Lunchtime Links 2-5

Feb 5, 2010 17:18 UTC

Euro debt fears roil global markets (Shah, WSJ) The U.S. is less worse than Euro economies, so Euro trouble causes flight to the dollar. Funny that we’re viewed as quality: When you factor in the debt of state and local governments, we’re in similar trouble….never mind unfunded liabilities for Medicare and SS.

Moody’s warns about U.S. credit rating (FT) These warnings have been fairly frequent.

Bernanke’s exit strategy: tighter reserve requirements (Kessler, WSJ) A good op-ed from yesterday. Another way of sequestering excess reserves, besides paying banks not to lend them out, is to just require them not to.

Unemployment rate falls despite declining payrolls (Mutikani, Reuters) The hard data, for those interested, is here.

How banks can win despite being second (Eavis, WSJ) Modifying the first mortgage frees up homeowner income to service their home equity lines of credit and other second lien mortgages…

Why we keep getting poorer: housing costs rising as % of income (Charles Hugh Smith)

Biggest bubble in history is growing every day (Pesak, Bloomberg) He’s referring to China’s reserves.

13-year-old QB commits to USC (Carrosquillo, FoxNY)

Toyota… (imgur)

New ski warnings (CollegeHumor)

Global air traffic volume (note how it varies with the sun)…


It funny that Canada still gives development aid to China when you read the article “Biggest bubble in history is growing every day”.

This would be better spent at home.

Posted by MTLCAN | Report as abusive

Beware the government’s job figures

Aug 8, 2009 06:05 UTC

In a phone conversation yesterday, John Williams at Shadow Government Statistics warned me not to read too much good news from the better-than-expected jobs figure.  The government’s seasonal adjustments aren’t, well, adjusting properly.  They’re still keying off “typical” fluctuations in employment.  But of course today’s economic climate is anything but typical.  Yesterday the official unemployment rate ticked down a tenth of a percent to 9.4%, but according to Williams it should have ticked up a tenth of a percent to 9.6%.

There are big seasonal changes in employment that the Bureau of Labor Statistics corrects for in order to reduce the volatility of the unemployment rate.  For instance, each year employment spikes ahead of the holidays as companies add workers, and then drops as those workers are let go.

July usually sees a regular pattern of planned automobile production line shutdowns to accommodate retooling for the new model year, but recent disruptions to the auto industry have changed pattern this year. Without the usual pattern of shutdowns, the government’s computers nonetheless responded by creating the usual offsetting boost in jobs, not only in the auto industry, but in supporting industries as well. The auto industry itself was alone among durable goods manufacturing industries in showing a reported, seasonally-adjusted monthly gain in July, up by 28,000 jobs.

Besides bad seasonal adjustments, Williams has problems with the so-called “birth-death” model, which “adds a fairly consistent upside bias to payroll levels each year, currently averaging 76,000 jobs per month.”  The genesis of the birth-death model was after the early ’80s recession, when employment figures didn’t catch jobs being added by new small businesses.  However, when a company like Taylor Bean & Whitaker stops reporting its stats, say because all employees were fired en masse, BLS assumes the company is still in business.  (For how long, I’m not sure)  The bottom line is that, in recessions, you’re losing more jobs from failing businesses than you’re gaining from emerging ones.  Hence the upward bias of the model during recessions.

But according to Williams the biggest problem with the official unemployment rate—”U-3″ in BLS parlance—is that it excludes both the underemployed and workers who have become “discouraged” and stopped looking for work:

During the Clinton Administration, “discouraged workers” — those who had given up looking for a job because there were no jobs to be had — were redefined so as to be counted only if they had been “discouraged” for less than a year.  This time qualification defined away the long-term discouraged workers.

Add all the underemployed and the disappeared and you have Williams “alternate” measure, which pegs unemployment at 20.6%, not 9.4%.

For more of Williams work, I recommend a subscription to SGS.

And for more on the unemployment rate, check out this helpful post from EconomPic Data.

COMMENT a is correct. Plus, the recent stock market rally, is being funded by the Fed. Those who are saying the worst is over, are lairs. O had a chance to make real change, but he sold out to Goldman. Nothing has changed, and things are just going to get worst. Save your money. An economy based on buying things we don’t need, is doomed to fail.

Posted by Rick | Report as abusive