Where is the US economy headed?

@okie,

Why surprised? Most financial pundits have said a hundred times that they expect unemployment to hit over 10%. I think 10% is too low.

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@okie,

The story did make the headlines today, but ran out of running-room, Okie. The unemployment rate increase (9.7% vs 9.4% last month) was not unexpected. The unemployment rate, as we have discussed earlier, is a lagging indicator. The job loss number of 216,000 is 50,000 better then last month and 200,000 better than the month before that. In January, the job loss number was 750,000 as you will recall.
The reality is, of course, that job losses may be declining, but the unemployment rate will continue to rise. The average work week declined to 33.1 hours. That underemployment will have to be soaked up before jobs are created.
Some numbers re the 216,000 job losses:
Construction: (65,000)
Manufacturing: (63,000)
Financial: (28,000)
Professional/Business Services (22,000)
Government (18,000)
Retail (10,000) (Source: U.S. Labor Dept)

P.S. Okie, your article cited said the unemployment rate "...jumped almost half a point to 9.7% (from 9.4%)." Sloppy reporting/editing at best.
The Dow rose 100 points (1%) on the jobs report appearing to some to be positive on balance.

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@realjohnboy,

Positive news in the sense that the rate of increase had decreased, if I'm reading it right.

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@roger,

Yes, Roger. The popular refrain from economists I follow in response to various reports is some variation of "The news is less bad."
Not good...but less bad. We have a long, long way to go.

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rjb, The job loss in government is much higher than the number you reported; it also hides the fact that many government departments have mandatory days off per month that have been increasing from once a month. Many government workers are now living on the edge, because their loss in income has dramatically affected their spending.

The service industry continues to lose jobs as consumer spending constricts based on lost jobs and reduced hours. If we have any kind of recovery, it's going to be a slow one for job creation. I'm guessing it's going to be five to seven years before we see any kind of reversal of job losses we are now experiencing.

roger, You're reading the information corrrectly, but the bleeding of jobs will continue for at least five more years or more before we see some positive signs in job creation.

What we must continue to watch is two-fold; consumer spending, and job creation. Not much else matters.

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@realjohnboy,

exactly. sort of "the ship is taking on water much slower than it was. bail faster and maybe we'll make it".

i heard one guy saying today that he thought that it would be at least a year or 2 till things started humming again. but CI might be right about it being longer.

if more boomers started retiring early, it might help. but considering what a spanking so many have taken on the market and such, i don't know if there are many that can afford to do it.

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@DontTreadOnMe,

DTOM, What I've been observing in the stock market is very interesting; even as more people continue to lose jobs and consumer spending continues to drop, the stock market seems immune to these trends in jobs and consumer spending.

I sold off the rest of my money market fund last June and bought into three funds that have shown more than a 10% increase so far, but last Monday, I sold off 25% of my YTD gains in all funds and from my International Funds and transferred it into my bond funds. I plan to continue doing this during the next three months (@25% each) until all my gains for this year is transferred into my bond funds.

I believe most investors will be purchasing stocks based on all the "good" news, and help the stock market continue its gains for the next 12-months or so. At least that's my strategy.

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@cicerone imposter,

Quote:

I believe most investors will be purchasing stocks based on all the "good" news, and help the stock market continue its gains for the next 12-months or so. At least that's my strategy.

or alternately, what is good for corporate America is now completely divorced from what is good for the average Joe. Much of the stimulus money will be sucked up by individuals who have no need for more work/money and more than that by corporate firms that are the pipe through which the stimulus money runs. We all make fun of "trickle down economics" because it was silly in theory and has been proven over and over again to be a failed theory. But Obama did it anyway, put $800 billion into the trickle down pipe. After profit takers and thoughts who would have been working without the stimulus take their cut, what will come out to the intended recipients?? $300 billion.......if the system works really really good (and the tax cuts do ANYTHING more than make the rich more rich)???

My guess is that ten years from now when all of the post mortems are done it will turn out that $800 billion bought around $200 billion of what was wanted.

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@hawkeye10,

hawkeye, Your post tells me you don't have a clue as to the stim plan. The amount you mention is for tax reductions. Go back and do a little reading on the stim bill, then come back and tell us how much of the stim bill is for infrastructure, helping states with funding, how much the stim bill will actually help our economy, and how much will be "waste."

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@cicerone imposter,

If you think anyone knows you are nuts. It will take ten years of looking at the data in the rear view mirror to figure it out.

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@hawkeye10,

hawkeye, You are wrong! Most financial pundits have already given credit to the TARP funds and stim bill for minimizing this recession. Even with my jaudiced eye, I see that our economy is not as bad off as many have expected from the recession that began in 2007. Many companies are showing signs of recovery, and home sales have been improving at a time more people are losing their jobs.

Anything that has to do with any economy that tries to look 10-years ahead has no understanding of economics - macro or micro.

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@cicerone imposter,

Quote:

Anything that has to do with any economy that tries to look 10-years ahead has no understanding of economics - macro or micro

Jesus, is English your first language or eighth?? I said that it will take ten years of looking at the data being generated right now before we know for sure exactly what the $800 billion did, and how. You are living in a country that did not figure out that it was in recession till 8 months after it started, we are not exactly on the ball!

The economy is complicated, and our economic experts are not particularly expert.....knowledge takes a good deal of time to come to the surface.

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@hawkeye10,

Why 10-years? That doesn't make any sense, because we can analyze past economic activity pretty quickly. The government publishes weekly economic activity immediately; that's how they make their projections, but there is no math formula that can predict future economic activity.

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@cicerone imposter,

Quote:

Why 10-years? That doesn't make any sense, because we can analyze past economic activity pretty quickly

Well, considering that it takes 60 days to get an accurate measure of how many people are working, and how much, not particularly quickly.........

Anyways, they can tell reasonable fast what happens, it takes much longer to puzzle together why things happen, how all of the subsystems work together. Decades after the fact economists were still figuring out what happened during the last depression, in fact I think that most of the best work was done during the 50's. Our attention was diverted away during some of that time, so maybe it does not take 20 years on this one.

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@hawkeye10,

You are forgetting many aspects of why today's tools are far superior to what happened half a century ago. I'm sure there's no need to detail them out for you.

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@cicerone imposter,

Quote:

You are forgetting many aspects of why today's tools are far superior to what happened half a century ago. I'm sure there's no need to detail them out for you

but lookie here, this recession/depression was not predicted by hardly anyone. The theories thrown up by the academic economists over the last thirty years have almost universally been proven wrong in practice.

economists love their tools, granted. They have not been of much use to the rest of us though. Check this out, and come back with your pollyanna optimism and see how far it gets you. Almost nobody believes that the pro's have a clue.

Quote:

What happened to the economics profession? And where does it go from here?

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets " especially financial markets " that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation.

It’s much harder to say where the economics profession goes from here. But what’s almost certain is that economists will have to learn to live with messiness. That is, they will have to acknowledge the importance of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets and accept that an elegant economic “theory of everything” is a long way off. In practical terms, this will translate into more cautious policy advice " and a reduced willingness to dismantle economic safeguards in the faith that markets will solve all problems.

http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?_r=1&hpw

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@hawkeye10,

But even that hawk rather dissembles more underlying and profounder difficulties and almost suggests that if the high priests of this demonic art were to merely reform their attitudes in the manner recommended everything will again come right.

Experts are by their nature at war with irrationality and imperfections and deeply in love with theories of everything which serve to bring their name to the attention of a confused mass of illiterate subjects and the more ambitious among them to whom even a transitory success is better than no success have a rather poor record of offering cautious policy advice which, by its very nature, is somewhat deficient of those characteristics with which a man might make a splash in the world and gain the ear of those desperate for some straw to which they might cling in order to facilitate their journey downstream towards the safe harbour of the publisher of their memoirs and the library containing the history of their administration.

The gold price rise predicted something. It was $400 in 2005 and $700 by mid 2007 which led to my suggestion that we might assert that we are off the gold standard but actually cannot escape from its severities. Diamonds are a Girl's Best Friend.

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G-3 is the most commonly reported "unemployment rate." It is the one that rose from 9.4% to 9.7% in August.
We have talked before about G-6, which adds in the underemployed. It rose from 16.3% to 16.8% in August, as the average number of hours declined by .3%.

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@realjohnboy,

How would you measure unemployment rjb if your instrument took into account the decline in hours worked, the nature of the work and the increase in the number of days off.

Suppose we have one man-power on a 30 hour 5 day week with extensive tea breaks engaged, with a team of colleages and suppliers, for about 200 days per year in preparing the coach Her Majesty rides up the course in at Royal Ascot or one woman power on similar hours cutting out material to compose the lastest thing for the fashion shows. Compared to a firefighter holding back the flames on Californian hillsides or a nurse working in the intensive care unit.

Do they all count as one unit on your scales?

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I am not sure I understand your question, Spendious. But I also didn't comprehend your 125 word sentence directed at Hawkeye.
I actually do appreciate, more perhaps than others. your late night wittiness when you get home from the pub.
Economics, the cold science, does not pass judgment on the social value of "work." The footman to Prince Charles, or Prince Charles himself (whatever happened to him, by the way?) or the nameless firefighter in CA.
The health care debate here did sort of blur the lines when it became known that President Obama intended to have a Death Panel to decree who were to get medical care and who would be too old or frail to merit it. But I digress.
There is a statistic called the Gross Domestic Product which is the total dollar value of goods and services in a given country. Value added is a term that comes into play. Some guy takes $20 worth of lumber, invests his time, and produces a chair that sells for $100. The formula for tabulating this stat is quite complex, involving about 10 letters in the alphabet (C + I +NX - etc).
Measuring the value of services gets pretty complicated. Take the fires in CA which have cost something like $100M to fight. How do you put a value on what was saved?
Interestingly, the Bureau of Labor Statistics has divided the economy into some 25 categories, like manufacturing, retail etc. Each of those sectors can be quantified (perhaps) as to how much is contributed to GDP. The BLS can estimate how many workers are in each category, so by simple division can ascertain how much each worker adds to GDP.
But there is more! The BLS knows what the hourly rate of pay is for workers in each category. So by a little more math, they can estimate how much GDP is generated be each dollar of wages.
I would think that food production has pretty high value per wage dollar.
Or heavy manufacturing where a lot of functions are highly mechanized.
But what do I know.

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Where is the US economy headed?

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