Depression/Recovery Watch: August

[Godwynn]

We lost 247,000 jobs and unemployment lowered?

Do you care to dig for the reason why Integral? I assume the reason will be something along the lines of "You have been unemployed for so long we won't count you anymore."

 

[Integral]

We lost 247,000 jobs and unemployment lowered?

Do you care to dig for the reason why Integral? I assume the reason will be something along the lines of "You have been unemployed for so long we won't count you anymore."

I was a bit puzzled too, so I looked into it.

This is a weird jobs report, so this might take a second.

The jobs report is based on two monthly surveys: one of 50,000 households, the other of a few thousand firms. The 'nonfarm payroll employment' figure is taken from the firm survey: according to employers, the nonfarm sector is employing about 247,000 fewer people than it was one month ago.

But...

The 'unemployment rate' proper is taken from the household survey. According to that survey, the number of unemployed Americans declined by 260,000 over the past month. That is, in June the survey indicated that 14,729,000 peope were unemployed; in July, that number was 14,462,000. (From the household side: employment declined by 155,000, unemployment declined by 260,000, the aggregate labor force declined by 420,000, and the number of people not in the labor force rose by 600,000 or so.)

In June, the household survey indicated that unemployment was 14,729,000/154,926,000 or 9.507%. Firms reported declines in payroll employment by 443,000.

In July, the household survey indicated that unemployment was 14,462,000/154,504,000 or 9.360%. Firms reported declines in payroll employment by 247,000.

Long story short: the jobs report contains two surveys. They usually move in the same direction with about the same magnitude. This month, they contradict each other. Lulz ensue.

[If you're wondering how they extrapolate those big numbers out of a couple thousand surveys, the short answer is 'survey weighting'. The longer answer is 'we roll a set of d20 and see what comes out.']

 

[JerichoHill]

I know nothing about the affiliations of the web site, I didn't look into it. The article has nothing to say about how data is compiled and used, it just points out that it changes, and rather comically at that. Is there something there that is false?

You can look at the ads the site has, very obvious it is a hack. And it is fairly common knowledge that these estimates get revised by those of us who watch them. Numbers and figures are coming in from all over at differing times as companies all don't have the same reporting schedule. That is why the estimates are labeled "preliminary, revised, actual" in that order. Basically, the author is showing their own ignorance about data collection and the procedures involved which are very basic.

 

[JerichoHill]

F'sure, it was a comfort to learn that the Great Depression of 1948 only lasted from 1990-96.

Please stop trolling

 

[JerichoHill]

We lost 247,000 jobs and unemployment lowered?

Do you care to dig for the reason why Integral? I assume the reason will be something along the lines of "You have been unemployed for so long we won't count you anymore."

Int provided some reasons, but yes Godwynn, part of the decrease are people removing themselves from the potential employment pool, whether due to discouragement or retirement.

 

[Naskra]

Yes, JH, the data gets revised. Everyone is agreed on that, even the hacks. So the hacks got lucky. Be happy for them.

 

[Camikaze]

A nice piece by SMH resident economist Ross Gittins:
http://business.theage.com.au/business/turnbulls-take-on-debt-has-as-much-fudging-as-a-fake-email-20090807-ed19.html

WHEN Malcolm Turnbull isn't fighting his way clear of the fake email affair, he's trying to get our attention back on to the Federal Government's growing public debt. In his (mercifully briefer) reply to Kevin Rudd's 6000-word essay, he mentioned little else.

So, how worried should we be about that debt? Much less than Turnbull wants us to be. He is exaggerating the size of the debt, misrepresenting the cause of the debt, exaggerating the difficulty we'll have repaying it, misrepresenting its effect on our prospects and pretending we'll end up with little to show for it.

He gives the impression the Government has already incurred a debt of $315 billion, but this is actually just an estimate of what the debt may be in June 2014. The milder-than-expected recession suggests it may end up being a lot less than that.

In any case, this is the estimate of the gross debt, whereas Turnbull always quotes the net debt when referring to the Howard government's record. The difference between the two is the Government's holdings of cash and liquid assets, which total approximately $100 billion.

Turnbull gives the impression the debt will be solely the product of Rudd's decisions to spend money but, in truth, about half of it would have occurred in any event, being the consequence of the fall-off in tax collections and increase in dole payments caused by the recession.

Economists call this the effect of the budget's ''automatic stabilisers'', which automatically push the budget into deficit during recessions and thus cause an increase in net government spending, which helps to cushion the economy's fall.

Once the economy starts recovering, the automatic stabilisers reverse direction and push the budget back towards surplus. In other words, the budget will automatically help the Government eliminate the deficit and start repaying the accumulated debt. Remember, too, that all the officially designated stimulus spending is a one-off.

Turnbull speaks of working Australians being ''asked to repay the mountain of debt incurred by this Government - a massive task facing taxpayers for years to come''. He talks of the children of young home buyers, as they reach working age, being ''burdened by having to pay higher-than-necessary taxes to meet the punitive interest costs of repaying the massive Rudd debt''.

''For at least 60 years, it has been a proud boast that every generation of Australians has left its children better off than their parents. As Rudd Labor's debt piles up unrelentingly on the shoulders of taxpayers of the future, we have to ask the tough questions: will we be the first generation not to deliver on that dream? Will we, through reckless and irresponsible decisions, deny the next generation their fair share of opportunities in life?'' he asks.

This is alarmist nonsense. It's true that when you borrow money you have to pay interest on the debt until it is repaid. It is true, too, that the interest on the debt will be paid from our taxes. But it is not ''punitive'', it happens with all borrowing, whether by businesses, households or governments.

Nor is the debt ''massive'' or ''mountainous''. The typical home buyer borrows two or three times their annual income and manages the repayments without great stress. At the projected peak in the net debt of $203 billion in June 2014, it will be equivalent to just 14 per cent of the nation's annual income (the gross domestic product).

Such a modest, manageable debt - a fraction of the relative size of the net public debts of all the major developed countries - will not take generations to pay off, not that it would matter greatly if it did.

Do you believe that someone with a credit-card debt or car loan can't enjoy a rising standard of living over time? That a family with a mortgage can't prosper until the mortgage is paid off? Of course you don't. Whether people become better off over time is a function of the pay rises and promotions they get, not whether or not they have to use part of their income to service their debts. Similarly, the notion that real GDP per person can't rise if the Federal Government has a bit of debt is absurd. Economic growth comes from improved productivity, more machines and more workers, not from the absence of public debt.

 

[Supermath]

Int provided some reasons, but yes Godwynn, part of the decrease are people removing themselves from the potential employment pool, whether due to discouragement or retirement.

Wouldn't discouraged people get counted in U-6 though (which went down from 16.5 to 16.3 seasonally adjusted and stayed at 16.8 not seasonally adjusted)?

 

[innonimatu]

Int provided some reasons, but yes Godwynn, part of the decrease are people removing themselves from the potential employment pool, whether due to discouragement or retirement.

They removed themselves? Says who? I believe that the truth is that they were removed from the statistics.

 

[Cutlass]

Wouldn't discouraged people get counted in U-6 though (which went down from 16.5 to 16.3 seasonally adjusted and stayed at 16.8 not seasonally adjusted)?

That's not the number that's commonly reported though. I think they stick to the common number just to avoid confusion. Let the pros deal with the other numbers.

 

[JerichoHill]

That's not the number that's commonly reported though. I think they stick to the common number just to avoid confusion. Let the pros deal with the other numbers.

Correct. U3 is commonly reported.

 

[JerichoHill]

They removed themselves? Says who? I believe that the truth is that they were removed from the statistics.

No, you're right inno, poor choice of words on my part, but you knew what I meant. Well, with regards to discouraged workers. Folks who decided to retire...

47% of the US federal government workforce will be eligible to retire within a few years. That'll be interesting.

 

[innonimatu]

No, you're right inno, poor choice of words on my part, but you knew what I meant. Well, with regards to discouraged workers. Folks who decided to retire...

47% of the US federal government workforce will be eligible to retire within a few years. That'll be interesting.

Thanks for pointing out the impact of retirement. It may explain some changes in the numbers, though I suspect (with the growing population) that it wouldn't actually cause a reduction of the working population.

How prepared is the US to support an increase in the number of retired people? In Europe social security works (almost everywhere) as a pay-as-you-go system, with the benefit that it is more insulated from economic crisis. Private pension plans, and public pension funds, have increased over the last 15 years or so, but they're still not important, in Western Europe, at least.
I'm under the impression that in the US a large part of the population relies primarily on private pension plans and pension funds. Is that correct?

 

[Whomp]

Actually, no we do not. We've moved from a system of defined benefit (pensions) to defined contributions (401(k), 403(b) and 457(b)) plans. Instead of company directed it's now employee directed.

The majority of retirees will take from their retirement accounts, home sale and social security to maintain their retirement lifestyle.

 

[Cutlass]

In the US what you rely on for retirement is dependent on where you have worked. Almost everyone has Social Security. But generally SS is, at best, marginal to live on for retirement. In the past many people had pensions. However many of the people who had pensions from private employers have seen those pensions cut or dissolved as the companies went out of business or through bankruptcy, or in some cases just dropped the plans. Most people have private savings of 1 form or another. There are a couple of government sponsored private retirement saving plans such as 401k and IRA. If your employer now contributes to your retirement, it is typically by the 401k program. Government employees are the group that most commonly now have true pension plans. I don't know what that looks like at the federal level, but at the state and local level in many locations that is a looming fiscal disaster as bad as anything the federal government faces with medical costs. There are some programs to pre fund these obligations, but AFAIK the payments to these funds have all fallen well short of the need. So they will effectively be pay as you go. And I predict that many of them will not be paid to what the formula currently says they should be paid to.

 

[Rashiminos]

We lost 247,000 jobs and unemployment lowered?

Do you care to dig for the reason why Integral? I assume the reason will be something along the lines of "You have been unemployed for so long we won't count you anymore."

Funny you should mention that:

Here's someone's not-so-expert opinion on that: http://urbansurvival.com/week.htm

OK, so how do you lose more than a quarter million jobs and not see unemployment go up?



Welcome to jiggering numbers 101.

*

First thing you do is change the divisor. Assert that the labor force shrank by 422,000 people during the month.
*

Reduce the assumed unemployed by not counting people who have run out of benefits. In other words, since the number of people who have run out of benefits has increased, the number left to count as unemployed dropped 267,000.
*

But, wait! Employment was down 155-thousand... Right! So the only number we need to 'bury' is the delta from 267K to 155K, so all we need to do is make up 112,000 jobs.
*

Won't be able to hide all of them in the CES Birth/Death model, but who's going to question 43,000 jobs being statistically created in the summertime in the travel & leisure sector, right?

I suspect Integral's findings are closer to reality.

 

[PiMan]

Australia works the numbers by only counting those who have been looking for work in the past four weeks. If they have given up in looking for work, then they aren't unemployed.

That said, unemployment has genuinely not risen much here for a couple of months. For every full time job lost, a part time job has replaced it.

 

[Fugitive Sisyphus]

Is there a place to get accurate numbers of interest payments on the national debt?

According to wikipedia the number for the 2009-2010 fiscal year is $164 billion but that can't be right as it states that this is an 18% increase so according to wikipedia 18% more than 260 is 164(!).

 

[Integral]

Is there a place to get accurate numbers of interest payments on the national debt?

According to wikipedia the number for the 2009-2010 fiscal year is $164 billion but that can't be right as it states that this is an 18% increase so according to wikipedia 18% more than 260 is 164(!).

BEA, NIPA 3.2, line 29ish. here are the tables; scroll down to 3.2 and look for the line items for 'interest payments'. Then change the time frame from quarterly to annual. (under the most recent revision. Goes back to 1995.)

Also available through OMB here, table 3.1. Goes back to 1940.

The two disagree slightly in that BEA reports receipts of interest payments and outlays of interest payments separately, while OMB reports net interest payments.

(edit: you asked for 'accurate' numbers. I provided official figures, which are in no way guaranteed to be accurate. In addition to the two above cited, I'm sure Treasury also keeps records of interest payments.)

 

[civ_king]

In a boom time, when people remove themselves from the workforce they generally are starting a family or retiring, in times like now people remove themselves from the work force because they don't think they will find jobs (If I had been jobless for a year I would be discouraged too)