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Bad News, Bad Economists

10:22 AM, Jun 1, 2012 • By GEOFFREY NORMAN
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The unemployment numbers have been released and they are dismal and, typically, unexpectedly so. Fewer than 70,000 new jobs and the least scary measure of unemployment rising from 8.1 percent to 8.2 percent. According to NPR:

Economists had expected BLS would say the jobless rate was 8.1 percent and that payrolls expanded by at least 150,000 jobs.

First reaction to this bleak news might be to think that, if anyone deserves to be out of a job, it ought to an economist whose prediction is off by 50 percent. These guys need to buy themselves some new chickens with more reliably predictive guts.

The second reaction is that this couldn't have come at a worse time. And by that, one doesn't mean for President Obama. He isn't important to this discussion and making himself less so every day. He has a job and if his prospects for keeping it look increasingly dicey, he'll still be fine. Lots of high dollar speaking gigs, a big book contract (even failed presidents get those), private schools for the kids, nice vacations, clothes for the bride ... all the goods things.

The reason this is the worst possible time for news like this is simple. It is June. This is the season when Americans graduate and/or get married and begin new lives. This is supposed to be a time of high hopes and bold ambitions and big dreams. Instead we get economic doldrums and a demoralization that threatens to become a kind of permanent psychic condition.  

So June 2012 sees a large and important cohort of citizens (the young) putting off buying homes – though there are plenty of them in foreclosure that can be picked up cheap – and delaying starting families and unable to do what Americans have always done ... namely making themselves better off.  Instead, they will be looking to Washington for help that never seems to come. Washington, meanwhile, is looking at the swing states where, according to an economist cited in Politico, things are good enough:

'Most of the swing states by the third quarter of this year will have a lower unemployment rate than the national average,' said Xu Cheng, a senior economist at Moody's Analytics  ... The Moody's model, which accounts for unemployment, historical voting patterns, per capita income and other factors, currently predicts Obama will win at least 26 states and 303 electoral votes. ... 

Mr. Cheng is an economist who, according to the Times, is in the prediction racket:

Xu Cheng, a senior economist at Moody’s Analytics, which uses state economic and political data to predict election results, said his team had altered its model this year to account for “the grumpy voter effect.” 

Cute locution, that "grumpy." Some might choose another, more forceful word to describe the mood of a citizenry that has been told, by Washington and all those economists who teach at ‘Unexpectedly U.,’ that things aren't so bad and, anyway, they are going to get better real soon. Certainly in time for the election.  

But there is one small item of good news that one can latch onto. Mr. Cheng is, after all, an economist. Even better, he labors for Moody's Analytics, home of everybody's go-to guy, Mark Zandi, who is always predicting a turn in the corner and always running into walls.  

So given his profession and his professional associates, there is reason to believe, with some confidence, that Mr. Cheng is not merely wrong but spectacularly and unexpectedly so.

That would be some much needed good news for all those grumpy people out there.

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