November 30, 2005

Unintended comedy, economic news reporting division.

The NYT just needs to bring us down, for some reason. All the economic news is good, but Vikas Bajaj, on the front page of the paper today, searches desperately for the bad. Check out the first few lines:
Gasoline is cheaper than it was before Hurricane Katrina slammed into New Orleans. Consumer confidence jumped last month and new home sales hit a record. The stock market has been rising. Even the nation's beleaguered factories appear to be headed for a happy holiday season.

By most measures, the economy appears to be doing just fine. No, scratch that, it appears to be booming.

But as always with the United States economy, it is not quite that simple.

Consumer confidence is bouncing back from what was arguably some of its worst readings in years. Gasoline prices-the national average is now $2.15, according to the Energy Information Administration- have fallen because higher prices tamped down demand and supplies in the Gulf Coast have been slowly restored. The latest read on home sales, released today, contradicts virtually every other recent measure of housing activity that generally indicate a slowdown. And yes, manufacturers' fortunes are on the mend, but few besides airplane makers are celebrating.

It all means that the economy is likely to end the year with a splash, but that does not mean the broad economic picture next year will be even better.

How can anyone read that and not laugh?

67 comments:

EddieP said...

What's laughable is that anyone is still playing Jimmy Carter's American malaise dirges. The economy is roaring along so well that the fed interest rate bumps to slow it down are barely effective. In spite of the terrible economic consequences of the natural disasters this country has experienced in the last year, we're growing, not collapsing. Almost all states report surplus tax revenues, unemployment at 5% which used to be the magic "full employment" indicator. Stock Market is approaching 11,000. Please don't throw me in that briar patch.

XWL said...

Aren't you picking at low hanging fruit though?

Newsroom pessimism might be a by-product of the sorry state of newspapers.

If you work for a company that is firing people, tightening belts, in turmoil, and full of grumbling (damn TimesSelect) then pessimism must flow like tap water.

Also might explain the sourness at CNN compared to the peppiness at FNC, it's not only ideological, it's a function of failure and success.

If you are failing you see failure everywhere. If you are succeeding, you see success. Could be as simple as that.

Icepick said...
This comment has been removed by a blog administrator.
Icepick said...

Ann, anyone looking to bring the Republican Party and its elected officials down would read the last sentence you quoted hopefully.

EddieP, be careful about that briar patch! Remember that the economy was roaring in the late 1990s, right up until the Tech Bubble burst in March of 2000. I'm not saying that I think we're headed for disaster in 2006, just that things aren't always as good as they appear. The future is unknowable.

Henry said...

Just the headling made me laugh. But then it almost got me to read the article. Just to find out what the slug in the pudding is today.

XWL, I like your analysis.

SippicanCottage said...
This comment has been removed by the author.
AJ Lynch said...

XWL:
I agree- you have offered a great analysis. Like the old saying goes..."it's a recession when your neighbor loses his job, but a depression when you lose your own job". That could explain the newsroom negativity but I suspect it's all about maligning the current White House occupant.

PatCA said...

I really think newspapers still believe that bad news and controversy, even if it is laughably inaccurate or misleading, will draw subscribers (as one of your posters once mentioned).

As the LAT how well that works.

erp said...

I like this one:

Unemployment Plummets!

Pastor_Jeff said...

I think XWL, AJ and Pat are all onto something. How can the economy be good when the newspaper industry is bleeding? And how are you going to solve that problem with articles that read in total: "All in all, the economy's doing fine. Now get back to work." And if you print that, He-who-must-not-be-named will try to take credit.

Old Dad said...

Ignorance + Bias = Journalism

Al Maviva said...

>>Unemployment Plummets!

You need to report that as the NY Times would report it.
--------------------
Blacks, Women, Hardest Hit by Declining Unemployment Payments

Memphis, TN -- The Department of Commerce's announcement concerning the historic level of unemployment last month is no consolation to Mychal Brown. Brown, who is African American, had his unemployment relief payments cut off last month, a situation that Senatory Harry Reid described as "Despicable... Thuffering Thuccotash."

Like thousands of other African Americans near Memphis, Brown lost his benefits when he obtained work in a factory opened by food processing company that had relocated from New Orleans following the failed Bush Adminstration relief efforts. Experts blame the decrease in unemployment benefits on the Bush administration, and a stingy, ultra-right wing conservative Republican Congress.

Haley Barbour, an extremist right wing conservative republican governor from Mississippi, said that it was unfair to blame falling unemployment payment rates on President Bush. Barbour, who was the RNC chairman, stated "of course you're going to have dropping unemployment payments when there are more jobs."

Princeton Economist Paul Krugman noted that "the unemployment scandal is just another example of the Bush lies." House leader Nancy Pelosi asked, "now, do you see what we're up against?"

Still, the scandal means little to Mychal Brown, an honest, hard working African American man. All he knows, is that his unemployment benefits were cut off. "That's a payment of $790 a month I don't have coming in any more."

The Department of Commerce noted that the jobless rate of 4.8% was an historic low, especially coming in the Fall, which is typically a time of higher unemployment rates.


Jayson Blair contributed to this article.
---------------

See? It's not hard to write like the NY Times. You just need to drink a big cup of the Kool Aid, and you can do it too.

downtownlad said...

The economy is growing nicely, but people don't see it that way. How many jobs have been created in the last five years? I don't even think it's a million. Remember - the population of this country has grown by about twelve million over the last vive years.

And the stock market has done absolute nothing over the last five years either. It hasn't budged.

So if the economy is booming, where are the tangible signs that people can see? It's not jobs, it's not wages. It's in corporate profits, which is fine, but since the stock market hasn't budged nobody is seeing the benefits there either.

The only real signs are in the property market.

Troy said...

Come Ann, The hills are alive with the sound of music -- right before the Nazis come and ruin it all.

jeff said...

Al Maviva - sounds like you ought to be writing for The Onion, Point Five, or Scrappleface... that was beautiful.

Lou Minatti said...

The people at the New York Times have pretty big buts.

Old Dad said...

downtownlad,

Some perspective:

According to the DOL, the economy has created more than 5 million new jobs since 2000, and current unemployment is 5.0%. Many would argue that 5.0% represents structural full employment.

According to the BLS, average wages have grown about 15% corrected for inflation over five years. Not great, but it certainly beats a poke in the eye with a sharp stick.

The markets actually have done quite a lot. No doubt, the 2000-2002 correction was painful, unless you timed the market, but indexed funds haved done quite well since June of 2002, returning 30+ %.

Consumer confidence is up this month.

Perhaps, we're spoiled, but our economic glass is clearly more than half full. The American economic machine is far from perfect, but it's certainly the best that ever was.

downtownlad said...

Old Dad - What are the numbers since February of 2001 when Bush took office? I don't think it's five million. There was actually a zero net increase in jobs during Bush's first term, and job growth this year has been running well below 200,000 a month.

It's very easy to say the stock market has bounced back from a low, but the market is still well below the highs that it reached in 2000. Remember - the market peaked in March of 2000. Bush took office well after that bust. Yet stocks have still not moved since then.

http://finance.yahoo.com/q/bc?s=%5EDJI&t=5y

I don't blame Bush for this. But i think this is why people generally think the economy sucks.

paulfrommpls said...

Downtownlad -

Those are decent points.

I believe labor is always the last thing to recover. The 2000-2001 downturn resulted from one of the biggest over-investments in technology ever: it was a real big fall off a real big bubble. Since it was technology being invested in, what that means is that there's still a lot of excess technology already in place that industries of all kinds are figuring out how to fully utilize as the economy picks up steam.

So they don't need to hire right away, exactly because of the nature of the bubble and collapse we just went though, moreso than in some other recessions.

This is my semi-lay-person's understanding of it.

Oh, and 9-11 was the about the worst economic shock the country's gone through since the Depression, right as the recession might normally have been beginning to end more menaingfully than it has.

paulfrommpls said...

As for the NYT article, this sentence bothers me:

"Consumer confidence is bouncing back from what was arguably some of its worst readings in years."

Is there a singular-plural problem there with "was?" It refers to the word 'some,' right? It's definitely awkward. I think it'd be awkward with "were," too. (For a professional writer, does sloppiness indicated feveredness at all?)

david bennett said...

Eddie P:

Interest rates are up, but the fed has other ways to create money. Their actions are contradictory and the plan to stop publishing M3 is raising eyebrows and concern. A lot of money is flowing in.

Right now there is griowing skepticism about key figures. Core inflation does not include energy or food, it puts health care at 6% when it's actually 18% of the economy and substitutution methods basically means steak can be replaced hamburger so prices remain stable.

Savings rates became negative this summer. The housing refinancing money machine is slowing down. And in December credit card holders will recieve bills with the new minimum payments.

Roughly 50% of new jobs have been based on the real estate market, at some point it has to slow down. The equivalent of stock p/e: price/rent is at record highs.

And incidently the SPX (Standard and Poor Index) price to earnings ratio of around 18 is at close to 1929 valuations, this is with unusually hugh profit growth which can't be mantained in truly competive markets, remembers competetion brings margins down. Historically we have had secular bear and bull markets. Bears included 1929 to 1948 and 1968 to 1982 when the Dow went from 1,000 to 1,000. There is a possibility we are in one now.

Private investors have reduced their support of the dollar. It is increasingly being held by central banks, especially Japan and China who is not completey our friend. Another flow is from offshore banks and mysterious dollars which are probably petro in origin. So we are very dependant on questonable sources to prevent panic and collapse of our currency.

Also note that money flows in are currently helped by a tax amnesty for corporations if they bring in overseas money for job creation. This has amounted to hundreds of billions.

So we have record private debt, record foreign debt and near record federal debt. We have been dependant on the real estate market to create jobs and to act as a cash machine as people pull out increased equity primarily for consumption. And I'm sure you are aware that a huge percentage of the loans involved have been ARMs often interest only, many have been made to "subprime" borrowers often for speculative purchases.

There are a lot of potential chain reactions lurking.

For example I'm sure you understand the risks that Buffet and others have pointed out in the nearly one trillion that have gone into hedge funds, including increasingly your pensions. I am also certain that you understand the implications of an inverted yield curve (where short term interests rates exceed long term) and how close we are to that.

So why exactly are concerns "laughable?" Personally I take Volkner's warnings and those of others quite seriously.

Grim Ghost said...


According to the DOL, the economy has created more than 5 million new jobs since 2000 ...According to the BLS, average wages have grown about 15% corrected for inflation over five years.


Both your statistics are inaccurate, the one about jobs hugely so.


Going by the BoL establishment survey, in October 2000, there were 131,789 thousand people at work, 20,464 being on government jobs. Average hourly earnings private = 14.01

According to the latest report (preliminary) for October 2005, there were 134,061 thousand people at work, 21867 working on government jobs. Average hourly private earnings = 16.27


So we have 2.3 m jobs created, out of which 1.4 million are goverment jobs.

Increase in hourly earnings = 2.27/14.01 = 15.5%. Not '15% after inflation'.

Grim Ghost said...

One more thing to point out -- which Ann and the other posters seem to have missed completely.

The major driver of the economy for the last few years has been real estate, specifically residential real estate. Well, in the last 2 days, we've had some seriously contradictory notes on the real estate market. The (larger and more accurate) exiting home sales number indicated a sharp slowdown in the RE market. The new home sales indicatd a solid jump. Other anecdotal reports indicate a slowdown in many markets, some builders have warned and even the economist of the NAHB says that he doesnt' trust the new home numbers completely. The market didnt either.

So Bajaj is absolutely correct -- the picture on the residential RE market, which has been driving the economy for the last few years, is very mixed. Of course, if you happen to think that we can all become millionaries selling houses to each other, then you probably think he's wrong.

david bennett said...

Old Dad:

You might want to get some citations, not just claims from Rush that people are making more.

http://www.epi.org/content.cfm?id=2099

Contrary to what many here claim the MSM tends to be guided by the sell side (which does not have your interests at heart, but argues everyday is a wonderful day to buy stocks or some service) or optimist types, similar in type to those who guide our war efforts and who think happy thoughts make happy outcomes. Anyone who reads financial news of any depth would know that wages are falling even against probably low estimates of price inflation.

wildaboutharrie said...

Kevin Drum responds to this thread...

http://www.washingtonmonthly.com/

(sorry, when I try to make a link I always mess it up.)

paulfrommpls said...

All the economic pessimism has merit. In general, it just needs to be remembered that the worst-possible perspective is also probably not entirely accurate.

Also, even though it can come across as 'mocking of doomsayers,' we really have faced situations in the recent past that were accompanied by similar "there is no way out" predictions. Reagan's deficits; the S&L fiasco come to mind.

It isn't like those things were harmless, but our economy does have a penchant for adapting and moving on.

Thinking longer-term in the past, a specific variable that negative analyists often ignore, I think, is the growth in the labor pool in the last 20 years resulting from an unbelievable amount of immigration, much of it consisting of people who weren't going to earn a lot for a while.

So as they inevitably add to the ranks of the lower-income, it becomes an unremarked or taken-for-granted aspect of the USA - the simple ability to absorb something like that. More than sborb it; we end up using it to add to the gradual increase in prosperity. (So far.)

I read an article a while back - City Journal? that's a must read - saying that the economic performance of native-born African Americans has been very, very good for the past several decades. I should try to find it, it was interesting.

Pogo said...

The Economic Policy Institute is known for its pessimistic and even alarmist predictions.

The truth is somewhere between the sky is blue and the sky is falling.

Old Dad said...

Grim,

BLS cites 137,532,000 employed in Oct. 2000 and 143,340,000 in Oct. 2005. More than a 5 million job increase no? And isn't 15.5% "about 15%" as I posted?

Dave B,

Just cruise dol.gov. Lot's of numbers.

downtownlad,

No the market is not at its historic high, but so what? It's trading higher than for almost all of the Clinton years. I personally don't think that political leadership has much to do with market performance. Under what reasonable analysis can it be said that the "economy sucks"? It sucked in 1979 and it sucked even harder in 1929, but we're rolling along pretty well today.

paulfrommpls said...

Kevin Drum:

"So in an economy that's allegedly in terrific shape, workers will see an average pay increase that....barely matches inflation."

What's he's referring to is the average increase of 3.5% compared to expected inflation of 3%; meaning (roughly) the actual annual wage increase will be half a percent.

For the moment I'm ignoring his other points about how the signifcant wage increases are concentrated in relatively few fields, and many workers will do worse than the average; although I am struck by the implication that a situation of all workers gaining above the average is the only morally aceptable outcome.

I want to focus on the 3.5 minus 3 thing. When put into context of the always grindingly slow increase in national prosperity, relatively speaking, adjusted for inflation, a gain of .5 percent in one year isn't bad at all. Add that up over 10 and 20 years, compounded, and it means some pretty steady increases in well-being, geivn that you accept these kinds of figures as having any validity at all, and any relationship with happiness.

downtownlad said...

No the market is not at its historic high, but so what? It's trading higher than for almost all of the Clinton years.

And you're point is? The stock market has historically gone up 10% a year. By the time Bush took office, the market had already had a rather major correction, so asking for a 10% per year increase after that would not be asking for much.

Instead - the market is lower than when he took office. In other words, had it just done what it normally does, the market would have been about 60% higher than it is today. I could have made more money by keeping my money under my mattress. People have the right to be upset by the pathetic performance of the market.

Again - I don't blame Bush for this. But I don't call this a boom either. Stock markets go up in a boom. The U.S. is one of the worst performing markets in the world over the last five years. Please explain to me again how that is good?

I did not vote for Clinton, but everyone I talk to will readily concede that they got bigger raises when Clinton was in office.

Maybe the market is finally picking up. I hope so. But until people see it in their paycheck, the economic numbers certainly haven't trickled down to the average consumer yet.

paulfrommpls said...

By the way, if you check out the comments on the Drum post here -

http://www.washingtonmonthly.com/archives/individual/2005_11/007664.php

- aside from any merit on the state of the economy these days, you'll be treated to a cornucopia of Republican-hatred. Conservatives and Republicans are only happy when most people are poor and poor people are suffering - that kind of thing.

So conservatives are actually pretty damn demonic, don't ya know. That's really all you need to know about them.

The reality-based community forges on ahead...

Grim Ghost said...


BLS cites 137,532,000 employed in Oct. 2000 and 143,340,000 in Oct. 2005. More than a 5 million job increase no?


Look at my numbers. They are based on the establishment survey, which is generally more accurate and is considered the gold standard. I don't know where you got your numbers from, but if you used the household survey, practically all economists consider it less reliable.


nd isn't 15.5% "about 15%" as I posted?


No, because you said 15% after inflation. Thats not correct, its around 15% overall, not adjusting for inflation. Adjusting for inflation, its much less.

Old Dad said...

downtownlad,

It sure seems to me that you are blaming bush. If not, then of what relevance is your observation that the market is lower today than when he took office?

Pick another arbitrary time frame, say June 2002 until today. Presto--there's your boom.

My point is simple and irrefutable. The American economy is the greatest in the world, and we live like kings. Actually, that's a little misleading. We live better than most kings ever did.

Grim Ghost said...


For the moment I'm ignoring his other points about how the signifcant wage increases are concentrated in relatively few fields, and many workers will do worse than the average; although I am struck by the implication that a situation of all workers gaining above the average is the only morally aceptable outcome.


I'm struck by how you're distorting Kevin's comment totally. All he said was (repeating the LA times) is that the majority of workers will get a pay raise that does not keep up with inflation, in short they will see a real inflation adjusted decrease.

The basic point here is whether the economic picture is completely brigh or rather murky. The NYTimes article claims that its rather murky with bright and dark spots. If you fall in the group that does not see his or her wage keep up with inflation, then you fall into one of the darker spots. In short, it supports neither the all bright or all dark picture, but the mixed picture which was precisely the point of the article and one that Ann ignored.


want to focus on the 3.5 minus 3 thing. When put into context of the always grindingly slow increase in national prosperity, relatively speaking, adjusted for inflation, a gain of .5 percent in one year isn't bad at all.


But the point of the LA Times Article is that most people won't get that 3.5% raise because that number is distorted by some very high raises. I personally have some serious doubts about that actually, because I think average here means median, not mean (mean raise computation makes very little sense) and the LA Times screwed up. The other point the LAT makes is that health insurance premium increases may wipe a great chunk of this out.

And I dont' consider a real increase of 0.5% to be a sign of a great economy for job seekers. Its not bad, but even in the context of a huge economy, its not great.

Finally, yes, there are plenty of yahoos in Kevin's comments. So what ?

Grim Ghost said...


My point is simple and irrefutable. The American economy is the greatest in the world, and we live like kings. Actually, that's a little misleading. We live better than most kings ever did.


The first part is correct, but the 2nd part that we live better than most kings is very debatable (certainly not better than modern kings or princes, even in poor countries.

In any case though, the topic was whether the economy is completely bright, or whether it has bright and dark spots. I happen to believe in the latter, irregardless of whether we live as kings, emperors, pashas, shoguns, Caliphs, Nizams.

Stiles said...

There is a lot to point to from the economic news to support both pessimistic and optimistic scenarios, but to say there aren't some troubling storm clouds is naive.

Things that worry me in no particular order.

1. Large increases in liquidity in the global economy with the likelihood that this is leading to unproductive distortions in "real" economy investment.

2. That this increase in liquidity is substantially due to more sophisticated and expanded use of derivatives and backed securities, which on a daily basis reduce risk and provide expanded access to credit but whose operation and stability is not well understood in a crisis.

3. Negative savings rate in the US.

4. Large budget deficits in the US during a time of strong economic expansion. Big structural problem here.

5. What will happen to consumer spending now that refi equity extraction has peaked. Will business investment pick up the slack if consumer spending slows?

6. Job growth concentrated in government jobs and real estate. (See concern #1)

7. Are the official inflation measures accurate representations of costs as experienced by most households?

There is always some aspect of the economic picture that is troubling and most gloomy predictions never come to pass. Just like most threatening clouds do not drop a tornado on your house. However, there are some structural concerns about the global, and in particular, our economy that should not be dismissed out of hand. Maybe I'm just too conservative and need to get jiggy with our new age economy.

In the big picture, the dramatic improvemment in the average standard of living for India and China occurring now is a marvelous change, and one that has long been hoped for. However, while good in a global sense, the change is not without some downside risks to our economy during the transition decades.

Old Dad said...

Grim,

The employment numbers came from the BLS CES. The comp numbers came from BLS NCS and were adjusted for inflation according to the BLS. don't know if these are the preferred data sources or not, but still argue that they indicate our economic glass is more than half full.

Are there dark spots? Sure, but there's more good economic news than bad.

And I wouldn't trade places with any monarch born before 1950.

paulfrommpls said...

Grim -

The first I meant as a sort-of-unfair joke. Although it's not quite as unfair as you say, I don't think; I think you could take his words as implying that *most* people advancing better than the average is the only proper goal.

The scond point: it stands unaffected. In the sentence I quote he's sneering at the importance of 3.5 - 3, all aside from his other points, and that's how I was addressing it.

As for the "so what" on the snarky commenters: because that's what the Dems have become, or are gradually letting themselves be taken over by, even on what you might hope is a relatively intelligent site like Drum's.

Intelligent people luxuriating in stupid hate: such an attractive group of people with which to associate.

I could pre-answer "the right is no better" but I'll just leave it as "yes it is." And that's why the rational folks are gradually sliding that way.

I door-knocked for Wellstone, by the way. A lot. I like to think if he was still alive, he'd be playing some kind of role of telling his erstwhile supporters to calm the hell down. He was not a hate-filled man.

downtownlad said...

The beginning of Bush's term is not arbitrary. Most Americans are going to give credit to economic circumstances to the party in power.

What is arbitrary is picking the lowest point of the stock market over the last four years as a starting point . . .

People didn't care that the malaise of the early 1980's was caused by Carter. They still blamed Reagan during the recession of 1982, and it wasn't until the economy had actually bounced back from that recession and recovered lost ground that people started to give Raegan credit.

Bush has been President for five years, and we still haven't made up for lost ground in terms of the stock market and we've barely budged in terms of job growth.

Until that changes - perceptions on the economy will not change either.

You want to see people talking about a booming economy? How about the Stock Market actually hitting new highs. Then you'll get your talk about a boom.

lakema said...

Does anyone here actually disagree with the 'laughable' statement:
"It all means that the economy is likely to end the year with a splash, but that does not mean the broad economic picture next year will be even better. "

Isn't there ample evidence for precisely this? Why is this laughable? I feel like I'm either missing something obvious or that this is just meritless NYT bashing.

Old Dad said...

downtownlad,

Now I get it. You don't blame Bush, but you do want to burden him with a recession that began before he took office.

Gee, Kerry must really feel like a loser. Couldn't even beat a sitting President in the midst of economic Armageddon.

When the market tops 11,000 will the President get out of your dog house? Didn't think so.

Old Dad said...

lakema,

Part of the problem is that the piece is poorly written. Take the quote you cite:

"It all means that the economy is likely to end the year with a splash, but that does not mean the broad economic picture next year will be even better. "

The economy is apparently splashing, not tanking. We assume the reporter thinks that splashing is good, but what does it mean? Let's assume that it means "good," say 6 on a scale of 1-10.

The reporter then brilliantly concludes that because the economy is now a 6 is not proof that it will next year be a 6 or better. Well, duh. It's also not proof that it will be a 5 or worse.

It's called damning with faint praise.

paulfrommpls said...

Lurking in back of all the left-leaning criticism of the economy is the overriding task: using every single issue, domestic and foreign, to paint W as totally corrupt, overwhelmingly incompetent, and as simply evil as possible.

All he wants to do is trash the environment; all he's done is absolutely horrible for the economy and everyone should have seen it from the beginning; all he wants to do is destroy international cooperation so he and his rich friends can lord it over eveyone in the entire world. And so on.

I really don't think I'm exaggerating. I suspect that's even what some of the commenters here believe, or try to believe.

And it all goes back to the Iraq war: finding reasons that refusing to give any possible justification the time of day, regardless of the potential impact on all of us now that we're there, is not only okay, but is the only permissible approach.

david bennett said...

Old dad wrote:
--------------------------------
No the market is not at its historic high, but so what? It's trading higher than for almost all of the Clinton years.
--------------------------------

This was my point. Historically the market has averaged a p/e of 14, frequently it is below that, sometimes above. It is significantly above that. Historically we have also had "secular" generational bulls and bears which last from 10 to 20 years. It may be that we have escaped this pattern it is uncertain.




-------------------------------
personally don't think that political leadership has much to do with market performance.
-------------------------------

I never said it did, though cuts in the dividends and capital gains tax which would drive up real values as long as mantained. So a higher p/e would be justified, but if one argues that "this time is different" then arguments must be made and numbers plugged in. Generally a high stock market valuation means that at some point it will fall. This could be soon.

----------------------------------
Under what reasonable analysis can it be said that the "economy sucks"? It sucked in 1979 and it sucked even harder in 1929, but we're rolling along pretty well today.
----------------------------------


I did not say the economy sucked or even that it would suck. I said there are some various serious warnings and that they need to be taken seriously.

I gave 2 names at least including Buffet and Volkner. If you claim that in your judgement they are not "reasonable" so be it. I take them as people to listen to.



As for whoever said the market rises 10% a year, yes over the long term, though many estimate 9% which matters a lot to an investor . You can have 20 year periods with no significant increases.

A rough calculation is inflation plus GNP growth plus dividends.

Note that dividends are at half their usual rate of 4%, so if things were all averaged out, you would have lower returns.

Also note that a very large percentage of dividends and profits comes from the financial companies which given the huge amount of often risky debt held could get hit very hard by an economic crunch or an increase in interest. So dividends could go down more and the p/e could rise much higher.

Many others could get hit as well, the low returns have caused many to go into riskier ventures. The difference between junk bonds and safe bonds is at a historic low, there is probably too much money in hedge funds and many are extensively leveraged.

Incidently contrary to implications I don't think "grim ghost" or myself said the "sky was failing." Instead in response to remarks that indicated concerns were "laughable" we said, "no there are some very serious concerns" and we each listed some.

Old Dad I went to some recent BLS data (Oct 2005)

http://66.102.7.104/search?q=cache:jWTJ3-rHXs8J:www.bls.gov/news.release/pdf/realer.pdf+bls+%22real+wages%22+2005&hl=en

I will quote:

-----------------------------
Average weekly earnings rose by 2.9 percent, seasonally adjusted, from
October 2004 to October 2005. After deflation by the CPI-W, average weekly
earnings decreased by 1.6 percent.
---------------------------------



Please read this last line.


Grim Ghost had also looked at your figures and pointed out that contrary to your claims they didn't take inflation into account.

Somebody else tried to debunk my earlier post that EPI is pessimistic, however EPI had used BLS sources. The fact that you don't like EPI doesn't mean their numbers are wrong, you need to come up with differing, documented numbers. Not simply dismiss the source.

Old Dad said...

Dave B,

I was responding to downtownlad. My only response to you was to reference the BLS data.

Will take your word for it about the BLS data despite the BLS claims that its data are adjusted for inflation. Note, too, your data is for one year, my claim is for five. Agree that there is a big difference between a prorated 10% and my claim of 15% real wage growth. Neither is stellar.

Grim Ghost said...


. In the sentence I quote he's sneering at the importance of 3.5 - 3, all aside from his other points, and that's how I was addressing it.


No, the point is that the LA Times claims that most workers will get less than 3.5% (I'm dubious of this because of the mean/median distinctiot, but lets grant that now). So most workers wont get the .5 % increase (which is pretty small incidentally, compared to real wage growth in some great economies in the past), but some even smaller increase or a decrease. That is hardly a sign of an economy in dany shape.



As for the "so what" on the snarky commenters: because that's what the Dems have become, or are gradually letting themselves be taken over by, even on what you might hope is a relatively intelligent site like Drum's.


Well, the very first message on Kevin's site in that response is:

what the hell do expect out of the LA Slimes, Kevin? You will get the same negative bullshit spin you have in this post...


Kinda goes against your thesis that the right is so much more civilized and less prone to hate, doesn't it ?

Grim Ghost said...


Lurking in back of all the left-leaning criticism of the economy is the overriding task: using every single issue, domestic and foreign, to paint W as totally corrupt, overwhelmingly incompetent, and as simply evil as possible



The whole NYTimes article which started this doesn't even mention Bush. It doesn't even really mention fiscal issues. It really focuses on general economic and monetary issues. And you're the first one to mention Iraq on this thread.

This is clearly an example of sensible rational response from the right. The non-defensive, non hate filled, non paranoid right which doesnt see everything as an attack on their beloved leader.

Grim Ghost said...

Old Dad

I still don't know where you're getting your data from. On the CES BLS site

ftp://ftp.bls.gov/pub/suppl/empsit.ceseeb1.txt

This shows non farm employment for 2000 as 132 M (111 M private) and non farm employment for 2004 as 131480 (109862 private). For October 2005, the number is 134 million (112 million private). So employment growh is as best 2 M, with around 1.2 M private.

paulfrommpls said...

Grim, I'll give it one more shot, but seriously, all you're doing is dancing around the points.

1. I'm either a terrible writer or you're willfully misunderstanding my point about Drum's sentence there. I get his larger points. Fine. But that sentence, by itself, it's not taking it out of context, makes the point that an economy gaining 3.5-3 is in itself deserving of the sneer "allegedly in great shape."

That's all he's talking about. Read it without your perception that I'm cruelly twisting it. That sneer stands on its own. It's a small point I thought was worth pointing out, that here was an intelligent liberal exhibiting a kind of vague, inaccurate understanding of what those numbers mean. Gee, .5 is real small - it must mean nothing! But 3.5 -3 is not "barely matching inflation" in this context. It's actually pretty good.

If you think I'm misreading him, fine. It would mean he's an even worse writer than I am.

2. As I'm sure you already know, a larger discussion of relative merits of left versus right in terms of civility and rationality would include an acknowledgment that of course there is plenty of yahooness to go around. You know where I stand on it, though I don't pretend to have convinced you. But your specific example of righty nastiness may not be quite the ringing triumph you seem to believe it is.

3. As for the final point in your next comment, what I was doing is making a benign obervation to a group of largely like-minded individuals you've stumbled upon here. It's a point about the general tendency we all see on the left side of the political world to demonize W as much as possible, and to me, I believe it all goes back to Iraq the way I described.

Again, as for your specific - but he doesn't mention Iraq in the article! - that could not be more beside the point.

Sorry, man. There is a slowly growing group of not-entirely-stupid and only-semi-deluded former and quasi lefties who are real mad at the rest of the left these days. That's what I do, talk about that, it's my metier. I can be annoying. But you gotta face up to the anger among a lot of your compadres. (If I'm reading you right, who you are, I mean.)

Grim Ghost said...

Paul -- yes, I see the point you're trying to make. But I still you're misreading Kevin a little in that I don't think he makes the 3.5 - 3 claim, but simply claims that most workers will be barely at the rate of inflation, even excluding increases in medican premiums. Either way, its probably a debateable issue.

Certainly, I don't think that a 0.5 increase would justify the claim that the economy is in great shape. That sort of increase would mean 138 years to double real income (unless you increase hours worked per week).

The basic point is that the economy has bright and dark spots. The RE reports (existing home sales vs. new home sales) clearly capture this, and that is a defensible article from the NYTimes. There are lots of things to be concerned about including huge levels of debt, huge budget and trade deficits, negative savings rate and so on, just as there are things to be positive about such as GDP growth.

Old Dad said...

Grim,

Here's the BLS site for the employment data:

http://data.bls.gov/PDQ/servlet/SurveyOutputServlet

I'm interested in your thoughts, regardless. CW suggests that 5.0% unemployment is pretty good, but that depends on definitions.

Robin Goodfellow said...

Personally, I've noticed a big change in the economy in the last few years. Back in 2001 and 2002 I had a lot of trouble finding decent work. I'd put my resume out there and send out dozens and dozens of cover letters, and I rarely got a response, let alone an interview. In 2005 it could not be more different. I put my resume out there and I get recruiters calling me before I even start writing cover letters. And the two times I've gone looking for work this year I've gotten job offers in less than a week, at very respectable pay rates. And my resume is not much different than it was in 2002. I'm sure there are other factors at play, but it's clear to me that the economy is pretty hot right now.

Undercover Christian said...

Where I live the unemployment rate is 2.5%. We can't even keep our jobs filled. There is a factory in town that is setting up a bus to bring people in from another city an hour away because the factory has almost 100 jobs that it has been unable to fill.

If only people were more willing to move. . . .

knoxgirl said...

I think we seem to be doing pretty well considering not much time has passed since the dot-com bubble burst AND then 9/11 happened. But what do I know.

Grim Ghost said...

Old Dad

Sorry, I click on that link, I get Servlet not found.

The thing about employment numbers is that they come from 2 sources. There is the household survey (from which the 5.0% number comes), then there is the establishment survey, which is larger and much more comprehensive. The establishment survey is what economists and Wall Street and the Fed primarily use to make most of their decisions. So yes, 5% is good in general, but the establishment survey is much more mixed.

The matter of serious concern to me isn't even unemployment per se. Its things like the huge debt (both personal and government), and the negative savings rate. The economy has been largely driven by consumer spending rather than business capital investment over the last 3-4 years. It seems to me a that a lot of this is driven by people using their houses as ATMs under the assumption that housing prices will constinue to go up by 12% per year. Lax lending habits have created a huge bubble in many areas, and the fallout could be much worse than the fallout of the dotcom era.

At least the dotcom era, for all its excesses, gave us many solid businesses and lots of web infrastruture. What will the RE boom give us when it bursts ? A bunch of unfilled condos with corian countertops ?

Its equally disturbing to see the negative savings rate, as people expect their houses to bail them out, rather than relying on wage growth. Can we all get rich selling houses to each other, with money paid for by the Chinese or other foreign investors ?

Separate topic -- on why more people don't move -- its not always that easy for older people who have children in schools, possibly a working spouse, to move. The real estate boom has probably made it much harder. If you want to move from Pittsburgh to LA, you will have to trade your house for a small crowded condo.

DR said...

Look at my numbers. They are based on the establishment survey, which is generally more accurate and is considered the gold standard. I don't know where you got your numbers from, but if you used the household survey, practically all economists consider it less reliable

Grim, let's not be disingenuous. There's nothing wrong with the household numbers. They merely measure different things, which is to say the household numbers also count self-employment, which is the establishment survey does not.

If you own your own business, surely you are employed, are you not? Perhaps not to a Democrat, though.

In any case, employment growth since 2000 (household) has been 6 million jobs, which is more than reasonable. Labor force growth has been 8 million since 2000, so the unemployment rate is up from 4% to 5%.

DR said...

So yes, 5% is good in general, but the establishment survey is much more mixed

The establishment survey is considered more reliable for month to month changes, so it is used by many for that purpose. However, it is also extensively revised every month. For example, in Sept 2005, the Labor Dept reported that 35,000 jobs were lost (using the establishment survey), mostly because of Katrina. However, today (2 months) the September number has been revised (again) so that today it shows a 17,000 job increase.

That is a net change of 52,000 jobs in the positive direction. Not so reliable after all.

The take-away here is that both the household and establishment surveys measure employment, but look at different slices of the economy. Usually, they change in a similar manner. Since 2000, however, they havent been doing so.

That, in itself, is information that should not be disregarded.

Jeff Medcalf said...

"The basic point is that the economy has bright and dark spots."

Yes. So does the Sun. If you stand back a little way, you can see whether the bright or dark spots predominate. In the economy, as the Sun, right now it's the bright spots.

Knucklehead said...

Paulfrompls said:

I think you could take his words as implying that *most* people advancing better than the average is the only proper goal.

Could one or more of the more mathematically adept participants in this interesting discussion 'splain how such a thing could be a goal, let alone "the only proper goal"?

Ace said...

Its things like the huge debt (both personal and government), and the negative savings rate

People have been "worrying" about this since the early 1990's.

At what point are you going to stop harping on it?

Ace said...

It all means that the economy is likely to end the year with a splash, but that does not mean the broad economic picture next year will be even better.


"Likely"??

Um, since the economy is roaring is will end the year on a high note.

The want of a downturn next year is so evident in that sentence.

These people are parody at this point.

gj said...

There's an excellent post on this topic by Barry Ritholtz at The Big Picture: Headlines Versus Underlying Data

Grim Ghost said...


Grim, let's not be disingenuous. There's nothing wrong with the household numbers. They merely measure different things, which is to say the household numbers also count self-employment, which is the establishment survey does not.


You're the one being disingenous here. The fact of the matter is that the establishment survey is considered the gold standard and is generally considered more reliable because it uses a much larger sample space. Ask any reputable economist on Wall Street and thats what they'll tell you. The household numbers are useful in many ways, but what Wall Street, the Fed, and most professional economists consider more important is always the establishment numbers.


If you own your own business, surely you are employed, are you not? Perhaps not to a Democrat, though


Thank you. I think that statement clearly shows how your own comments are driven by ideological bias rather than solid analysis. The household survey, like I said, is useful, but the establishment survey is generally considered the gold standard.


The establishment survey is considered more reliable for month to month changes, so it is used by many for that purpose. However, it is also extensively revised every month.


Not correct at all. Typically revisions are only for the past 2 months (largely to take into account surveys that weren't completed in time for the previous compilation). Besides a change of around 52000 jobs in an economy of 130 million working people is remarkably accurate, showing an error rate of 0.04 %. Hardly "extensive revisions".

Todays report shows the establishment data as showing an increase, the household data as showing a decrease. But irregardless of the news, the establishment data must be considered as more accurate unless we have solid scientific reasons to belive otherwise. [ And saying that Democrats don't believe that self-employed people are employed does not meet that standard of proof]

Grim Ghost said...

"Its things like the huge debt (both personal and government), and the negative savings rate


People have been "worrying" about this since the early 1990's.


Is this the carnival of the ignorant ? The savings rate has most definitely not been negative since the late 1990s.


At what point are you going to stop harping on it?


Don't tell me. Tell Alan Greenspan. He just gave a speech commenting on how he thought deficits could hurt future growth. He's also expressed concern about the housing bubble and the savings rate, as have other economists.

But doubtless you believe that there is absolutely no problem with a massive debt of several trillion dollars, and with a negative savings rate. I commend you, and ask you for the substance you've been using.

I should also point out here that we actually saw surpluses in the mid to late 90s that reduced some of the concerns about the previous debt. These surpluses came about as a confluence of 3 events

1) The Peace dividend from the end of the cold war
2) A once in a lifetime boom, the stock market boom
3) A combination of a Democratic President and a Republican (part of the time) House that stalemated each other and led to tax increases, but no spending increases, helping to cut deficits.

I don't see any similar confluence in the future.

Such a conflie

Grim Ghost said...


Yes. So does the Sun. If you stand back a little way, you can see whether the bright or dark spots predominate. In the economy, as the Sun, right now it's the bright spots.


If you do indeed consider the bright part of the economy relative to the dark part of the economy to be equivalent to the Sun, then you should put every penny you have into stocks on margin. Even the 10 year note if you expect long term rates to fall. Also, take out the biggest HELOC you can get and use it buy as much and larger property as you can. Or use interest-only mortgages.

If you're reluctant to do that, then I suggest the example you're citing is exaggerated.

I have yet to year a good explanation for why a negative savings rate, and huge personal and federal debt should be blithely dismissed. The economy has been largely kept afload not by capital spending by business, but by consumer spending, heavily driven by HELOC and other equity extraction loans. When 40-50 % of home loans in California are I-O, and when the local economy is so heavily driven by RE, then most definitely it should be a matter for concern.

Matthew said...

Hopefully, I'm not too late on commenting this post, but here's some observations:

1. Most of you guys are missing the point of the post in the first place. Notice how this article devotes about 3/4 of its space to saying how an economy that "appears to be booming" is going to hell, because of mixed signs on housing and that the law of supply and demand worked with three dollar gas prices. I just can't imagine the NYT bending over backwards like this with Clinton in office in 1999.

2. Is that 3.5-3 figure from an LA Times article? If so, I remember another LA Times article awhile ago, I think right before the election, which proudly stated that nominal wages declined in the past month. After digging a bit into the article though, only the nominal wages without benefits added in declined. With benefits included, the past month actually had an appreciable, real gain of wages.

3. I won't say that the picking of the start of Bush's term is arbituary, but the bursting of the tech bubble was in full swing when January 2001 rolled around. With Worldcom alone, it would not have had near the capital expenditure if they didn't cook the books. The general reevaluation of the market at the time helped lead to the 3.5% unemployment rate. The recession was deep, helped by the market's bearish attitude after 9/11. However, now the economy is booming and, after living in three states, I have personally seen many companies bursting at the seam with demand and without enough people available to fill them.

4. As for the housing market, I'm still not as sold about a bubble as many are. In places such as California and South Florida, it's mostly a constrained supply at work. Where in San Francisco, housing prices are absolutely going through the roof, the houses in the booming Atlanta suburbs are staying about constant, since so much available land still exists around Atlanta.

5. There has been a lot more debate recently about the household vs. establishment surveys, due to how the surveys have differed over the past few years. However, I have seen a business run out of a home which needed to hire three new people to satisfy demand. I don't see how these independent contractors and small businesses working out of their homes would report their hires to the establishment survey. Indeed, the establishment survey has traditionally been the gold standard, but with all these small companies existing, the establishment survey could be behind the times.

Grim Ghost said...


Most of you guys are missing the point of the post in the first place. Notice how this article devotes about 3/4 of its space to saying how an economy that "appears to be booming" is going to hell, because of mixed signs on housing


Where did you get the "going to hell" phrase you use ? is that phrase or anything like it remotely used in the article ? Ditto for the 3/4th number.

And because housing has driven the economy for the last few years (as many economists say), mixed signals on housing are indeed important. It need hardly be said that even real estate cheerleaders are admitting theres been a slowdown in many markets. And the economist of the NAHB (not exactly hostile to home builders) is quoted in that article itself saying that he's suspicious of the new home sales numbers.


I just can't imagine the NYT bending over backwards like this with Clinton in office in 1999.


The NYT published a number of articles about the tech bubble back in 1999 and gave a lot of prominence to Greenspan's comments in 1996 about irrational exuberance. Also, I could make a good argument that the economy was considerably stronger from a fiscal perspective (certainly in terms of job creation) in 1999 and that was after an expansion of several years. In both cases, there was a bubble waiting to burst (NASDAQ in that case, real estate in this case).

Also, I would suggest taking a look at today's article by the same author in the NYTimes.

http://www.nytimes.com/2005/12/02/business/02cnd-econ.html

This is about today's job numbers and is a very positive article in general. How does that fit in with your pre-conceptions ? I need hardly add that the original article didn't even mention Bush, and most of its concerns were with monetary issues (the housing bubble) and the Fed. Maybe some people are getting too defensive, huh ?


I have personally seen many companies bursting at the seam with demand and without enough people available to fill them.


Maybe. I know that many companies, including my own, although they are doing quite well financially (and have a stockpile of cash) are so far hiring quite selectively. Companies in general have a lot of cash which they're not using as much as they might for capital spending or hiring.


In places such as California and South Florida, it's mostly a constrained supply at work. Where in San Francisco, housing prices are absolutely going through the roof, the houses in the booming Atlanta suburbs are staying about constant, since so much available land still exists around Atlanta.


House prices are also booming in Las Vegas, Arizona, even in some areas of Idaho, places that can hardly be said to have a shortage of available land. I also find it a little hard to believe that in many areas land suddenly became much harder to find circa 2001-2002, leading to a spike in prices. No, what happened was that a combination of lax credit standards and speculators leaving the NASDAQ bubble to speculate in RE lead to a huge jump. Affordability in California is at all-time lows, and so many of the new jobs are RE related.


However, I have seen a business run out of a home which needed to hire three new people to satisfy demand. I don't see how these independent contractors and small businesses working out of their homes would report their hires to the establishment survey.


A business run out of a home (unless it was completely run off the books) would indeed be in the sample pool for the establishment survey. The Establishment survey also uses tools like the Birth-Death model to take into account business that have just started or just shut down. It may be that the household survey captures some forms of employment better, but it has methodlogical problems of its own and its sample size is smaller.