More Than Half-Million New Jobs Since June 1 Rebuts Recession Fears Stoked By CNBC And Trump

If the Atlanta Federal Reserve Bank's current estimate of GDP growth at a robust 3.7 percent rate in the current quarter--which the Reserve Board's interest-rate setting Open Market Committee itself looks to for the best available sense of where GDP will come out--proves to be reasonably accurate (as it did in the past few quarters), President Obama will have achieved a remarkable but little noticed milestone in economic management.

Since the beginning of the 20th Century and now into the 21st, only four previous administrations have come and gone without a single recessionary period beginning during their watch! As it happens, all four are those of Democratic presidents: John F. Kennedy, Lyndon B. Johnson, Jimmy Carter and Bill Clinton. President Obama would be the fifth Democratic president in a row to end his term without seeing a recession start--indeed, he saw one off: the "Great Recession" that began during the final months of the Bush administration after the housing finance crash.

You wouldn't know these facts if you only listened to Donald Trump, Fox News and CNBC. Rick Santelli, one of CNBC's main commentators on Federal reserve policy and the economy (he long ago ceased to be an objective "reporter"), really likes the Atlanta Fed forward estimate of quarterly GDP, but only when it's low enough to validate his thesis that Fed and Obama administration policy is all wrong and failing. When it reads as positively as it does currently, Rick doesn't say much about the Atlanta Fed's data. He has taken a circumspect posture about the 547,000 net new jobs posted over June and July announced by the Bureau of Labor Statistics on August 5 (see below). CNBC has not yet dredged up Jack Welch to assert that the Labor Department jobs data is rigged (as he did late in the Romney campaign in 2012), but there are 90 or so days left in the campaign, so stay tuned!

In the days leading up to the most recent jobs report, CNBC gave a special platform to long-time Fed critic Peter Boockvar to warn investors that the August 5 jobs number could be a "miss'" that would disappoint the market--well below the consensus prediction of 180,000--because, in his view, the U.S. had already entered a period of hiring downturn. CNBC also published, on August 2, an article asserting that "Jamie Dimon is wrong about the US economy" (Dimon being the well-respected CEO of JP Morgan), citing the views of Deutsche Bank's chief economist Joseph Lavorgna that the economy would already have been in a recession for the past four quarters were it not for what Lavorgna called the unusual strength in consumer spending contributing to GDP during the past year (it was up 4.2 percent in the just concluded quarter).

Statistically, Lavorgna's hypothetical is mathematically sound, but it is not only a hypothetical, it is that rare bird, a known counterfactual! On the morning of the jobs report, on August 5, Lavorgna was forced to concede on air that "job quality was good," but went on to say that current data shows growth of only 1 percent or so--apparently not noticing the Atlanta Fed projections in his research--and that the August report was not a "long term sustainable phenomenon." (Thus, he at least gave the CNBC hosts another opportunity to keep using the word "recession" in a sentence without much evidence!)

And Rick Santelli wasted no time, on that morning, moving to debunk the jobs report as a distorted view because of the Labor Department's "seasonal adjustments"--a charge he does not seem to have made whenever the jobs report disappoints the market! But facts are stubborn things, and even CNBC at least was willing to forward to its audience a note from an ex-White House advisor asserting that there was "not one bad number in the July jobs report." However, it coupled this article with a Trump campaigner's observation that, while the jobs report was strong, "too many Americans are still left out" of an economy that is "flat," referencing the workforce participation rate (which has been declining since before the George W. Bush Administration, primarily due to baby-boomer retirements!)

Candidate Trump, of course, bases his election argument, in no small part, on his pledge to revive the economy with millions of new jobs "brought back" to America to reverse job losses. But the facts say otherwise, despite the disappointing May 2016 jobs report that Trump rightly called a "bombshell." After the June report showed strong growth of 288,000 (now revised to 292,000) net jobs, the Trump campaign sent out Donald Trump, Jr. to claim that the Labor Department report was "manipulated" to make the Obama administration look good. Of course, back in May, when the report from the same Labor Department was quite poor in terms of job creation, no such claim came from either Donald Junior or Senior. One can expect, however, that they will double down on the manipulation claim (shades of Jack Welch--now an "anyone but Clinton" Trump supporter).

As to Fox News, the home page on August 5 carried only a brief bottom-of-page note on the jobs report (below a couple of photos of Britney Spears in apparent beachwear--perhaps a final tribute to the departed Roger Ailes), which seems to affirm their maxim: "If you can't say something bad about Obama's performance, say as little as possible." On the Fox Business Network, the report was downplayed by a commentator who said that the jobs data was affected by seasonal adjustments and "catch up" from May was hard to reconcile with the 1.2 percent GDP number for the second quarter and, like Lavorgna on CNBC, was "not a sustainable" phenomenon." On Fox, what else is new.

In any event, the August 5 stock markets seemed to read the jobs data decisively differently than the CNBC and Fox commentators and the Trumps, closing up 1 percent for the Dow and at all-time record highs for the S&P 500 and NASDAQ. In politics and economics, it pays to follow the adage: "Don't fight the tape!"