President Obama declared Wednesday that “we have stepped back from the brink.” Who knows what numbers brought him to that conclusion.
Fundamental economic statistics are worse than they were months ago. Any growth economists were predicting in December and January to start in midyear is expected to be weaker.
Consumer confidence and the stock market have been rising, but that is because the president and the press are no longer misleadingly bashing the economy and now are misleadingly cheering things on. Lawrence H. Summers, the president’s chief economic adviser, was right when he said on March 13 that an “excess of fear” had driven down the economy and the stock market, but it was Mr. Obama who led the pack getting people to panic. For months, he hammered away that the economy was in an “unprecedented crisis.”
Now that the president is claiming things are getting better, widely reported data on unemployment and gross domestic product tell a different story. Unemployment has risen 0.43 percentage points on average each month this year. During the last four months of 2008, unemployment was increasing at a little more than half that rate (0.25 percentage points). In February, after the $787 billion stimulus package was passed, the Obama administration predicted that unemployment would hit bottom at 8.1 percent but then improve. With the unemployment rate now at 8.9 percent and rising, that prediction has proved to be wildly optimistic.
In January, the Wall Street Journal’s survey of business economists and forecasters predicted that GDP during the second quarter would decline by -0.4 percent. Four months later, that same group now predicts that it will drop by -1.4 percent.
Many sectors of the economy were reported to be getting worse just last week. During the first three months of 2009, the mortgage delinquency and foreclosure rates in the United States experienced their greatest quarterly increases since records started in 1972. Both numbers are at their highest recorded levels. Those numbers are bad and getting worse at a faster rate. Relatedly, housing prices are falling at ever-faster rates. The S&P/Case-Shiller U.S. National Home Price Index posted a 19.1 percent drop for the first quarter of this year compared to 2008. This was the largest quarterly decline in the reading’s 21-year history.
Other bad news includes escalating estimated drops in U.S. manufacturing output. The latest numbers indicate that manufacturing now is expected to plummet by 12 percent this year. In February, the drop was expected to be 8 percent. The overall economic decline is reflected in government’s take. Federal tax revenue plunged $138 billion, or 34 percent, in April compared to a year ago.
The dire state of the economy isn’t surprising. President Obama’s big-government policies will continue to generate unemployment and reduce growth in GDP. Contrary to the president’s claims, we haven’t stepped back from the brink. We still face serious economic problems Mr. Obama can’t make disappear with rosy speeches.