Brad DeLong's Semi-Daily Journal: A Weblog

Alternative answer:

They're beginning the process of aligning near term forecasts with the pessimistic long-run outlook that underlies the doom scenario for Social Security.

From the looks of things, I'd say the 1.6% growth forecast for 2005 is as wildly optimistic as last year's 3.0% forecast. It seems far more probable that we will slide back into negative job creation, especially as the effects of rising interest rates and a sagging dollar begin to take hold.

For those of us who are too lazy to find the statistic, what was the actual growth in 2004?

The November to November growth in nonfarm payroll employment was 1.58%.

Test...

There should be no surprise. Employment growth was about 1.6% this year; the same could be guessed for next. Little in the way of a fiscal stimulus can be expected. Short term interest rates are likely to be increased several times by the Federal Reserve, while the effects of rate increases this year will mildly slow growth in months to come as long as long term rates remain low. The American dollar has fallen against the Euro and Canadian and Australian dollars, which should begin to raise our exports and provide a little employment boost. Since the dollar has been supported by a number of prime trading partners however, the employment effect will indeed be little. Further trade liberalization and work shifting abroad will cost some jobs. So, there is every reason to expect the coming year to be much as this year in terms of job creation.

anne--I'd not hold out much hope for exports to increase. First, there is the fact that the U.S. no longer manufactures much--certainly not enough to have any sizeable effect.

Second, if history is any guide, what we'll see is not exporting manufacturers increasing production as sales rise. Instead, as they did two years ago, most such manufacturers will simply raise their overseas prices. This allows them to boost profits without incurring any additional expenses for increasing physical output.

So I'd be surprised if we even stayed flat on employment growth.

You didn't notice that 1.6% is also the growth number that justifies saying Social Security will have trouble in the future?

What is especially worrisome about the push to needlessly reform Social Security is the refrain in the media that tells us we do have a Social Security crisis and surely a crisis must be acted on. Conservatives have so long insisted on a Social Security crisis, and the logic is so deceptively simple, questioning the premise is most difficult. After all, there are fewer and fewer workers to support retirees. Soon there will be 10 people working to support 200 million retirees. Imagine 10 people working. But, this is a nonsense argument. Social Security is accumulating a surplus and will be for more than a decade, while full benefits can be afforded with no change in the program for 38 to 48 years. If economic growth is slightly better than the gloomy 1.6% predictions of a few self-serving analysts, the program will have no payments problems for far more than 48 years. But, how do you convince people Social Security is fine when the media tells them constantly that it is not fine?

I would not count on much benefit from the dollar weakness, at least on a net basis.
The trade, current balance is so big that exports have to grow at a rate 150% faster than imports to generate a net improvement in the balance. Over the last few years it has looked like trend real import growth was about 8% and real export growth was about 6%. Thus, for trade to generate a net positive to real GDP
growth, export growth would have to double to
12%.

A (alternate) - A year ago those working in, on or somewhere near the vicinity of economics in the Administration thought that voters cared about economic performance. Now they know that presidents are chosen out of paranoia about homosexuality, a dehumanizing devotion to the scriptures of an ancient Near Eastern tribe and sympathy for cell masses smaller than a pinpoint. So the economic non-powers-that-be must have reckoned, "Heck, nobody important cares anyway. Let's print a reasonable estimate this time."

Spencer,

Could you please tell me where you found the 1.58% number for Nov 2003-Nov 2004 non-farm payroll growth? Is it from the BLS? If so, where? I've been trying to argue with a member of the non-reality-based-community. Thank you.

It seems to me that we should see a narrowing of the trade balance because, although exports won't increase much, imports should decrease. After all the American consumer, that is those supporting Walmart etc., don't have any money to spend.

The november employment gain is from BLS.

Go to bls.gov and look up the data.

I have it in my data base, so I did not go to bls.

At the top of the bls home page there is a bar
to hit to look up historic data series.

There is also a direct link to the latest data.