Last May, during the peak of improvement we were seeing in the US economy, I went out on a limb and suggested that we would be seeing a turndown that would inevitably impact the 2012 Presidential Election.
Today, I am going to give you an update on the data I have that supports that theory even more today than it did one year ago.
The rate of profit growth drives the US economy. The rate of profit growth drives hiring in the future. Once that simple fact is understood, it becomes rather easy to see where we are headed in terms of both the economic and employment outlooks.
First, let’s look at a bit of history. At the end of the second quarter of 2007, the rate of profit improvement was at 5.84%, falling below the level I contend we need to maintain to have employment growth the following year. Non farm employment stood at 137.6 million. We would be down 0.36 % over the next twelve months. Year over year job losses would continue until September 2010.
Of course it was the third quarter of 2009 that returned us to a rate of profit growth that would indicate we would have positive employment growth one year later. And we did. September 2010 provided a NFP number that showed we had added jobs over the previous 12 months.
Dipping below the threshold and the nation loses jobs. Rise above the threshold and the nation adds jobs.
This is not a coincidence. It is not conjecture. There is a strong correlation between the rate of profit growth and job growth, as I have written here before.
So where are we today?
Since the column I penned on Obama’s Goose simmering, when the most recent four quarters had shown a year over year profit growth of 22.61%, the numbers have been rapidly deteriorating.
Last 12 months ending 3/2011
Last 12 months ending 6/2011
Last 12 months ending 9/2011
Last 12 months ending 12/2011
The trend should be clear and easy to understand. I have analyzed this data back several decades and the relationship between profit growth and employment growth is beyond dispute.
It should also become clear that the NFP number for December 2011 is important because we will be at approximately the same level of employment at the end of December 2012, if not slightly below. We had 132.1 million Americans working at that point. And because we have more working today, there will be jobs shed in the near future.
My indicators also indicate that the rate of profit growth for the four quarters ending March 2012 will be below 5%, indicating that we will also have fewer people working in March 2013 than we had at the end of March 2012.
So, to put it simply, President Obama is going to have to campaign for reelection in an economic environment that is not improving as he and his administration has been claiming, but one that has been weakening, despite adding trillions in additional debt along the way.
Unfortunately, this administration as well as others in the past, have never understood the economic mechanisms that do what we need so badly in our economy. That is to generate jobs in which taxpayers are able to garner higher wages as the opportunities multiply.
Even worse, I feel that we have lost three years of what we could have had getting us on the right path for economic growth despite what may have been going on in the rest of the world.
The Reelection Campaign of Obama will be in a panic as soon as the economic numbers begin to present the reality to the American people (which they have known all along) in a manner that cannot be spun into positive news.
We have been victims of relativism when it comes to economic news and the reporting of how things are progressing. The job numbers were positive. So the right things were happening according to the major media outlets.
But while the numbers were indeed positive, they were simply not positive enough. For employment numbers, we have been told how things were getting better yet we are still more than five million employees below were we were in March 2008.
Beating estimates is also another relative comparison that has done us more harm than good. Beating estimates only tells us that the forecasters are not accurate, not whether or not we are seeing real, sustainable growth.
When you have that fact there are 5 million fewer Americans working, and then you are told that we have the largest GDP in US history, you should be asking yourself which number is not as relevant as it has been made out to be? Are we looking at the wrong indicators? I certainly believe so.
Since the second quarter of 2010, Obama has presided over the largest economy in US history. The largest. Think about that.
Does it feel like the largest economy in US history? Look around. Be honest with yourself.
And when the rest of the year provides more economic disappointments that will not be able to be addressed in the next six months, how do you feel people will vote in November?
Obama has already lost this election. He lost it more than a year ago. But abnegation will keep Obama and his followers from admitting the truth until, in all likelihood, after the election is officially over.
All the data I reference can be found at: