Thread: The Jobs Glass Is More Than Half Full

Looks to me as if we are heading back to what we never recovered from and thats anther recession or worse,the only thing that prolonged it was the war in Iraq which I think served a dual purpose,if you look at the jobs created they been almost souly in the defence sector and so called war on terrorism.
The Fed for the most part has been a useless organisation preventing niether the depression or the numerous recession's since its creation.Its time it was replaced, for it only serves one set of masters and thats wall street/ corporate...

That's a good article about government statistics.

Originally Posted by gray wolf

Looks to me as if we are heading back to what we never recovered from and thats anther recession or worse,the only thing that prolonged it was the war in Iraq which I think served a dual purpose,if you look at the jobs created they been almost souly in the defence sector and so called war on terrorism.
The Fed for the most part has been a useless organisation preventing niether the depression or the numerous recession's since its creation.Its time it was replaced, for it only serves one set of masters and thats wall street/ corporate...

Care to back up your statements? Care to explain why inflation has stabilized and why we haven't seen any depressions like we did decades ago? Care to explain how the most recent oil shock was the first one that policy makers allowed to pass through the economy completely, and yet you didn't recessions like we saw in the 1970s?

Originally Posted by Shek

Care to back up your statements? Care to explain why inflation has stabilized and why we haven't seen any depressions like we did decades ago? Care to explain how the most recent oil shock was the first one that policy makers allowed to pass through the economy completely, and yet you didn't recessions like we saw in the 1970s?

My God are you crazy or just haven't bought anything in the last year,inflation stabilized not hardly forget all the numbers that the Fed crunchers put out for they only show a small percentage of the true inflation rate.As to depressions to my knowlege we only had one1929/30 but numerous recessions since and the only way they managed that is to increase the money supply to the point that the dollar only buys less than 5 cents on the dollar.Lets see in 1970 you could buy a house for roughly $30,000 today that same house cost you $150/200 thousand dollars, why inflation and the lost of value in the U.S. dollar, no wonder other countries are dumping it in favor of other currancies I would to.

Originally Posted by Gio

You can't open the financial pages without hearing about our "jobless recovery." There's no end to the hand-wringing about how gross domestic product, corporate profits and consumer spending are all moving up smartly — yet the economy seems steadily to have fewer and fewer jobs available. Oddly, at the same time we're told the unemployment rate is falling even as there are fewer jobs, but that's supposedly because discouraged workers have just gotten tired of even trying.

How can all these contradictory things be true at the same time? That's simple. Maybe some are not true.

Huh? How can these official government statistics that we always hear quoted so confidently every day in the business media and by politicians not be true? Well, let's have a look at the reality of the jobs statistics. You won't like what you see.

When you hear (seemingly endlessly) about how "payrolls contracted this month," or that "there are 2.7 million fewer jobs today than when President Bush took office," you are hearing numbers from something called the Establishment Survey, put out every month by the Department of Labor's Bureau of Labor Statistics. It's called "Establishment" because it's a poll of 160,000 business establishments and government agencies.

That's right, it's just a poll. Same as when someone knocks on your door and asks you who you're going to vote for. These 160,000 establishments simply tell the bureaucrats at the BLS how many people are on the payroll each month. If you thought it was more accurate or complete than that, or perhaps that the BLS gets some kind of computer report on all the salaries paid all over the country, you're wrong — big brother isn't that big (yet).

There are all kinds of flaws — the bureaucrats call them "artifacts" — in the Establishment Survey. If someone is moonlighting and holds two jobs, he gets counted twice. Agricultural workers are left out. And so are self-employed and household workers (because the bureaucrats are only polling establishments). And most significant, brand new and smaller establishments are left out, because the bureaucrats don't even know they exist in order to poll them.

When you hear about the "unemployment rate," that comes from an entirely different BLS survey. This one is called the Household Survey. It's called "Household" because, instead of polling establishments, it polls 60,000 American households. And it has plenty of its own "artifacts." So there's a basic reason why you could see the unemployment rate going down at the same time as the number of total jobs is contracting — it's these two statistics are taken from two entirely different surveys, and both of them are nothing more than mere polls.

Wait — it gets worse. It turns out that the Household Survey can be used for more than just the unemployment rate. To know the unemployment rate, you have to know the number of employed people — so the Household Survey offers its own version of how many jobs there are in the economy. And what it's telling us is that this is not a "jobless recovery" after all. According to the Household Survey, job growth in this recovery is soaring.

Take a look at this chart, which compares the two surveys' versions of employment reality. First, while the Establishment Survey shows that all-too-familiar loss of 2.7 million jobs since year-end 2000, the Household Survey shows jobs being just about flat.



But more interesting is the fact that the two surveys tracked each other closely during the recession, but then they parted company shortly after the recession ended (according to the National Bureau of Economic Research, the recession "officially" ran from March 2001 to November 2001). Since the Household Survey's job count bottomed out in January 2002, it's shown 1.8 million new jobs added to the economy through last month. At the same time, though, the Establishment Survey has shown 817,000 jobs lost.

These are the statistics that we count on to tell us what economic reality is. Yet, since January 2002, the two surveys have diverged by 2.6 million jobs! So what, then, is reality? The only reality is that we don't really know. Nobody does.

But lots of people pretend to know, of course. Most professional economists will tell you something like "Well, we've always used the Establishment Survey to measure jobs." OK, so that means that at least today's questionable statistics are comparable to history's questionable statistics. But the statistics are all still questionable.

And the traditionalists don't really have any definitive reason for preferring one over the other. Their typical limp defense of the Establishment Survey is that it's more accurate than the Household Survey because it uses a larger sample — 160,000 establishments, rather than 60,000 households. But the same traditionalists are perfectly happy to use the Household Survey to calculate the unemployment rate.

To my mind, sample size is the least of the problems. I'm more concerned by the fact that the Establishment Survey completely ignores self-employment and newer and smaller businesses. Maybe that didn't matter 50 years ago when everyone either worked for a big corporation or didn't work at all. But in today's dynamic economy, the creation of new businesses is the engine of growth. And more and more workers are "free agents" who operate entirely outside the corporate sphere. This is particularly evident during economic slowdowns. Surely some of the former professionals who were downsized during the last recession became independent consultants, landed real clients and were paid for their efforts. Some may even have been paid handsomely. Yet this reality isn't — and can't be — reflected in the Establishment Survey.

That means that, over time, the traditional way of looking at jobs statistics — the Establishment Survey — may be becoming increasingly irrelevant. And if that's true, then we're at real risk that important policy decisions will be built on error.

Over the last week the Federal Reserve has made it clear that it intends to keep interest rates at rock bottom — and maybe even ease further — until it can see evidence of job growth. But why is the Fed acting as though there's no such evidence right here and right now? It's there in plain sight, in the Household Survey. But the economic traditionalists at the Fed are the most traditional traditionalists of all — so the potentially outmoded Establishment Survey is all that counts.

That means that the Fed could accidentally unleash a new cycle of inflation by keeping rates low long after the economy has already started to really recover. It could happen because they're making a dual error. First, they're taking jobs as their single measure of economic growth. And second, they're looking at the wrong measure of jobs.

The lesson in all this? Never — and I mean never — blindly trust the statistics you read about the economy. As this example of the jobs statistics shows, they are never as simple and accurate as they seem. So let the Fed make stupid decisions based on blind trust — there's nothing you can do about that. But as an investor, you don't have to make stupid decisions.

Question everything you see. And when you see a glaring contradiction like our supposed "jobless recovery," get to the bottom of it. I'm satisfied that this recovery isn't so jobless after all — and that it really is a recovery.

--Originally appeared on SmartMoney.com.

The Jobs Glass Is More Than Half Full by Don Luskin -- Capitalism Magazine

Well, this article is nearly 3 1/2 years old, and his prediction that inflation will be unleashed went unfufilled. His statistics knowledge is poor, as the sample size is phenomenal for both surveys (ask any statistician if they'd like a sample size of 60K households, and you'll see them salivating at the thought). His discussion of how well the sample frame fits the population frame is solid, but his discussion really leads nowhere IMO - it just muddies the water.

Since his biggest gripe appears to be not including self-employed individuals, then his choice should be to use the statistics from the Current Population Survey (CPS), which shows a growth of 8 million jobs from 2000-2006. And, given the ability of the Fed to charter a course through the first unmitigated oil shock in US history without a recession, maybe their use of the Current Employment Statistics (CES) survey is the appropriate tool. Maybe the author's both right but really wrong, all at the same time

Originally Posted by gray wolf

My God are you crazy or just haven't bought anything in the last year,inflation stabilized not hardly forget all the numbers that the Fed crunchers put out for they only show a small percentage of the true inflation rate.As to depressions to my knowlege we only had one1929/30 but numerous recessions since and the only way they managed that is to increase the money supply to the point that the dollar only buys less than 5 cents on the dollar.Lets see in 1970 you could buy a house for roughly $30,000 today that same house cost you $150/200 thousand dollars, why inflation and the lost of value in the U.S. dollar, no wonder other countries are dumping it in favor of other currancies I would to.

The Fed certainly screwed up during the depression by tightening the money supply instead of loosening it. That was over 7 decades ago. Fed policy has been rock solid since the Volker disinflation, and Alan Greenspan is an absolute ROCK STAR! in the economics community. A little dose of inflation is good for the economy, and that's exactly what the Fed has done over nearly the past three decades. Not too cold, not too hot, but just right! The Goldilocks principle, if you will.

As far as your discussion on the worth of the dollar, you should look up the term "classical dichotomy." Once you've done that, you should probably also look up how inflation is calculated (do a search for "CPI", or just go to the BLS website and you can find it all right there). You'll understand why your house example is a fallacy to demonstrate inflation across the economy. Additionally, in and of itself, inflation can't account for all of the price increase of housing. For example, look at the Metro DC area, or any dense urban area - what has happened to the price of homes that are located near urban subway or transit networks? Could it be high demand which has raised the real price? Say it isn't so

Originally Posted by Shek

The Fed certainly screwed up during the depression by tightening the money supply instead of loosening it. That was over 7 decades ago. Fed policy has been rock solid since the Volker disinflation, and Alan Greenspan is an absolute ROCK STAR! in the economics community. A little dose of inflation is good for the economy, and that's exactly what the Fed has done over nearly the past three decades. Not too cold, not too hot, but just right! The Goldilocks principle, if you will.

As far as your discussion on the worth of the dollar, you should look up the term "classical dichotomy." Once you've done that, you should probably also look up how inflation is calculated (do a search for "CPI", or just go to the BLS website and you can find it all right there). You'll understand why your house example is a fallacy to demonstrate inflation across the economy. Additionally, in and of itself, inflation can't account for all of the price increase of housing. For example, look at the Metro DC area, or any dense urban area - what has happened to the price of homes that are located near urban subway or transit networks? Could it be high demand which has raised the real price? Say it isn't so

Lol yep the BLS should be changed to B.S. for that is mostly what it puts forth,ever notice how shortly after the BLS comes out they always change the numbers of jobs created and always down.There are to many good financial sites out there to get too invoved in any Fed report for thier bound duty like the PPT (Plunge Prtection Team) is to protect the financial sector.
Oh we are not the only country who is playing the game of pumping the system by flooding thier economys with endless amount of money and like us it will come back to bite them in the ass,for it only means more and greater inflation unless like Japan we have deflation...

Originally Posted by gray wolf

Lol yep the BLS should be changed to B.S. for that is mostly what it puts forth,ever notice how shortly after the BLS comes out they always change the numbers of jobs created and always down.There are to many good financial sites out there to get too invoved in any Fed report for thier bound duty like the PPT (Plunge Prtection Team) is to protect the financial sector.
Oh we are not the only country who is playing the game of pumping the system by flooding thier economys with endless amount of money and like us it will come back to bite them in the ass,for it only means more and greater inflation unless like Japan we have deflation...

Please tell me what the inflation rate in the US has been over the past twenty years, and what it has been over the past ten years (if we're pumping the economy with too much money, then inflation should be through the roof). Also, during the same periods, how about you give me what the average real growth rates have been.

Either bring the statistics to back up your claims or else put down the kool aid.

Originally Posted by Shek

Please tell me what the inflation rate in the US has been over the past twenty years, and what it has been over the past ten years (if we're pumping the economy with too much money, then inflation should be through the roof). Also, during the same periods, how about you give me what the average real growth rates have been.

Either bring the statistics to back up your claims or else put down the kool aid.

I'll answer that with a QUESTION WHAT DO YOU THINK OUR PRESENT INFLATION RATE IS and has been the last 10 years,IF YOU ARE GOING TO ANSWER IT WITH SOME GOVERMENT LINE THAT ITS 4/5% DON'T WASTE YOUR TIME AND MINE WITH AN ANSWER...
IS THE INFATION RATE GOING TRU THE ROOF PERHAPS NOT BUT ITS TO THE ATTIC...

Originally Posted by gray wolf

I'll answer that with a QUESTION WHAT DO YOU THINK OUR PRESENT INFLATION RATE IS and has been the last 10 years,IF YOU ARE GOING TO ANSWER IT WITH SOME GOVERMENT LINE THAT ITS 4/5% DON'T WASTE YOUR TIME AND MINE WITH AN ANSWER...
IS THE INFATION RATE GOING TRU THE ROOF PERHAPS NOT BUT ITS TO THE ATTIC...

Gray Wolf,

It is probably not the best thing to do to yell at others on the board.

Next, you are correct that the inflation rate over the past 10 years is not 4-5%, because it is in the range of 2.5%. That's right, the Fed has done an outstanding job, with inflation kept at the target band, and real (not nominal) growth at 3.7% over the same time period.

Now, do you have a methodology and statistics of your own demonstrating that the inflation rate wasn't 2.5%?

You'll need to not only provide the above, but also make a compelling case for why the CPI is a poor measure of average inflation in the US.

Frequently Asked Questions

Originally Posted by gray wolf

Lets see in 1970 you could buy a house for roughly $30,000 today that same house cost you $150/200 thousand dollars, why inflation and the lost of value in the U.S. dollar

Your numbers above correspond almost exactly to what the CPI measures as inflation. Therefore, it is illogical for you to claim that the CPI is inaccurate.

Originally Posted by gray wolf

no wonder other countries are dumping it in favor of other currancies I would to.

Please explain why SE Asia has racked up around 2 trillion USD in foreign currency reserves over the past several years, the exact opposite of your assertion.

Fed Official Sees Inflation Falling to 2%,
Warns Against Trying to Push It Lower
By GREG IP
March 24, 2007; Page A8

Underlying inflation is likely to drift down to 2% from its current level of 2.3%, but getting it much lower could prove painful for the economy, a Federal Reserve official said.

The remarks by Fed Governor Frederic Mishkin suggest that getting inflation into what some officials call a "comfort zone" of 1% to 2% could involve prolonged high interest rates and greater unemployment. For that reason, other officials may prefer a higher comfort zone of around 2%. The question is central to the Fed's current debate over whether to adopt an explicit inflation target, and if so what the target should be.

In a speech prepared for delivery to the Federal Reserve Bank of San Francisco Friday evening, Mr. Mishkin said that in recent decades inflation has become more stable and less likely to rise or fall in response to lower or higher unemployment.

He attributed that to the Fed's greater success in adjusting interest rates to alleviate upward and downward pressure on inflation, and to the public's expectations of inflation remaining more stable.

Stable inflation expectations mean workers and companies are less likely to press for higher wages and prices in response to a price jump such as from an oil-supply disruption. Thus, a rise in inflation is more likely to reverse than to persist.

He said this means the inflation trend is less likely to rise in response to an overheating economy, but once it does, much higher interest rates and unemployment would be necessary to nudge it back down.

Mr. Mishkin noted that surveys of economists and consumers and the inflation-indexed Treasury bond market suggest the public expects long-term inflation of around 2%, based on the price index of personal consumption expenditures. In January, inflation by that measure was 2.3%, excluding food and energy.

"I think we can be reasonably optimistic that core PCE inflation will gradually drift down" from that level, Mr. Mishkin said. The process may be slowed as "the recent rebound in prices for gasoline and other petroleum products" feeds through into other goods and services, but thereafter, "we might expect ... inflation to move into better alignment with long-run expectations and thus settle in around 2%."

But he said because inflation expectations are anchored at around 2%, he is "less optimistic" that actual inflation will "move much below" that level "in the absence of a determined effort by monetary policy. ... A substantial further decline in inflation would require a shift in expectations, and such a shift could be difficult and time consuming."

Originally Posted by Shek

Gray Wolf,

It is probably not the best thing to do to yell at others on the board.

Next, you are correct that the inflation rate over the past 10 years is not 4-5%, because it is in the range of 2.5%. That's right, the Fed has done an outstanding job, with inflation kept at the target band, and real (not nominal) growth at 3.7% over the same time period.

Now, do you have a methodology and statistics of your own demonstrating that the inflation rate wasn't 2.5%?

You'll need to not only provide the above, but also make a compelling case for why the CPI is a poor measure of average inflation in the US.

Frequently Asked Questions

Seeing as it is very evident that you have no idea what inflation is I'll give you the definition of it "INFATION: a Presistent increase in the level of consumer prices or a presistent decline in the purcasing power of money,caused by an increase in available good,,sevices,money supply and credit"..
Example:cost of goods (inflation) from 1970 to 2006 is about 435%
What $100.00 would have bought in 1970 would now cost you $531.16.
What $100.00 in 1980 would have bought now cost $267.76
What $100.00 would have bought you in 1990 now cost $160.79
What $100.00 would have bought in 2000 now cost you $185.41

Now get off the goverment popaganda,turn off the t.V. and start doing your homework,for in no year has inflation ever,ever seen even even a low of 5 percent,which of course the Fed has a very vested intrest of puting out such nonsence,vetern benefets,S.S. and every other program where payments and future payment are based upon the inflation rate!!!

Originally Posted by gray wolf

Seeing as it is very evident that you have no idea what inflation is I'll give you the definition of it "INFATION: a Presistent increase in the level of consumer prices or a presistent decline in the purcasing power of money,caused by an increase in available good,,sevices,money supply and credit"..
Example:cost of goods (inflation) from 1970 to 2006 is about 435%
What $100.00 would have bought in 1970 would now cost you $531.16.
What $100.00 in 1980 would have bought now cost $267.76
What $100.00 would have bought you in 1990 now cost $160.79
What $100.00 would have bought in 2000 now cost you $185.41

Now get off the goverment popaganda,turn off the t.V. and start doing your homework,for in no year has inflation ever,ever seen even even a low of 5 percent,which of course the Fed has a very vested intrest of puting out such nonsence,vetern benefets,S.S. and every other program where payments and future payment are based upon the inflation rate!!!

LOL! It appears as if you are using this site, The Inflation Calculator. Now, once you actually take a look at the site, you'll notice that it uses the CPI for its calculations. Of course, the calculator doesn't match up fully with the calculator from the BLS website, CPI Inflation Calculator, but the difference is really insignificant. So, don't you find it quite ironic that you cite a calculator that is based completely on the CPI, while at the same time calling it propaganda?

So, after several posts, you still haven't provided an alternative method or alternative statistics to measure the inflation rate, and it follows that you haven't made a case why your non-existent alternative is more credible than the BLS's calculations. Should I expect you to do so?

Next, I notice that you chose dates that included the oil shocks of 1973 and 1979, ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt, which in a sense "cooks the books" if you will by including the only double digit years since 1947. If you look at the period following Volker's disinflation, with 1983 as your start year, then inflation is as follows:

[[CPI(2006) - CPI(1983)]/CPI(1983)] * 100 = [(201.6-99.6)/99.6} * 100 = 102%

Now we divide by the number of years, 23, and we get 102/23 = 4.5% average annual inflation.

Now, if you want to look at Alan Greenspan's tenure, roughly 1987-2005, the average inflation is just under 4%.

In any event, your analysis once again completely ignores the classical dichotomy, where in the long run, nominal variables (inflation) don't affect real variables (real prices). Thus, when prices inflate, wages will follow. So, your analysis is incomplete.