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News & ArtsFriday, June 5, 2009
Economy Today in Not Understanding Economic Indicators
Posted by Grant Brissey on Fri, Jun 5, 2009 at 9:51 AM
Much is being made of the unemployment report for May (345,000 jobs lost, less than the 522,000 economists had predicted might happen). It's the lowest rate of job loss since last September (the end of last summer), leaving the current unemployment for May at 9.4 percent—the highest since 1983, a year following the severe recession of the early 1980s.
This Gallup poll also shows job loss slowing, but still exceeding job creation:
U.S. Job Loss Slows, but Still Exceeds Job Creation
I get it. Job losses are slowing, and this suggests that the economy is continuing its turnaround. Here's my question (and again, I'll profess to knowing nothing about how the economy works, lest you think I'm trying to suggest otherwise): How much of this owes to seasonal factors? Or the simple fact that summer is here? Unless I'm mistaken, people tend to spend more money in the summer. Thus, affected industries would reasonably experience some amount of job retention. How significant are these unemployment numbers alone?
3
I believe (and correct me if I'm wrong) that these numbers are seasonally corrected before being published. In other words, the increases and decreases associated with particular seasons are already taken into account and the numbers are adjusted accordingly.
4
http://www.bloomberg.com/markets/ecalend…
Scroll down and you can year to year percent change. While seasons affect employment (the big one is around that shopping for Jesus day), this drop is nothing short of rather stunning. Especially considering that government employment was down (i.e. its not the census hiring that's doing this).
It is starting to look more and more like what we had was a fear depression. We had a recession thanks to housing and asset deflation, but it was the panic that hit late last year that sent us off the cliff into a great recession/mini depression. That is now mostly over and I think the new question is do we have a V or L type recovery.
Scroll down and you can year to year percent change. While seasons affect employment (the big one is around that shopping for Jesus day), this drop is nothing short of rather stunning. Especially considering that government employment was down (i.e. its not the census hiring that's doing this).
It is starting to look more and more like what we had was a fear depression. We had a recession thanks to housing and asset deflation, but it was the panic that hit late last year that sent us off the cliff into a great recession/mini depression. That is now mostly over and I think the new question is do we have a V or L type recovery.
5
Yep, the released data are seasonally adjusted. You can see it in the heading of the table on the government site.
http://data.bls.gov/PDQ/servlet/SurveyOu…
http://data.bls.gov/PDQ/servlet/SurveyOu…
6
@4 - That's fine and I hope you are right but it should be pointed out that the majority of the fear was coming from the media and from the Federal Government who needed to justify themselves coming to our uncalled for rescue. The steps that have been taken to address this level of crisis have been fairly extreme. There is no consensus on how all this currency manipulation will end up playing out.
7
To address your question, the seasonal impact depends on the industry.
Summer can either be high period for employment (construction) or a low period for employment (retail).
But like other people have said above, the numbers are already seasonally adjusted.
Summer can either be high period for employment (construction) or a low period for employment (retail).
But like other people have said above, the numbers are already seasonally adjusted.
8
All the state budget cuts, the GM/ auto industry bankruptcy, and the lack of a jobs plan as part of Obama's economic recovery plan ensure that we will not see unemployment lessen in a meaningful way for years to come. Unless we reinvest in green jobs well beyond the scale that Obama has so far done, and get state governments on board with their own stimulus plans instead of budget cutting plans that increase unemployment. Word on the street is that won't happen, and next year Obama will be pushing "deficit reduction" for the midterm elections. That would deepen, not lessen, our economic woes. But it might make bondholders happy.
9
@4, it also appears that the Keynesian monetary policy ( at least as applied through the government Stimulus packages) worked to prevent a depression.
We'll never know what would have been the result without the stimulus, but it is very difficult to argue the stimulus did not work. I guess the tale isn't over yet, but right now, looks like the theory is valid.
We'll never know what would have been the result without the stimulus, but it is very difficult to argue the stimulus did not work. I guess the tale isn't over yet, but right now, looks like the theory is valid.
10
Grant,
I agree. It's a spin. The recession is sticking around. In fact, it may get worse come end of summer. It would have been the same had a it been a Republican in the WH. Let's see the numbers after 9/1/09.
I agree. It's a spin. The recession is sticking around. In fact, it may get worse come end of summer. It would have been the same had a it been a Republican in the WH. Let's see the numbers after 9/1/09.
11
@6 I think there was a legitimate reason for fear and extreme situations call for extreme responses.
The only question I have is whether Paulson shares in Bernanke and Geithner's Nobel Prize.
It will be interesting to see how the inflation scenario plays out. Personally I think we will be fine. If you look at the amount of money and wealth actually circulating in the economy we have less, not more, then we did before. I think that will cut heavily against inflation. That being said we can't run trillion dollar deficits for long and have that remain the case. But things like TARP and the stimulus are one off events and in the case of TARP will most likely be paid back.
@9 I agree, though I think the liquidity the fed and treasury put in played a huge role as well.
The only question I have is whether Paulson shares in Bernanke and Geithner's Nobel Prize.
It will be interesting to see how the inflation scenario plays out. Personally I think we will be fine. If you look at the amount of money and wealth actually circulating in the economy we have less, not more, then we did before. I think that will cut heavily against inflation. That being said we can't run trillion dollar deficits for long and have that remain the case. But things like TARP and the stimulus are one off events and in the case of TARP will most likely be paid back.
@9 I agree, though I think the liquidity the fed and treasury put in played a huge role as well.
12
@4: I'm not sure about "preventing a depression"; we really weren't anywhere close to that level of crisis. However, I think most economists would agree that the stimulus has done more good than harm, and has lessened the impact of the recession.
@8: I'm skeptical. My personal opinion is that people and businesses have pulled back so hard on consumption and investing that we'll see expansion by early next year, with unemployment falling by mid year (it's a lagging indicator). Agreed that balanced budget amendments and state governments' budget cutting are only making things worse, but those can't be changed on short notice (and a lot of voters don't understand the difference between micro and macro, to wit all of the blowhards on the radio saying crap like "I can't spend myself out of debt, so neither can a national economy")
The real credit probably goes to the Fed for its intervention to stabilize the financial sector and ease the credit crunch. An implosion there wouldn't necessarily have caused a depression, but it certainly would have created a huge amount of chaos and made recovery that much more difficult.
@8: I'm skeptical. My personal opinion is that people and businesses have pulled back so hard on consumption and investing that we'll see expansion by early next year, with unemployment falling by mid year (it's a lagging indicator). Agreed that balanced budget amendments and state governments' budget cutting are only making things worse, but those can't be changed on short notice (and a lot of voters don't understand the difference between micro and macro, to wit all of the blowhards on the radio saying crap like "I can't spend myself out of debt, so neither can a national economy")
The real credit probably goes to the Fed for its intervention to stabilize the financial sector and ease the credit crunch. An implosion there wouldn't necessarily have caused a depression, but it certainly would have created a huge amount of chaos and made recovery that much more difficult.
13
@12 We had pretty much the exact same set up going on. Had the fed and treasury not acted the financial system would have collapsed in on itself and we would be talking about 30-40% unemployment.
The stimulus while helping, is more of a "get us out of recession thing", its only just beginning to kick in.
The stimulus while helping, is more of a "get us out of recession thing", its only just beginning to kick in.
15
I finally got a job, after six months of unemployment. It was at a Summer Camp. Seemed to me to be a pretty good indicator that the season saved my ass.
The question is whether or not we can sustain it.
P.S. what happened to letters from the unemployment line? Did they all get hired?
The question is whether or not we can sustain it.
P.S. what happened to letters from the unemployment line? Did they all get hired?
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