The D Word

[we vs us]

Well, that's a fine how-do-you-do:

quote: IMF Says Advanced Economies Already in Depression

Feb. 7 (Bloomberg) -- Advanced economies are already in a "depression" and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said.  

"The worst cannot be ruled out," Strauss-Kahn said in Kuala Lumpur, where he was attending a gathering of central bankers from Southeast Asia. "There's a lot of downside risk."  

I guess the first guy to use the D word had to be a Director level guy at the IMF.  Anyone else would've been booed off the stage by the pollyannas at CNBC.

[joiei]

quote:Originally posted by we vs us

Well, that's a fine how-do-you-do:

quote: IMF Says Advanced Economies Already in Depression

Feb. 7 (Bloomberg) -- Advanced economies are already in a "depression" and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said.  

"The worst cannot be ruled out," Strauss-Kahn said in Kuala Lumpur, where he was attending a gathering of central bankers from Southeast Asia. "There's a lot of downside risk."  

I guess the first guy to use the D word had to be a Director level guy at the IMF.  Anyone else would've been booed off the stage by the pollyannas at CNBC.

Probably so because the "informed news agents" at Fox Business wouldn't have a clue.

[we vs us]

The language I've seen to date is invariably something like "the worst economic crisis since the Great Depression."  So people are willing to compare the severity of the two, but no one so far has been willing to use "depression" as a descriptor of what's happening now.  

This might be an outlier.  The IMF guy could just be a superbear, like Rubini or Taleb are in that CNBC clip.  At the same time, someone inevitably has to break the seal on terminology, and it might as well be a honcho at the IMF, which has an international outlook but also has major ties to the US. There's such a fear amongst domestic media and pundits that naming something accurately (calling it a recession or a depression) might also be labelled as feeding the crisis of confidence.  Someone connected but not TOO connected has to be able to tell it like it is.

[Cats Cats Cats]

This whole thing is just getting started.  25% of workplaces have wage freezes.  Probably more than that have hiring freezes.  Losing tons of jobs everyday that will compound and when they run out of money to spend on things will drop more jobs.  The attempted stimulus package is trying to get ahead of this.  Maybe it isn't necessary.  I however think that I will hear a lot of people complaining in a year about why they didn't do anything.  Then again doing it, might not work either.

[guido911]

In wholly unrelated news, the Dow is down 380.  Incidentally, does anyone else get phone calls from investment folks on the odd day the market is up yet these folks are eerily quite on days like today. I know, "duh!"

[Hometown]

Someone else could give a more accurate and detailed description but 1929 happened in two big spurts.  First a big collapse and a wealthy investor stepped in and purchased and propped up the market.  The market stabilized but then drifted downward for another six months when there was another big collapse.  That was it.  Soup lines.  25% unemployment.

Meanwhile, have you heard Inhofe and Coburn recently?  According to them we don't need stimulus in Oklahoma.

If you ever want to know why we are a beat down, poor state those two losers would be a good place to start looking for an answer.

[cannon_fodder]

I read a great piece today that was saying comparing any economic crisis in 2009 to something that happened in the 1920's is akin to describing how to fix your Lexus by reading a manual on how to shoe a horse.

It is an entirely different animal.  Unemployment, deflation, export quotas, stock market prices... sure there are similarities.  But the comparison should be made with the understanding that things are probably more different than they are similar.

[YoungTulsan]

Real unemployment is already in the 10-20% range according to some, depending on how you calculate it.  One thing is for certain, the 7.6% that is reported by the government and media is not the proper way to count it.  As I understand it, the 7.6% is the number of people collecting unemployment benefits as a percentage of the total labor force.

That doesn't include people who still haven't gotten a job after a certain period of time (They are considered "discouraged" and dropped from the data)

It doesn't include the underemployed, people who work a part time job because that is all they can get, even though they wish and need to work more than that.

It doesn't include people who do not work because they are on the government dole (aside from the unemployment benefits dole).

It really is hard to get a clear number, since some of these categories are somewhat grey areas, but it should at the very least include all of the "discouraged workers" in the number.

http://www.njfac.org/jobnews.html

^ That site claims an unemployment level of 15.7%

http://www.shadowstats.com/charts_republish#emp

^ This method claims a rate of 18% http://www.shadowstats.com/ has a whole collection of "contrary to government data" reports based off the belief that government reporting is usually manipulated for nefarious purposes.  I don't know, they may take things too far in the estimate of 18% unemployment.

My gut tells me the truth is probably in the middle.

Here is the actual report from the government in January:

http://www.bls.gov/news.release/empsit.nr0.htm

According to the BLS:
Workforce:   153,716,000
Unemployed:   11,616,000 (Up 4.8 million in last 12 months)
Underemployed: 7,800,000 (Up by 3.1 million in last 12 months)
Marginally Attached: 2,100,000 (Up 400k in 12 mo.)

Those other sites seem to gather extra numbers to add into this mix that I am not finding in the government's report.

I can understand the underemployed, and the marginally attached (People who have looked for work but have not in the last 4 weeks, may also be for reasons such as family matters and school) being a grey area, since each individual has their own circumstances.

There are also 734,000 "discouraged workers" reported in the BLS data (a subsection of the "marginally attached" number), which outside sources seem to think is a much larger number.  Those are people who quit looking for a job after giving up searching.  That should certainly be no grey area, and should be included in the unemployment figures.

So I am thinking higher than 7.6% but maybe not the full 15-18% some theorize.

But I do have one more question:  What qualifies as "in the labor force" if 81 million adults are not in it.  What would unemployment be at without government taking care of everyone?

There are 81,023,000 "Not in Labor force".  I'm not sure what this entails.  There are approximately half that number of people in the US over the age of 65 (about 38 million) which is reasonable to expect to be out of the labor force.  The totals add up (labor force/non labor force) to 234 million, which would lead me to believe this data represents all people over the age of 16.  That means 234 million minus the "workforce" of 153 million, minus seniors over 65, equals 43 million adults not in the labor force for whatever reason.

This is of course the greyest possible area one can step into.  However, it must be at least considered.  Obviously many people suffer from disabilities and are unable to work.  There still are a few people in today's society who decide to be stay at home mothers.  And I'm sure there are a few who have enough wealth from family or spouse that they do not need to work.  I still pose the question, how many of these people would be in the workforce if it were not for the government dole providing something for nothing?  The presence of a huge government taking care of people from cradle to grave has to have a substantial effect on the job market, reducing peoples incentive to get out and do something productive for personal financial gain.

Maybe I just inadvertently made a case for why we need all these government programs?  Who knows.

[YoungTulsan]

quote:Originally posted by cannon_fodder

I read a great piece today that was saying comparing any economic crisis in 2009 to something that happened in the 1920's is akin to describing how to fix your Lexus by reading a manual on how to shoe a horse.

It is an entirely different animal.  Unemployment, deflation, export quotas, stock market prices... sure there are similarities.  But the comparison should be made with the understanding that things are probably more different than they are similar.

I don't think basic economics, market forces, the effects of excess credit, etc have really changed since then.  The difference is with technology, things move so much quicker, and the government & fed reserve have added so many more layers of manipulation into the picture.  I think the speed and volume electronic trading have brought is one of the biggest losses of transparency we've faced since things happen too fast to analyze or catch when some crooked entity makes a big move.

[cannon_fodder]

FYI, to be considered unemployed you do NOT have to be collecting unemployment.  It is supposed to represent the number of adults who are currently seeking employment and are not currently employed.  If you are not seeking employment (retired, house wife, independently wealthy, bum) you are not unemployed.  Unemployment DOES include people on welfare, section 8, title 19, medicare, medicaid and everything else "on the government dole" if those people are seeking employment (some are even employed and still require benefits).  

80,000,000 goes pretty quick when you take out retirees, housewives (whatever the proper term is now), college students, rich folk, bums, people on disability and so on.  

But you are correct that underemployed is not considered (nor do over employed take away from the total) and discouraged workers are by definition not included.  Discouraged is not included because if you are not looking, by definition you can't not gain employment.  It is an area that should be considered, but not included in the unemployment number IMHO because it can convey different things.

The BLS number is important as IS because it serves as an indicator.  The 7.6% number is important because the BLS number at 3% is full employment in economic speak.  The CHANGE in the number is what's really relevant.

"Real" unemployment is calculated by various surveys and economic groups.  One of the most reliable is Merrill Lynch.  It takes into account underemployment in wage and benefit as well as hour cuts and considers certain "discouraged" workers as unemployed (the exact criteria I am not sure of, some are done proportionally... a cut from full time to 20 hours a week is .5 unemployed).  They released their new number yesterday and posted it at 13.9%. The lowest number since 1994.

For comparison, in early 2000 "real" unemployment was around 7.5% while the BLS number was around 4%.  

Article about the Merrill Lynch new numbers:
http://www.workforce.com/section/00/article/26/16/33.php

Here is an interesting chart for comparison (note, the great depression say a 13% decline in payroll from peak, further making the comparison dubious)

[waterboy]

Lets start a pool like the superbowl. I'll take 12% with a discouraged/underemployed figure of 6% for a total of 18. Yeah, put me down with $5 on 18.[]

If memory serves, after the stock market tumble of late 29, it took 3 more years for the economy to bottom out. Roosevelt took office in early 33 at the bottom. With technology we will shorten that span. More like 12 months.

[we vs us]

One of the major difference's between now and the Great Depression is the time element.  Things are just moving sooo much faster than they did back then.  Both the contraction itself and the government response.  At the same time, the level of micro-criticism is stunning.  Every news channel, every blog, every chat board, every local, state, or national politician is yelling really loudly about the yeas and nays of the stimulus, and no one seems to want to give an idea time to work.  They want it to work NOW.  Or to fail NOW.  Tomorrow at the latest.

As an aside, I really, really wish there was a way to measure moral hazard, even on a rudimentary basis.  It doesn't get mentioned so much in the economic theory I read, but it's become a real cornerstone of the politics of economics.  I obviously don't agree with the idea of a Nanny State (which incorporates individual moral hazard) but at the same time, I'm also mostly against corporate welfare (which involves moral hazard on an institutional level).  Point being, the idea of the government incentivizing someone/something to stay out of economic activity altogether needs to be clarified much more, if only because it's such a major ideological stumbling block to compromise.