Saturday, June 06, 2009
But This ISN'T an SNL Skit
But hey, spin is in. The White House is defending itself against criticisms over its earlier economic pronouncements with spin.
Republicans noted that a report by the Obama transition team in early January said that without a large stimulus plan, unemployment would go above 9%. It is now above that level, despite passage of the stimulus plan, though less than 5% of funds have been spent.Spin:
Christina Romer, chairman of the White House Council of Economic Advisers, countered that she saw some positive developments in the numbers. The Labor Department reported Friday that job losses slowed to 345,000 -- the first time in six months that monthly payroll losses have been less than a half-million. And for the second month in a row, the labor force actually grew. That helped drive the unemployment rate up, but it also suggested more people are feeling positive enough about the economy to look for work.Fair enough, except this response is flatly contradicted the household survey's much higher number of unemployed workers:
Among the unemployed, the number of job losers and persons who completed temporary jobs rose by 732,000 in May to 9.5 million.and by the steep rise in discouraged workers in recent months:
What's bad about this is that Romer should have discussed the change in trend for temporary workers, which is a genuinely positive indicator. I did point that out.
So not only do we have spin, but we have incompetent spin.
The explanation for more people searching for work is that people who weren't working are desperate enough to come back into the marketplace. Usually these are older women forced back in as kids or husbands lose their jobs and can't get new ones. Eventually, the number of discouraged workers will fall and the discouraged workers cohort will come back into the marketplace. When jobs appear. Not before then.
My unhappiness with the "stimulus" bill wasn't political at all. It was because because less than a fourth of the stimulus even hit inside the government's expected recessionary cycle, and most of that hit right at the end of the recessionary cycle. The majority of it is due to be spent at a time when the government projected a healthily growing economy.
This meant that either the government was lying about the duration it expected for this recession, or that it was using the recession as a pretext to pursue its own goals, or that it was just incompetent. Your guess is as good as mine. My guess is that Obama's team looked at the average duration of US recessions and told him that this thing was almost over, which explained why the administration claimed stimulus bill was so urgently needed that Congress wasn't even allowed to read the darned thing before voting on it. In other words, incompetence.
I told you the darned report was depressing. I found it so darned depressing that I didn't even want to quote the worst parts, which have been duly included above. The number of temporary job losers should have been inflated by the effects of the census jobs' completion, so hopefully it is not as bad as it looks. But it is unequivocally BAD.
Yesterday I was thinking to myself, "Hey, it's Friday, we could all use a break, and I don't want anyone to blow their brains out because they are reading my blog." But on the other hand, real life is not an SNL skit, and when the government is spewing such nonsense it should be exposed. They ought to at least feel the need to lie convincingly.
So here's the last bit of bad employment news, which I hinted at in yesterday's May employment post, but did not explain. The outlying figure was the establishment survey. Not only did it report job losses of only 345 jobs, but the figures for the prior months were revised up. Could this have anything at all to do with a B/D adjustment which added 319 thousand jobs in May? Hmm, possibly it could.
If you are wondering why this bright and chipper adjustment occurred, it is not due to a government conspiracy. Instead, it is due to the methodology for the B/D survey, which depends on the Business Employment Dynamics Survey, which is always more than half a year behind. Thus the adjustments for the current period are derived from employment data from last year, before the steep decline in the economy began. And not only that, last year GDP for the second and third quarters was substantially boosted by a very large stimulus bill which was in fact dumped immediately into the economy, which played a big part in creating a pattern of rising GDP through the first part of a recession (which is a neat trick, but can be accomplished if you are prepared to throw enough money directly into the hands of cash-strapped consumers):
Thus, the data BLS is using to produce the establishment survey B/D component has nothing to do with current conditions. There is a reason why they publish both the household and establishment survey. They will go back and revise the establishment data as they get better data, and eventually it will be pretty darned good. One would think that someone like Christina Romer would have to know this sort of thing to be Chair of the White House Council of Economic Advisors, but instead it is clear that she didn't even read the darned employment report before spinning it. Is she in that position because she has boobs, and for no other reason? I think not, because although the economic pundit profession is skewed toward males, there are quite of few women in it, and most of them are very good. I think it is because she is the type of person who doesn't read the reports before commenting on them.
Yesterday's report is also depressing because it matches well with my retail survey, which I discussed in some deep angst exactly two months ago, and with the continued dire nature of the rail reports. Due to my campaign to prevent a rash of Friday blog reader suicides, I also did not publish the rail data.
If you are feeling depressed, exit this post now and do not read the comments. I will put the rail data in the comments in deference to civility and my hopes that you will have a good weekend.
The sun finally came out here after a week of rain, or otherwise I wouldn't be writing about this stuff at all.
On a YoY basis:
Jan/Feb: Carloads -15.8%
Jan/Feb: Intermodal -15.8%
March: Carloads -17.3%
March: Intermodal -14.9%
April: Carloads -23%
April: Intermodal -17.9%
May: Carloads -24.7%
May: Intermodal -19.7%
Lest you think that the stimulus biased the later months upward in 08, here's the absolute data for 09:
And for 08:
Normally the economy picks up as one goes on into the summer months. April has a bit pop, but May should definitely be larger than March. Instead, we are headed the other way.
Due to the fact that weakness is in both intermodal and carloads, the entire economy continues to decline, and it may be declining at a faster rate than during March-April.
Your posts over the last few weeks have been particularly excellent. Really solid, perceptive and rigorous analysis. I particularly like the fact that you don't treat the BLS B/D adjustment problems as evidence of a conspiracy. As you note, since they accurately describe their methodology, and give us all the info we need to see its effects and dispute them, the problem lies in the readiness to comment of so many who don't bother to read the reports.
This is raising havoc, of course, with our business model and has resulted in our rail schedulers regularly screaming at me and my lowly logistics peers to get the damned things unloaded. That the customers are only using so much product is of little interest to them.
Next up -- and I smell it coming -- is a surcharge to our customers supplied from rail depots to make up for the surcharge the railroads are charging us. Our customers, in turn, pass it on. Is this maybe one way that inflation starts in a stagnant or shrinking economy?
I think the railroads had better be careful. There's basically a glut of diesel and diesel prices have risen much less than gasoline because of that. There are a lot of truckers looking for loads, and $75 a day can go a long way to shifting marginal rail loads to truck.
Let's face it - the railyards have open space. They don't need to do that. Truckers are getting hit with some extra depot charges too, though.
It drives me nuts when people refuse to even read the explanations on how this data is collected (posted on the web for everyone to read and presented in very clear and explanatory format) and instead just rant on with theories that the government is lying to them.
But maybe here we should give some responsibility to the reporters. They never explain any of this stuff and report this information with certainty, whereas the actual reports explain the uncertainties. So readers get the idea that these numbers are very precise, and then react as if they have been lied to when they discover the numbers aren't precise.
BLS surveys are high-quality work, especially considering the money they get to do them. Nor do they ever attempt to mislead anyone.
"It drives me nuts when people refuse to even read the explanations on how this data is collected (posted on the web for everyone to read and presented in very clear and explanatory format) and instead just rant on with theories that the government is lying to them."
I hear that! Take the CPI. I'm driven nuts every time I hear someone say that "they" don't include food and energy in it any longer. It's simply not true. Further, I'm fine with the substitution adjustments. I substitute! I'm fine with hedonics.
I'm torn on owner occupied rents instead of using housing prices, but not because of some grand government conspiracy theory. On the one hand, it did smooth out the CPI as intended. It filtered out the unsustainable housing bubble. On the other hand, that did help allow the housing bubble to grow bigger before it popped (by keeping interest rates too low).
What really gets me is the claim that the CPI "always" understates consumer price inflation. These arguments were even made when housing prices, oil, and commodities were crashing and retailers were having huge discounts due to drastically lowered traffic. What was the CPI doing then? It certainly wasn't tanking. The same forces which were holding it down when oil spiked to $140+ were simply working in reverse when oil crashed. One reason was that rents did not fall nearly as fast as home prices.
And lastly, statements like "it is common knowledge that the CPI..." make me just want to throw in the towel entirely some days. It reminds me of an old SNL skit. If memory serves, the game show was called "Common Knowledge". You wouldn't win based on coming up with accurate answers to questions. Instead, you'd win if your answer matched the answers of polled high school students. LOL!
No one read the whole bill. It was conceived in the back rooms in Congress and rushed to passage as if the economy would collapse immediately if it wasn't passed. We now know that was a total fallacy. If Congress didn't have so many economics challenged members they would be hard at work on a bill to cancel a lot of the so called stimulus and replace it with a real stimulus bill.
Speaking of stimulus, why aren't they lowering cap gains taxes and adding accelerated depreciation on foreclosures purchased to convert to rentals. Methinks that would stimulate some buying in some of the housing markets. IMHO, the recession will not reverse until the excess real estate inventory is worked off.
The parties get too caught up in their myths to govern rationally.
I agree that Jimmy is right, and I really thought by this time that Congress would be discussing more stimulus (of the spending variety) or a change in stimulus. I'm quite surprised that things got this bad before the federal government reacted.
They ARE reacting. They're throwing a "Hail Mary". They're going to pass health care "reform", banking "re-regulation", and Cap'n Trade by fall.
They want to believe that once the Federal government has near-complete control of the economy, little things like elections really don't matter that much. The job will be done, and Democrat operatives will run the economy from Civil Service sinecures no matter who is in office. Voters will know that the only way to improve your standard of living will be to vote for politicians who will increase the dole.
I think they're wrong; I think it's going to come crashing down around their ears in fairly short order, but I suppose I could be mistaken.
Mind you, it's justified. The Obama plan is to slam in massive rationing of healthcare to the chronically ill, disabled and elderly. The way they intend to do it is to create large pools that cover the retirees instead of Medicare, and then they will spread the costs so that the low-income voters will support denying care to these people.
If a Republican administration were considering this, it would have Dems marching in the streets.
The cutest thing about the Dem proposals is that they will all create preferred systems that will cover federal government retirees! Talk about a class system. Flyover country is being asked to bend over big time.
I predict an ugly 2010 election.
The Guaranteed Healthcare Access Plan will be administered by a National Health Board and regional boards modeled on the Federal Reserve System with fiscal, administrative, and political independence to make tough decisions based on the merits, not special interest lobbying.
Yes, the FRB has worked out so well, we should emulate that! NOT!
Y'see, one of the purposes of creating a highly polarized electorate is to ensure that your base voters have nowhere to go when you disappoint them ...
You caught me off guard on that one. I hadn't seen much info yet.
Are you sure you don't have that exactly backwards? What I've seen in the last few days is that everyone currently in Medicare will stay in Medicare, and the Baby Boomers who would normally go into Medicare will stay in the national health insurance plan. Since current Medicare enrolees are largely the 1930s-born Silent generation, Medicare costs will decrease fairly sharply going forward, and can be safely ignored.
Costs for those under the nationalized health insurance system, on the other hand, will rise dramatically going forward. That's the group that will find their fees increased and their care rationed, it seems to me.
Or maybe I misunderstood your point.
As soon as you get older and younger people covered under the same plan with spread premiums, either premiums will get too high or coverage for the elderly will be greatly cut.
If the average 66 year old were to buy a medical policy group rated, it would cost well over 1K monthly. There is no way you can combine coverage for the younger and older cohort without raising average premiums greatly.
Older people aren't going to get the type of treatment they get under Medicare.
I'm not sure that's the correct conclusion. Economics matter, but so do votes. There are an awful lot of Baby Boomers now claiming "life begins at 65". And they vote. Politicians will have a choice of denying them health care services, vs. raising rates on a smaller, younger cohort that doesn't vote as regularly or as reliably.
It's not clear to me that the Boomers are going to willingly sacrifice anything at all. Frankly, I think they're going to attempt to bleed the country white.
Yes, I'm aware that the WWII generation has gotten all the benefits that Boomers are going to eventually lose. They also had sufficient children to pay the taxes required for those benefits without placing undue strains on the economy. Boomers (in the aggregate) did not have sufficient children early enough to pay for the same benefits, and then failed utterly to plan for that fact (again, in the aggregate).
I expect this lack of foresight to continue until it simply can't anymore. I'm not making judgements about what Boomers do or don't deserve. I don't think it has anything to do with "deserve". I'm simply pointing out the reality of the situation.
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