How're we doing? (Sept 2012 edition)

By -
Unemployment: Yesterday's jobs report (Sep 7th) was reported as negative, after last month's positive. The monthly fluctuations have become standard since 2010 (see graph). Basically, the growth in jobs has been flat -- around 125K jobs per month since 2010.

It takes about 150K jobs just to keep up with population growth, but people have been dropping out of the job-market. Consequently, the official unemployment rate has dropped slightly, and ever more slowly.


GDP: Huge amounts of "fiscal stimulus" have brought GDP back over its pre-recession level. The piper will have to be paid some day... but not yet.

However, if one subtracts "transfer payments" from GDP, or if we look at industrial production, or the total number of people employed, we are still about 97% of the pre-recession levels. (See this August 5th post from the excellent Calculated Risk blog for details.)


Retail Sales: Though retail sales rebounded from its recessionary lows, they have flattened in 2012.

Stock market boom: Amidst this flat and stagnant real economy, we're seeing a stock market boom. We probably have Ben Bernanke to thank. By lowering interest rates (the exact opposite of what he ought to do) he has encouraged investors to take a chance on stocks.





Summary: After rebounding off the lows of the recession, the economy has not yet reached its pre-recession point. Using a "level concept" of recession (as opposed to the standard "change-concept") we're still in a recession. The bad news is that things have started to slow in the last year. Bill Gross of PIMCO talks of a "new normal", economist Tyler Cowen speaks of a "Great Stagnation". The immediate future seems to promise a slow crawl upward rather than any type of crash.



Comments

Post a Comment

Popular posts from this blog

Country Shares of World GDP

By -
Image
Here's a chart of world GDP, broken down by country share. ( HT: Carpe Diem ). Careful with the x-axis, it is not at all to scale! The basic idea is that India and China had large shares pre-industrial revolution, after which Europe rose. The U.S. shoots up, to over 40% of world GDP by 1950. Then, Japan begins to grow in the 1960s, and China in the 1980s. Suppose countries end up with GDPs proportionate to their populations. What would that picture look like? I've added a bar to the right, showing the break-down of world-population. Look at the U.S. squished down, with less that 400 million out of a world population of over 7,000 million. The biggest change is in the previously un-noticed 'rest of the world". If Africa, the Middle East and so on moved toward freedom, that could be the story of the century.  What if they do not? Here's a chart with a new assumption. Suppose the "rest-of-world" does not increase its relative s
Read more

von Mises on the Quantity Theory of Money

By -
Reading von Mises a while ago, I was surprised to see him speak against the Quantity theory of Money, but what he said made a lot of sense. A recent Facebook comment sent me back looking for the source, and I decided to blog a few choice quotes, because others may find it interesting. My summary of von Mises's position is as follows: The supply of money is an important factor in its value. This is the element of truth in the Quantity Theory However demand for money is the other factor. The quantity theory gives short shrift to demand for money. (One must look to individual decision-making processes and their objective context to understand the demand for money. One cannot start with the aggregate demand for money.) Even if supply were the only factor, it is wrong to assume the value of money will change in direct proportion to the change in supply It is also wrong to assume that an increase in supply of money changes all prices generally and similarly A good theory o
Read more

U.S. Economy: Federal Debt- How big is it?

By -
Image
( Updated: Dec 2012 ) Lots of numbers:  Trying to get a clear picture of U.S. government debt can be frustrating. The government owes: 60% of GDP : bonds owed to private entities , both foreign and domestic 100% of GDP : if we add bonds owed to the government-itself (e.g. Social Security "trust fund", Federal Reserve) 400%+ : if all Fed promises to social security and medicare recipients are met (they won't be) [Note: the GAO claims that adding another 2% (of payroll) to the current 13% payroll tax would keep social security funded for more than 70 years!] A snapshot: The U.S. government (officially) owes about US $16 trillion to the public, plus to the Fed, plus to the "trust funds".  The GDP of the U.S. is approximately $16 trillion. (Both these were about $15 Tr. last year.) To put this in perspective:  adding up the assets of everyone in the U.S. and subtracting liabilities, we get a "net worth" that adds up to about $ 64 trillion ($5
Read more