There are a few forms of federal stimulus that are still helping to prop up the economy, and if they’re allowed to expire at the end of the year, that could depress GDP growth by a full 1.5 to 2 percent, J.P. Morgan reminds us in a research note released on Friday. Via the Wall Street Journal, here’s a graphic showing what could happen to the economy if extended unemployment insurance benefits and payroll tax cuts aren’t renewed by Congress once they expire at the end of 2011.
These were measures included in the original stimulus that were extended last December, and J.P. Morgan estimates that they’ve lifted household disposable income by $150 billion this year alone.
Things are looking worse for the U.S. economy than even three months ago. Since August, forecasters have revised their outlook to predict more gloom than they had expected, according to a new survey of 45 forecasters by the Federal Reserve Bank of Philadelphia. On average, economic forecasters predict real GDP growth of 2.4 percent in 2012, down from 2.6 percent in August, and the 2012 unemployment rate to be 8.8 percent, compared with 8.6 percent in August. Their predictions for 2013 and 2014 are also lower: just 2.7 percent and 3.5 percent, respectively. And that’s still higher than what the Fed itself is projecting, with a growth forecast of 2.4 to 2.7 percent for 2014.
President Obama is slated to visit Michigan today with the South Korean president, touting U.S. car manufacturers who could benefit from the free-trade agreement that just passed Congress. He’ll be well-positioned to take advantage of new auto sales numbers that have just been released. According to advance estimates from the U.S. Census bureau, retail sales were up strongly in September — 1.1 percent above August’s number and 7.9 percent above September 2008. And the automobile industry has helped fuel that boom, performing better on the whole than the rest of the retail sector:
Princeton economist Angus Deaton has taken a close look at whether the recession has actually made Americans feel less happy. In a new paper, he analyzes data from a daily Gallup poll that asks Americans about how their lives are going and if they’re satisfied with their standard of living — an index of what happiness researchers call “subjective well-being.” Here’s a graph showing what he found, based on an 21-day moving average of the Gallup response. The solid line represents all Americans, and the dotted line represents those 60 and older, whom researchers have previously found to be happier on average than the rest of the population:
There are some big changes that seem to make sense: a big drop following the collapse of Lehman and the financial crisis. But the bigger trend seems to be perplexing. Overall happiness seems to have risen substantially since the beginning of 2009 — at levels even higher than before the current crisis — even though the recession and economic slump would have presumably taken a big toll on the American psyche.
Deaton puzzled over this shift himself and concluded the rise in happiness actually had to do with the very questions that Gallup was asking. In the lead-up to the 2008 election, Gallup posed the questions about political preferences first, asking whether the poll participants planned to vote, whether they approved of the sitting president, whether the country was headed in the right direction, and so forth. When those questions were dropped in early 2009, reported happiness immediately spiked. According to Deaton’s analysis, the very act of thinking about politics makes Americans feel less happy and satisfied with their lives — an effect that’s almost as big as being unemployed.
“People appear to dislike politics and politicians so much that prompting them to think about them has a very large downward effect on their assessment of their own lives,” he writes. “The effect of asking the political questions on well-being is only a little less than the effect of someone becoming unemployed, so that to get the same effect on average well-being, three-quarters of the population would have to lose their jobs.”