A Rosy Rose Losing It's Petals?

When Barack Obama released his budget and deficit projections, more than just a few people thought they were absolutely too rosy (See Full Story). I wrote about this when I wrote my blog entry titled: Numbers Are What You Make Of Them.

Now, only 5 weeks after submitting that budget, one of the key statistics that Obama's economic team used to develop it and to estimate their deficit projections, the unemployment rate for 2009, has already been blown out of the water. Team Obama had said that unemployment would only reach 8.1 percent for this year and fall to 7.9 percent for next year (as noted in the above linked news article from Reuters news). Friday's jobs data came in at 8.5 percent unemployment and that is a rate that is 4-tenths of a percent higher than Obama's projected ceiling for the year. What's worse, we continue to lose jobs at a clip of 650,000+ per week with the amount of those remaining unemployed still growing. Furthermore, the overall unemployment rate had been somewhat buoyed by job additions in the government sector; but, that has come to an end with this last report showing a loss of 5,000 government jobs (See Full Story).

We already know that Obama's stimulus bill was more back-loaded than front-loaded with only 27% of the "job's creation" funding being set for this year. However, that number appeared to be rosier, too, because it now looks as if there are a number of conditions being placed on the use of the stimulus money, like Davis-Bacon work rules being applied to non-Federal projects, that will ultimately force many of the so-called shovel-ready jobs to be either dropped or to be re-bid and delayed by months. For that reason, 27% of work funding for 2009 may slip to 20%, or even much less.

Most economists are projecting an "average" unemployment rate of between 8.5% and 9.3% for 2009. Even the optimal average projection of 8.5 is substantially higher than Obama's ceiling of 8.1%. And, all those projections are in conflict with a past Obama statement that his projections are in line with most mainstream economists. I guess "mainstream" is what you define it as; sort of like a past President who said: "It depends on what the definition of is is."

We are almost a third of the way through this year and the rise in unemployment isn't abating. Many feel we will hit a level of 10 percent unemployment before leveling off. If that turns out to be the case, we will end the year at an average level of unemployment that is greatly above that very optimistic and rosy number that Obama's entire budget and deficit projections are being built upon. That, in turn, will destroy much of Obama's rosy estimates for any of those years going forward. If so, his plans for reducing the deficit by half won't even be close.