The Stimulus’ “Lagging Indicator” Myth

Obama and the Dems credit the recent better job market to the Stimulus bill, but defend the-still-week job market by saying that jobs are a “lagging indicator,” it lags the rest of the economy when it comes to improvements, therefore the Stimulus does not yet fully reflect in the job market.

The Problem is this: February, the month the stimulus was signed and before any stimulus money was dished out, the economy lost 60,000 jobs less than in January, and in March the economy lost even less jobs than in February. If the “logging indicator” excuse is true, why did the economy in March, the month stimulus money merely started rolling out, lose less jobs than it did in each of the two months before it? The March improvement cannot be attributed to the stimulus considering jobs are a lagging indicator. Right? It takes time for the Stimulus to reflect in the market. Aint it so?

Whichever way you will cook it, you are toast: if you use “lagging” is a factor, how/why did we get the March improvements? You will of course have to agree that some (or most) of March happened on its own (just as February certainly did happen on its own because it was before the Stimulus). If so, how much of the general improved job markets since then took place on its own independent of Obama? And if you will say logging is not a factor and the better March number IS a direct result of the stimulus, why is the job market now, a half year later, still not doing better than it is?

Side Note:  if you wonder why February saw improvements even before the Stimulus, go back to Katrina for the answer: the New Orleans waters receded before the Bush team took any action. Why? because there is this much havoc that panic can cause before things get less bad on its own. The same is with the job market: it started getting less bad on its own, back in February.

(This writing was posted here too)


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Actual job loss figures

BLS,Changes in the number of unemployed adults, from month to month, seasonally adjusted, in thousands:

  • May 2008 +861
  • Jun 2008 +126
  • Jul 2008 +248
  • Aug 2008 +640
  • Sep 2008 +42
  • Oct 2008 +629
  • Nov 2008 +255
  • Dec 2008 +632
  • Jan 2009 +508
  • Feb 2009 +851
  • Mar 2009 +694
  • Apr 2009 +563
  • May 2009 +787
  • Jun 2009 +218
  • Jul 2009 -267
  • Aug 2009 +466

I'm not sure where you got your data from (links are always nice, BTW). But that is not the point. You think you've spotted a perturbation in the data that demonstrates that the stimulus didn't work. Well, look at this list - there isn't a smooth line to be found.

A discussion of whether or not the stimulus worked might be interesting (although premature); however, what you are offering doesn't shed any light on  the question.

One thing that is undeniable: there is a hell of a lot more confidence in the economy than there was at this time last year.



You aint looking at the good table

first off, you are not looking at the good table. You goto look here. This is the correct one.

Secondly, don’t look month by month; look at the average gain or loss of a few months together: a grim picture will reveal itself.

Third, speaking about more confidence today than a year ago, get this:  from September 2008 through February 2009, that economy was just in a panic mode following the Lehman collapse; the revelation of the Medoff shtick, and due to candidate (later president) Obama warning Americans of darkened economic despair. As a result of all this, confidence  went flying down and with it the eceonomy and the job market. But that era was bound to pass considering that the President changed his tone on the economy in the second week of March, and the Lehman/Medoff shock automatically cooled off. Therefore, current economic numbers need to be placed into perspective relevant to the real recession, meaning the economy up to last year’s September, rather than the panic economy which was bound to pass. and if you look at current job numbers vs. the months before the panic, we are still in worse shape.


What would have happened

Your link doesn't work, please fix.

Moreover: your OP consisted entirely of fixating on a month to month comparision. The fallacy of doing so was what I was attempting to demonstrate in my comment.

Your theory that the economy fixed itself is where is the evidence to back it up? What is your theory about what would have happened to the economy had John McCain won the election and launched his spending freeze?

Stimulus has been an abject failure

More jobs have been lost than stimulus bill writers projected, and more jobs lost since it was passed than in the prior 8 years!

It never was a stimulus. It always was nothing more than a Big Government bailout - a trillion dollars of spending to keep Big Government going.

Doubt me? Break out the private sector and Govt sector employment numbers for this year. It tells the tale clearly. Obama has bailed out the GOVT and has left the private sector on its own.

"Your theory that the economy fixed itself is where is the evidence to back it up?" Recessions always work themselves out. Where is your evidence that laws of economics are suddenly changed.


Well, Annie,

Recessions always work themselves out.

It is nice to know that you believe the sun will come out tomorrow, however, in my view recessions sometimes turn into depressions and depressions can be horrific. Herbert Hoover was expecting the economy to fix itself, with the result that on his watch GDP dropped 25%.

If everyone knows that recessions always work themselves out, then why was there panic in the financial markets last fall? Why didn't all those experienced money people just say "oh well, it it work itself out by March, no need to worry...."

Govt action is what stops recoveries

Recovery is the natural next step in the business cycle ... it's happened in every one of the more than two dozen recessions/depressions of the past 150 years of our history and in other countries too ... but ONLY if Government doesn't stand in the way and screw it up.

"Herbert Hoover was expecting the economy to fix itself, with the result that on his watch GDP dropped 25%."Nonsense. Hoover was the most interventionist President in US history up until that point. His policies were anti-free-market and Keynesian. Alas, he intervened in ways that made things worse. Herbert Hoover inflicted the  huge Smoot-Hawley tarriff in 1930 and tax increases in 1932, meanwhile the Federal reserve inflicted an insanely deflationary policy to defend their gold holdings AT THE SAME TIME a global trade war was going on. Hoover massive increases in Govt spending tried to do what the 'stimulus bill' of 2009 did, but these efforts were completely useless and futile. Hoover's biggest mistake was his wrong belief that wage rates should stay high. FDR followed that error and today economists estimate that policies based on that error lengthened the depression significantly.

The economy cannot get back on its feet when Government is knocking it down with sledgehammer blows like that.

Govt action is what stops recoveries.

The analogy would be if say the Democrats were to propose a massive tax hike in 2010 and 2011 (oops doing that), roll out a job-killing energy tax (oops, doing that), raised min wages (oops), failed to entice more trade by killing free trade bills (oops, doing that), proposed more regulations on business (oops, Obamacare)...

In fact, take another few hammer blows to the economy like Obama is doing and the recovery will be tepid to non-existent.


There is no such thing as a business cycle.

Unless you understand the word "cycle" to mean something that is not regular, predictable, or repeatable, and which has random timing. In other words, not a cycle at all.

 The idea that an economic crisis that was caused by a hands off approach will be solved by a hands off approach is laughable.

If it was obvious that the ship would right itself, why was there so much panic among the professionals last fall? Why didn't they just calmly withdraw their cash and loaf around for 9 months, given that they knew the cycle would kick in again around March?

If government action is the only thing that stops the recovery portion of the cycle from happening, why is the economy recovering?

Mead50 you have a poor

Mead50 you have a poor understanding of economics if you don't understand Adam Smith's invisible hand. We haven't even had anything close to laze faire economics for years. Bush expanded the government beyond anything we have ever seen from before. Also this finanacial crisis was caused by many of the government's policies. The federal reserve caused the moral hazard that pushed the finanacial crisis. Freddie Mac was the government's pet project.

 Well, here is the

 Well, here is the laissez-faire approach. Give tax cuts for 8 years on borrowed money from China and other countries, spend our money on Iraq, neglect our infrastructure, send our jobs overseas, bail out banks and corporations when it all fails, bail out cities and states when it all fails as we have given our jobs away, ignore globalization, and tell everyone in world at the Olympics in Beijing that "America, has no problems." [George Bush]

Now the opposite of laissez-faire would be to invest in your country, invest in your people, and invest in the future. Having not done that we are reduced to bailouts of banks and corporations, bailouts of cities and states, extension of unemployment benefits, cash for clunkers, and casinos in every state. We are where we are with years of neglect. We are up against 1 billion Chinese and 1 billion Indians who want our jobs. Both parties are playing politics and are not attacking the issues. You cannot have a welfare society by the democrats and you cannot run the country by republicans who want to run it by neoconism, militarism, laissez-faire, corporate fascism, and religionism. All these ism's cannot run a country. 

Only a pragmatic approach can run a country.

That is:

1. Invest in the country; Energy independence, possible high speed rail, and 35 billion dollars for upgrading our air traffic control system. That will make planes fly more direct routes, and that will save fuel and airlines become profitable and they can buy planes creating jobs.

2. Invest in the people; With globalization you need mandatory vocational training. Since we are giving up our non skilled jobs, you will need a trained workforce to compete with globalization and cheap labor to preserve the middle class.

3. Invest in the future; That is all sciences and innovation. Stop the nonsense on embryonic stem cell research in which we lost scientists to Singapore. Subsidize technology as they do in other countries. We are falling behind in so many areas. 

We have seen Japan for 30 years take away our textiles, our autos, our steel, and our electronics. 1 billion Chinese and 1 billion Indians will take the rest. It is first with cheap labor, and then market share, and then bankruptcies or companies going overseas to survive. 

We have built the Hoover dam, the interstate, and put a man on the moon. China has the longest bridge, building cities, and has the largest airport in the world. We used to do great things and we used to have presidents which excelled greatness. Today it is useless ideology. We better wake up.

Bush expanded government by useless ideology and by getting into trouble. Other parts of our government got out of hand as you say and congress and the fed contributed to the problems also. 

I know enough

Mead50 you have a poor understanding of economics if you don't understand Adam Smith's invisible hand.

I know enough to recognize a mere metaphor when I see one.

For the record:  "economies" are comprised of the actions of people, and there is no metaphor, cycle, or deity that maintains their equilibrium or puts them back on track when they jump the rails.