Presidential economics: Do parties matter?

Comments & Context

With the presidential election a mere 127 days from the release of this
report, and the candidates apparently not waiting for the
once-traditional Labor Day kickoff, this is a good time to look at the
partisan patterns in some major economic and financial indicators. The
differences are significant, and worth thinking about for anyone with
dollars at stake after January 20, 2009.

Not to spoil the suspense too much, but here are the basic
conclusions. Since Franklin Roosevelt’s third term (1941–44),
Democrats have generally presided over faster growth and stronger stock
markets than Republicans; Republican administrations have been
friendlier for disinflation and the bond market. Also, Republicans tend
to preside over recessions early in their terms, with growth
accelerating as time passes; Democrats tend to preside over earlier
accelerations followed by slowdowns as the term matures.

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State unemployment jumps

Fed Focus

And other reasons for the Fed to hang fire.

Originally published June 20, 2008

The BLS reported a sharp jump in state unemployment rates this morning, further evidence of a slackening job market. That, plus the performance of capacity utilization, suggests that the Fed is likely to hang fire for months to come – especially since gas prices seem to be doing a lot of their tightening work for them.

STATE EMPLOYMENT
The big news in the June 6 BLS release on national employment was the big jump in the unemployment rate.  We’ve been waiting for the last two weeks to see if there were some regional anomalies in the increase, but we need look no further than the first sentence of the summary in this morning’s BLS release on state and local employment trends. "Virtually all regional and state jobless rates increased in May."  It’s an ugly table: Thirty-seven states reported statistically significant  increases in unemployment, and only one state, Louisiana, reported a decline.  The Midwest saw the biggest jump, +0.8 points, and the Northeast, South and West all posted gains of .5 points, right in line with the 0.5 increase reported for the nation as a whole in early June.

The state establishment survey put in a stronger performance. Bucking the national trend, employment rose in 30 states in May, and total state employment rose by 30,000 (vs. a national payroll decline of 49,000). But that follows a decline of 142,000 in total state employment in April (vs. -28,000 nationally). Over the two months, the decline in total employment exceeds the national decline by 35,000. Yearly growth in the sum-of-the-states measure is now 0.3%, slightly ahead of the 0.2% rate for the national establishment survey.

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Hawk Talk

Fed Focus

Originally published June 10, 2008

One of us heard Dallas Fed president Richard Fisher’s presentation at the Council on Foreign Relations this morning. Fisher was unsurprisingly hawkish on inflation – he said several times and in several different ways that no central bank can "countenance" a rise in inflation. He was worried that when the U.S. economy recovers from this case of "anemia" (he prefers that term to "recession"), it will start expanding with inflation at an uncomfortably high level. When asked if his colleagues shared his concerns – if, as the questioner put it, the Fed had the "character" to raise rates with the economy still sluggish, as it did in the Volcker years, he answered by saying that he had the highest respect for his colleagues. He praised Bernanke and Geithner several times, and professed his admiration for Jean-Claude Trichet as well.

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Comments on April Employment

Employment & Productivity

Originally published May 14, 2008

Though headline job losses were smaller than expected in April, the details of the report were weaker than the first impression would encourage. And even though the household survey was stronger than its payroll counterpart, as advertised by the decline in the unemployment rate, a look under its surface also uncovers weakness.

Total employment was off by 20,000, though plus signs were very hard to come by as you scan the sectoral breakdown. Construction fell by 61,000, about evenly divided between residential and nonres; manufacturing shed 46,000, almost all of it in durables. Private services gained 81,000, but many major sectors declined. Wholesale trade was off 11,000; retail, -27,000; information, -2,000. Finance, somewhat mysteriously, gained 3,000. The biggest gains were in health care, up 37,000; bars and restaurants, +18,000; computer systems design, +10,000; and administrative and support services, +13,000. The last sector got no help from its temporary help component, which fell 9,000. Government added 9,000, thanks to an unusually large gain of 4,000 in federal employment. State and local employment was up just 5,000, about a quarter its average over the last year. Budgetary pressures may finally be taking their toll on public employment.

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