Friday, June 05, 2009

Unemployment rate now at 9.4%: What does that say about the stimulus?

Back in January 2009, when the administration-elect was selling its stimulus plan, it released a report authored by Christina Romer and Jared Bernstein. I mentioned the report here. (The link to the report in that post doesn't work anymore but you can find the report here.) I think it's time to see whether we can determine if the stimulus is having the projected effect. The report included an unemployment graph that (almost) allows for this kind of accountability assessment:

There are, however, some fuzzy things about making this comparison:

1) Unemployment numbers come in two varieties: regular and seasonally-adjusted. I don't know whether the projected numbers are regular or seasonally-adjusted, so I don't know which of the actual numbers to use for comparison;

2) I don't know exactly what the projected timeline is. I mean, does the hash mark for "Q1" mean January 1? or does it mean the end of Q1, i.e. March 31? One's comparison could be off by as much as 3 month, given this ambiguity. I would assume that the Q1 hashmark marks the start of Q1, except that the graph projects the effect of the stimulus beginning right at Q1 2009, before the new administration was sworn in, and weeks before a stimulus plan could or would be in place.

3) Since the stimulus plan wasn't signed into law until February 17, 2009, its effect starts later than what is depicted in the graph (unless the Q1 hash mark is supposed to designate the end of Q1).

4) As always the case with projections, maybe projected rate without the stimulus wasn't pessimistic enough and, thus, maybe the stimulus if helping more than we can see.

Given all the fuzziness, I'm not drawing any conclusions yet.

I do note, though, that the current 9.4% is much higher than the projection depicted on this graph, even without the stimulus spending. This table from the Bureau of Labor Statistics (the source for the 9.4% number) shows unemployment rates by month since 1999:

The report includes this footnote explaining that the projection in the graph might be too low:
Forecasts of the unemployment rate without the recovery plan vary substantially. Some private forecasters anticipate
unemployment rates as high as 11% in the absence of action.
I appreciate that the report didn't use the scariest prediction available to make the case for the plan, but it's looking like the private forecasters were closer to right.

[Update: I meant to note about the table that the unemployment numbers track relatively well with the projections (sans stim) in the graph until the latest number which is much higher than the projection.]

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