Secret Information from the Bureau of Labor Statistics [View article]
John -- You are completely correct. I am trying to help people see that there is plenty of job creation at the worst of times. I am also attempting to make clear that it is still a time of distress for many millions of workers. Both the magnitude and duration of unemployment are at high levels.
I have written many employment articles, and I cannot assume that readers are familiar with all. I also cannot cover every topic in each article.
I needed to be clearer in this one, but I am delighted that some readers are now focused on labor force dynamics.
Thanks for your helpful comment.
Jeff
On Aug 13 11:57 PM John Lounsbury wrote:
> Jeff - - - > > I think I know exactly why you wrote this article. I believe you > are attempting to give some insight to people who have been commenting > things like "there can't be 2 million jobs created" if the job losses > are 300,000. I think most of the commenters did not recognize your > objective. Of course, if I'm attributing the wrong motive, feel > free to slam me.
When I write about a principle of economics or government, it is policy neutral. Professors have opinions, but they also teach their courses. The good ones make a careful distinction. I always did.
I could have cited many conservatives making a similar point about the need for stimulus. I chose this example because of the nice explanation of a key point: People take what they know -- individual behavior -- and extrapolate to organizations, government and economics.
Any professor knows that this is the first hurdle with new students. Unfortunately, most market pundits either did not take or forgot the courses!
Thanks for making a point that deserved a response. It is very helpful in sharpening up my message, and I really appreciate it.
Jeff
On Aug 12 01:12 PM CautiousInvestor wrote:
> The Return of Big Government: Policy Advice for President Obama > > > > In the current global financial crisis, economists and policymakers > have reembraced Big Government as a means of preventing the reoccurrence > of a debt-deflation depression. The danger, however, is that policy > may not downsize finance and replace money manager capitalism. According > to Senior Scholar L. Randall Wray, we need a permanently larger fiscal > presence, with more public services. His advice to President Obama > is to discard all of former Treasury Secretary Paulson’s actions. > Wray believes that we can afford any necessary spending and bailouts, > and that these actions will not burden our grandchildren. > ----------------------... > > Pasted above is synopsis of a policy paper written by Wray who is > obviously a fan of government intervention and active fiscal management > of our economy. > > The professor argues that there is an economic identity between consumption, > international trade and governement spending. > > "At the aggregate level, the dollar spending of all three sectors > combined must equal the income received by the three sectors combined. > Aggregate spending equals aggregate income. But there is no reason > why any one sector must spend an amount exactly equal to its income. > One sector can run a surplus (spend less than its income) so long > as another runs a deficit (spends more than its income)." > > It's under this identity the good professor concludes that deficit > spending is tantamount to consumer spending since, if trade is in > balance, consumer savings must be transmuted into deficit spending > for the identity to be satisfied. The problem with this silly model > is that spending, more often than not, is greater than income and > is augmented by debt. The model, very conveniently, excludes investment. > > > If we include investment in the equation and maintain the stipulation > that spending must equal income, then......assuming trade is a wash........consumer > savings must either go into investment or fund deficit spending. > And this is precisely the case against deficit spending: it crows > out investment spending which establishes the foundation for fuuture > growth.
I understand where you are coming from. The stimulus bill was a compromise. By definition, no one really likes it.
Policies can stimulate the economy, even when we do not like the actual spending decision.
I am trying to write for investors. The objective is to profit regardless of who is in power. My investors made money under Bush and will do so under Obama.
I strongly encourage people to put politics aside when making investment decisions. Just an idea....
Thanks for taking the time to state a viewpoint that is widely shared!
Jeff
On Aug 12 09:00 AM enigmaman wrote:
> The point of any stimulus package would be to stimulate the economy, > this stimulus was designed alone ideological lines, more socially > responsive which helps ease ones burden but does very little if anything > to stimulate business and or job creation. When the President recently > said, "the stimulus has worked" people look around and simply dont > see it and then logically conclude spending the rest is no longer > required because they are afraid of the huge deficit, which both > parties have indicated is untenable. When Obama said " We are broke" > common sense would then tell you " when you find yourself in a hole > you stop digging", but this would work counter the theory you discuss. > When Cheney said " deficits dont matter" he was demagogued by the > left, but based on your article his statement would appear to be > true. Seems to me that the problem we have as far as understanding > what is going on is that neither party is willing to " Give it to > us straight" they are to consumed by the political aspects as it > relates to their respective parties. As a result we will continue > to have more of the same volatility and loss of individual wealth > which BTW bodes well for the system which secures its power from > our fears and weaknesses. Its as clear as mud because thats the way > both sides want it to be
The 2001 Recession Is a Poor Example [View article]
Sorry for the typo and thanks for catching. I hope others got the meaning. I have no opinion about current defense stock values. The point was to illustrate how the market reacted to uncertainty prior to the second Gulf War.
Thanks again!
Jeff
On Jul 22 12:07 PM Valley Boy wrote:
> "After 9/11 it was clear that the US was going to engage in war with > Iran." Do you mean Iraq? Or do you mean Iran? And is it still > clear? > Are defense stocks a good value now compared to 2001?
New York Fed Model: No Chance of Recession in 2010 [View article]
This is interesting. The author cites actual data on a topic of interest and explains it in an objective fashion.
It is another piece of an economic puzzle that we all hope to understand.
There may be many readers -- I hope so -- who accepted the information and added it to their own personal analysis.
Meanwhile, the Seeking Alpha Commentariat condemns the conclusion -- pretty much without rationale except for disagreement -- and the readers who bother to rate the comments give them all "thumbs up."
This is the definition of confirmation bias. Mark provides a good source of information, especially if you want some balance from Zero, and the wannabees on SA.
Neil -- This is another good question. The answer is that the cyclicality we expect is dealt with in "step one" which needs a better name!
The Birth/Death adjustment is only the residual. It is stable over time, even through business cycles. That will be demonstrated in Part 3. It is the main point. All of the criticism is about a residual term, with no one looking at the part of the process that addresses 80% of the jobs from new businesses.
I appreciate your patience, since this is difficult to do in a single piece in my spare time. I'll be interested in your reaction after the next installment.
Bureau of Labor Statistics Response to Birth / Death Adjustment Critics [View article]
Neil -- Thanks for taking another look.
First, I am not a journalist. Among other things I taught research methods at a top university and my undergrad courses also covered critical thinking, your special interest. I have discussed these topics repeatedly on my blog.
So why would you assume that I did not investigate this research in some detail. If you check out my past work, you might make a guess at the hundreds of hours I have spent on this subject. It is not easy, and I have the advantage of a lot of grad work in econ.
So when I say the paper is good work, it is not just a superficial conclusion. I have spoken with several BLS specialists, and asked plenty of questions. I have reviewed many challenges.
The paper reported here was based upon model development extending back into the 90's. These are real-time results for the entire life of the model. What more could they do? They reported what happened.
Why don't you ask some of your questions to the many critics who attack the BLS work? Check out their data. Just provide a little "equal time :) "
It is true that they improve the ARIMA model each year with data from the prior five years. It is not true that they "cherry picked" a time when their method worked.
I hope you will read Parts 2 and 3 of this series for more information and data.
Bureau of Labor Statistics Response to Birth / Death Adjustment Critics [View article]
Neil -- This is a simple statement of the facts. It compares the forecasts to the actual known results. The backup is the actual state unemployment count. As I noted, companies do not lie when they have to pay premiums.
The state data is a good source for any of us who want to be objective on the subject.
Meanwhile, I am curious. Is there any actual data that would convince you? I try to learn from every comment, but it helps if people try to be constructive. I am writing more in this series, and I promise to do my best in covering all questions.
Serious Problems with the BLS Unemployment Numbers [View article]
Dirk -- We all want the best available data. To be fair-minded, why not take a look at how the BLS responds to these criticisms?
Since we have actual data from state employment offices (with about a nine-month delay) we can now go back and evaluate the critics of the birth/death adjustment. oldprof.typepad.com/a_...
Put another way, the birth/death adjustment has improved the actual job count in every quarter since it has been implemented, including recessionary times.
The real question is not whether this is an effective method, but why it works so well. I am working on an article on this theme.
When It Comes to Politics, Successful Investors Should Be Agnostic [View article]
There are several good comments here, suggesting to me that I need more clarity on this theme.
I certainly agree that we should all act as citizens to get the type of government we want. I also like to see free market incentives in action. I have written about the difficulty of combining public and private purposes in institutions like Fannie and Freddie.
What I encourage is to separate the role as citizen from the role of investor. As investors, we should try to succeed no matter who is in office. Furthermore, I always want to see what is coming from Congress. In this case, I wanted to know what Barney Frank had in mind for executive compensation. Why? Because his opinions are a good guide to what will happen.
I cannot control that outcome, but I can draw conclusions about whether it affects my investments.
A CNBC interview of Rep. Barney Frank turns into a train wreck after Frank and CNBC's Mark Haines can't stop talking long enough to listen. Are these two related?[View news story]
I try to put aside my personal opinions about Frank or any other guest. I am just trying to get the best possible information about what is likely to emerge from Congress. This is in sharp contrast to those who start with an opinion about the source. More here:
The State and Local Government Crisis Looms Larger [View article]
The key points from the Don Boyd paper are the following:
1) Stimulus has not yet hit 2) The effect is quite significant, but temporary 3) More action might be required
In an environment with so much economic uncertainty, it is well to shorten our time horizons a bit.
There are some who think the stimulus was too little, and some who think it was unnecessary. If something seems to be helping in the near term, there is a large group assuring us that eventually it will be a disaster.
You misquoted me. I specifically said that I was going back to the last recession so that we could look at actual data. The data cited are from 2001, not this year.
We do not yet have state employment data for the last two quarters. When we finally get the data I think we will see job losses running at 30 million/year, even larger than you suggest, and new jobs created running at 24 million/year.
I am curious about why you think state unemployment records are false.
Secret Information from the Bureau of Labor Statistics [View article]
I have written many employment articles, and I cannot assume that readers are familiar with all. I also cannot cover every topic in each article.
I needed to be clearer in this one, but I am delighted that some readers are now focused on labor force dynamics.
Thanks for your helpful comment.
Jeff
On Aug 13 11:57 PM John Lounsbury wrote:
> Jeff - - -
>
> I think I know exactly why you wrote this article. I believe you
> are attempting to give some insight to people who have been commenting
> things like "there can't be 2 million jobs created" if the job losses
> are 300,000. I think most of the commenters did not recognize your
> objective. Of course, if I'm attributing the wrong motive, feel
> free to slam me.
The U.S.'s Deficit Dilemma [View article]
When I write about a principle of economics or government, it is policy neutral. Professors have opinions, but they also teach their courses. The good ones make a careful distinction. I always did.
I could have cited many conservatives making a similar point about the need for stimulus. I chose this example because of the nice explanation of a key point: People take what they know -- individual behavior -- and extrapolate to organizations, government and economics.
Any professor knows that this is the first hurdle with new students. Unfortunately, most market pundits either did not take or forgot the courses!
Thanks for making a point that deserved a response. It is very helpful in sharpening up my message, and I really appreciate it.
Jeff
On Aug 12 01:12 PM CautiousInvestor wrote:
> The Return of Big Government: Policy Advice for President Obama
>
>
>
> In the current global financial crisis, economists and policymakers
> have reembraced Big Government as a means of preventing the reoccurrence
> of a debt-deflation depression. The danger, however, is that policy
> may not downsize finance and replace money manager capitalism. According
> to Senior Scholar L. Randall Wray, we need a permanently larger fiscal
> presence, with more public services. His advice to President Obama
> is to discard all of former Treasury Secretary Paulson’s actions.
> Wray believes that we can afford any necessary spending and bailouts,
> and that these actions will not burden our grandchildren.
> ----------------------...
>
> Pasted above is synopsis of a policy paper written by Wray who is
> obviously a fan of government intervention and active fiscal management
> of our economy.
>
> The professor argues that there is an economic identity between consumption,
> international trade and governement spending.
>
> "At the aggregate level, the dollar spending of all three sectors
> combined must equal the income received by the three sectors combined.
> Aggregate spending equals aggregate income. But there is no reason
> why any one sector must spend an amount exactly equal to its income.
> One sector can run a surplus (spend less than its income) so long
> as another runs a deficit (spends more than its income)."
>
> It's under this identity the good professor concludes that deficit
> spending is tantamount to consumer spending since, if trade is in
> balance, consumer savings must be transmuted into deficit spending
> for the identity to be satisfied. The problem with this silly model
> is that spending, more often than not, is greater than income and
> is augmented by debt. The model, very conveniently, excludes investment.
>
>
> If we include investment in the equation and maintain the stipulation
> that spending must equal income, then......assuming trade is a wash........consumer
> savings must either go into investment or fund deficit spending.
> And this is precisely the case against deficit spending: it crows
> out investment spending which establishes the foundation for fuuture
> growth.
The U.S.'s Deficit Dilemma [View article]
Policies can stimulate the economy, even when we do not like the actual spending decision.
I am trying to write for investors. The objective is to profit regardless of who is in power. My investors made money under Bush and will do so under Obama.
I strongly encourage people to put politics aside when making investment decisions. Just an idea....
Thanks for taking the time to state a viewpoint that is widely shared!
Jeff
On Aug 12 09:00 AM enigmaman wrote:
> The point of any stimulus package would be to stimulate the economy,
> this stimulus was designed alone ideological lines, more socially
> responsive which helps ease ones burden but does very little if anything
> to stimulate business and or job creation. When the President recently
> said, "the stimulus has worked" people look around and simply dont
> see it and then logically conclude spending the rest is no longer
> required because they are afraid of the huge deficit, which both
> parties have indicated is untenable. When Obama said " We are broke"
> common sense would then tell you " when you find yourself in a hole
> you stop digging", but this would work counter the theory you discuss.
> When Cheney said " deficits dont matter" he was demagogued by the
> left, but based on your article his statement would appear to be
> true. Seems to me that the problem we have as far as understanding
> what is going on is that neither party is willing to " Give it to
> us straight" they are to consumed by the political aspects as it
> relates to their respective parties. As a result we will continue
> to have more of the same volatility and loss of individual wealth
> which BTW bodes well for the system which secures its power from
> our fears and weaknesses. Its as clear as mud because thats the way
> both sides want it to be
The 2001 Recession Is a Poor Example [View article]
Thanks again!
Jeff
On Jul 22 12:07 PM Valley Boy wrote:
> "After 9/11 it was clear that the US was going to engage in war with
> Iran." Do you mean Iraq? Or do you mean Iran? And is it still
> clear?
> Are defense stocks a good value now compared to 2001?
New York Fed Model: No Chance of Recession in 2010 [View article]
It is another piece of an economic puzzle that we all hope to understand.
There may be many readers -- I hope so -- who accepted the information and added it to their own personal analysis.
Meanwhile, the Seeking Alpha Commentariat condemns the conclusion -- pretty much without rationale except for disagreement -- and the readers who bother to rate the comments give them all "thumbs up."
This is the definition of confirmation bias. Mark provides a good source of information, especially if you want some balance from Zero, and the wannabees on SA.
Stocks Are No Longer Cheap [View article]
Here's a thought. Interest rates matter. The media P/E ratios include many times of much higher interest rates. Asset allocation is a comparison.
Let's suppose interest rates were the 70's era 14%. We would all choose bonds over stocks at current earnings forecasts.
With the ten-year at 3.5% or so -- well -- it makes a difference.
Economics and Intuition [View article]
The Birth/Death adjustment is only the residual. It is stable over time, even through business cycles. That will be demonstrated in Part 3. It is the main point. All of the criticism is about a residual term, with no one looking at the part of the process that addresses 80% of the jobs from new businesses.
I appreciate your patience, since this is difficult to do in a single piece in my spare time. I'll be interested in your reaction after the next installment.
Thanks again -
Jeff
Bureau of Labor Statistics Response to Birth / Death Adjustment Critics [View article]
First, I am not a journalist. Among other things I taught research methods at a top university and my undergrad courses also covered critical thinking, your special interest. I have discussed these topics repeatedly on my blog.
So why would you assume that I did not investigate this research in some detail. If you check out my past work, you might make a guess at the hundreds of hours I have spent on this subject. It is not easy, and I have the advantage of a lot of grad work in econ.
So when I say the paper is good work, it is not just a superficial conclusion. I have spoken with several BLS specialists, and asked plenty of questions. I have reviewed many challenges.
The paper reported here was based upon model development extending back into the 90's. These are real-time results for the entire life of the model. What more could they do? They reported what happened.
Why don't you ask some of your questions to the many critics who attack the BLS work? Check out their data. Just provide a little "equal time :) "
It is true that they improve the ARIMA model each year with data from the prior five years. It is not true that they "cherry picked" a time when their method worked.
I hope you will read Parts 2 and 3 of this series for more information and data.
And thanks again for following up.
Jeff
Bureau of Labor Statistics Response to Birth / Death Adjustment Critics [View article]
The state data is a good source for any of us who want to be objective on the subject.
Meanwhile, I am curious. Is there any actual data that would convince you? I try to learn from every comment, but it helps if people try to be constructive. I am writing more in this series, and I promise to do my best in covering all questions.
Thanks,
Jeff
Serious Problems with the BLS Unemployment Numbers [View article]
Since we have actual data from state employment offices (with about a nine-month delay) we can now go back and evaluate the critics of the birth/death adjustment. oldprof.typepad.com/a_...
Put another way, the birth/death adjustment has improved the actual job count in every quarter since it has been implemented, including recessionary times.
The real question is not whether this is an effective method, but why it works so well. I am working on an article on this theme.
Seeking Alpha Ranked as a Top 10 Blog Platform [View instapost]
The fact that we trail PerezHilton says a great deal about the audience for information.....
When It Comes to Politics, Successful Investors Should Be Agnostic [View article]
I certainly agree that we should all act as citizens to get the type of government we want. I also like to see free market incentives in action. I have written about the difficulty of combining public and private purposes in institutions like Fannie and Freddie.
What I encourage is to separate the role as citizen from the role of investor. As investors, we should try to succeed no matter who is in office. Furthermore, I always want to see what is coming from Congress. In this case, I wanted to know what Barney Frank had in mind for executive compensation. Why? Because his opinions are a good guide to what will happen.
I cannot control that outcome, but I can draw conclusions about whether it affects my investments.
Thanks again for some very helpful comments.
A CNBC interview of Rep. Barney Frank turns into a train wreck after Frank and CNBC's Mark Haines can't stop talking long enough to listen. Are these two related? [View news story]
oldprof.typepad.com/a_...
The State and Local Government Crisis Looms Larger [View article]
1) Stimulus has not yet hit
2) The effect is quite significant, but temporary
3) More action might be required
In an environment with so much economic uncertainty, it is well to shorten our time horizons a bit.
There are some who think the stimulus was too little, and some who think it was unnecessary. If something seems to be helping in the near term, there is a large group assuring us that eventually it will be a disaster.
In practice, policy makers adjust to events.
U.S. Jobs Propaganda Gets More Desperate [View article]
You misquoted me. I specifically said that I was going back to the last recession so that we could look at actual data. The data cited are from 2001, not this year.
We do not yet have state employment data for the last two quarters. When we finally get the data I think we will see job losses running at 30 million/year, even larger than you suggest, and new jobs created running at 24 million/year.
I am curious about why you think state unemployment records are false.