Unemployment falls below 9%

[Tricky]

The stock market has long since ceased to have any relation to the real economy in terms of it's health. In fact, Dow gains are inevitably the result of companies doing things that HURT the real economy, such as massive layoffs/outsourcing/offshoring that improves the corporate profit/loss statement, but destroys the ability to consume for 10s of 1000s of formerly well-paid American workers.

Really? Then why is it that a stock-market plunge is what always precedes a recession, including the last one? I agree that the stock market is only one indicator the health of an economy, but most economists will agree, it's a pretty important one.

 

[Muldur]

Really? Then why is it that a stock-market plunge is what always precedes a recession, including the last one? I agree that the stock market is only one indicator the health of an economy, but most economists will agree, it's a pretty important one.

The stock market is too susceptable to mainipulation either by businesses themselves as I previously noted or by unscrupulous stock traders (short sellers in particular), or by fiancial terrorists.

There is some evidence that the 08 crash was either initiated or made much worse by stock maniuplation.

Link to report on financial terrorism

Link to "Stock Shock"

 

[BenBurch]

The stock market is a COMPLEX indicator of the health of the economy, but it is not an UNRELIABLE indicator.

 

[JoeTheJuggler]

Why does this remind me so much of the debate about the impact of the health insurance bill on the deficit? We all agreed the CBO estimate is what should be used to gauge that impact until it failed to support the claims of people against the bill.

The unemployment rate was accurate enough when it came to criticizing Obama for his failed prediction that it wouldn't reach 10%, but now it's not good enough. The stock market used to be considered a good gauge of investment conditions, but now it's not.

 

[AvalonXQ]

Most indicators are useful in one direction.

For example, if my blood pressure is really high, that's a good indicator I have a health problem. But the converse is not true -- normal blood pressure does not prove good health.

Unemployment statistics are underinclusive, so a high unemployment statistic is clearly a problem. In contrast, a low unemployment statistic does not prove that there isn't a problem; the stat isn't counting all those out of work.

CBO estimates are based on the bill sponsor's own assumptions, so if even the CBO agrees a bill will be expensive, it will be. In contrast, if the CBO says that, based on the assumptions given it, the bill will not be expensive, then the CBO's estimate is likely as accurate as its assumptions.

 

[WildCat]

Why does this remind me so much of the debate about the impact of the health insurance bill on the deficit? We all agreed the CBO estimate is what should be used to gauge that impact until it failed to support the claims of people against the bill.

The CBO made assumptions unsupported by reality, such as the Medicare "doc fix" actually occurring even though eliminating it last minute is an annual excercise and no one actually expected doctor payments to decrease by 30%.

Now, the CBO has to make such assumptions but those reviewing their reports have to keep that in mind.

 

[Ziggurat]

The unemployment rate was accurate enough when it came to criticizing Obama for his failed prediction that it wouldn't reach 10%, but now it's not good enough.

If Obama had made any predictions about the labor force participation rate, then I'd be happy to compare his predictions to that. But he didn't. So I can't compare his prediction of the labor force participation rate to what actually happened. I wish I could, but I have no choice in the matter. But I do have a choice if I'm just concerned with what's going on. I can consider both. In fact, the BLS puts out multiple measures of employment and unemployment, and I can look at any or all of them. There's no reason not to. You can too. And during the onset of the recession, those different metrics pretty much all agreed: things were getting bad, fast. So when all the metrics were agreeing, it didn't really matter which metric you picked. Now that the metrics don't all agree, examining multiple metrics becomes more important to figuring out the truth. But for some reason, you're opposed to doing that. The problem isn't my willingness to examine multiple metrics, the problem is your refusal to do so.

 

[lomiller]

If you are unemployed and looking for a job or employed and looking for a better job you don’t care about labour market participation rates you care about unemployment rates. That’s why they are measured the way they are.

So while unemployment rates have a clear and direct impact, labour market participation rates are much harder to draw meaning from and are certainly not the one size fits all metric of economic health you are trying to use them as. In fact lower participation rates in the 16-24 age group may very well indicate people staying in school longer, getting more education, which in generally is good for a nations future economic prospects.

 

[Bri]

Ziggurat is trying to use the labor participation rate to tease out the number of people who have given up looking for a job and are therefore not counted in the unemployment rate but should be.

The problem is that the labor participation rate can't be used to determine the number of people who have given up looking for a job because it's a measure of people who don't have jobs, including people who can't work or don't want to work (students, disabled, people caring for children or elderly relatives, etc).

So he is using a flawed metric to try to correct for another flawed metric.

-Bri

 

[Ziggurat]

If you are unemployed and looking for a job or employed and looking for a better job you don’t care about labour market participation rates you care about unemployment rates. That’s why they are measured the way they are.

I never said that the official unemployment rate wasn't useful or meaningful. But if the unemployment drops because people have given up looking, is that an improvement? Maybe for the people who are still looking, since they have less competition, but overall I would say no, it's not.

So while unemployment rates have a clear and direct impact, labour market participation rates are much harder to draw meaning from and are certainly not the one size fits all metric of economic health you are trying to use them as.

I'm not trying to use them as a one size fits all measure. I'm using it specifically to gain information about the employment situation, in particular to get information that the official unemployment rate doesn't measure. And even that is obviously only one part of the economy, and I never suggested otherwise.

In fact lower participation rates in the 16-24 age group may very well indicate people staying in school longer, getting more education, which in generally is good for a nations future economic prospects.

If this is what's happening, then that suggests the bad economy is what's driving people to choose school. But if you're choosing school because of the bad economy, that that means you wouldn't choose school if the economy was good. Which suggests that it's not actually a very good investment for those marginal case, or they would be going to school even if the economy was good. We've got an education bubble right now already. Telling me that it's inflating even more doesn't exactly raise my hopes.

 

[Ziggurat]

So he is using a flawed metric to try to correct for another flawed metric.

Every metric is flawed. But the more metrics you use, the more accurate your understanding is likely to be.

 

[BenBurch]

Every metric is flawed. But the more metrics you use, the more accurate your understanding is likely to be.

The nice thing about metrics that do not reflect reality is that you can draw any conclusion that suits you just by choosing the right lie to start with.

 

[AvalonXQ]

If you are unemployed and looking for a job or employed and looking for a better job you don’t care about labour market participation rates you care about unemployment rates.

Why don't I care about labor market participation rates? If I'm looking for something, isn't it valuable for me to know that a lot of other people were looking for it, couldn't find it, and gave up? Doesn't that tell me something about my ability to find it myself?

 

[Ziggurat]

The nice thing about metrics that do not reflect reality

There's no such thing as a metric which reflects reality. Metrics reflect what they measure, nothing more, nothing less.

 

[Corsair 115]

In fact, Dow gains are inevitably the result of companies doing things that HURT the real economy, such as massive layoffs/outsourcing/offshoring that improves the corporate profit/loss statement, but destroys the ability to consume for 10s of 1000s of formerly well-paid American workers.

Except when its well-paid workers elsewhere whose jobs are outsourced to the U.S. See the case of Electro-Motive (owned by Caterpillar) in London, Ontario.

 

[Tricky]

There's no such thing as a metric which reflects reality. Metrics reflect what they measure, nothing more, nothing less.

If they're done right, they measure real things. They're not a comprehensive reflection of reality, but unless they're just "made up" they should reflect a portion of reality.

 

[JoeTheJuggler]

If you are unemployed and looking for a job or employed and looking for a better job you don’t care about labour market participation rates you care about unemployment rates. That’s why they are measured the way they are.

Yep. As I pointed out, the first thing you do to figure the labor force participation rate is to add together the employed and unemployed.

On top of that, the trend of good news only goes back a few months. That we haven't improved in a 10 year trend is beside the point.

I just heard a commentator on NPR making much the same point a couple of us have made: many of the people now out of the labor force are going back to school (trade school, traditional school or otherwise). When we come out of this, we'll have a better labor force.

 

[Ziggurat]

If they're done right, they measure real things.

Sure, but every metric we've been talking about in this thread measures something real. So I'm not sure what your or Ben's point is.

 

[AvalonXQ]

I just heard a commentator on NPR making much the same point a couple of us have made: many of the people now out of the labor force are going back to school (trade school, traditional school or otherwise). When we come out of this, we'll have a better labor force.

Yes, and that's a good thing. I like the fact that Americans are resourceful; when the economy's so bad that they can't find work, people find other useful things to do like retraining or professional development.

But the man who claimed his lavish spending and disastrous economic meddling would fix things should not be congratulated because the job market got so bad that people stopped looking for work.

I think the figure we're all really looking for is job availability -- that is, how many new jobs are being made available in the current economic conditions.

 

[JoeTheJuggler]

I never said that the official unemployment rate wasn't useful or meaningful. But if the unemployment drops because people have given up looking, is that an improvement?

Again, the announcement of the January unemployment rate included the announcement that the economy added nearly a quarter of a million jobs. So even if the labor force participation rate remained low, it isn't what accounts for the decrease in unemployment.

Also, the labor force participation rate isn't able to distinguish between people who have quit looking for work out of frustration and those who are, for example, staying in school or returning to school because they have that opportunity.

Also, the 10 year trend in labor force participation you cited doesn't give any evidence that the January drop in unemployment is due to people having given up looking for work.