Monday, December 08, 2008

Even gloomier

Dean "Sunshine-and-Lollipops" Baker reminds us that we should be even more pesimistic about Friday's jobs report with its estimated 533k lost jobs (and downward revisions of September and October figures, bringing total job losses to -1.9 million since the beginning of the recession).

The reason, the numbers don't impute:

the Bureau of Labor Statistics (BLS) imputes jobs into its survey for new firms that could not included in its sample. This imputation is based on its "birth/death" model which is inevitably backward looking. As a result, it misses turning points, underestimating job growth when the economy speeds up and overestimating job growth (or underestimating job loss) when the economy slows.

The BLS imputed 143,000 jobs into the establishment data over the last three months based on its birth/death model. In the three months from September to November of last year BLS imputed just 117,000 jobs into the establishment data.

In short, the BLS attempts to adjust for unsurveyed new firms by estimating the jobs they create. But most certainly, new firm births are off the historical mark, so BLS is statistically counting jobs that aren't really there.


Friday, December 05, 2008

Congratulations Jared!

The Biden team shapes up:

Given the critical nature of the economic challenges facing America, Vice President-elect Joe Biden announced today the creation of a new position in the Office of the Vice President: Chief Economist and Economic Policy Advisor to the Vice President. The Vice President-elect has selected nationally-prominent economist Jared Bernstein for the post.

"Jared Bernstein is an acclaimed economist, and a proven, passionate advocate for raising the incomes of middle class families. His expertise and background in a wide range of domestic and international economic policies will be an invaluable asset to the Obama-Biden Administration," said Vice President-elect Joe Biden. "It's an honor to have him on my team and I look forward to his advice and counsel."

Thursday, December 04, 2008

Who wants to be a trillionaire?

Lots of different economists, apparently.

Greg Mankiw spins a nice yarn:

Not all economists think fiscal stimulus is the answer to the economy’s ills. “There are other choices,” said Greg Mankiw, a Harvard professor who served as President George W. Bush’s chief economic adviser. Foremost among the alternatives is monetary policy, said Mankiw. The Fed can act to bring down long- term interest rates as well as short-term ones, he said.

Umm, Greg, short-term rates are already almost at zero--nowhere else to push. And last time I checked, the market determines long-term rates, and for a long time no one but sovereigns have wanted in the market for US long-term debt. Historically, long-term rates are still pretty low, and they are so at the benevolence of sovereign investors.

So how might the Fed act to bring down long-term rates, in Mankiw's view? Mankiw's interjection is a subtle way of staking out an anti-stimulus position in the recession policy discourse. My inkling is that, in so saying, Mankiw has the following in mind. In 1992, Fed Chairman Alan Greenspan (along with Rubin and a cast of other characters) snookered the incoming Clinton Administration into putting balanced budgets before ambitious democratic social policy goals. A balanced budget, it was argued, would reduce long-term interest rates and thereby speed growth such that those policies could be "afforded" some time later down the line (you know, if this budget-growth scenario played out). And as we know, our dreams of national health care were abandoned at the altar.

Any economist worth his or her salt knows, though rarely will admit publicly, that "balanced budgets" is a more useful political than economic concept. Mankiw knows this, too, and has not been much of a budget-balancer in his research, or as head of Bush's Council of Economic Advisers. However, he finds the argument useful to employ against the tax policies and social programs he ideologically opposes. And he is subtly urging Ben Bernanke to pick and use a similar bludgeon against the incoming Obama Administration to tamper its ambitions for "change." Hmmm, that sounds sorta familiar. Of course, its quite glaringly hypocritical. Bernanke has been burning through cash faster than a coked-up Paris Hilton on a Las Vegas weekend bender. But the Democrats are the ones who should show restraint.

It's hard to believe this guy has the best selling economics text books. Remember, he told us that McDonald's fry chefs should be classified as manufacturing jobs.

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