Presidents and Manufacturing

Average manufacturing jobs / month gained or lost for the past half dozen Presidents and since the turn-around on January 2010.

Notes on methodology: Generally speaking, the January in which the executive transitions from one branch to another will be almost entirely impacted by the outgoing President's policies and not those of the incoming President. As such, the average uses the change in monthly manufacturing payrolls starting with the change from the first full month of the President's term (i.e., from the February that is the first full month to the March thereafter) and going until the first full month after the President's term (i.e., the last change counted is from the January during which the President in question is last in office to the February thereafter). Data from BLS/FRED.

Mitt and Manufacturing

Rather bold of a guy who made a lot of money closing down (among other things) American manufacturing plants to speak on manufacturing jobs ... too bad it was boldly striding into error.

Trends in Manufacturing Payrolls

A bit of manufacturing job historical info:

• Peak: 6/1/1979 (shortly before Reaganomics) at 19.553 million manufacturing jobs
• Decline from 6/1/1979 to 2/1/2001 (first full month of Bush II's first term): 2.523 million jobs, a 12.9% drop
• Decline from 2/1/2001 to 2/1/2009 (over the course of Bush II's Presidency): 4.644 million jobs, a 27.3% drop
• Post Bush II floor: 1/1/2010 (less than a year after President Obama sworn in) at 11.458 million jobs
• Increase from 1/1/2010 to 8/1/2012 (turnaround to present): 512 thousand, a 4.5% rise

But When Did Those Jobs Disappear, Mitt?

The state of industry speaks for itself better than some candidates do. When Mitt Romney in Toledo on the 26th of September, 2012 said, "we see manufacturing jobs disappear", he neglected to mention that most of that disappearing happened during the tenure of a President who implemented the same policies that Romney himself is pushing. He also neglected to mention that under the current President they're not disappearing anymore. Under the current President, we've seen manufacturing jobs grow again.

In manufacturing in specific, manufacturing jobs moved mostly sideways through the first quarter of 2006, creeping to a peak in April of that year. From the April 2006 peak, 1.844 million manufacturing jobs were lost under the Bush II administration by the first full month of President Obama's term. From the floor in January 2010, we've recovered 512 thousand manufacturing jobs as of August 2012. There's still a long way to go, but adding half a million manufacturing jobs since January 2010 is growth, not "disappearing".

Social Security and the Elderly Bread: Individualistic Solutions Inferior, Except When The World Ends ... and Then Who Would Be Counting?

John Kay reminds us of an excellent analysis of why we implement "welfare" programs in, "The welfare state’s a worthy Ponzi scheme", from which a highlight follows:

Social security is a means of inter-generational transfer. The only bread fit to eat is bread baked today: but why should today’s bakers feed the retired bakers of yesteryear? Why should we look after old people, who can no longer do anything for us? 

... We feed the generations of our parents and grandparents in the expectation future generations will come along and do the same for us. ... One day, the world will end and the last generation of workers will have been cheated of their expectation of a peaceful retirement. ... 

A brilliant analysis of the issues was provided half a century ago by Paul Samuelson, the great economist – an analysis that might have received wider attention had it not been written in mathematics and published under the uninviting title of “An exact consumption-loan model of interest with or without the social contrivance of money”. 

The only individualistic solutions to the problem of ageing are to store bread to eat, or sell, when it is stale and you are old; or to take the opportunity when young to bribe younger people to look after you in your dotage. Samuelson showed these outcomes were inferior to the outcome of the social security contract for every generation except the one alive on judgment day.

The rest of the article -- over at the Financial Times -- is also well worth the read, despite Kay's acceptance of the idea that "Ponzi scheme" can be reasonably applied to these social contracts. The designation of Ponzi scheme only applies to those plans that will fail even if everyone involved sticks to them and keeps going, failing because the scheme's earnings will necessarily be less than those promised in payout. Social security and the like will continue to function and pay out what's promised so long as our society sticks to them, administers them sensibly, and doesn't end. That's partially because we adjust the earnings / output to what can be done with the current demographic environment, but that makes it not qualify as a Ponzi scheme. The mere fact that someone won't be able to derive theoretical benefits after the society ends isn't enough to qualify as a Ponzi scheme. If it were, every transaction that isn't fulfilled instantly would be a Ponzi scheme.

Real GDP, the Past Eight Years, and the Years To Come

Real GDP for the past 8 years:

Whatever else one may or may not read into this chart, it sure doesn't help the case for those who would say we should change ships back to the party of Bush II.

Of course, if one adds in potential GDP, essentially where the GDP ought to be right now if we were going to be back to "normal", we're clearly not done. It's roughly like we're going 45 in a 55 MPH zone. There's some serious work to be done to get the economy up to speed. So why has the debate been about how much to raise our foot off the pedal instead of how much further to press down?

When It Went Wrong

When did things start down? Where was the bump in the road that triggered the Great Recession? In this election season, that question matters in the short term for trying to choose the folks most likely to not send us back down the same path. Partisans from both major parties would love to tell us things when wrong under the other party's watch, but only one side can say it accurately. So when did it start?

To begin answering that question, we can't just look at GDP or unemployment alone. While those may tell us when things really got bad, they don't tell us when the problem started. To get a better idea of when the problem started requires focusing further back than when it became obvious to everyone. The overall economy was hammered by a financial crisis, but that financial crisis didn't just spring up on its own. The financial crisis was triggered by a stumbling housing market. So when did housing tumble off the cliff?

Housing fell off a cliff in 2006; in 2007/8, it was just still falling from 2006.

Building permits peaked on September 2005 and then proceeded to fluctuate through January 2006. Housing starts peaked in January 2006. Then after January 6th, both building permits and housing starts tumbled off that cliff, followed soon after by residential construction. Between the January 2006 peak and the start of the 110th Congress in January 2007, housing starts dropped by 38% and residential construction dropped by 15%. The housing industry was collapsing throughout 2006 and bringing layoffs starting with housing and spreading into related domestic industries such as window and cabinet making. Following on housing's decline, manufacturers new orders hit choppy waters in 2006, . By the end of 2006, the effects weren't yet enough to seriously shake unemployment or turn GDP negative, but the decline did start to show in other measures and a slackening of quarterly GDP growth. The annual growth in consumption per capita for 2006 started back down from what we'd seen in 2005.

Demand/person slowed down in 2006 ... before getting to an actual drop.

Put it all together it's really only a technicality that the recession didn't hit until late 2007. In fact, the economy was already in rough shape in 2006, with really lousy growth evident over the 2nd and 4th quarters of 2006, to the point of quarterly GDP growth just barely staying out of negatives.

2006 wasn't technically recession; but it was darn close.

Clearly, the first wave of what became the Great Recession was well under way during the watch of the 109th Congress (2005-2006) under President Bush II, even though we hadn't reached technical recession yet. What happened during the 110th Congress was just that it became clear that the problem -- which was already under way -- was spreading from housing into finance and from there to everything else. The curtain covering over the problems was pulled away in 2007-2008, but the trouble was there before the curtain pulled away. Republicans held majorities in both Houses of the 109th Congress, as they had for almost all of the time since 1995 (except for a slim Senate flip in part of the 107th Congress). By 2006, Republican policies had held sway in both the executive and legislative for years and they were still in control. While there's room for debate as to how much involvement government had in the creating or allowing the mess, the weight of evidence says that if one were going to blame governance, the party to blame for that mess is Republican.