Financial News

[Balta1701]

Not seasonally adjusted, we have lost 3 million jobs the past two months. The 1.2 number I provided is not seasonally adjusted for January.

There is literally nothing to be gained when evaluating the status of this year's job market by looking at the non-seasonally-adjusted number and then saying nothing about what you're expecting the seasonal adjustments did wrong.

[NorthSideSox72]

So, looks like (with both graphs), we're now back to about where we were when Obama was inaugurated. If he can push those lines notably below that point, he's going to be awfully tough to beat in November.

 

[StrangeSox]

Not seasonally adjusted, we have lost 3 million jobs the past two months. The 1.2 number I provided is not seasonally adjusted for January.

 

This is the adjustment that BLS makes to the labor market for the 2010 census, which they do entirely in January 2012 and don't revise 2010 or 2011. There were not actually 1.2 million jobs lost.

 

"Effective with data for January 2012, updated population estimates which reflect the results of Census2010 have been used in the household survey. Population estimates for the household survey are developed by the U.S. Census Bureau. Each year, the Census Bureau updates the estimates to reflect new information and assumptions about the growth of the population during the decade. The change in population reflected in the new estimates results from the introduction of the Census 2010 count as the new population base, adjustments for net international migration, updated vital statistics and other information, and some methodological changes in the estimation process. The vast majority of the population change, however, is due to the change in base population from Census 2000 to Census 2010.

 

In accordance with usual practice, BLS will not revise the official household survey estimates for December 2011 and earlier months. To show the impact of the population adjustment, however, differences in selected December 2011 labor force series based on the old and new population estimates are shown in table B.

 

The adjustment increased the estimated size of the civilian noninstitutional population in December by 1,510,000, the civilian labor force by 258,000, employment by 216,000, unemployment by 42,000, and persons not in the labor force by 1,252,000. Although the total unemployment rate was unaffected, the labor force participation rate and the employment-population ratio were each reduced by 0.3 percentage point. This was because the population increase was primarily among persons 55 and older and, to a lesser degree, persons 16 to 24 years of age. Both these age groups have lower levels of labor force participation than the general population."

 

[StrangeSox]

A more strongly-worded reply:

 

http://www.ftportfolios.com/Commentary/Eco...nomic-ignorance

 

We have pushed back hard in recent years against the bearish conventional wisdom. Many analysts have argued that the US economy is on the verge of collapse, a double-dip or some other kind of calamity, like hyper-inflation.

 

We have disagreed. In most of these debates we are crossing swords with articulate analysts who are knowledgeable about economics, mathematics and data. They have the best of intentions.

 

However, there is a group of influential people (meaning that they get lots of hits on their blogs or websites) who may be articulate and have an ax to grind, but at the same time know little about economics, mathematics and data. A classic example is the Drudge Report link today to a headline and blog post by Tyler Durden that says, “Record, 1.2 million people fall out of labor force in one month…”

 

Nothing about this headline is true, and it starts with the byline. Tyler Durden is a made up name, an alias. Tyler was a character in the movie “Fight Club,” played by Brad Pitt. The character is a figment of the protagonist’s imagination, an alter ego. Maybe Tyler is Drudge himself? Second of all, the labor force actually increased in January from its December level. To say anything else is to ignore the truth.

 

The reason Tyler and Drudge are confused about this is because they are looking at a statistic that measures the number of people of working age who are “not in the labor force.” This number did jump by 1.2 million in January. However, any analyst should look deeper into the data before making outrageous claims. After all, the jobs report was very good and the labor market has been getting better for almost two years. A huge and massive drop in the labor force would be weird.

It turns out that something weird did happen, just not what Tyler Durden reports.

 

Every once in a while the Bureau of Labor Statistics (BLS) makes catch-up adjustments to its underlying data. Often, but not always, this happens in January. This time the BLS added 1.7 million people to its estimate of the working age population. To get a sense of how huge this is, the average monthly increase in population estimates over the past two years (2010-11), was 159,000. In other words, the January population estimate adjustment was normal; it was catch-up for the past.

 

But this change has add-on effects. When the BLS estimates a new level of the population, it then estimates how many of those people are in the labor force. For the month of January, the BLS said that of the 1.7 million new people it counted, 500,000 were in the labor force and 1.2 million were not. To say, as Drudge and Tyler Durden did, that the labor force fell by 1.2 million is a basic and frightening misuse of statistics. It’s simply not true and it is leading many people astray.

 

For the record, the employment-population ratio was 58.5% in January, the same as it was in December and November and up from its level of 58.2% in September. In other words, even though the government estimated a big jump in the working-age population, the share of the population that has a job is actually flat to higher.

 

Private sector jobs have increased for 23 consecutive months, total cash earnings are up 4.6% in the past year and previous months’ data are being revised upwardly, not downwardly. The bottom-line is that the economy is getting better, even as politically motivated Internet traffic is getting so desperate that it has to resort to a misuse of statistics to make its point.

Edited February 6, 2012 by StrangeSox

[Balta1701]

Different topic, long but good read from NY Mag arguing that Dodd-Frank has already been surprisingly successful in breaking the Wall Street culture that drove the bubble cycle.

[NorthSideSox72]

UE weekly claims number falls yet again, to 358,000, lowest since April 2008. 4 week moving average falls to 366,250, also the lowest since April '08.

 

Here is an interesting scenario to consider. Let's say the economy continues to heal at a good pace during the next 6-8 months, hiring continues to do well, etc. One thing this will likely cause is for more of the people who have "dropped out" of the workforce to start looking for work again. If enough of them do that in a short period, the UE rates may actually stay the same or even go up again, even though the ecomony is actually more sound than it was. That may make it difficult on Obama, because that UE6 number is what the public is fed all the time.

 

[Balta1701]

UE weekly claims number falls yet again, to 358,000, lowest since April 2008. 4 week moving average falls to 366,250, also the lowest since April '08.

 

Here is an interesting scenario to consider. Let's say the economy continues to heal at a good pace during the next 6-8 months, hiring continues to do well, etc. One thing this will likely cause is for more of the people who have "dropped out" of the workforce to start looking for work again. If enough of them do that in a short period, the UE rates may actually stay the same or even go up again, even though the ecomony is actually more sound than it was. That may make it difficult on Obama, because that UE6 number is what the public is fed all the time.

I would think that, but when you look at employment to population statistics, we never even got close to the 2000 peak during the housing-boom expansion. What you propose may happen at some level, but I think that there's a legitimate and ongoing dropoff in employment to population, driven partly by the loss of good jobs and partly by the fact that these last 2 downturns happened as the baby boom generation was approaching retirement.

[Balta1701]

Rep. Bauchus was the non-leadership guy who 60 minutes actually made a pretty strong case against, in their insider trading feature.

Rep. Spencer Bachus (R-Ala.), who holds one of the most influential positions in the House, has been a frequent trader on Capitol Hill, buying stock options while overseeing the nation’s banking and financial services industries.

 

The Office of Congressional Ethics, an independent investigative agency, opened its probe late last year after focusing on numerous suspicious trades on Bachus’s annual financial disclosure forms, the individuals said. OCE investigators have notified Bachus that he is under investigation and that they have found probable cause to believe insider-trading violations have occurred.

[Balta1701]

The House GOP has apparently raised a white flag and has expressed a willingness to pass a 10 month extension of the payroll tax cut in a clean bill.

[Balta1701]

On average, when a country is playing a world cup soccer game, stock trading volume in that country falls ~45%.

[Harry Chappas]

On average, when a country is playing a world cup soccer game, stock trading volume in that country falls ~45%.

 

That'll explain the poor economic situation in regard to the EU, pay attention to the important s***. Wanna release bad economic news wait for the day before you have a WC match....does this cover qualifiers?

[Balta1701]

Actual policy matter...Portugal doing pretty much what one expects under these circumstances.

Unlike Greece, Portugal is a debtor nation that has done everything that the European Union and the International Monetary Fund have asked it to, in exchange for the 78 billion euro (about $103 billion) bailout Lisbon received last May.

 

And yet, by the broadest measure of a country’s ability to repay its debts, Portugal is going deeper into the hole.

 

The ratio of Portugal’s debt to its overall economy, or gross domestic product, was 107 percent when it received the bailout. But the ratio has grown since then, and by next year is expected to reach 118 percent.

 

That’s not necessarily because Portugal’s overall debt is growing, but because its economy is shrinking. And economists say the same vicious circle could be taking hold elsewhere in Europe.

 

Two other closely watched countries on the debt list, Spain and Italy, also have rising debt-to-G.D.P. ratios — even though they, like Portugal, have adopted the budget-slashing and tax-raising measures that the European officials and the I.M.F. continue to prescribe.

 

And on Tuesday, new figures showed that the Greek economy shrank even more than expected last year, as Greece struggles under ever heavier austerity demands by its European lenders.

 

Without growth, reducing debt levels becomes nearly impossible. It is akin to trying to pay down a large credit card balance after taking a pay cut. You can slash expenses, but with lower earnings it is hard to set aside money to pay off debt.

 

Vitor Gaspar, the Portuguese finance minister who came to power as part of a new government last summer, is highly regarded by European economic and finance officials. He has reduced the government’s budget deficit by more than one-third so far, through tough measures that include cuts in spending and wages, pension rollbacks and tax increases.

 

But many economists say those moves are also a reason Portugal’s economy shrank by 1.5 percent in 2011 and is expected to contract by 3 percent this year.

 

“Portugal’s debt is just not sustainable,” said David Bencek, an analyst at the Kiel Institute for the World Economy, a research organization in Germany. “The real economy does not have the structure to grow in the future and thus will not be able to pay back its debt in the long run.”

[StrangeSox]

Expansionary Austerity!

[NorthSideSox72]

Expansionary Austerity!

What is being ignored here is that Portugal's path was going that way in the short term regardless. It is not as if the ecomony there was growing, then was stopped by this action.

 

[StrangeSox]

Is austerity making their situation better or worse, their debts more manageable or less?

[NorthSideSox72]

Is austerity making their situation better or worse, their debts more manageable or less?

Short run? Worse. Long run? Better. That is the whole purpose of these moves.

 

[StrangeSox]

Evidence that this is true in the long run?

[NorthSideSox72]

Evidence that this is true in the long run?

Not having crushing debt in the future?

 

[StrangeSox]

But if severe austerity measures keep knocking the economy down, debt won't get any better.

[NorthSideSox72]

But if severe austerity measures keep knocking the economy down, debt won't get any better.

Evidence that short term austerity disallows long term growth?

 

[StrangeSox]

Evidence that short term austerity disallows long term growth?

 

It doesn't, necessarily. But there doesn't seem to be any convincing evidence that severe austerity measures actually result in better outcomes down the road.

 

We could cut our own spending to 10% GDP. Sure, eventually the economy would recover and we'd have less debt, but that first 50 years or so would be a real b****.

[Balta1701]

Not having crushing debt in the future?

But their debt has gotten more crushing?

[Balta1701]

What is being ignored here is that Portugal's path was going that way in the short term regardless. It is not as if the ecomony there was growing, then was stopped by this action.

Why do you say that their economy was going that way regardless? Much like the rest of the continent, they had a huge slump in 2008-2009, but they had basically moved back to slow growth in 2010, just like much of the continent...then they began substantial budget cuts. And just like in the US, once a country has contracted that much, it ought to be quite hard to make it start contracting again, because there shouldn't be another shock to be delivered.

 

 

Furthermore, they also had their debt under control, at 65% of GDP, before 2008.

[NorthSideSox72]

Why do you say that their economy was going that way regardless? Much like the rest of the continent, they had a huge slump in 2008-2009, but they had basically moved back to slow growth in 2010, just like much of the continent...then they began substantial budget cuts. And just like in the US, once a country has contracted that much, it ought to be quite hard to make it start contracting again, because there shouldn't be another shock to be delivered.

 

 

Furthermore, they also had their debt under control, at 65% of GDP, before 2008.

Before 2008. You see, it was "under control" then, but the way the economy was built, it was too high a level for being in a good economy. If it was 65% in a bad economy, that would have been fine. Portugal is not the United States.

 

[Balta1701]

Before 2008. You see, it was "under control" then, but the way the economy was built, it was too high a level for being in a good economy. If it was 65% in a bad economy, that would have been fine. Portugal is not the United States.

How exactly are you defining a "Good economy"?