Republicans and their media water-carriers are apoplectic about Friday's report showing the unemployment rate dipped to 7.8 percent in September as the U.S. economy added 114,000 new jobs. But while many conservatives have been quick to follow in Richard Nixon's footsteps in accusing the career civil servants at the BLS of cooking the books for President Obama by showing more robust employment growth this summer, there is one jobs report no Republican wants to talk about. Because in the spring of 2011, the Bureaus of Labor Statistics and Economic Analysis revealed that the Bush recession was far more severe than the incoming Obama administration knew at the time or Republicans want to admit now.
In late 2008, Barack Obama's transition team led by Christina Romer and Jared Bernstein began planning the President-elect's response to the near collapse of the American financial system that fall. In readying what in February 2009 would become the $787 billion American Recovery and Reinvestment Act, Romer and Bernstein estimated that unemployment would peak at 8 percent with the stimulus--and 9 percent without it.
Unfortunately, only much later did Obama's team--and the American people--learn just how catastrophic the U.S. economic situation was at the beginning of 2009.
As The Economist and the Washington Post's Ezra Klein explained, in early 2009 the American economy was not only in much worse shape than anyone imagined; it was literally on the brink of collapse. As The Economist explained the run-up to the passage of the $787 billion recovery program:
The White House looked at the economic situation, sized up Congress, and took its shot. Unfortunately, the situation was far more dire than anyone in the administration or in Congress supposed.As Klein summed it up last year:
Output in the third and fourth quarters fell by 3.7% and 8.9%, respectively, not at 0.5% and 3.8% as believed at the time. Employment was also falling much faster than estimated. Some 820,000 jobs were lost in January, rather than the 598,000 then reported. In the three months prior to the passage of stimulus, the economy cut loose 2.2m workers, not 1.8m. In January, total employment was already 1m workers below the level shown in the official data.
The reality has been worse than the administration's nightmare scenario. Even with the stimulus, unemployment shot past 10 percent in 2009.Continue reading below the fold.
To understand how the administration got it so wrong, we need to look at the data it was looking at.
The Bureau of Economic Analysis, the agency charged with measuring the size and growth of the U.S. economy, initially projected that the economy shrank at an annual rate of 3.8 percent in the last quarter of 2008. Months later, the bureau almost doubled that estimate, saying the number was 6.2 percent. Then it was revised to 6.3 percent. But it wasn't until this year that the actual number was revealed: 8.9 percent. That makes it one of the worst quarters in American history. Bernstein and Romer knew in 2008 that the economy had sustained a tough blow; they didn't know that it had been run over by a truck.
Just how big a truck is reflected in these charts from the Center on Budget and Policy Priorities. CBPP now estimates that the unemployment rate, which reached 9.8 percent in 2009, would have approach 12 percent in the absence of the stimulus. As the numbers show, in the last quarter of 2008 the contraction of the U.S. economy was greater than at any time since the Great Depression of the 1930's.
But for Republicans, many of whom still continue to claim George W. Bush inherited a recession from Bill Clinton, the BLS' jaw-dropping downward revision of the 2008 and 2009 jobs numbers must be swept under the rug. To acknowledge them doesn't just add more confirmation that their nominee Mitt Romney is lying when he says President Obama "made the economy worse." The BLS data shows that the America was on the brink of economic collapse as Obama took the oath of office. And the overwhelming consensus of economists including the nonpartisan CBO and John McCain's own chief economic adviser, it is thanks to his stimulus program and other actions taken by his administration that Barack Obama prevented Great Depression 2.0.