Slow-go on economy

Way slower than what the White House had been expecting at the beginning of the year - and, according to NYT columnist Dave Leonhardt, the result of depending on forecasting models that aren't reliable during a crisis.

These models, which are also used by Wall Street and various research firms, do a decent job most of the time. But they are notoriously bad at forecasting turning points because they are based on an assumption that the recent past will more or less repeat itself. Clearly, recent economic history is not going to repeat itself. It included two huge asset bubbles, first in stocks and then in real estate. The models came to treat those bubbles -- and the additional consumer spending they caused -- as the new normal. When asset prices began falling, the models couldn't keep up, with either the pace of declines or the economic damage they were causing.

Early on, Obama's people saw the unemployment rate peaking at 9 percent without the stimulus package and 8 percent with. As it turned out, the May rate was 9.4 percent and June could be even higher. (The rate in L.A. County was 11.6 percent.) Frankly, little of this has anything to do with whether and to what degree the stimulus plan is working. Here's the general consensus: It's definitely better to have it than not to have it, but the effectiveness so far has been limited - as could have been expected.

For starters, a stimulus package doesn't affect the job market immediately because most employers don't hire or fire workers as soon as they sense their business shifting. That's why economists refer to employment as a lagging indicator. When private economists began analyzing various stimulus proposals in January, they said that none would have a major effect on the jobless rate until the end of the year. By June, the effect would be only a few tenths of a percentage point, which translates into several hundred thousand jobs.