Yesterday the OMB released its Mid-Season Review of the US Budget. In keeping with the encroaching Beijingization of all data releases, the administration now sees yet another decline in the 2010 budget deficit, this time a reduction of $84 billion compared to the February forecast. According to the budget office, despite a $33 billion projected drop in revenues, outlays will see an even greater haircut courtesy of "lower unemployment and government program" spending. Yet even so, the 2010 budget deficit is expected to hit $1.47 trillion and $1.42 trillion in 2011. Of course, all these numbers are flawed and irrelevant: the confirmation - the OMB's assumption about jobs projections. To wit: "With continued healthy growth in 2011 and beyond, the unemployment rate is projected to fall, but it is not projected to fall below 6.0 percent until 2015." One problem with this "assumption": for this projection to actually happen, it means the US government needs to start creating 245 thousand jobs every month beginning in July through the end of 2005 (and we give the OMB the benefit of the doubt: if their assumption means 6% by the beginning of 2015, it implies a ridiculous job creation rate of 300,000 per month for 54 months straight). Alas, in attempting to present the rosiest picture possible, the budget office is now completely ignoring such useless things as logic and merely discrediting itself with increasingly more ridiculous "analyses."
Readers will recall that a few days ago we presented the summary findings of a CEPR paper which demonstrated that 2007 peak employment levels will not be met until 2021, even after assuming a job creation rate of 166,000 a month for eleven straight years. The reason for this is that all the very smart economists consistently miss the most glaringly obvious thing: demographics, or specifically population growth. As the CEPR indicated, "Based on CBO projections, we assume a monthly growth in the labor force of just over 90,000 workers per month from January 2008 forward." In other words, just the natural growth of America will have added 8.6 million vacancies to the labor force from December 2007 through the end of 2015. And since the economy is already in the hole to the tune of 7.5 million jobs from the 2007 peak (see chart below), the OMB is effectively stating that it can bridge the shortfall of 16 million jobs in the next 5 years. Why, sure they can - if they can somehow create 245k jobs each month for the next 66 months. Alas, as the data demonstrates, the only time during the tenure of the Obama administration where there was a positive NFP number, is when the census fudge factor added hundreds of thousand of (potentially double-counted) positions, which have now been unwound. And obviously each month that does not create a net positive add to the economy, means more and more jobs have to be back-end loaded. In a few months, the economy will need to be adding 300k amonth to get to the OMB projection, then 400k... then 500k... Soon after that even China will have to tip its hat to the US propaganda machine.
Full chart summarizing the latest set of Goebbels-worthy data coming from the administration below:
Alas, this utter lack of logical thinking is precisely what occurred in the European stress tests: we will have quite a few more things to say shortly about Germany's Street Test Urban Achievers, the Landesbanks shortly, and how using a little comparable logic and data mining also quite easily refutes yesterday's "stupendous news."