Dec 6th, 2008 at 3:31 pm
The Bush Employment Legacy
Maybe George W. Bush has been trying to implement my flat-output, declining employment hypothetical scenario.
29 Responses to “The Bush Employment Legacy”
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December 6th, 2008 at 4:06 pm
can one of you smart Yglesias readers explain to me why unemployment is leading to $1 gallon gas? I understand that as demand goes down, so does price, but is 1% increase in unemployment make for a 75% decrease in fuel useage???
December 6th, 2008 at 4:15 pm
Because even people with jobs are consuming less gas, and because prices aren’t 1=1 related to decrease in usage (there’s also expectations and other factors).
December 6th, 2008 at 4:53 pm
Sorry, it still does not ad up. Not even a little bit. Prices are down 72% since July.
If people are consuming less of things, then other commodity prices should be down similarly. Where are these other price drops?
December 6th, 2008 at 5:00 pm
It should be noted that although the Bush administration presumably has their share of responsibility, some of the employment to population stagnation (in the weak recovery if not the recession itself) can probably be attributed to the aging of the population, since even in a great economy people are going to want to retire when they get old enough.
December 6th, 2008 at 5:02 pm
Miatch, that’s not the main reason. The actual main reason is pretty murky at this point, but one plausible explanation is that the Chinese were stockpiling oil for the Olympics, which drove up prices. Investors misinterpreted the price signal, thinking that Peak Oil had arrived, which touched off a speculative bubble in oil, which has now collapsed.
December 6th, 2008 at 5:31 pm
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December 6th, 2008 at 5:40 pm
Re: misinterpreted the price signal, thinking that Peak Oil had arrived
More like investors watching with horror as housing unwound suddenly saw oil prices going up and piled in to what they hoped would be a safe (=ever increasing) investment. At least two of the big Wall Street titans (Goldman and Morgan) became major player in the oil futures market even as they fled real estate.
December 6th, 2008 at 5:46 pm
Come on now Yglesias. Bush has been a bad President. But putting responsibility for employment figures on the US Presidency is a bit off.
December 6th, 2008 at 5:59 pm
Maybe we could find a way to bring Alan Greenspan of 15-20 years ago back and he would be happy that the dire threat of wage inflation had been seriously averted.
December 6th, 2008 at 7:06 pm
It looks like my comment got held up due to excessive links, here it is again with fewer links.
If people are consuming less of things, then other commodity prices should be down similarly. Where are these other price drops?
They did. Most just slightly before oil did. Here’s an aggregate commodities index:
http://www.bloomberg.com/markets/commodities/cfutures.html
Wheat has gone from 9.50 in Aug to about 4.50 this week. Corn went from 6.20 to 2.90 in the same time. For metals, copper has gone from close to 4.00 over the summer to just over a buck fifty today, other metals save gold are similar. (but it is slightly off its highs as well.
December 6th, 2008 at 8:46 pm
It was widely thought that the price increases had nothing to do with supply/demand and everything to do with big money speculators. With the big money institutions on the skids now, the speculative pressure isn’t there any more and the air is out of the balloon. Just like Californians paying outrageous electricity prices because of Enron’s market manipulations – we were all taken for a ride by the big money guys. Kinda nice bookends on the Bush Presidency isn’t it?
December 6th, 2008 at 9:29 pm
So think of the price of gas like tickets to a big rock concert. Limited supply of tickets to any show. Band is very popular. All the tickets get sold, including a lot to scalpers. Price goes from $100 per seat to something like $500 or more a seat — up to whatever the market will bear.
So gas is the same way. Under booming economic conditions the demand may exceed production by only a few percentage points. But futures traders bid it up, because big business gets desperate and is willing pay whatever it takes to get contract for the delivery of a tanker full of oil. The slight difference between supply and demand get magnified exponentially.
Suddenly the economy goes pear shaped.
Using the rock concert example, it’s like a band suddenly become has-beens, and they can’t sell out their concert venues. Scalpers who bought up blocks of tickets early (futures) have to cut their losses. So suddenly, after-market ticket prices take a nose dive as the scalpers (futures traders) try to recoup some of their money they spent purchasing tickets (futures).
With oil, eventually production is cut back — because a lot of oil fields aren’t profitable to run below a certain price per barrel — and the roller coaster ride starts cranking up again. If OPEC gets its act together and enforces production quotas, the price of oil will start climbing (unless there’s a worldwide depression). If not, well, the price keeps getting cheaper, until only the juiciest oil fields are profitable. Then the price begins to rise again — later than sooner.
December 6th, 2008 at 9:38 pm
The inadequacy of your non-Marxist theory of history is apparent! Production must always rise because of the iron law of capitalism: profit! The whole point of socialism is the idea that humans can democratically control their destiny in order to make possible the kind of calculation you seem to think will be afforded the public somehow in the capitalist future.
Of course, it’s also possible that you forgot to leave out an important factor of your prediction…
December 6th, 2008 at 9:48 pm
Peak Oil is so 2005.
When production peaked.
December 6th, 2008 at 9:59 pm
I can not believe that this president will not help people without jobs but give them un- employment that does not do much. what about your bills, your mortgage???? Waht about XMAS for their kids, food. I bet he is eating this holiday and buying gifts for his family but he could care less about AMERICANS of this country and that is very sad??????????????
WHAT IS WRONG WITH THIS PICTURE WHNE PEOPLE ARE WITHOUT JOBS, FOOD AND MONEY RIGHT AT A HOLIDAY????????????
December 6th, 2008 at 9:59 pm
I can not believe that this president will not help people without jobs but give them un- employment that does not do much. what about your bills, your mortgage???? Waht about XMAS for their kids, food. I bet he is eating this holiday and buying gifts for his family but he could care less about AMERICANS of this country and that is very sad??????????????
WHAT IS WRONG WITH THIS PICTURE WHen PEOPLE ARE WITHOUT JOBS, FOOD AND MONEY RIGHT AT A HOLIDAY????????????
December 7th, 2008 at 3:22 am
A barrel of oil costs less now than the marginal cost of production. So its gone from $150 a barrel to selling below cost.
Speculation can go both ways.
December 7th, 2008 at 8:03 am
Re: I can not believe that this president will not help people without jobs but give them un- employment that does not do much.
To be fair even to George Bush, what should he be doing? He signed the unemployment extension, and that about all we’ve ever done for the unemplpyed: let them collect benefits longer. If you can think of more that could be done, you should contact your congressman since new laws and new programs need to come from Congress
December 7th, 2008 at 8:15 am
I wonder if Matthew Yglesias knows what he thinks his point is.
The chart is plotting a ratio, jobs divided by population. Matthew seems to think the fact that it is “flat” is some sort of condemnation of (of course) George Bush.
Matthew: what is this ratio supposed to do over time? Go up a lot? Because if it doesn’t go up then employment is “flat”?
Should the number of jobs in the country be 80% of the number of people? 90%? Obviously 100% is a natural cap on this number (or is it, Matthew? you tell me), but I just wonder where you think the asymptote should kick in. Should all 2-year-olds and 89-year-olds also be employed? Because that would be good? And for employment not to exist for those people is bad?
The shorter summary of this chart is that employment hovers around 60-65% of the pouplation.
Given human demographics (and preferences), what on earth else should it do? Really wondering,
December 7th, 2008 at 1:18 pm
The problem with your flat-output scenario is that there is a lot of really cool ass stuff that will exist in the future, but doesn’t exist now. People didn’t used to have computers or the internet or IPODs, but without increasing output those new things can never materialize. People have insatiable desires, plus there are a lot of people who actually enjoy the work they do. Instead of declining work there will probably be an increase in the percentage of the work that people do which they enjoy.
December 7th, 2008 at 8:53 pm
Bush’s record on employment blows, to be sure, but this graph is a paradigm example of how to lie (or exaagerate) with statistics. In this case, what you do is start the Y axis from some number greater than 0. This has the effect of making what is really a not very large change look huge and precipitous. Shame on you Matt. Let’s not start adopting the tactics of the Republican liars.
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