A Tale of Two Lines

June 5, 2012

A colleague asked me “Why am I standing in line at the restaurant if there are so many in the unemployment line?”

I told him that we were standing in line with the 91.7% of the folks who are employed, not the 8.3% who are unemployed (U-3 unemployment measure).

I should have told him that we were standing in line with the 85.2% of folks who are fully employed, as opposed to the 14.8% who are not (U-6 unemployment measure).

Blue line indicates those of us who are standing in line at Applebees, Red line indicates people suffering from the “jobless recovery.”

The blue line shows the average number of hours worked by people with jobs in the private sector. It shows that those of us who are working are doing fine.

The red line in the chart below is a monthly index of the employment-to-population ratio, normalized to a value of 100 in December 2007, when the recession began. The lack of an uptick in the redline since 2009 is, we think, the essential tale.

Regardless of how one chooses to explain it, the fact that it has not improved is the critical issue.

We recall Dicken’s opening line from A Tale of Two Cities:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

Sobering fact: Long term unemployment, defined to be 27 weeks or more out of work climbed to  5.4 million, or 41.3% of unemployed(U3) people.

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The REAL Unemployment Problem- Creating a Permanent Class of Government Dependents

May 15, 2012

The real unemployment problem- an increase of  17.9 million Americans no longer in the workforce since 2000; According to the U.S.Census 49% of Americans live in a home that receives direct monetary benefits from the U.S.Government.

Not the kind of “Change” I like to see.

Looking back at the recessions in the 1960’s, ’70’s, and ’80’s, we see a sharp recovery in employment. No such luck with the last recession.

I have a colleague who sends me crap fallacies like Paul Krugman’s latest unemployment “it isn’t structural” polemic. My colleague hates  government austerity, loves higher taxes, and loves deficit spending (uhh- he calls it necessary stimulus.)

Mr. Krugman sets up a straw man argument about the ratio of government employment to U.S. population remaining flat to show there is no structural problem. (Conveniently ignoring the fact that government employment growth is at it’s highest level since 1968)

Strawman argument from a Nobel prize winner. Isn’t that something?

That’s what happens- I guess- when you look at U-3 instead of U-6 Unemployment figures.

Let’s look at some less obscure points. How about the ratio of Americans not in the workforce  between 2000-2011 versus the increase in population over the same period?

Population increased over 30 million; folks not in the workforce increased to 17.9 million in the same period.

60%!

That is probably too weak a signal for an economist of Mr. Krugman’s pay grade to acknowledge.

Look at the chart above.

Here are some of the facts  behind that chart:

  1. There are 242 million working age Americans
  2. Only 142 million of them have jobs
  3. Those who aren’t working are depending on the government for their spending
  4. There seems to be no employment recovery. (That ‘jobless recovery’ thing.)

Bottom line, added to every other dependency and entitlement program, the unemployment that is “not structural’ according to Mr. Krugman actually brings the number of Americans dependent upon the federal government up to 91 million.

I think that folks would rather have a job.

Our shops have openings for skilled machinists. Our schools have programs to teach machining. Yet there are no applicants.

Dear Mr. Krugman, we do have a  ‘structural’ unemployment, problem, and it isn’t at all what you think.


Why We Don’t Post About Unemployment

January 12, 2012

Low unemployment numbers can be deceiving. When the unemployment rate declines, it does not necessarily mean that more people found jobs. Instead the number can reflect people  dropped off the official unemployment rolls and out of the workforce. How is that “good news?”

Unemployment figures should be taken with a grain of salt.

In the county where I live, the number of unemployed dropped from 6800 to 5600 in November, according to county workforce director  in a recent news story in our weekly paper,  The Post.

Yay ! 1200 people no longer unemployed? A 17.6 % drop- in  unemployment?

Not so fast.  “…the number of people employed in Medina County remained at approximately 91,700 over that same period.”

People who run out of benefits and quit actively  seeking work drop off the list of unemployed and are also no longer counted as part of the workforce.

The estimated workforce in Medina County dropped from 98,500 in July to 97,300 in November.

1200 in all.

The 1200 people  that dropped from the unemployment rolls- would seem to be the 1200 people  who also dropped out of the workforce between July and November.

So that 1200 person drop in unemployment is not good news- it doesn’t mean that 1200 people now have found good paying jobs.

In reality, it means that those 1200 people have run out of benefits and are not counted by the officials as unemployed nor as part of the county workforce.

That’s why we don’t report on changes in the unemployment rate- the changes are PRESUMED to mean that the employment situation got better. The reality is that those people are now officially invisible, as they aren’t even counted in the workforce, nor are they counted as unemployed. But they are unemployed.

When a change in an indicator can mean more than one thing, it is questionable to use it as an indicator. Does it mean this? Does it mean that?

Ambiguous indicators are worse than worthless- they are deceptive. Changes in the unemployment rate are ambiguous indicators- they could mean an uptick in hiring, or they could mean people have run out of benefits and are no longer being counted as part of the workforce.

In the case of unemployment statistics,  what appears to be good news (a drop in the unemployment rate) is not always good news (the people are just no longer counted as unemployed nor as part of the workforce).

That’s why we don’t post about unemployment. And when anyone does, we suggest you take it with a grain of salt.

Glenn Wojciak article in The Post

Morton Salt photo


Where’s the Jobs?

December 3, 2010

Guest post by Peter Morici.

Only 39,000 new jobs created is awful.

After we back out health care and social services, which are largely gov’t funded, the private sector is not creating permanent jobs.

None, zero, nada. 

Where's the Jobs?

After health care, social services and temp services are backed out, the private sector ACTUALLY LOST lost 24,000 jobs

Ugh! (SpeakingofPrecision asks-IS THAT A TECHNICAL TERM?) 

So much for the gradual recovery.

 Meanwhile Congress and President negotiate extending the tax cuts–which everyone knows will end in a compromise in the range of $500,000 to $1,000,000 for the cutoff or a temporary extension or both, and extending unemployment benefits, again. 

Deck chair anyone?

 Rearranging the chairs on the deck of the Titanic! 

The economy must add 13 million private sector jobs by the end of 2013 to bring unemployment down to 6 percent.

 President Obama’s policies are not creating conditions for businesses to hire those 350,000 workers each month, net of layoffs. 

Peter Morici

703 618 4338 

Peter Morici is a professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the U.S. International Trade Commission.

 Photo credit.

Actual photo of Titanic Deck Chairs

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An Engineer’s Point of View

March 25, 2010

 

I received an email from a trusted colleague that had a letter attached describing the writers frustration with outsourcing.

Here at pmpaspeakingofprecision. com, we are all about people making things to make our world safer and our lives better. So when we read this letter describing one engineers frustration when trying to do exactly that, well, we asked for permission to share it with you.

Keeping the dock from opening up the oil tanker like a can opener.

The writer, a maritime design engineer, is trying to source wheel fenders so that hulls of  “80,000 DWT” oil tankers don’t rupture when contacting a fixed surface of the dock. It really matters, when “The potential impact of failure is 2000 years” if the hull tears. This post takes some highlight’s from that letter.

Guest post by Vitaly Feygin

My name is Vitaly Feygin. I am a Structural Engineer, not a writer, but I urge you to read this post.

Like many immigrants I came to this great country 20 years ago.

Twenty years ago we all were shocked to discover the prosperity of this country and how much this country achieved using competition of small and medium size businesses.

Great career for twenty years as an engineer.

Today, I want to ask you: “Where is that competition? Where are professionals and skilled craftsmen who made this country?”

Instead of professionals who are doing and managing their work and are proud of what they were doing, we developed a gang of MBA (Masters of Business Administration) who mastered bureaucracy, who have not created anything but hurdles for those who could work. What these MBA have done to us- they sold us out.

Doing nothing, their only significant task was to sell our work to countries like China or India. That is the “real” Business Administration. Here is an example.

I am a Maritime Structural Engineer. In our business we are quite frequently use special rubber fenders that protect ships from destruction during dock operations.

Five years ago there were 5 companies producing these fenders in US. Today there is only one company, and after that company swallowed all her competitors they moved manufacturing facilities to where? You are right, to China.

We became a nation that sells to each other Chinese products- products that are produced in Communist China at a time when millions of US workers are without work and with no means to support themselves.

Go to any store and try to find any merchandise that is produced in this country.

You will find none.

We are discussing Health Reform with whom?

With destroyed small and medium size businesses who cannot compete with subsidized Chinese labor.

 
 
 

More than half of the 763,000 jobs lost in the first two quarters of 2008 were lost in small firms, and unincorporated self-employment fell from an average of 10.4 million in 2007 to an average of 10.1 million in 2008—9.6 million by November and December.

 

You probably heard that China artificially keeps her currency undervalued.

We send to them our jobs and now they peg their currency to keep us at a disadvantage.

 China has growth.

We have enduring unemployment

 

 

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Economy Sheds More Jobs

March 11, 2010

Obama’s policies not enough.

Guest post  by Peter Morici

 The Labor Department reported the economy shed 36,000 jobs in February and the unemployment rate held 9.7 percent. Counting workers compelled to work part time for lack of full time opportunities and discouraged workers that have quit looking, the unemployment rate rose to 16.8 percent.Continuing job losses indicate President Obama’s stimulus spending and support for the banks have failed to turn the economy around. In an economic recovery, jobs are a  lagging indicator, not a never indicator.Eight months into the much touted recovery, the economy should be adding jobs not losing jobs at a slower pace. No study of economic history could yield a conclusion other than that the U.S. economy walls along the precipice of a double dip recession.To add jobs, businesses need customers and capital. Businesses lack customers because of the yawning trade deficit with China, and capital because the Bush-Obama bank bailout enriched Wall Street financiers without fixing the problems of the 8,000 regional banks that do the tough lending.

Nearly all the sustainable GDP growth accomplished in the second half of 2009-GDP growth less adjustments for inventory changes–went into the pockets of Wall Street bankers as bonuses.

When dollars leave the United States to purchase imports and do not return to purchase exports, Americans cannot sell all they make-be it manufacturers, software makers, movie producers, or clean shirts from the corner laundry. 

From 2005 to 2008, by consuming more than they produced and earned, through excessive foreign borrowing, Americans sustained a false prosperity with a trade deficit in excess of 5 percent of GDP.  That line of credit has run out, and either Americans balance their trade accounts or reconcile to slow growth, no jobs and economic decline.

Stimulus spending and subsidies for Wall Street financiers are palliatives-more accurately, an ice pack for the hangover from the Bush years of heavy borrowing, and shabby financial practices that began with Enron and continue at Goldman Sachs today, through shameful tactics such financial engineering to cover up Greece’s financial blight to selling of mortgage backed securities to investors while it shorts the market.

Regional banks have not benefited from the TARP, which was intended to create an elaborate analog to the Savings and Loan Crisis Resolution Trust Corporation. Instead, the 8,000 regional banks lack money to lend businesses.

No customers, no capital, no jobs

Failing to address root causes of economic malaise invites decline.

President Obama and speaker Nancy Pelosi obsess about income redistribution in every piece of legislation, ranging from health care reforms to road construction.

A just distribution of wealth is a noble goal, but there must be wealth to distribute.

The American economy is at sea. Without rudder or compass, America navigates an iceberg field while the ships’ captain and pilot focus on a well stocked bar, lest the passengers become aware of their imminent peril.

Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.

 

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On These Maps, Dark Is Not Good

March 2, 2010

Sometimes, our eyes can help us see what is really going on, no matter what the talking heads in the media try to tell us.

On this first map, a satelite image of the Korean peninsula, the light indicates urban and economic activity as evidenced by electric lights in South Korea. The absence of light at the top of the peninsula indicates an apparent lack of economic and industrial activity in North Korea.

Darkness means no economic activity that can afford outside lighting.

Link: Korean Peninsula

On this map of unemployment rates by county, again darkness indicates lack of economic activity.

Darkness means county unemployment 10% or more

Here is the interactive version posted on YouTube:

Click here to see this interactive map show the growth of unemployment by county from Jan 2007 to January 2010.

Sometimes, it’s easier to just show what you mean.

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