Greg Sargent: By launching into a full blown angry panic about improving jobs numbers, they only draw attention to, and reinforce, the idea that the economy is, in fact, improving — and, worse, that the prospect of economic improvement is terrible news for Romney’s presidential prospects. Here is Romney policy director Lanhee Chen… finding his efforts cluttered up by his questioner’s insistence that he endorse unemployment trutherism…. This is the latest manifestation of what Jonathan Bernstein has called the closed conservative information feedback loop. There were the poll truthers, who told us that any Obama lead simply must be the result a liberal media conspiracy to rig all the polls to create a false sense of an inevitable Obama victory. Only Rasmussen and Gallup are telling the truth. Oh, wait — Gallup shows Obama ahead now. So those numbers can’t possibly be true, either. Then there was the release of the Drudge race-baiting tape of six-year-old Obama comments…. This latest — unemployment trutherism — strikes me as having the potential to be a bit more damaging to Romney. It’s very likely that these claims are now going to break through to the nightly news, drawing still more attention to the dropping unemployment rate.
Felix Salmon: This move is about optics as much as it is about reality: with the unemployment rate now below 8%, a key Republican talking point has been neutralized. And for the wonkier types, Obama can now say that he’s created more private-sector jobs in the past four years than George W Bush created in eight. Indeed, if it weren’t for public-sector job losses — exactly the kind of spending cuts that Republicans claim to love — the unemployment rate right now would have a 6 handle. Those optics explain the frantic and ignoble conspiracy theories from the Republican side: they’re trying to alter perceptions of the number itself, even if they can’t alter the effect that rising employment has on the electorate’s propensity to vote for Obama. Because it seems as though rising employment is giving a significant boost to Obama’s re-election chances — and that from here on in, it will only be helped by the 7.8% headline unemployment rate. It’s a little bit depressing that 7.8% counts as low, for these purposes, but clearly it does — especially considering that it has come down 1.2 percentage points in the past year. I don’t know how much credit Obama can really take for that, but America, right now, seems to be willing to give him the benefit of the doubt.
Capital Economics put out a cracker of a note on UK output this week. It’s taken us a while to get through it but we wanted to do it justice. Here’s the key extract: ‘Supply pessimists’ point to high inflation and growing employment as evidence of a small output gap. But inflation was pushed up by temporary factors and has eased recently, while domestically generated inflation has remained low. The rise in employment since 2010 is puzzling, but it has been concentrated in low productivity sectors where there was less labour hoarding during the recession. If we assume (generously in our view) that the economy was operating 2% or 3% above potential in 2007, and that the financial crisis dealt a permanent blow to the economy of 5% of GDP, the output gap should still be about 6% of GDP. If our view is correct, this implies unnecessary fiscal consolidation under current plans of about 2.5% of GDP, or £35bn in current prices. A large output gap offers the prospect of the UK being able to enjoy strong economic growth, if and when demand recovers, without inflation taking off. But as long as monetary and fiscal policies are conditioned on a pessimistic view of spare capacity, this prospect may be frustrated. Accordingly, supply pessimism may be self-reinforcing.