John Ransom

One of the fatal miscalculations that has plagued the Obama administration is their complete, total and utter misunderstanding on how energy prices affect the economy.

Our friends over at Political Calculations have done a great job trying to explain this to the White House for the past year.

When gas prices go up, says PC, new unemployment claims follow a few weeks later as fuel costs eat into money that would otherwise go to labor costs.  

In fact, Political Calculations top-of-the-page feature “Good Morning White House Staffer”- which shows the relationship between gas prices going over $3.50 per gallon and new unemployment claims going up- is a must see.

The feature takes gas price and unemployment data from 1976 to the present and allows you to predict the unemployment rate two years from now when gas prices go to a level that you input.

For example, if gas prices go to $4.15 on average, two years from now, says the PC tool, unemployment will be at 10 percent.     

While other economists have been caught flatfooted two years in a row on unemployment and the rapid slowdown of GDP, PC has called it in advance, leaving Townhall readers better informed than most top traders on Wall Street.

This is in part due to their excellent work on the relationship between gas prices and the economy. 

Inflation-Adjusted Motor Gasoline Prices and U.S. Unemployment Rate, January 1976 to January 2011

While gas prices are going down right now as you read this, Political Calculation is advising you to “keep your resume up to date,” and suggesting to residents of our federal city “that this summer will perhaps present the best opportunity you will have to sell your metropolitan Washington D.C. home before that real estate market changes.”

Why?


John Ransom

John Ransom is the Finance Editor for Townhall Finance.
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