, the recovery package was designed for a more optimistic scenario than what we have today.
These rapidly worsening conditions in the job market are worth remembering when attempting to judge the success of the $787 billion economic stimulus, notes EPI President Lawrence Mishel, who in May offered a sense of how much worse unemployment might have gotten without an economic stimulus. A table from that report, Sounding the Alarm, is shown below. ”When the Obama administration started planning its budget and designing the stimulus, no one fully saw the crash course the country was on,” said Mishel, who projects that the growth in unemployment will be substantially lessened by the impact of the stimulus.
Along with millions of lost jobs, Mishel points out that many other workers who have held onto their jobs are suffering from stagnant wages and an erosion in the number of hours they work, which will further constrain consumption.
“This indicates a sluggish recovery,” said Mishel. “Given the high and persistent unemployment ahead and the expected income declines, it will be necessary to provide support for affected families and to do more to generate jobs,” said Mishel.