When the current Administration took over in 2009 we praised its realistic analysis of economic conditions. President Obama talked frankly about the tough conditions we were experiencing and resisted pouncing on each positive bit of news as sign of a turnaround even though his opponents would blame him for each down tick in the markets.
It was refreshing as the previous administration’s economic team were tossing around rosy scenarios up until the day they asked taxpayers for a $700 billion bailout of the financial system; or else.
Unfortunately the Administration has fallen into this short term cycle thinking and worse have started to discuss economic reports before their release. Both President Obama and Vice President Biden discussed expectations for today’s unemployment situation report for May and were quoted in numerous venues yesterday stating that the May employment report (released this morning) would show significant job growth. Technically they were right as nonfarm payrolls grew by 431,000 but that was about 100,000 short of consensus estimates and 411K of that was due to census hiring. It was an awful number that was most likely the reason the Dow Jones dropped more than 300 points today.
First of all the Administration should not get so specific on an economic report prior to its release. These reports can have a dramatic affect on markets. Second, they shouldn’t be soooo wrong. Did they already know the number? If so were they too dumb to separate out the those census figures or did they think the rest of us were too dumb to notice.
Either way they made themselves look foolish.
There are numerous factors to blame for the economic mess we find ourselves in but if there is one overriding theme it is the persistence of short-term thinking. Whether it is company CEOs failing to look beyond the next quarterly report and how it will affect their bonus, the government failing to come up with a long-term energy policy or market analysts believing the current bubble is somehow a new paradigm resilient to normal cycles, there has been a consistent lack of long-term thinking and planning.
In order to build an economic recovery that goes beyond the recent boom and bust cycles we must seek long-term solutions. The Administration can begin by avoiding playing the monthly employment figures for short-term political points.
But if they must, they ought to look at the figures a little more closely.