What is wrong with the US economy? Part 2

[Al68]

jimmy, although I never knew quite what your intent was in your posts, I always gave you the benefit of the doubt that your intent wasn't simply to be mean. I don't pick that up in any of your posts, ever.

But I don't think you ever saw the economy through my eyes. I work in a lab that serves the building industry. We've been in a recession for many, many months. But things have taken an ugly turn in the last few weeks, from bad to unprecidented. We're looking at a 50% cut in income in the next quarter - and possibly worse in the quarter after that. I expect to lose my job.

I just assumed you worked in a field that was more shielded from the storm than mine is.

BTW, the president of my company has announced that the hit list will be announced on Jan 5th - sigh!

Funny thing about the word "recession". It's definition depends on who's using the word. The only definition I know of that is objective is a drop in GDP for 2 consecutive quarters.

Of course that definition isn't useful at all for those that want to mislead the public. They would much prefer a subjective, variable definition.

Because anyone who claimed that the GDP dropped 2 consecutive quarters could just be called a liar outright. Of course, nobody is claiming that, they're just saying we're in a "recession", whose definition is whatever they think it should be at the time.

Well, any definition that's not objective and clear cannot possible be useful to me.

So, those that say we're in a recession, do you have a definition that is objective and concise enough for me to even be able to agree or disagree?

 

[Jimmy Snyder]

So, those that say we're in a recession, do you have a definition that is objective and concise enough for me to even be able to agree or disagree?

Yes and no. Many consider the NBER (National Bureau of Economic Research) as the arbiter of when recessions start and end. You could say that it is objective and concise in the sense that they make public their decision and when they do, you know what their decision is. However, they do not publish the exact criteria that they use. I'm pretty sure that they do not have a precise definition.

Yesterday the NBER announced that we have been in a recession since December of last year. msn.com ran the story with a headline that said something like "It's official, we're in a recession". That gives you an idea of how some people regard the NBER's judgement. None the less, there is a celebrity flavor to it all, the NBER is famous for being famous. Anyone who wants to can claim that we are not in a recession and if you do, a measure of your officialness will be the number of people who accept your announcement. As for myself, I accept the NBER's announcement.

 

[Astronuc]

Funny thing about the word "recession". It's definition depends on who's using the word. The only definition I know of that is objective is a drop in GDP for 2 consecutive quarters.

Of course that definition isn't useful at all for those that want to mislead the public. They would much prefer a subjective, variable definition.

Because anyone who claimed that the GDP dropped 2 consecutive quarters could just be called a liar outright. Of course, nobody is claiming that, they're just saying we're in a "recession", whose definition is whatever they think it should be at the time.

Well, any definition that's not objective and clear cannot possible be useful to me.

So, those that say we're in a recession, do you have a definition that is objective and concise enough for me to even be able to agree or disagree?

The 3Q08 GPD decline was revised from -0.3% to -0.5% (I believe that is an annual rate), but the 4Q08 is expected to have a more severe decline. One estimate puts it at -4% (annual rate), but we won't know until Jan or Feb 09.

However this has some insight - Officials Vow to Act Amid Signs of Long Recession
http://www.nytimes.com/2008/12/02/business/economy/02econ.html

and

All Recessions Not Created Equal (I would suggest downloading/saving the graphic)
http://www.nytimes.com/imagepages/2008/12/02/business/02econ.graphic.html

Two consecutive decline in GDP is just one definition of recession, and I think 3 quarters of negative growth (not consecutive) would be another definition, but then there are several components to consider of which GDP is one, as well as personal consumption, employment and housing prices. The decline in housing prices is perhaps the biggest problem in addition to credit defaults and bankruptcies, which have snowballed because of the derivatives (e.g. credit default swaps and securitized debt). The economy has been too highly leveraged (actually over-leveraged) for well over a year.


And as a reminder - please don't personalize disagreements, but be civil and address the comments. And no gloating.

 

[kronon]

Confirmation here of what many of us have been saying for while: Its all about politics. Bad quantitative models, 15 standard deviation events and restrained regulators are just local symptoms of an over-arching political policy.



WASHINGTON (AP) — The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

The administration's blind eye to the impending crisis is emblematic of its governing philosophy, which trusted market forces and discounted the value of government intervention in the economy. Its belief ironically has ushered in the most massive government intervention since the 1930s.

Many of the banks that fought to undermine the proposals by some regulators are now either out of business or accepting billions in federal aid to recover from a mortgage crisis they insisted would never come. Many executives remain in high-paying jobs, even after their assurances were proved false.



http://www.google.com/hostednews/ap/article/ALeqM5hTDPY8hFtJLxsv8i1Q7OvoRrlYrQD94PQ0JO0

 

[Jimmy Snyder]

Funny thing about the word "recession". It's definition depends on who's using the word. The only definition I know of that is objective is a drop in GDP for 2 consecutive quarters.

By the way, this is not the first time that NBER has declared a recession without a drop in GDP for 2 consecutive quarters. The GDP figures were much worse in the 2000 recession:

09/00 -0.5
12/00 +2.1
03/01 -0.5
06/01 +1.2
09/01 -1.4

compare to:

12/07 -0.2
03/08 +0.9
06/08 +2.8
09/08 -0.5

 

[OmCheeto]

And as a reminder - please don't personalize disagreements, but be civil and address the comments. And no gloating.

Yah! Let's all hold hands and sing a http://www.youtube.com/watch?v=jHPOzQzk9Qo".

And turn these lemon's into lemonade.

Good things about a recession:

http://useconomy.about.com/od/grossdomesticproduct/f/Recession.htm"
it will cure inflation

http://kay.net.nz/2007/10/25/is-a-recession-bad/"
The whole economic cycle includes recession. It’s normal. It’s like having night after day, ying and yang, breathing out after breathing in. You get the idea!

The following is about one of the few human devices that makes me want to buy a gun.

http://www.monbiot.com/archives/2007/10/09/bring-on-the-recession/"
On Sunday I visited the only UN biosphere reserve in Wales: the Dyfi estuary. As is usual at weekends, several hundred people had come to enjoy its beauty and tranquility and, as is usual, two or three people on jet skis were spoiling it for everyone else. Most economists will tell us that human welfare is best served by multiplying the number of jet skis. If there are two in the estuary today, there should be four there by this time next year and eight the year after. Because the estuary’s beauty and tranquility don’t figure in the national accounts (no one pays to watch the sunset) and because the sale and use of jet skis does, this is deemed an improvement in human welfare.

http://radar.oreilly.com/2008/10/effect-of-the-depression-on-te.html"
First, this recession will be good for innovation because recessions generally are. During boom times, companies direct development and occupy great talent with at best evolutionary improvements over the state of the art. Companies are great chasers of new things, but aren't great at making new things. A recession means technologists cease to be paid vast amounts to duplicate the work of others.

And don't forget to whistle!

 

[Al68]

You could say that it is objective and concise in the sense that they make public their decision and when they do, you know what their decision is. However, they do not publish the exact criteria that they use. I'm pretty sure that they do not have a precise definition.

Well, sure, it's an objective fact that NBER has determined that we're in a recession. But without an objective, precise definition, that fact is of no use to me in any solid way.

If whether or not we're in a recession is just a matter of opinion, it has no real, objective meaning.

In other words, whether or not we're in a recession (without a precise definition) is unverifiable by any objective means. That makes the word nothing more than a political tool.

 

[mgb_phys]

In other words, whether or not we're in a recession (without a precise definition) is unverifiable by any objective means. That makes the word nothing more than a political tool.

Even with a precise definition (negative growth for n months) it's still pretty meaningless.
On a personal level.
Use credit card to buy more stuff, borrow money to pay credit card = prosperity and growth.
Decide to get rid of extra car and use transit = recession and povery

 

[russ_watters]

By the way, this is not the first time that NBER has declared a recession without a drop in GDP for 2 consecutive quarters. The GDP figures were much worse in the 2000 recession:

09/00 -0.5
12/00 +2.1
03/01 -0.5
06/01 +1.2
09/01 -1.4

compare to:

12/07 -0.2
03/08 +0.9
06/08 +2.8
09/08 -0.5

Here's the thing: the NBER did not judge the "2000 recession", as you are calling it, to have started until March of 2001. I am disheartened by the NBER's judgement because the are not using consistent criteria. Here's what they've said:

The committee views real GDP as the single best measure of aggregate economic activity. In determining whether a recession has occurred and in identifying the approximate dates of the peak and the trough, the committee therefore places considerable weight on the estimates of real GDP issued by the Bureau of Economic Analysis of the U.S. Department of Commerce.

http://www.nber.org/cycles/recessions.html

The committee gives relatively little weight to real GDP because it is only measured quarterly and it is subject to continuing, large revisions

http://www.nber.org/cycles/november2001/

The committee believes that the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis. In concept, the two should be the same, because sales of products generate income for producers and workers equal to the value of the sales. However, because the measurement on the product and income sides proceeds somewhat independently, the two actual measures differ by a statistical discrepancy. The product-side estimates fell slightly in 2007Q4, rose slightly in 2008Q1, rose again in 2008Q2, and fell slightly in 2008Q3. The income-side estimates reached their peak in 2007Q3, fell slightly in 2007Q4 and 2008Q1, rose slightly in 2008Q2 to a level below its peak in 2007Q3, and fell again in 2008Q3. Thus, the currently available estimates of quarterly aggregate real domestic production do not speak clearly about the date of a peak in activity.

http://wwwdev.nber.org/dec2008.html

At least in this most recent case, they gave a reason for disregarding their criteria.

From Astronuc's link, the current recession is the only one in recent memory to show positive GDP growth over the first year of the recession - except, of course, for the 2001 recession, who'se dates miss two quarters of negative gdp growth!

From the wiki on the 2001 recession:

In early 2004, NBER President Martin Feldstein said:

"It is clear that the revised data have made our original March date for the start of the recession much too late. We are still waiting for additional monthly data before making a final judgment. Until we have the additional data, we cannot make a decision."

http://en.wikipedia.org/wiki/Early_2000s_recession

Thus far, however, they have declined to revise the date. In fact, most of the criteria they use was later revised down:

The four series cited by the NBER in their decision about the recent business-cycle peak were revised as follows:

-Real personal income less transfers:When the NBER dated the recession, this series showed a generally steady rise throughout 2000 and early 2001. Subsequent revisions reveal that income peaked in October 2000.
-Nonfarm payroll employment: The data at the time of the recession announcement showed employment growing at a substantial pace in early 2001, with 287,000 jobs added from December 2000 to its peak in March 2001. Revised data show that employment grew less than one-third of this amount in early 2001 and peaked in February 2001.
-Industrial production:The original data used by the NBER showed that this series peaked in September 2000. Revised data show that this peak came even earlier, in June 2000.
-Manufacturing and trade sales: Original data showed a peak in August 2000; the most recent data show a peak in June 2000.

http://www.econbrowser.com/archives/2006/08/the_2001_recess.html

Now It is also surprising to me that they make no comment on the anomalous GPD readings this year. The reason for them should be obvious: the economic stimulus package put more money in people's pockets, which they spent in the first 6 months of this year. By my calculations, $600 given to each of about 200 million taxpayers works out to about 2% of our annualized GDP if spent in 6 months. This is real money spent by real people on real products and should carry a heavy weight because it did exactly what it was designed to do: override the effects of a recession.

All that said, the judgement would have been a lot easier had the economic stimulus package been passed a few months sooner.

 

[edward]

Who cares about the GDP and who declared what and when. The economy is a disaster. My son had to call six guys into his office this morning and tell them that they would not be getting their pay checks on the 5th. If they are lucky they might get a check on the 20th.

Sure they can quit , but the only jobs available in Arizona are for prison guards. (seriously)

 

[russ_watters]

Who cares about the GDP...

People who care about the economy and care about being objective care about the GDP. It isn't everything, it is just the most important indicator of the overall health of the economy.

...and who declared what and when.

This thread is in the Politics forum and not the Social Sciences forum for a reason: even though economics is supposed to be a science, the realitiy is that it is highly politicized.

The economy is a disaster. My son had to call six guys into his office this morning and tell them that they would not be getting their pay checks on the 5th. If they are lucky they might get a check on the 20th.

Sure they can quit , but the only jobs available in Arizona are for prison guards. (seriously)

And that is precisely why we need to look at broader indicators. In almost every economy, almost everyone knows someone who is unemployed, underemployed, or otherwise in economc distress. As I've reminded others, the title of this thread is "What is wrong with the US Economy", not, "What is wrong with the life of some guy edward knows".

 

[Astronuc]

Someone who works in one of those big financial companies -

The economic situation is quite tough, and people are losing their jobs every week. You might have heard, too - but Citi are set to let go of 52,000 people globally, RBS about 3,000, Credit Suisse are also cutting jobs this Friday, JPM as well. It is quite scary.

Some economists believe we have not seen the trough yet, others say it will be another Great depression, if not worse. There are conflicting views on how to cope with this.

While the Fed are making important decisions, some people claim the results will be less than satisfactory: they blame the credit creation for the crisis and point out the monetary injection will only worsen the situation (because that money will be created "out of thin air" once more).

I think CS is the one scheduled to lay off on Friday. I'm not sure about the others. JPM will trim WaMu staff by 9200.

RBS likely to cut 2,700 jobs; India may also see layoffs
http://www.banking-business-review.com/article_news.asp?guid=F21D5861-025F-4DB6-9484-7CBFBC071B42


Meanwhile - Auditors fault Treasury oversight of bailout funds
http://news.yahoo.com/s/ap/20081203/ap_on_go_co/financial_meltdown

WASHINGTON – The government must toughen its monitoring of the $700 billion financial bailout to ensure that banking institutions limit their top executives' pay and comply with other restrictions, federal auditors said Tuesday in the first comprehensive review of the rescue package.

The Treasury Department has no mechanism in place to track how institutions are using $150 billion in taxpayer money that the government injected into the banking system as of last month, the Government Accountability Office concluded in its report to Congress.

The auditors acknowledged that the program, created Oct. 3 to help stabilize a rapidly faltering banking system, was less than 60 days old and has been adjusting to an evolving mission.

But the 72-page report was bound to feed congressional concern that banks and other institutions are not being properly monitored and are not using the money to increase lending.
. . . .

 

[edward]

As I've reminded others, the title of this thread is "What is wrong with the US Economy", not, "What is wrong with the life of some guy edward knows".

They are one and the same Russ. You are apparently one of the people who only cares about their own self interests.. I will remind you that your turn to see that pink slip may also come one day.

 

[mheslep]

...

Now It is also surprising to me that they make no comment on the anomalous GPD readings this year. The reason for them should be obvious: the economic stimulus package put more money in people's pockets, which they spent in the first 6 months of this year. By my calculations, $600 given to each of about 200 million taxpayers works out to about 2% of our annualized GDP if spent in 6 months. This is real money spent by real people on real products and should carry a heavy weight because it did exactly what it was designed to do: override the effects of a recession. ...

If people spent the money. The evidence is they did not, instead they just banked it, or payed down debt. That is, the stimulus checks mailed last May had no effect on GDP via the consumption contribution. See the attached BEA sourced graph on personal consumption vs disposable income. Income clearly spiked up w/ the govt. checks, consumption went limp.
http://online.wsj.com/article/SB122757149157954723.html

 

[russ_watters]

They are one and the same Russ.

You know a guy who lost his job. Here's a story about 1,400 new jobs coming to Philly: http://www.nbcphiladelphia.com/news...ve-It-Philly-Employer-Hiring-1400-People.html
My anecdote is bigger than yours, so the economy must be doing spectacular! [/sarcasm]

See how useless anecdotes are?

 

[russ_watters]

If people spent the money. The evidence is they did not, instead they just banked it, or payed down debt. That is, the stimulus checks mailed last May had no effect on GDP via the consumption contribution. See the attached BEA sourced graph on personal consumption vs disposable income. Income clearly spiked up w/ the govt. checks, consumption went limp.
http://online.wsj.com/article/SB122757149157954723.html

What is the definition of "personal consumption" and where did the money go? Even if people used the money to pay down credit card debt or pay (or get ahead of) their other bills, it is still money going out the door.

What else could account for the 6 months of positive GDP growth without income growth?

 

[OmCheeto]

I hope everyone didn't think I was just trying to be funny with my python post.

I was trying to be serious.

I know it's difficult to absorb so much information so fast. I've been an economical illiterate for most of my life. What a surprise to find out that the people running the world were just guessing as to how to do it.

But referring back to my whistling post, I liked the following the best. Mostly because it was simple enough for me to understand:

http://kay.net.nz/2007/10/25/is-a-recession-bad/"
Martin Kay
October 25, 2007

So why then is everyone so frightened by the mention of the dreaded R word? The US Federal Reserve has stepped in whenever the economy looked like it was heading for recession by lowering interest rates and pumping liquidity into the economy to stave off recession. But is this a good idea? It seems like a good deal - why go through recession when you could possibly stave it off for good.

Yes. It is politics. People in power, and everyone else for that matter, don't like things going wrong on their watch. It's simple human nature.

I like Kay's analysis. Let the flotsam float away. Let the jetsam sink to the bottom.

...

sorry. I've run out of cute metaphors at the moment.

....

ps. just hired someone on Friday. Hiring freeze went into effect yesterday. She's the best. I saw "graduated with a degree in applied sciences" on her resume and thought to myself; "Damn, a scientist! Throw all the other applications away!"

 

[edward]

As I've reminded others, the title of this thread is "What is wrong with the US Economy", not, "What is wrong with the life of some guy edward knows".

That someone Edward knows is my son and his employees Russ.

My sons job and the strife of his employees are every bit as much about what is wrong with the economy as any rear projected GDP statistics you can post. You can crunch all the numbers you want and it won't change anything at this point.

A while back people were posting about the cost of food. Hey go jump on them O.K.

As a matter of fact the thread should now be titled What Happened To The U.S. Economy.

 

[russ_watters]

That someone Edward knows is my son and his employees Russ.

So you take this subject very personally and react based on emotion, not logic. I get it and it is understandable, edward, but even as you do it, you should be able to recognize that reaction for what it is. And it isn't even that it isn't personally relevant to me that matters: what matters is that it isn't relevant for any of the other couple hundred million people who didn't lose their jobs recently. The only way to properly evaluate The Economy is through broad economic statistics. Anecdotes are things to commiserate over in GD and not useful beyond that.

And just fyi, you don't know me - you know very little about me because I don't talk about my personal life much here. I've had some job issues this year too, and they weren't pleasant. But they are completely irrelevant here.

 

[edward]

So you take this subject very personally and react based on emotion, not logic. I get it and it is understandable, edward, but even as you do it, you should be able to recognize that reaction for what it is. And it isn't even that it isn't personally relevant to me that matters: what matters is that it isn't relevant for any of the other couple hundred million people who didn't lose their jobs recently. The only way to properly evaluate The Economy is through broad economic statistics. Anecdotes are things to commiserate over in GD and not useful beyond that.

And just fyi, you don't know me - you know very little about me because I don't talk about my personal life much here. I've had some job issues this year too, and they weren't pleasant. But they are completely irrelevant here.

Do you realize that you just stated that job issues are not relevant in this thread about economics??

One job may be irrelevant. But in my son's case he has 15 employees and the same thing is happening all over the country.

I was trying to give some insight as to how the economic crisis has already filtered down to the local level.

Go ahead and keep throwing out statistics that only mattered in the past.

 

[mheslep]

What is the definition of "personal consumption" and where did the money go? Even if people used the money to pay down credit card debt or pay (or get ahead of) their other bills, it is still money going out the door.

What else could account for the 6 months of positive GDP growth without income growth?

GDP = Consumption + Investment + Govt Spending + (Export - Imports), so it was one of those. Note govt spending has to be in govt purchases, as in buying guns and butter that the govt. then owns. Mailing checks that don't purchase anything doesn't count, unless and until the recipient goes out and buys something, where it then counts as Consumption. Likewise for individuals who just deposit money in the bank, doesn't count.

 

[Astronuc]

Employers shedding jobs as recession deepens (2 hrs ago)
http://news.yahoo.com/s/ap/20081205/ap_on_bi_ge/financial_meltdown

WASHINGTON – With the economy sinking faster, employers are giving more Americans dreaded pink slips right before the holidays.

The Labor Department releases a new report Friday that's expected to show the employment market deteriorated in November at an alarming clip as the deepening recession engulfed the country.

After bolting to a 14-year high of 6.5 percent in October, the unemployment rate likely climbed to 6.8 percent last month, according to economists' forecasts. If they are right, that would mark the worst showing in 15 years.

Skittish employers, which have slashed 1.2 million jobs this year alone, probably axed another 320,000 last month, economists forecast. If that estimate is correct, it would represent the deepest cut to monthly payrolls since October 2001, when the economy was suffering through a recession following the Sept. 11 terrorist attacks.

Employers are slashing costs to the bone as they try to cope with sagging appetites from customers in the United States as well as in other countries, which are struggling with their own economic troubles.

The carnage — including the worst financial crisis since the 1930s — is hitting a wide range of companies.

Just in recent days, household names like AT&T Inc., DuPont, JPMorgan Chase & Co., as well as jet engine maker Pratt & Whitney, a subsidiary of United Technologies Corp., and mining company Freeport-McMoRan Copper & Gold Inc. announced layoffs.
. . . .

Employers cut 533K (the expectation was 230K to 340K according to what I heard yesterday)

US sheds 533,000 jobs
http://news.yahoo.com/s/afp/20081205/bs_afp/useconomyunemployment

WASHINGTON (AFP) – The US economy lost a stunning 533,000 jobs in November and the unemployment rate jumped to a 15-year high of 6.7 percent, the Labor Department said Friday.

The report highlighted the severe retrenchment by companies in the face of a struggling economy and tight credit.

The number of job losses was much higher than the 325,000 expected by private forecasters.

The report, seen as one of the best indicators of economic momentum, also included a sharp upward revision in the number of job losses in the prior two months: October saw a loss of 403,000 jobs (up from an earlier estimate of 240,00) and September job losses were revised up to 320,000 from 284,000.

. . . .

Yet unemployment rate is 6.7%, which is down. Discouraged workers, i.e. those given up, are not counted, so the unemployment (for whatever reason) rate is actually much higher.


Imports are down somewhat more than exports, so the trade deficit is down - but so are exports.

 

[Gokul43201]

The only way to properly evaluate The Economy is through broad economic statistics.

Like the unemployment rate? How do you anticipate that number is likely to trend over the next year or so? Do you think we are near the peak at 6.7%, or do you think it'll get higher?

 

[turbo]

Like the unemployment rate? How do you anticipate that number is likely to trend over the next year or so? Do you think we are near the peak at 6.7%, or do you think it'll get higher?

Depending on the timing, the official unemployment figure could actually drop while real unemployment is increasing. This happens when groups of people from earlier lay-offs exhaust their benefits and are no longer counted. If people exhaust their benefits at a faster rate than new claims emerge, "official" unemployment will decline while real unemployment climbs.

 

[Astronuc]

Depending on the timing, the official unemployment figure could actually drop while real unemployment is increasing. This happens when groups of people from earlier lay-offs exhaust their benefits and are no longer counted. If people exhaust their benefits at a faster rate than new claims emerge, "official" unemployment will decline while real unemployment climbs.

The unemployment rate would have moved even higher if not for the exodus of 422,000 people from the work force. Economists thought many of those people probably abandoned their job searches out of sheer frustration. In November 2007, the jobless rate was at 4.7 percent.

from the revised Yahoo/AP article.
Employers cut 533K jobs in Nov., most in 34 years
http://news.yahoo.com/s/ap/20081205/ap_on_bi_ge/financial_meltdown

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

The number of long-term unemployed (those jobless for 27 weeks or more) was
little changed at 2.2 million in November, but was up by 822,000 over the past
12 months. (See table A-9.)

Total Employment and the Labor Force (Household Survey Data)

In November, the labor force participation rate declined by 0.3 percentage
point to 65.8 percent. Total employment continued to decline, and the employ-
ment-population ratio fell to 61.4 percent. (See table A-1.)

Over the month, the number of persons who worked part time for economic
reasons (sometimes referred to as involuntary part-time workers) continued
to increase, reaching 7.3 million. The number of such workers rose by 2.8
million over the past 12 months. This category includes persons who would
like to work full time but were working part time because their hours had
been cut back or because they were unable to find full-time jobs. (See
table A-5.)

. . . .

Apparently if one takes all the 'unattached' or discouraged workers, then the unemployment rate would be more like 12%.

Actaully 12.5% - http://www.bls.gov/news.release/empsit.t12.htm
and the term is 'marginally attached' as opposed to 'unattached'.

The Employment Situation for December 2008 is scheduled to be released
on Friday, January 9, 2009, at 8:30 A.M. (EST). Employment Situation
release dates for the balance of 2009 can be found on the BLS Web site at
http://www.bls.gov/schedule/news_release/empsit.htm.

 

[kronon]

some initial reactions of economists to the job data:


This is almost indescribably terrible. In the past six months the U.S. has lost 1.55 million jobs, almost as many as were lost in the whole 2001 recession, which included 9/11 and the two months after. The pace of job losses is accelerating alarmingly, as this report attests, with steep drops in most sectors but the biggest deterioration in services — down 370,000 in November after 153,000 in October. Note education/health and governmentt added 59,000, so core private payrolls even worse than headline. Desperate.

This was much worse than was expected and represents wholesale capitulation. The threat of a widespread depression is now real and present.


The bottom drops out of the labor market… History tells that once the labor market weakens as much as it has in the past several months, job-shedding takes on a life of its own and tends to persist for a long while. We expect labor market conditions to be dreadful for many months to come and consequently for consumer spending to continue to decline. The U.S. consumer, which for so many years was the global engine of growth, will remain a significant drag on economic activity in coming quarters

A shockingly weak report that suggests the fourth quarter could see a drop in real GDP of 5% or more at an annual rate. The large downward revisions to employment in September and October suggest that the economy was even weaker than we thought when the credit crunch intensified (indeed the employment report for September, which now shows a larger than 400,000 decline in jobs, was surveyed in the week before Lehman Brothers failed).,, These data will spur the calls for a massive stimulus plan, increase the chances of a rescue package for the domestic auto industry

 

[Ivan Seeking]

...STEVEN PEARLSTEIN, The Washington Post: About 600,000 people got discouraged, probably, and left the workforce, or most of them. And we had also nearly as -- 400,000 workers who were working part-time, additionally, working part-time last month involuntarily. They would have rather had a full-time job and all they could get was part-time.

So if you add up the sort of marginal workers, marginally employed workers, or people who discouraged or people who are underemployed, you're dealing with a sort of underemployment and unemployment rate of more than 12 percent, according to the Department of Labor...

http://www.pbs.org/newshour/bb/business/july-dec08/jobloss_12-05.html

 

[jal]

So if you add up the sort of marginal workers, marginally employed workers, or people who discouraged or people who are underemployed, you're dealing with a sort of underemployment and unemployment rate of more than 12 percent, according to the Department of Labor...

>10% is considered going into the depression.
In order to get a proper comparison ... how did they arrive at 25% for the depression?
jal

 

[OmCheeto]

>10% is considered going into the depression.
In order to get a proper comparison ... how did they arrive at 25% for the depression?
jal

Experts will probably all have their own definition for what a depression is.
The following describes one aspect of the sociological side of economics.
The experts make up new, less harsh sounding phrases so the masses won't freak out when things go bad.

The Wall Street Journal
December 5, 2008, 3:59 pm
http://blogs.wsj.com/economics/2008/12/05/defining-depression/"

Friday’s dismal November jobs report brings the old joke to mind: A recession is when your neighbor loses his job, a depression is when you lose yours.

The truth is that there is no good rule of thumb for a depression, like the two quarters of consecutive GDP declines that many people use for a recession. And unlike recessions, which are semi-officially declared by the National Bureau of Economic Research’s business cycle dating committee, there’s no arbiter to say that an economy has fallen so hard it’s in a depression.

In the old days, what we now call recessions used to be called depressions. The word recession only came into common use after the Great Depression, in order to distinguish garden-variety downturns from that epic crash. Sort of like the World Meteorological Association retiring a devastating hurricane’s name.

That said, with the economy in the midst of what may be its worst downturn in the postwar period, it is worth thinking about what it would take to dust off the “depression” moniker.

Richard Sylla, an economic historian at New York University, says that his rule of thumb for a depression would be double-digit unemployment rates lasting for more than a few months. The only times that occurred in the U.S. were during the Great Depression and the 1890s. The deep recession that ended in 1982 briefly saw unemployment rise above 10%.

Berkeley economic historian Brad DeLong’s definition of a depression is in a similar vein: Unemployment hits 12%, or it stays above 10% for three years.

Rutgers economic historian Michael Bordo says he would define a depression “as a sustained decline in output of 2 or more years of at least 10% per year. If you look at U.S. history we only really had one such event.” –Justin Lahart

But it looks as though everyone is freaking out right now anyways.

We need a cheerleader.
Buy low! Sell High! Get into the market now! If everyone took that $10,000 under their mattress and put it in the market, that'd be over a trillion dollars! And buy a new car! If 50,000,000 Americans buy a new car for $20,000, that's another trillion dollars! Recession over! No more bailouts! Yippie!...

...

um. ok. back to freakin out.

 

[russ_watters]

Employers cut 533K (the expectation was 230K to 340K according to what I heard yesterday)

US sheds 533,000 jobs
http://news.yahoo.com/s/afp/20081205/bs_afp/useconomyunemployment
Yet unemployment rate is 6.7%, which is down. Discouraged workers, i.e. those given up, are not counted, so the unemployment (for whatever reason) rate is actually much higher.

?? Unemployment rate is up from 6.5%.

Apparently if one takes all the 'unattached' or discouraged workers, then the unemployment rate would be more like 12%.

Actaully 12.5% - http://www.bls.gov/news.release/empsit.t12.htm
and the term is 'marginally attached' as opposed to 'unattached'.

How is that useful? Can you compare that number to, say, a rate calculated the same way in 2001 or 1991?

In any case, 533,000 is a big, big number. It may be a reaction to the stock market turmoil, but it points to a likelihood that the recession will be pretty significant. The previous two months were revised up as well.

 

[turbo]

And buy a new car! If 50,000,000 Americans buy a new car for $20,000, that's another trillion dollars! Recession over! No more bailouts! Yippie!

I beat you to it. Bought a new Forester yesterday. With new-vehicle sales slumping, there are some pretty good deals out there.

 

[Gokul43201]

Depending on the timing, the official unemployment figure could actually drop while real unemployment is increasing. This happens when groups of people from earlier lay-offs exhaust their benefits and are no longer counted. If people exhaust their benefits at a faster rate than new claims emerge, "official" unemployment will decline while real unemployment climbs.

Is there good reason to believe that this effect is significantly more pronounced this time round than during previous recessions? I can imagine that there might be less of this if a recession, even if deep, was pretty short-lived (it takes time before people start losing hope). So, one question worth answering is: has the weak employment situation this time been around for longer than is typical?

If not, what other reason is there that makes this time special? If there is none, and this is something seen in all similar recessions, then I see no good reason to replace the official unemployment rate with some "real" unemployment rate; the official number remains a better economic indicator because it comes with a smaller error bar.

 

[mgb_phys]

Is there good reason to believe that this effect is significantly more pronounced this time round than during previous recessions?

Generaly the effect gets worse each time, because all the tricks from each earlier recession are already in place and new ones are added.

In the UK during the 80s as unemployment rose the official rate ended up being about 1/2 the real rate - then in the next downturn that becomes the starting point for the creative statisics this time.

 

[russ_watters]

(for whatever reason) [why people not looking for a job are not included in unemployment stats]

The purpose of the conventional unemployment statistic is to gauge the supply and demand of labor in the labor market. People who are not in the labor market don't affect it. Ie, if you apply for a job and the "official" unemployment rate is 5%, it doesn't matter if there are 1 million or 10 million "unattached" workers. They don't affect your prospects for getting the job.

As you might expect, though, when those people enter the market as the economy picks up, the unemployment rate will continue to rise. So while you may think the rate doesn't show how bad it really is, the corollary is also true: sometimes it makes the overall economy look worse than it really is (which is why the NBER doesn't use the unemployment rate directly in its dating procedure).

More info on the different measures, international standards, rationales, and criticisms: http://en.wikipedia.org/wiki/Unemployment#Measurement

 

[russ_watters]

>10% is considered going into the depression.
In order to get a proper comparison ... how did they arrive at 25% for the depression?
jal

By the conventional definition.