Rolling US Economy Into The Shitbin Thread

Message Bookmarked
Bookmark Removed

here we go guys

El Tomboto, Thursday, 18 October 2007 23:44 (8 years ago) Permalink

personally I'm applying for a civil servant position ASAP

El Tomboto, Thursday, 18 October 2007 23:45 (8 years ago) Permalink

Just FYI, during the 1930s depression, many civil servants were paid with vouchers rather than cash, because local governments were unable to collect property taxes and their receipts fell into the shitbin.

Aimless, Friday, 19 October 2007 00:12 (8 years ago) Permalink

Economy's doing poorly enough as it stands, why do we deliberately want to roll it into the shitbin?

Abbott, Friday, 19 October 2007 00:14 (8 years ago) Permalink

Because that way Hillary can rescue us all.

Dandy Don Weiner, Friday, 19 October 2007 00:17 (8 years ago) Permalink

lol property taxes

El Tomboto, Friday, 19 October 2007 00:18 (8 years ago) Permalink

shitbin's a great word, BTW.

Dandy Don Weiner, Friday, 19 October 2007 00:20 (8 years ago) Permalink

you been loving my thread titles lately

El Tomboto, Friday, 19 October 2007 00:26 (8 years ago) Permalink

i came to this country some time ago with little more than a crippling debt burden in GB Pounds and the shirt on my back. i used to have to send back $1,200 each month to pay off my UK debt, and now I'm sending back over $1,400 to cover the same amount of debt repayment. that's two and a half thousand dollars disappearing from my tiny disposable income every year, for no explicable reason. i *heart* the decline of the US economy.

Roberto Spiralli, Friday, 19 October 2007 00:27 (8 years ago) Permalink

anyway why start this thread now because the bit where ritholtz points out that domino's pizza can't print new menus fast enough to keep up with inflation was pretty fucking amazing

I wish rasheed wallace was still around to show us the latest and greatest exploding bubble blogs

El Tomboto, Friday, 19 October 2007 00:28 (8 years ago) Permalink

wow Roberto that was some shitty timing, that sucks

El Tomboto, Friday, 19 October 2007 00:29 (8 years ago) Permalink

This was in the paper today:

Mortgage defaults

Hit an annual rate of 1.5 million in September. That compares with 900,000 last year from fewer than 800,000 in 2005. At the current rate, more than one million Americans will lose their homes to foreclosure, making this the worst housing recession since the Second World War.

Housing starts

Sank to a 14-year low of 1.19 million in September. Starts are a vital economic engine, creating jobs and growth as people stuff their homes with sofas and TVs. Starts peaked at 2.3 million in early 2006, and the decline will be a drag on the rest of the economy until the slide stops.

Mortgages

A quarter of the roughly 50 million U.S. home mortgages are subprime. That's seven times the number of high-risk mortgages there were in 2001. That means that many more marginal homeowners have mortgages, making it far more likely they'll wind up in default.

House prices

Fell 3.2 per cent in the second quarter. Prices are falling faster and more broadly than they have in decades, according to the closely watched Case-Shiller index.

http://www.theglobeandmail.com/servlet/story/LAC.20071018.IBUSECONOMY18/TPStory/Business

everything, Friday, 19 October 2007 00:29 (8 years ago) Permalink

In regard to inflation, in the USA during the past three years inflation has been soaring - but almost entirely in the housing sector. The fact that people are encouraged to see their houses as investments rather than as expenses doesn't mean that skyrocketing housing costs weren't inflationary. They were.

As the bubble market bursts, I predict a recession with an extra added bonus of inflation running close to 10% - before the end of 2008. As it has for the past 30 years, the official CPI will understate the real inflation rate. It was rigged under Reagan so that government entitlement programs indexed to the CPI would not increase at the true pace of inflation.

If Bush continues to shovel shit on the dollar right up to the end of his term in January 2009, the inflation rate could hit 15%-20% by 2010.

Aimless, Friday, 19 October 2007 00:55 (8 years ago) Permalink

There are some good economics articles put up here as well:
http://www.VoxEU.org

stet, Friday, 19 October 2007 01:02 (8 years ago) Permalink

Which shit on the dollar are you referring to?

Dandy Don Weiner, Friday, 19 October 2007 01:02 (8 years ago) Permalink

As the bubble market bursts, I predict a recession with an extra added bonus of inflation running close to 10% - before the end of 2008.

lol

aaaaaaaaaaaaaaaaaaaaaaaaaa, Friday, 19 October 2007 06:11 (8 years ago) Permalink

this is why i live in canada!

J0rdan S., Friday, 19 October 2007 06:13 (8 years ago) Permalink

oh wait.

J0rdan S., Friday, 19 October 2007 06:13 (8 years ago) Permalink

Guys, this is a good time stay in academia right?

Catsupppppppppppppp dude 茄蕃, Friday, 19 October 2007 11:51 (8 years ago) Permalink

It's a good time to learn a European language.

Nubbelverbrennung, Friday, 19 October 2007 13:33 (8 years ago) Permalink

Prime shit examples:

When Bush was elected in 2000, the federal budget was in surplus and the national debt was being paid down. Had this state of affairs continued, as projected, it would have led both to lower interest rates and a strong dollar, together. Instead, Bush submitted a series of enormous tax cuts to the Republican-controlled Congress and lobbied them through. Immediately, the CBO's projected budget surpluses turned to projected deficits for the next decade.

Bush also initiated a war of choice, not necessity, in Iraq. This war has already cost well over $700 billion. Yet, Bush insisted on making his tax cuts permanent. Overall, the national debt has increased under Bush by about $2 trillion in seven years. This represents a difference of about $3 trillion of debt from what was projected at the start of his first term.

Because, due to Bush's tax cuts and other policies, the Federal government was in a far weaker position to stimulate the economy when the recession started after 9/11, almost the entire stimulus was delivered via lower interest rates. Because these rate cuts were artificial, and not based on a stronger dollar, this stimulus not only inflated the current housing bubble, but it also undercut the dollar even more than the ballooning national debt did.

Now the dollar is at an all-time low against the euro and the canadian dollar. However, the incomes of the top 10% of American households have increased at a good clip, while the lower 50% of households have seen a decrease in income after inflation. This is largely thanks to Bush's shitty policies. I expect more of the same mismanagement until he is gone.

Aimless, Saturday, 20 October 2007 18:36 (8 years ago) Permalink

I agree with everything you've just said. You're predictions still seem a tad extreme on the downside though, if I may so.

aaaaaaaaaaaaaaaaaaaaaaaaaa, Saturday, 20 October 2007 18:50 (8 years ago) Permalink

i wonder if income inequality will ever arrive as a political issue in this country. americans tend to not begrudge the rich - so it'll have to be more of a "for everyone's good" type of angle. no?

jhøshea, Saturday, 20 October 2007 18:54 (8 years ago) Permalink

I remember the 1970s and early 80s quite well. Back then people couldn't belileve it, either. Bush has done a bangup job of recreating many of the same policy errors under Johnson and Nixon that led to raging stagflation back then, except the underlying economy is now weaker than it was in the 1970s and the oil shocks we are likely to get are not political, as when OPEC was formed, but structural.

Oil will exceed $100/barrel some time this winter. The ever-weakening dollar will lead to smaller profit margins and rising retail prices on all imported goods (which means almost everything we buy in the USA). Transport costs will rise with pil prices. Stock prices will erode along with profits. With so many savings tied up in stocks and home equity, consumer spending will be crunched, and personal debt and bancruptcies will rise like a tide. Businesses will retrench and unemployment will rise. No end in sight.

I hope I am wrong.

Aimless, Saturday, 20 October 2007 19:07 (8 years ago) Permalink

Anyone want to join my modern-day James Gang? We shall ride across the lower Midwest, robbing and pillaging.

milo z, Saturday, 20 October 2007 19:09 (8 years ago) Permalink

sounds fun

jhøshea, Saturday, 20 October 2007 19:13 (8 years ago) Permalink

Sorry, I don't want to relocate. But this scheme sounds ripe for franchising.

Aimless, Saturday, 20 October 2007 19:14 (8 years ago) Permalink

Oil will exceed $100/barrel some time this winter. The ever-weakening dollar will lead to smaller profit margins and rising retail prices on all imported goods (which means almost everything we buy in the USA). Transport costs will rise with pil prices. Stock prices will erode along with profits. With so many savings tied up in stocks and home equity, consumer spending will be crunched, and personal debt and bancruptcies will rise like a tide. Businesses will retrench and unemployment will rise. No end in sight.

I hope I am wrong.

-- Aimless, Saturday, 20 October 2007 19:07 (14 minutes ago) Link

The coming of $100/barrel oil is not Bush's fault. It's yours and mine and everyone else's for using too damned much energy. I agree Bush could and should have done a lot more with policy to encourage energy efficiency, but there's little he could have done to stop oil's eventual rise to that price level.

Hurting 2, Saturday, 20 October 2007 19:26 (8 years ago) Permalink

Part of the pricing of oil represents the weakness of the dollar. This hurts the USA more than it does other countries. US citizens are paid in dollars and the US government collects revenue in dollars, so they are stuck. EU countries can use euros to buy increasingly cheap dollars, so they don't see the same rise in prices as we do. The weakness of the dollar is mainly Bush's fault.

Aimless, Saturday, 20 October 2007 19:31 (8 years ago) Permalink

The US also uses way more oil than other countries.

Hurting 2, Saturday, 20 October 2007 19:33 (8 years ago) Permalink

he could have done to stop oil's eventual rise to that price level.
Not starting a war in Iraq would definitely have helped here.

stet, Saturday, 20 October 2007 19:57 (8 years ago) Permalink

El Tomboto, Monday, 22 October 2007 17:47 (8 years ago) Permalink

arrgh, if that won't work then
http://calculatedrisk.blogspot.com/2007/10/imf-mortgage-reset-chart.html

El Tomboto, Monday, 22 October 2007 17:47 (8 years ago) Permalink

tombot u r freakin me out

gff, Monday, 22 October 2007 17:50 (8 years ago) Permalink

i hope my small apartment + modest savings plan + job in "information services" is enough to weather the shitstorm, if it comes. i got myself out of credit card debt a few months ago, at least

gff, Monday, 22 October 2007 17:53 (8 years ago) Permalink

well if you can hold down a job and don't have to worry about an ARM reset you should be okay, it's the homeowner with kids and a subprime loan and two cars who ought to be shitting themselves

El Tomboto, Monday, 22 October 2007 17:58 (8 years ago) Permalink

apart from some student loans and binging on credit cards over a few years, i'm kind of debt phobic.

which has actually made me lose out over the past several years, i realize, since i pay for EVERYTHING with a debit/check card... i could have just paid that balance on a credit card with some rewards scheme and has some air miles or something

gff, Monday, 22 October 2007 18:00 (8 years ago) Permalink

rolling gff personal finances into the shitbin thread, ha

gff, Monday, 22 October 2007 18:01 (8 years ago) Permalink

This will give you a boner Tombot

http://nymag.com/guides/money/2007/39952/

Dandy Don Weiner, Wednesday, 31 October 2007 11:30 (8 years ago) Permalink

the economy increased by 3.9% this quarter! bull market forever, baby. economy's better than ever. golden age.

yet me and so many people I know are getting laid off next month. granted we're all in the writing/design field, but urhhhhh. gggg.

burt_stanton, Wednesday, 31 October 2007 14:58 (8 years ago) Permalink


^^^ lol

most of that guy's scenario is not really news to regular bigpicture/CR readers I don't think. But #5, the "we don't pay attention" thing, yeah, well, evidently the awareness campaign is underway, but hell if the big players are paying attention.

He also leaves out the approaching demographic catastrophe as millions of inexperienced thirtysomethings and even some late-twenties kids are forced to move into arguably tougher jobs that the boomers have been holding for two decades. Beyond the social security and healthcare costs associated with mass retirement, I don't really know if this generation has the work ethic and definitely not the rolodex to just start filling in and not fuck up royally. too busy updating their linkedin pages.

El Tomboto, Wednesday, 31 October 2007 15:11 (8 years ago) Permalink

can someone explain what "being upside down on your mortgage" means, in plain English?

Tracer Hand, Wednesday, 31 October 2007 16:14 (8 years ago) Permalink

essentially, owing more than your home is worth.

Dandy Don Weiner, Wednesday, 31 October 2007 17:10 (8 years ago) Permalink

also Tombot I'm not going to blame this generation as much as I blame their parents.

Dandy Don Weiner, Wednesday, 31 October 2007 17:11 (8 years ago) Permalink

isn't that the way people buy homes? by paying for the privilege of a loan?

Tracer Hand, Wednesday, 31 October 2007 17:12 (8 years ago) Permalink

When you enter into a contract with a bank for a mortgage, both you and the bank assume that the property value will not plummet. The bank doesn't want you to default any more than you want to default. But if for whatever reason you need to sell your home, and you can't get what you owe on it, then you will owe the difference to the bank. And the bank knows that when that happens, you probably will not have enough assets to cover the difference.

Predatory-type loans (which seems like a nebulous description to me) typically compound the problem because they have higher transaction rates (points, etc.)

Dandy Don Weiner, Wednesday, 31 October 2007 17:17 (8 years ago) Permalink

oh certainly! well played baby boom letting healthcare slide for the 20 years you've owned the electorate

El Tomboto, Wednesday, 31 October 2007 17:18 (8 years ago) Permalink

yeah Tracer it's also called "negative equity"

El Tomboto, Wednesday, 31 October 2007 17:19 (8 years ago) Permalink

I mean if it's bad enough I'm sure it could. Maybe a better question for the world recession poll thread than the us toilet economy thread

rap is dad (it's a boy!), Friday, 15 January 2016 22:40 (5 months ago) Permalink

my black swan candidate is china too.. not only a housing bubble but an infrastructure bubble that propped up their growth rate - building a shit ton of defective crap nobody has any use for

so many swans, so little time

carthago delenda est (mayor jingleberries), Friday, 15 January 2016 23:07 (5 months ago) Permalink

rap is dad (it's a boy!), Friday, 15 January 2016 23:53 (5 months ago) Permalink

we could probably afford to spend more on our infrastructure than we already do

understatement of the decade?

people will look back at this time of sluggish demand, high unemployment, creaking public services and eight years of interest-free loans and wonder what was stopping us. an opportunity - and a generation of actual real people - squandered permanently on an altar of deficit ideology. public debt as a percentage of gdp has been average/normal for years now, even after we all bailed out the banks. for fuck's sake it's basically criminal what's happening.

illegal economic migration (Tracer Hand), Friday, 15 January 2016 23:57 (5 months ago) Permalink

Another respected economist who think the stock market needs to chill out:

http://blogs.piie.com/realtime/?p=5341

o. nate, Monday, 18 January 2016 02:15 (5 months ago) Permalink

Blanchard OTM

flopson, Monday, 18 January 2016 02:27 (5 months ago) Permalink

I don't think so, that's far too simple an answer to be satisfying.

on entre O.K. on sort K.O. (man alive), Monday, 18 January 2016 02:38 (5 months ago) Permalink

I don't believe in "herding" per se in the US stock market -- it's far too dominated by large, sophisticated players for any kind of prolonged or sustained herding imo.

on entre O.K. on sort K.O. (man alive), Monday, 18 January 2016 02:41 (5 months ago) Permalink

OB's on twitter! https://twitter.com/ojblanchard1

flopson, Monday, 18 January 2016 02:52 (5 months ago) Permalink

I don't believe in "herding" per se in the US stock market -- it's far too dominated by large, sophisticated players for any kind of prolonged or sustained herding imo.

― on entre O.K. on sort K.O. (man alive), Sunday, January 17, 2016 9:41 PM Bookmark Flag Post Permalink

but "large, sophisticated players" still don't know what the hell will happen any more than etrade babies, that's how equity markets work

Option ARMs and de Man (s.clover), Monday, 18 January 2016 03:10 (5 months ago) Permalink

yeah but large institutional investors don't just say "Oh shit, the stock market is going down, something must be going on, fuck, let's sell"

on entre O.K. on sort K.O. (man alive), Monday, 18 January 2016 03:11 (5 months ago) Permalink

Do they not? I have no idea how large institutional investors do things. Isn't a lot of their money in the day to day market like everyone else's?

something totally new, it’s the AOR of the twenty first century (tipsy mothra), Monday, 18 January 2016 03:15 (5 months ago) Permalink

Their decision-making process is a little more complex.

on entre O.K. on sort K.O. (man alive), Monday, 18 January 2016 03:22 (5 months ago) Permalink

More complex, I mean, than just "Oh I don't know what's going on but if everyone else is panicking it must be something bad"

on entre O.K. on sort K.O. (man alive), Monday, 18 January 2016 03:22 (5 months ago) Permalink

right -- the process is "do we think everyone else's panic will keep going on" and if so then yeah bail. or rather it depends on the player. that's the case for "large, sophisticated players" and hedge funds and etc.

like the thing happening _is_ everyone else's panic -- the market moves mainly on expectations of future market movement.

in fact one of the things the flash crash showed is that when things start to buckle, the "market makers" who "provide liquidity" by lots of small hft trades throughout the day, they all bail first because its just safer for them to sit it out.

and when that happens, then everything else plummets much more quickly because it loses a sort of basic support.

Option ARMs and de Man (s.clover), Monday, 18 January 2016 03:34 (5 months ago) Permalink

No matter how sophisticated the investor is, I think there comes a point when they just want to stop the pain. Very few have the stamina and conviction of the Michael Burry character in the Big Short, who was a few years early on the shorting subprime call and had to ride out large losses and investors trying to redeem. On the other hand, I'm sympathetic to the argument that the market collectively can be smarter than the individuals who make it up. Stocks were pretty richly valued before this correction, and I think there's a decent case to be made that they're just adjusting to the fact that growth is going to be slow for the next few years, rather than anticipating a major recession.

o. nate, Monday, 18 January 2016 03:40 (5 months ago) Permalink

had some interesting convos with Wall Street girls and guys last night. they didn't seem too panicky about what's going on. at the end of the day, I guess that going short (when everybody else is doing so too) is a less profitable strategy than "buying the dip" and these guys know it.

Sharkie, Monday, 18 January 2016 04:32 (5 months ago) Permalink

they're not playing with their money

Option ARMs and de Man (s.clover), Monday, 18 January 2016 04:33 (5 months ago) Permalink

the least insane person to have predicted the last crisis: "the economy is also not about to fall into another recession"

http://www.huffingtonpost.com/dean-baker/wall-street-rocks_b_9013386.html

flopson, Tuesday, 19 January 2016 17:29 (5 months ago) Permalink

I like him, and I do like that take on things.

on entre O.K. on sort K.O. (man alive), Tuesday, 19 January 2016 17:58 (5 months ago) Permalink

it's basically every liberal and/or progressive person's take on things for the last six years - DeLong, Krugman, Atrios etc etc

but the WPA was the worst thing that ever happened to our country so let's just cut some programs and raise rates or something

El Tomboto, Tuesday, 19 January 2016 20:42 (5 months ago) Permalink

no one knows where the demand is supposed to come from, is the ridiculous part. we replaced a tech boom with a housing boom with another tech boom with another housing boom. let's just keep going, it's working so awesomely!!!

illegal economic migration (Tracer Hand), Tuesday, 19 January 2016 21:38 (5 months ago) Permalink

i'm just glad the sequester is still holding firm

reggie (qualmsley), Tuesday, 19 January 2016 23:38 (5 months ago) Permalink

thanks to the Internets of Everythings we will soon be able to combine the tech boom WITH the housing boom
with HFT we'll be able to just have robots reinsuring the mortgages on the robot houses built by robots - for robots! shazam infinite growth

service desk hardman (El Tomboto), Wednesday, 20 January 2016 00:44 (5 months ago) Permalink

deficit been going up yall should be celebrating

flopson, Wednesday, 20 January 2016 00:46 (5 months ago) Permalink

also just words but booms are good, bubbles are bad. most booms aren't bubbles http://www.nber.org/digest/jan16/w21693.html

flopson, Wednesday, 20 January 2016 00:47 (5 months ago) Permalink

'boom' in the sense of 'boom and bust' so yes i meant 'bubble' FINE

illegal economic migration (Tracer Hand), Wednesday, 20 January 2016 01:16 (5 months ago) Permalink

click that link i posted and read the first like 100 words or just look at this picture; not every boom goes bust and very few busts wipe out the gains of the boom

flopson, Wednesday, 20 January 2016 01:22 (5 months ago) Permalink

is that graph about the stock market?

illegal economic migration (Tracer Hand), Wednesday, 20 January 2016 01:25 (5 months ago) Permalink

yeah

obviously i agree with krugman and baker, but it's been a long time since 2008. even krugman subtly shifted from 'we need stimulus NOW' to 'we did need stimulus then'

flopson, Wednesday, 20 January 2016 01:26 (5 months ago) Permalink

we need stimulus whenever demand is depressed and money is cheap, sheesh krugman keep up

illegal economic migration (Tracer Hand), Wednesday, 20 January 2016 01:28 (5 months ago) Permalink

contractionary monetary and fiscal policies are still contractionary though
it seems fairly clear that austerity is pretty useless and again, many many many opportunities exist for investment in infrastructure and in stability i.e. moar social security

service desk hardman (El Tomboto), Wednesday, 20 January 2016 01:30 (5 months ago) Permalink

for example how the hell is the DC metro having to consider a fare increase to cover costs? DC metro should be planning new lines and adding fancy new rolling stock, and Amtrak should be averaging 100mph between here and Boston, shit is ridiculous

service desk hardman (El Tomboto), Wednesday, 20 January 2016 01:33 (5 months ago) Permalink

fiscal policy isn't contractionary right now, last budget blew a gasket in the deficit (including some good stuff like extending eitc). contractionary isn't just not-stimulus you have to like, contract. i suspect demand is still depressed but the further and further out we go the harder it is to separate long term and short term.

the argument about whethr or not to invest in infrastructure is a combo of cyclical (do it when it's cheap and other resources are underutilized) and more long term cost-benefit stuff. seems obvious to me that now and last five years is an extremely good time, and it's super frustrating.

flopson, Wednesday, 20 January 2016 02:05 (5 months ago) Permalink

there was a nice NYT piece on this before the holidays: http://www.nytimes.com/2015/12/18/business/dealbook/a-missed-opportunity-of-ultra-cheap-money.html

Sharkie, Wednesday, 20 January 2016 03:19 (5 months ago) Permalink

Unemployment filings were at a 6-month high last week.

sssshhhhhhhhhhhhhhhh

we can be heroes just for about 3.6 seconds (Dr Morbius), Friday, 22 January 2016 19:09 (5 months ago) Permalink

http://fortune.com/silicon-valley-tech-ipo-market/

been trying to follow alphaville's discussion of capital-flows reversing but its pretty impenetrable to me.

Option ARMs and de Man (s.clover), Saturday, 23 January 2016 02:13 (5 months ago) Permalink

who are these frightful people good god

illegal economic migration (Tracer Hand), Saturday, 23 January 2016 02:18 (5 months ago) Permalink

lol

https://twitter.com/ObsoleteDogma/status/691452952939204608

flopson, Monday, 25 January 2016 17:39 (5 months ago) Permalink

tee hee

service desk hardman (El Tomboto), Monday, 25 January 2016 21:19 (5 months ago) Permalink

weird - is that just a coincidence?

on entre O.K. on sort K.O. (man alive), Friday, 5 February 2016 18:01 (4 months ago) Permalink

i feel like it's two not amazing earnings reports plus the SV bubble

𝔠𝔞𝔢𝔨 (caek), Friday, 5 February 2016 18:23 (4 months ago) Permalink

Yeah looks like a lot of big tech stocks are taking sizeable hits today -- FB, TWTR, YELP, although nothing close to that.

on entre O.K. on sort K.O. (man alive), Friday, 5 February 2016 18:26 (4 months ago) Permalink

ah don't worry they'll be fine

https://twitter.com/ddayen/status/697431928551526400

𝔠𝔞𝔢𝔨 (caek), Wednesday, 10 February 2016 21:53 (4 months ago) Permalink

WE HAVE TO CONTROL THE DEFICIT, PEOPLE, IT IS A MORAL OBLIGATION TO THE NEXT GENERATION BECAUSE THE BOND WOLVES ARE AT THE DOOR AND INFLATION - wait 10-year- bonds are yielding 1.7% err never mind

illegal economic migration (Tracer Hand), Monday, 22 February 2016 20:28 (4 months ago) Permalink

http://fivethirtyeight.com/features/what-is-the-real-unemployment-rate/

The “labor force participation rate” — the share of adults who are either working or actively looking for work — is near a three-decade low, which might seem to suggest that there are lots of people waiting to return to the job market. But a big part of that decline is due to the retirement of the baby boom generation. And even controlling for the aging population, labor participation was falling long before the recession, for reasons that are only partly understood.

The White House, in its report, estimates that the combination of demographics (“aging trends” in the chart below) and other long-term trends (“residual”) together account for the vast majority of the decline in labor force participation since 2009. Only the small sliver in the middle of the chart is due to the state of the economy. In the Obama administration’s estimation, there are about half a million Americans who should be in the labor force but aren’t. If they were counted as unemployed, the jobless rate would be about 5.2 percent, only a few ticks higher than the official rate.

The White House, of course, has an incentive to make the economy look as good as possible. So as a check on their number, I built my own simple model (an updated version of the one I used in this story a few years ago) to estimate how many people are still missing from the official unemployment rate. (I’ll put the details in a footnote,1 but essentially I just assumed that prerecession trends held steady.) My model estimates there are as many as 1.5 million people who should be included in the unemployment rate. That’s triple the White House’s estimate, but it still implies the “real” unemployment rate is down to 5.8 percent.

The difference between 4.9 percent and 5.8 percent is small but significant. Many economists consider 5 percent to be a rough long-term floor for the unemployment rate (other economists think the floor is lower); unemployment can’t drop much below that threshold without triggering inflation. But if there are really hundreds of thousands or even millions of willing workers just waiting to get back into the labor market, that means there is room for job growth to continue without driving up inflation. The participation rate has edged up in recent months, suggesting that the stronger economy is drawing workers off the sidelines. Next week’s jobs report will give the latest sign of whether that trend is continuing.

Mordy, Friday, 26 February 2016 23:27 (4 months ago) Permalink

3 months pass...

WHAT DOES BREXIT MEAN FOR THE US GAZ COOMBES

socka flocka-jones (man alive), Friday, 24 June 2016 13:28 (6 days ago) Permalink

It means stock up on your Amazon UK purchases now!

There must be some magic clue inside these gentle walls (Old Lunch), Friday, 24 June 2016 14:03 (6 days ago) Permalink


You must be logged in to post. Please either login here, or if you are not registered, you may register here.