more on stimulus

I have put together a note on whether or not President Obama's stimulus package is having an effect on the economy. When you look at the June state level unemployment rates (just released earlier this week) and the numbers available on recovery.gov regarding how much stimulus money has been paid to each state it would appear to be that, in those states that have received, as of June 30, 2010, more than a paltry $200 per person in stimulus money, the answer offered to this very important question is yes, it would seem to be having an impact. Because of the charts and tables included I could not directly post this note to this blog. It can be found on Scrbd by clicking here.

when will the employment numbers improve?

The patient was quite ill and was in intensive care. She has been moved from ICU to another room in the hospital. She not ready to be released. However some of the doctors, nurses, and family members are worried about mounting bills so she is discharged from the hospital. With quite a bit of luck and family members able and willing to step in and do what the hospital's staff was doing the patient may recover. If not, having been released far too early, she ends up in the hospital again, far more ill than before. Who will accept the blame? The Great Recession began in December of 2007. However, real GDP (RGDP) hit its peak in the second quarter of 2008. At that time output per worker (crudely measured by the ratio of RGDP to nonfarm payroll employment) was $91,865.27. Between the second quarter of 2008 and the second quarter of 2009 total earnings fell by over $500 billion. Since QII 2009 we have been in recovery. Recovery notwithstanding, real income remains some $270 billion lower than it was two years ago. And what has happened to output per worker? Overall productivity has grown by more than 7%. Our employment problems are simply a matter of arithmetic and we have a long way to go before the U.S. economy can be said to have fully recovered. How far? To reach the level of real income we enjoyed two years ago requires another two quarters of economic growth like the one experienced during the first quarter of 2010. Even then, given that between Q2 2008 and Q1 2010 productivity has grown from $91,865.27 to $98,521.31 (i.e. seven percent), the U.S. economy will have to grow 7% more for the level of nonfarm payroll employment to return to where it was at before the Great Recession began. And with continued growth in productivity, population, and the labor force it will take more growth still to bring the unemployment rate back to where it was before the recession. The likelihood of sustained economic growth in the near term is shrinking by the day. Last year, New Yorker columnist Jame Suroweicki warned of the harm to recovery budget balancing state governments could bring in his Fifty Ways to Kill Recovery. Within the last week, New York Times reporter David Leonhardt in his article "Governments Move to Cut Spending, in 1930s Echo" points out that here in the States, in Europe, and elsewhere the hope is that as states pull away the support that they have given to their economies that private sector spending will step in to make up the difference. Assume that by some miracle this comes to pass. Then as Leonhardt points out, governments will be able to shore up their finances that much sooner. If, as is much more likely, the money released from government as it cuts its spending fails to circulate at anything approaching the speed that it has been circulating with state spending and spending is further drawn out of the economy via increased taxes, the risks of another Roosevelt recession grows and we should not expect to see a recovery in earnings or employment anytime soon. For the numbers used in this posting click here .