Economic Glimmers of Light 20 comments
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What does it mean when employment and unemployment both move in the same direction? It might be an error in one of the two pretty fuzzy datasets, or it could be, as Agnes says this morning, a real turning point. That’s certainly what the bond market seems to think.
My feeling is that it’s far too early to say that unemployment has stopped rising, and that clearly nobody believes employment has stopped falling. We’re moving to a world where a smaller workforce works a shorter workweek, and that bodes ill for any kind of strong sustainable growth unless and until we see a serious and improbable turnaround in the jobs situation.
All the same, on such a happy day it would be churlish not to take some joy from today’s figures. The most vertiginous part of the economic plunge is clearly over, and there’s some real hope for (modest and painful) economic recovery going forwards; there’s actually a very good chance that the next few GDP figures will be positive. That’s something to celebrate a little.
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We've hit the scree.
You don't often see "churlish" used nowadays. Nice try Mr. Salmon.
This officially starts the beginning of the recovery. Now everyone is wondering when the official start of the double-dip recession starts. The confidence among the intelligentsia didn't last even 1/2 a year. Not a good omen.
By the way, as I "googled" to check the usage of "churlish" (incorrectly used by Mr. Salmon), I got a pop-up ad for "Cash for Clunkers." Who says this is "Great Depression II?"
Actually the hours worked increased from 33.0 to 33.1.
Here's some interesting stats on our "entitlement" generation:
- $400 billion - Amount that will come out of annual U.S. consumption as boomers push the savings rate from 1% to 5%.
- 69% - Portion of boomers aged 54 to 63 who are financially unprepared for retirement.
- 47% - Boomers' share of national disposable income in 2005...they only contributed 7% of national savings.
- 78% - Boomers' share of GDP growth during the bubble years of 1995 to 2005.
Here's a great article about the Leaner Baby Boomer Economy (Business Week):
consequencesunintended...
People need to come to grips with the fact that economic growth is going to be well below the mean of the last 30 years...
On Aug 07 10:45 AM enigmaman wrote:
> Lets say this is a true green shoot, one that will be the turning
> point for this economy, OK. So we know the patient isn't going to
> die, thats a relief, but do we know what the patient will be like
> when it comes out of its comma? Most pundits indicate this market
> is currently priced at fair value, fair value based on the usual
> metrics, however most pundits claim this recession is not your garden
> variety recession, so how can one use the usual measurements to determine
> if this highly unusual recession is fairly valued or not?
Yet we are told, depending on who is advising, the market is fairly valued or slightly over valued, based on what metrics? Explain how this can be if the fundamentals going forward will look quite different (worse), they have used fundamental analysis based on usual recessions to calculate fundamentals going forward, but many also admit this is a highly unusual and very deep recession, so why apply the same analysis. None of this adds up but it doesn't seem to matter. Like everything you knew is no longer relevant, again we face the "Its different this time" justification. Its like before the housing bubble, when housing prices were going to the moon, underwriters threw out the old guidelines because they no longer applied, appraisals were Made as Requested, and secondary investors bought MBS without knowing what they were buying because it didnt matter, they always made money and then what happened. This seems eerily similar, but I guess its just my imagination
On Aug 07 11:24 AM Relative Leverage wrote:
> A "recovery" will be weak at best as the baby boomers start saving
> more and spending less...
>
> Here's some interesting stats on our "entitlement" generation:<br/>
>
> - $400 billion - Amount that will come out of annual U.S. consumption
> as boomers push the savings rate from 1% to 5%.
> - 69% - Portion of boomers aged 54 to 63 who are financially unprepared
> for retirement.
> - 47% - Boomers' share of national disposable income in 2005...they
> only contributed 7% of national savings.
> - 78% - Boomers' share of GDP growth during the bubble years of 1995
> to 2005.
>
> Here's a great article about the Leaner Baby Boomer Economy (Business
> Week):
>
> consequencesunintended...
>
>
> People need to come to grips with the fact that economic growth is
> going to be well below the mean of the last 30 years...
theburningplatform.com...
Explain to me how the employment to population ratio is the lowest in the country's HISTORY (59%), and unemployment is not a problem. Even after an enormous percentage of women are now in the workforce, when they weren't in previous generations.
Spit up the Kool Aid, folks.
On Aug 07 02:03 PM James Quinn wrote:
> The numbers are a fraud. Take a look.
>
> theburningplatform.com...
Indeed, regarding the August 7, 2009 Official “Unemployment Announcement” Shadowstats.com says:
“Underlying economic series, shy of the related seasonal distortions in new claims for unemployment and the ISM manufacturing index, are consistent with a monthly July jobs loss in excess of 600,000, and a further increase in the unemployment rate…
The July 2009 seasonally-adjusted U.3 unemployment rate showed a statistically-insignif... decrease, to 9.36% +/- 0.23% (95% confidence interval), from 9.51% in June. Unadjusted U.3 held at 9.7% in July. The broader June U.6 unemployment rate eased to an adjusted 16.3% (16.8% unadjusted), from 16.5% (16.8% unadjusted) in June.
During the Clinton Administration, "discouraged workers" — those who had given up looking for a job because there were no jobs to be had — were redefined so as to be counted only if they had been "discouraged" for less than a year. This time qualification defined away the long-term discouraged workers. Adding them back into the total unemployed, unemployment in line with common experience — as estimated by the SGS-Alternate Unemployment Measure — held at about 20.6% in July.”
Any which way 247K job losses is still a very big number, and this is after spending several Trillions and super huge green shoot propaganda for last many months. We need to gain at least 125K jobs just to stay still- to take care of new workers.
Per the top line of the job's report, of grave concern is the fact that the total workforce shrank by 422 thousand workers. Next consider that the total unemployed rose (albeit more slowly), this is nothing to cheer. In addition, note that "the marginally attached" (discouraged and prospective employees) increased in number, and professial services cut back, too.
With 70% of the economy reliant on consumer spending, for the near to mid term, the fundamentals must be weighed as weakness, not strength.
Even Nouriel Roubini is praising policy makers for their actions. Roubini recently urged that Mr. Bernanke be reappointed as Federal Reserve chairman, saying he helped avert a “near depression last fall.
Earlier this year, Bernanke, Obama, Geithner and Summers understood that the riight-wing calls to 'Let the banks go bankrupt' and the left-wing calls to 'Nationalize the Banks' were both insane. The same can be said last year about Bush, Paulson and Bernanke.
Currently economies in countries that enacted large programs (United States, China and Australia) are faring better than those that enacted smaller programs (France, Italy and India).
In the next year or more the White House and Fed will face the complicated problem on how to withdraw from the enormous government intervention. The President will have to sell Congress on an agenda of regulation and contral that will insulate economy away from boom-and-bust cycles.
Todays markets appear to accepting the conclusion that a recovery is underway. I don't know how long this will last, but right now, the green shoots are growing rapidly. It is even being noticed by many small businesss owners. In some cases like in banking we don't have green shoots, but instead we have giant redwood trees.
First, to James Quinn: thanks for the link and stats. Let me add to your analysis, the thought that one of the larger industry segments that is hiring is government, and government workers cannot be thought of as productive in the same manner as private sector workers, inasmuch as the former consumes taxes while only the latter produces tax revenue. It would be interesting to drill down into the underlying data with this in mind.
Secondly: our current administration and monetarists clearly believe that the crisis is one of perception; that if they can only convince the foolish public to close our eyes and believe we're back in Kansas that we will magically return to an earlier time of prosperity. They are partly right - our economy has a significant psychological element - but they have misjudged what is happening. The boomer generation has been shocked, stunned, and rudely awakened to the reality of retirement years fast approaching, with nothing much to show for it but tattered 401Ks, indebtedness and a pile of cheap electronics. They are fast de-leveraging. They "get it", finally. Since the boomers contribute so much to the economy by simple virtue of their numbers, life in Kansas, and from coast to coast, will never be the same. This is a huge factor, truly world-changing. The stimulus has not stimulated much demand among the boomers, nor will any such stimulus do so. You cannot treat post-traumatic stress disorder that way. America will not see the consumer excesses of recent decades spring up again in this generation, and it's time to roll up our sleeves and begin rebuilding value with wood and metal rather than monetarist gamesmanship. That is, if the increasing tax burdens don't bury us first.