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Unemployment question for the economists among us


Brother Mango

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You are reading what you want to read (and sounding very beligerant about it, I might add). I wrote that there is no recession
except
for the one caused by media overhype and fearmongering.


I gave a further example of how the media can control real-life... I thought my real-life example explained my view.

 

 

I didn't say anything at all about what I might be reading. I told you about my personal experience, and that of people I know personally and worked with. We saw this coming when the media were still trumpeting the great economy. When I started working at that company, we had about 7500 people on our site. With the current round of layoffs, it will be down to about 1200. All this over the last ten years. This has nothing to do with the media, as far as I can tell. It is very real.

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One thing I do find interesting "in these hard economic times..." is that the media compares everything for us so that we don't have to. The stock market is at the lowest point "since 1996" or so. Unemployment is at its worst "since 1982" or so. Obama has spent more money "than all other Presidents combined" or whatever.


I just don't know if we can trust the news media...at all.


Well, I lived through 1982 and really, honestly don't remember much about that recession. I remember the long gas lines and the Sunday closings and 55 mph nationwide (even on interstates). I lived through (and invested money) the 1990's.


But, we survived. We lived through it. We honestly spent more time worrying about doing our jobs well and raising our kids well than we did worrying about who was Prez and how his economic policies would affect us.


This, too, shall pass. Just listen to Ben Stein's speech.
:p



I remember that recession. That's what killed my rock dreams. Clubs which had been having live music 6 nights a week cut back to 4, 4 night clubs to 3 or even 2, 3 night clubs to 2. All reduced the amount they paid by more. So, a 6 night club would cut back to 4 nights, but cut pay by half. A 4 night club would cut back to 3, but only pay 1/3 what they had been. I'd been making a living playing music, but I couldn't anymore. Changed my life completely.

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Maybe the media shouldn't be allowed to report on the recession because it makes the Dow go down. But on the other hand I thought it was the President that makes the Dow go down.
:confused:



Only when it's a Democrat. Remember, all of the good times during the Clinton administration were because of Reagan (but never Bush. I wonder why not), but the recession at the beginning of Bush 43's first term was Clinton's fault.

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I didn't say anything at all about what I might be reading. I told you about my personal experience, and that of people I know personally and worked with. We saw this coming when the media were still trumpeting the great economy. When I started working at that company, we had about 7500 people on our site. With the current round of layoffs, it will be down to about 1200. All this over the last ten years. This has nothing to do with the media, as far as I can tell. It is very real.

 

 

I'm going to go ahead and point out that, as debatable as the boundaries of a recession are, there has definitely not been one happening for all of the past 10 years. In fact, in the last 10 years, there was one of the longest periods of economic expansion in US history.

 

Extrapolating from this, your personal experience may not be representative of the general condition of the economy, and the company of which you speak may be an isolated case.

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Only when it's a Democrat. Remember, all of the good times during the Clinton administration were because of Reagan (but never Bush. I wonder why not), but the recession at the beginning of Bush 43's first term was Clinton's fault.

 

 

Funny, I remember it as GWB being blamed for a recession and Clinton getting credit for 8 years of prosperity.

 

I never heard anyone credit Reagan for the prosperity through Clinton's terms.

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Funny, I remember it as GWB being blamed for a recession and Clinton getting credit for 8 years of prosperity.


I never heard anyone credit Reagan for the prosperity through Clinton's terms.




That's just because you are probably using the general media for your sources. :rolleyes:



:D

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At 8% unemployment, why is there such widespread and intense devastation? In other situations, 92% success would be outstanding. Why not in this situation? Out of a population of 100 people, why can't 92 workers carry the day?


At the other extreme, 2% unemployment is too low. We want something like 4% and we're ok. And that makes the question even more puzzling: what do we get from 94/100 workers that we don't get from 92/100 and why is the difference so painful?

The 8% number is the "happy number" which is the lowest that can be presented.

To get real numbers, look at the BLS(Bureau of Labor and Statistics) U6 number. The U6 includes everyone who USED TO be counted long ago, in a faraway land. That one is now at page 20 here:

http://www.bls.gov/news.release/pdf/empsit.pdf

It reads 16% "not seasonally adjusted" and 14.8 "adjusted".

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The problem we have is that the unemployment numbers are combined with the excess housing inventory which is combined with the mortgage based securities that banks have now that they didn't have in the early eighties. I remember that time. I committed to a mortgage on a house I was building at 12% and climbing.

I had sold my previous home in 2 weeks at a nice porfit and was able to roll it into the new home. Now you can't even get someone to look at your house and it will be worth $10,000 less a month from now than it is now. You can't get a mortgage for love or money unless you go FHA and the taxes and insurance are going to kill you in Florida because of all the long-term homeowners that have a low tax base.

A big part of the US economy is automobiles and we all know what's happening to GM and even Toyota. Without that money flowing the economy is not turning as fast as it needs to and more unemployment is sure to come.

Aer we havin' fun yet?

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I'm going to go ahead and point out that, as debatable as the boundaries of a recession are, there has definitely not been one happening for all of the past 10 years. In fact, in the last 10 years, there was one of the longest periods of economic expansion in US history.


Extrapolating from this, your personal experience may not be representative of the general condition of the economy, and the company of which you speak may be an isolated case.

 

 

That may be, but, if you look at US GDP in Euros, we've been in a recession since about 2002, IIRC. The decline of the dollar allowed them to hide it for several years.

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Funny, I remember it as GWB being blamed for a recession and Clinton getting credit for 8 years of prosperity.


I never heard anyone credit Reagan for the prosperity through Clinton's terms.

 

 

Really? I heard it over and over again from Republicans and self-labeled conservatives.

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The problem we have is that the unemployment numbers are combined with the excess housing inventory which is combined with the mortgage based securities that banks have now that they didn't have in the early eighties. I remember that time. I committed to a mortgage on a house I was building at 12% and climbing.


I had sold my previous home in 2 weeks at a nice porfit and was able to roll it into the new home. Now you can't even get someone to look at your house and it will be worth $10,000 less a month from now than it is now. You can't get a mortgage for love or money unless you go FHA and the taxes and insurance are going to kill you in Florida because of all the long-term homeowners that have a low tax base.


A big part of the US economy is automobiles and we all know what's happening to GM and even Toyota. Without that money flowing the economy is not turning as fast as it needs to and more unemployment is sure to come.


Aer we havin' fun yet?

 

 

I am!

 

But then, I'm not unemployed anymore because I'm a full time student again, at the age of 52.

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Unemployment is -way- over 8%.

 

They aren't counting Military personnel anymore, and they don't count people who've given up looking (like DINKs that became SINKs), and they don't count people who are frictionally unemployed. And they don't count people who've used up all their UI benefits.. and they don't count people who returned to college.. and they don't count.. the list goes on and on..

 

So yeah. REAL unemployment is probably in the 14-18% range.

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At 8% unemployment, why is there such widespread and intense devastation? In other situations, 92% success would be outstanding. Why not in this situation? Out of a population of 100 people, why can't 92 workers carry the day?



At the other extreme, 2% unemployment is too low. We want something like 4% and we're ok. And that makes the question even more puzzling: what do we get from 94/100 workers that we don't get from 92/100 and why is the difference so painful?



I see things slowing but I don't see devastation. That word is a bit over the top, I think.

I was in Home Depot this afternoon for some lag bolts. There was'nt a {censored}ing soul anywhere. It was kind of spooky.

I guess that would be devastating to that store if it kept on. My mechanic the other day was able to take my vehicle the very next day, first thing in the morning. Another 'not a good sign' appearance. :idk:

The more people unemployed the more nervous everyone gets. Uncertainty is, in part, what's killing the Dow which in turn is fueling the possibility of more unemployment.

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From my wife, who is pursuing a doctorate in economics:

The unemployment rate is only one measure of economic activity and, as others pointed out, it only counts people who are actively seeking but cannot find employment. This doesn't account for "discouraged workers", who give up because they can't find jobs, nor does it provide information on workers who are underemployed (e.g. take a part-time job when they want full-time work). Significant problems in the housing and credit markets have also resulted in low economic growth.

The recession is not media hype; it is defined as a significant decline in activity spread across the economy and is recognized by the National Bureau of Economic Research.

This is why a stimulous package was thought to work, because it would give people more to spend boosting the economy and demand for production.


Unfortunately, the government decided that it could best decide where the money was to be spent. Instead of giving it to the people, making them feel more secure about spending. It decided to give it to companies that were failing and probably needed to go Chapter 11 to reorganize and become stronger.


The difference between now and the 70's is that in the 70's interest rates were rediculously high and the majority of the baby boomers were of working age.

The government by lowering the interest rates and reducing taxes, did the same thing a the stimulous package should have. Today we have the baby boomers retiring, looking for their social security, taxes fairly low, and intrest rates almost non existent. Aside from boosting consumer's confidence, reducing government spending and keeping taxes low for everyone, it will be very difficult for the government to spend our way out of this one.


On the whole if government could control its spending, 8% unemployment could be carried by the working 92%. Unfortunately, the government is like a Beverly Hills teenager with her father's credit card and doesn't know control.



In order to understand the idea behind the stimulus, you need to know that economic growth is measured through changes in gross domestic product (GDP), the market value of all final goods and services in a country.

GDP = C+I+G+NX

where C=consumption, I=investment, G=government spending, NX=net exports.

In order to increase GDP, the government must increase one of these components. The government could increase consumption by reducing taxes, which gives households more disposable income. However, tax cuts are not effective if households save a substantial percent of their refunds. This also explains why tax cuts should target the poor: the poor spend a greater percentage of their income than the rich.

Increased investment could also increase GDP, but interest rates, which could be lowered to increase investment, are basically 0 and can't go down any further.

The Fed's inability to decrease interest rates and problems with increasing consumption through tax cuts are why government spending is an important part of a stimulus: it directly spends money, increasing GDP. In the short run, government spending is imperative; the Bush tax refunds weren't enough. Some economists do not believe the Obama stimulus was big enough either. In the long run, budget deficits are a problem.

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From my wife, who is pursuing a doctorate in economics:


The unemployment rate is only one measure of economic activity and, as others pointed out, it only counts people who are actively seeking but cannot find employment. This doesn't account for "discouraged workers", who give up because they can't find jobs, nor does it provide information on workers who are underemployed (e.g. take a part-time job when they want full-time work). Significant problems in the housing and credit markets have also resulted in low economic growth.


The recession is not media hype; it is defined as a significant decline in activity spread across the economy and is recognized by the National Bureau of Economic Research.




In order to understand the idea behind the stimulus, you need to know that economic growth is measured through changes in gross domestic product (GDP), the market value of all final goods and services in a country.


GDP = C+I+G+NX


where C=consumption, I=investment, G=government spending, NX=net exports.


In order to increase GDP, the government must increase one of these components. The government could increase consumption by reducing taxes, which gives households more disposable income. However, tax cuts are not effective if households save a substantial percent of their refunds. This also explains why tax cuts should target the poor: the poor spend a greater percentage of their income than the rich.


Increased investment could also increase GDP, but interest rates, which could be lowered to increase investment, are basically 0 and can't go down any further.


The Fed's inability to decrease interest rates and problems with increasing consumption through tax cuts are why government spending is an important part of a stimulus: it directly spends money, increasing GDP. In the short run, government spending is imperative; the Bush tax refunds weren't enough. Some economists do not believe the Obama stimulus was big enough either. In the long run, budget deficits are a problem.

 

 

 

EXCELLENT! I love this reply. Thanks to you & the wife.

 

There's my other question: why are we ok at 96% employent but not at 92% employement when it would seem that the 4% difference isn't that much.

 

Discouraged worker, students, etc aren't counted at either level. Or, is the current condition not accurately described only by the unemployment rate, but also the combo of low interest rates and the real estate calamity?

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There's my other question: why are we ok at 96% employent but not at 92% employement when it would seem that the 4% difference isn't that much.

 

 

Because that number is only the tip of the iceberg; it only tells one part of one chapter in a much larger story. When hiring slows, a 4% unemployment rate can feel rough. If companies were hiring for quality positions, 8% wouldn't be much of an issue.

 

Looking at the unemployment rate as a gauge of how things are is kind of like looking in a guy's wallet to see how rich he is - it isn't anywhere near a complete story.

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I came across this video a couple of days ago, and it has really helped me to understand the current situation, in the simplest terms of course.

I had no idea that mortgages themselves became a commodity, and that eventually the demand for mortgages exceeded the supply, hence the lowering of lending standards.

[YOUTUBE]Q0zEXdDO5JU&feature=related[/YOUTUBE]

[YOUTUBE]iYhDkZjKBEw&feature=related[/YOUTUBE]

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Because that number is only the tip of the iceberg; it only tells one part of one chapter in a much larger story. When hiring slows, a 4% unemployment rate can feel rough. If companies were hiring for quality positions, 8% wouldn't be much of an issue.


Looking at the unemployment rate as a gauge of how things are is kind of like looking in a guy's wallet to see how rich he is - it isn't anywhere near a complete story.

 

 

Yes. I'm getting a sense that the unemployment rate is definitely a small piece of this whole puzzle.

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The Fed's inability to decrease interest rates and problems with increasing consumption through tax cuts are why government spending is an important part of a stimulus: it directly spends money, increasing GDP. In the short run, government spending is imperative; the Bush tax refunds weren't enough. Some economists do not believe the Obama stimulus was big enough either. In the long run, budget deficits are a problem.



First, livindablues observation about 'taxes fairly low' is erroneous and completely ridiculous. I fail to see that nearly 50% of ones' income going to the government as confiscatory, not fairly low. WTF?

The government not spending enough? Wow, just wow.

The next federal budget, if passed, will exceed the sum of all the federal budgets of previous years going back to the first US budget, COMBINED. I fail to see how the government needs to spend more. So we should go into further hock to foreign governments thus cementing us as a debtor nation for the foreseeable future? Are you prepared to pay much higher taxes now and have your subsequent generations paying for this too?

This was exactly what the dems were screaming bloody murder about; deficits any time a rep POTUS wanted to increase defense spending. Now it is their turn to make things right and they are moving, no sprinting in the opposite direction toward far more socialization of most economic activities.

More government and more hypocrisy is precisely what we don't need more of; bloated budgets, huge deficits, and many more bureaucrats. Incidently, the government is the only sector in the economy where employment numbers are increasing. This is not a good sign for those who like and support the 'free' market system.

Never has a government spent its way into prosperity by confiscating wealth from it hard working citizens and from future citizens. :facepalm:

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That know-it-all wiseacre doesn't have the mental dullness to hang with us!
:mad:



First, thanks EC437.

Second, Lug, LOL, I can be as dull as everyone else, Really! come on, give me a chance. :thu:
As a matter of fact, I am a guitar junkie, and I have been reading the HC forums for years, just never decided to reply. (now how's that for dull).

Anyway, as many pointed out, that in my reply, I did count those who cannot work into the 4%. They are correct, I should not have counted them.

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True. The market has lost more than 50% of its value since last year.



First, livindablues observation about 'taxes fairly low' is erroneous and completely ridiculous. I fail to see that nearly 50% of ones' income going to the government as confiscatory, not fairly low. WTF?



Hawkhuff, I couldn't agree with you more, that taxes are ridiculously high for some. However, I was comparing it to past century numbers where it has been as high as 94% and as recently as the 1970's with 77%.
Except for a short period in the late 20's and early 30's we would have to go back to post industrial time to see lower taxes.

Hear is a favorite quote of mine:

"You cannot legislate the poor into freedom by legislating the wealthy out
of freedom. What one person receives without working for, another person
must work for without receiving. The government cannot give to anybody
anything that the government does not first take from somebody else. When
half of the people get the idea that they do not have to work because the
other half is going to take care of them, and when the other half gets the
idea that it does no good to work because somebody else is going to get what
they work for, that my dear friend, is about the end of any nation. You
cannot multiply wealth by dividing it."

Dr. Adrian Rogers, 1931-2005
:cool:

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Some of you all don't remember the mid-late seventies,early eighties. Double digit unemployment,and interest rates! And I'm not talking 11-12%. I'm talking 18-24% on both unemployment,and interest rates! We have a long way to go to get back to that bad,but we are headed that way IMO.

 

 

You forgot the third part of the trifecta. Double digit inflation.

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Only when it's a Democrat. Remember, all of the good times during the Clinton administration were because of Reagan (but never Bush. I wonder why not), but the recession at the beginning of Bush 43's first term was Clinton's fault.



Funny. I remember when Clinton was in office the chant from dems of "We don't care about Paula jones, we only care about Dow Jones".


seems that's not as important now, huh? :D

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