Obama Must Create 230,000 Jobs A Month Until The End Of His Second Term For Return To Breakeven - Charting The New "7 Year Itch" Normal

Tyler Durden's picture

Recently there has been a surge in cherry picked employment charts highlighting that the Obama administration has done a great job in rescuing the economy. The premise goes: after dropping to as much as 700K+ jobs lost per month, the administration has managed to pull off a miraculous recovery and now we are riding on a wave of 8 consecutive "private jobs" beats in a row. This argument is so shallow we won't even bother with it. Perhaps the "economists" who espouse this theory will be so kind in their next iteration of their charts to overlay the monthly US debt issuance side by side with the jobs number. Because you see if you drown the economy in unrepayable debt, while using transfer payments to fund the digging of trenches by every man, woman and child who makes up the labor pool, then yes - you may get 0%, or even negative, unemployment overnight. Will it bankrupt the country (even faster)? Why, of course. But whoever said those who discuss politics subjectively ever care about the long-term implications of reality. So in the vein of sharing pretty charts, here is one: we show job losses since the beginning of the Recession (excluding for the impact of census hiring), juxtaposed to the natural growth rate of the Labor Pool (and not the artificial one, which according to the BLS is the same now as it was a year ago). We discover that i) 7.6 Million absolute jobs have been lost since the beginning of the Recession; ii) that a record 10.5 Million jobs (and you won't find this statistic anywhere), have been lost when factoring in for the natural growth of the Labor Pool of 90-100K a month (we use the lower estimate, which also happens to be the CBO's estimate), and that iii) assuming we expect to return to the jobs baseline level as of December 2007 (or an unemployment rate of 5%) by the end of Obama's second term (and we make the big assumption there will be a second term), Obama needs to create 230,000 jobs each and every month consecutively from September through November 2016 in order for the total jobs lost to be put back into the labor force, and that iv) an optimistic (if more realistic) projection of jobs returning to the work force means the return the baseline will occur in 2019, some 7 years after the start of the last recession. The point of these observations is not to cast political blame on either party: we are in this predicament due to the combined stupidity, corruption and greed of both parties. The question is how do we get out of here. And unfortunately for all those hoping that a return to a normal, baseline past is possible, please forget it (i.e., the New Normal is really real), at least for the next 7 years. This also means that any charting, technical analysis and other "reversion to the mean" approaches of forecasting the future will all end up sorely lacking and misrepresenting the final outcome.

Chart 1: a simple baseline chart that shows where we were, where we are, and where we are going, with the assumption of recovering all labor force growth-adjusted jobs losses from December 2007 through the end of Obama's second term. The conclusion: the economy needs 229,300 jobs per mont (incidentally, for the simplistic read on the labor force which does not account for demographic changes, which economists tend to conveniently forget all too often, a 230K jobs pick up a month, means a recoupment of baseline jobs lost in June of 2013).

Chart 2: We demonstrate that the cumulative jobs lost since December 2007, are in fact materially greater when adjusting for a realistic change in the labor force, instead of that presented by the administration, which naively expect people to believe that the labor force in August 2010 (154,110) was lower than that in August 2009 (154,426). That in the meantime the US population grew by 2.5 million seems to make no difference to the administration. Which only means that sooner or later this labor force participation will catch up to the numbers. Either way, we factor for it, and assume that the labor force was growing by 90K every month since the start of the recession, and add the cumulative differential to the jobs lost. The result: in the 33 months through August, the US has lost not 7.6 million jobs, but 10.5 million: a stunning 38% delta.

Obviously, all these projections are unrealistic. So let's take them down to some version of reality... even if it is Bank of America's. We take the most optimistic Wall Street projetions we could find - traditionally those belong to Bank of America's Ethan Harris. In a note released to clients, Harris discusses his revised jobs forecast:

Under the weaker growth trajectory we are now penciling in:

  • Private payrolls manage tepid monthly gains of just 25,000 through the end of 2010. As the growth recession fades in the second half of 2011, gains in private payroll employment should accelerate. We expect average monthly gains of 125,000 in the fourth quarter of 2011.
  • Therefore, for most of 2010 and 2011, employment growth is not expected to keep up with the rise in the labor force, which means the unemployment rate heads north. We expect a steady increase to 10.1% by the second quarter with a slow fall slightly below 10.0% by the end of 2011.

So let's adjusted the chart using Bank of America's projections, which assumesa gradual increase in the unemployment rate to 10% by Q3 2010 and a decline since then. We chart these projections on the chart below. According to this adjusted case, the payroll number will never return to the December 2007 baseline for the duration of Obama's term, even if one assumes 200K job pick ups beginning in January 2012 and continuing every month thereafter (as we have done). In November 2016 we forecast an unemployment rate of 5.7% using these assumptions. They are presented visually below:

And just to demonstrate what the recession will look like assuming even this quite optimstic assumption, here is the famous post WW2 recession comparison chart adjusted for an expansion of the depression (let's not split hairs here) labor force, that started in December 2007: it is shaping up to be 7 years before the jobs lost finally are put back into the system. And that's for those optimistically inclined.

So before everyone gets all political on who has done a more bang up job of destroying the economy, perhaps both sides can explain how they each got the US to a point where even wildly optimstic projections assume that the length of the most recent economic slowdown will take 85 months to resolve (and, in all reality, far, far longer).

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Nonconformist's picture

Maybe one place to start would be to stop growing the labor pool by 100K a month.

-1Delta's picture

TYLER what about 43? it is worth charting

Moneygrove's picture

Want the jobs back ? start a war with china !!!!!!! zero unempolyment in usa !!!!!! that was easy !!!!!!!! would be fun to watch ua air force bombing american factories in china on cnn !!!! 

snowball777's picture

If you start a war with China, and they dump 2.5T in treasuries, can you afford to take out more loans when you're paying Greek yields, bitch?

If starting a war would improve things, why haven't the TWO theaters that are hot now helped?

Idiots like you deserve to lose your country.

Moneygrove's picture

you think usa is going to pay back all its debt ? lol lol !!!!!!!!!!!

tmosley's picture

So you're advocating 60th trimester abortions?

Nonconformist's picture

HaHa, No, just stop importing additional labor that we do not need.

thesapein's picture

Can we export ignorance, somehow?

Shrinking a population also shrinks the supply of jobs. Unless you're doing God's work, people work for people. People trade with people.

Hey, I have an idea. All of the unemployed and all the immigrants can get together and form new communities with shops and factories and farms and show the world why each person can be thought of as a part of the engine and not just a siphon. That would mean getting off the sofa and maybe putting the immigrants with the know how in leadership positions.

Suisse's picture

The only thing that shrinks the supply of jobs is technology, mainly computers. Obviously removing foreign aliens would not affect the supply of jobs, there appears to be a surplus of labor.

thesapein's picture

Next, you'll want to stop importing technology.

I would never say we have a surplus of labor. That would be like passing by a crowd who didn't know how to put Humpty Dumpty back together and saying, they had too many people standing around doing nothing.

Suisse's picture

If there is a surplus of corn, that means we are unable to sell it all.

If there is a surplus of labor, that means we have lots of unemployed people.


I think we have a surplus of labor.

tmosley's picture

Prices are fixed above the market price.  This is what happens when government controls labor and industry.

Rusty_Shackleford's picture



"Stop fucking with prices!"  - ? Mises


thesapein's picture

Yeah, minimum wage was never a good idea.

Clycntct's picture

100% of 0 does not = minimum wage.

snowball777's picture

Neither was slavery.

Choose one.

thesapein's picture

Why not a maximum wage, instead?

thesapein's picture

Imagine a country where everyone wanted to be a car salesman. If most of the population only ever learned how to sell cars, what would we say about labor if sales started to fall and unemployment rose? Would we say that we had a surplus of labor? You would. I would tend to think that the problem was deeper and had more do with the type of skills available and not so much the amount. Worse, what if the cars needed maintenance while the mechanics were all overseas?

Getagrip's picture

This is insano talk. We don't do factories and real productivity stuff any more. Folks on indefinite unemployment/food stamps need to make $25 an hour just to break even.

johnnynaps's picture

hmmmmm, maybe if credit checks, background checks, job history, references, and drug tests ceased to exist would you have near full employment. But, I bet your little pea-sized brain never took those factors into consideration?!

Go ahead, cut the benefits, I dare you. Watch what happens when your daughter gets lifted by some loser then. It is by design that this country doesn't want full employment. You, are just going to have to deal with the sofa-sitters.

bigdumbnugly's picture

there are a lot of people just idly leaning on their brand new shovels...

aurum's picture

the one and only fix is no government or fed meddling...thats it...let free market forces take hold and things will be fixed. sure we will have pain for a while...allow those that are responsbile with capital allocation to win and those who were irresponsible lose. true capitalism. thats it...i am not saying tptb or the sheeple would go along with it...but its the only fix...that and asset backed currencies.

FEDbuster's picture

Somewhere over the rainbow Way up high, There's a land that I heard of Once in a lullaby.

Somewhere over the rainbow Skies are blue, And the dreams that you dare to dream Really do come true.

Someday I'll wish upon a star And wake up where the clouds are far Behind me. Where troubles melt like lemon drops Away above the chimney tops That's where you'll find me.

Somewhere over the rainbow Bluebirds fly. Birds fly over the rainbow. Why then, oh why can't I?

If happy little bluebirds fly Beyond the rainbow Why, oh why can't I?

umop episdn's picture

Just wait for the revisions on the job numbers, as the hole is even deeper than they are saying. (No surprise there.) Now, add in a nasty hurricane, or a big refinery accident, or just plain stupidity on the part of some of the big noise boyz... I am not happy about this!

thesapein's picture

I'm not so sure it's a "hole" because to me it looks like the continent sank a bit. Holes, dips, depressions, etc. all just seem to assume that the US will naturally float at some level above sea level, so this must just be temporary, as we will naturally be on top once again. I'm not so sure the US is immortal or the favorite of the gods.

101 years and counting's picture

are we talking real jobs or birth/death model jobs?  birth/death can create 5 million jobs in 3 months if the administration gets really aggressive in their modeling assumptions.

Hulk's picture

have to "improve" the birth-death model to get those numbers...

Hulk's picture

in the direction its a goin and pull the numbers out at the end of the year. No one will even notice...

Number 156's picture

Perhaps the current administration thinks they can fix unemployment by creating federal jobs?

breezer1's picture

it worked in zimbabwe, for a while. thats it , a federal government bubble. everyone could work for the government. we would pretend to work and they would...

Glasgow Gary's picture

Analysts have been discussing this exact trajectory for about a year now. The mainstream economists are not only dumb, but in some cases little more than craven pleasers. It's been clear since last Summer that getting back to normal was nigh impossible, once you pour population growth on top of the black hole in jobs we've fallen into.



mikla's picture

The mainstream economists are not only dumb, but in some cases little more than craven pleasers.


Being charitable:  Economists are morons operating under a failed world view.

Not being charitable:  Economists are dishonest central planners that should be executed in the town square for the purposes of amusement.  (Their constant goat sacrifices creates suffering throughout society, and all would do better getting rid of them.)

Economists cannot do the math.  Yes, they really are that stupid, and no, math is NOT a part of their academic curriculum (which is merely religious indoctrination).

These charts are so simple, as is the math, as is the "confidence" even the layman can concluded regarding possible future "growth".  When you add the fact that the geometric debt service is expected to come from central planner assumptions regarding these future "jobs", it's quite simple to understand you can't get there from here.

The US won't make it to 2016.  Sovereign default, constitutional crisis, and re-organization of the US Federal Government (e.g., Argentina).

Relating to previous threads, yes, a few central planners know what they are doing (enriching their own power and control by crashing the world into a brick wall, with anticipation of their Kingship over the next system), but the majority are simply morons (think CNBC bobblehead).

thesapein's picture

what's with the focus on population growth?

thesapein's picture

It's a classic response in a declining economy. 

Nonconformist's picture

Thesapein, what's with your focus on promoting population growth?

kathy.chamberlin@gmail.com's picture

only way to pay off this debt. promote living.

thesapein's picture

Skeptics always seem like we're taking an opposing side. I'm not sure what I believe on this topic; however, I'm quite certain of the incorrectness in what others are saying. They seem to know not what they mean and, more importantly, why they're saying it.

CrockettAlmanac.com's picture

They seem to know not what they mean and, more importantly, why they're saying it.

Fear of "the other" I assume, which I counter with the old saw, "people are the same all over." There is a legitimate concern about immigration insofar as we live in an out-of-control welfare state and it seems that the folks in the middle have to carry the weight of everybody else.

But apart from that, I'd say:


thesapein's picture

Please, just try explaining that one to me in full detail and see if it still sounds like a legitimate concern afterward. Better yet, imagine explaining it to a family that just immigrated here. I'm seriously asking if anyone wants to jump in here.

CrockettAlmanac.com's picture

just try explaining that one to me in full detail

Too much effort. Maybe we can find a day laborer standing outside a Home Depot who will be willing to write that one up for you on the cheap.

thesapein's picture

Yeah, go back to your couch and, wait, don't forget your remote.

RichyRoo's picture

more people = more consumers, and lower wages, so its good from those points of view. Also having a fragmented labor market with ethnic division makes divide and conquor much easier. Also immigrants dont know their rights, so they are easier to take advantage of.

Of course, you have to ask yourself, if population is inherently 'good' then why are the countries they are leaving such shit holes?

thesapein's picture

You pull me in to agree, only to fabricate a question that was never implied by words. So, no, I don't have to ask that question because, well, it has at least one false premise.

kathy.chamberlin@gmail.com's picture

ricky ricky roo - your cool.

Also immigrants dont know their rights, so they are easier to take advantage of.

not just immigrants. i think whole of america doesn't know their rights. i am just now exploring mine. especially not aware in my previous life.


tony bonn's picture

i would rather that obama produce an american birth certificate rather than 230,000 fake jobs which any birth/death monkey could produce....



Votewithabullet's picture

The republican governor of hawaii said she sent the states chief medical fuck to personally verify the birth certificate and THE REPUBLICAN GOVERNOR said the president was born in ooh ss aay. Racists, I love em, If you got nothing nice to say about anyone come sit by me. Dont you have any legitimate concerns to attack this negro with other than building 7 BS....unless you are actually a demoncrat attempting to make your opposition look insane? Oh your good real good.