Showing posts with label Unemployment. Show all posts
Showing posts with label Unemployment. Show all posts

Sunday, February 1, 2015

The Real Deflategate

The Fed has intensely debated
When interest-rate hikes should be slated.
Like a team I won't name,
They're playing the game
With balls that are underinflated.

With a mandate to find the right measure
Of balancing jobs versus treasure,
They're Patriots all,
But the Hawks want the ball
To be at the usual pressure.

The rate of the jobholding share
Is less than appears to be there,
As if it were tested
And then one suggested
To secretly let out some air.

In spite of the fear of inflation,
Wages display moderation,
Since it's hard to inflate
With a tumbling rate
Of labor force participation.

Says Yellen: "It starts to annoy,
In discussing the rate of employ,
The analogy calls
For playing with balls;
Is it something the fellows enjoy?"

"It seems to me, based on my role,
The economy's just like the Bowl:
The material might
Be flaccid or tight,
But the point is to get to the goal."

Monday, May 6, 2013

Bear Warning

Said one of those skeptical guys,
As the market was hitting new highs:
"The bulls may suppose
The economy grows,
But I doubt that the latter complies."

Thursday, March 21, 2013

Quantitative Ending?

Said Bernanke: "I think we will phase out
QE as recovery plays out,
And joblessness wanes
(Though the latter remains,
Admittedly, still quite a ways out)."

Thursday, March 14, 2013

Things Are Looking Up

Said a job-seeker, not so dejected:
"In the past I was feeling neglected.
But things may rebound,
As of late I have found
That at least I am being rejected."

"I'm sensing revitalization
In every failed application.
My hopes may be fond,
But once they respond,
It's proof of their consideration."

Wednesday, March 13, 2013

Update on Helping the Long-Term Unemployed

Yesterday I wrote of the need to "conquer [long-term unemployment] ills / By developing skills," and today I learned of a program doing just that. Jane Polin, a reader who advises charitable foundations, introduced me to the National Fund for Workforce Solutions, an award-winning, 32-site public-private collaboration. The NFWS (as distinct from the NSFW) is "an unprecedented initiative of national and local funders whose goal is the career advancement of low-wage workers using a model of substantial employer engagement to increase the potential for successful outcomes." Over the next three years, the Fund looks to elevate 23,000 workers into high-growth industries. It's a small step, but a big example.

Tuesday, March 12, 2013

Help the Long-Term Unemployed

The news has been better concerning
A rise in the ranks of the earning,
But many confirm
They've been out longer-term
Without showing signs of returning.

In order to bring employees in,
We need programs to put more trainees in,
To conquer more ills
By developing skills
Than the Fed's quantitatively easin'.

Wednesday, March 6, 2013

Dow Jones Record High

Despite the new highs in the Dow,
Economists still disavow
The hope that those wishin'
To find a position
Will likely be getting one now.

The stock market's rate of return
Is based on what companies earn.
As long as it's more,
On the stock exchange floor,
Employment's of little concern.

Wednesday, February 27, 2013

Bernanke's Records

Said Bernanke, in argumentation
To the makers of Fed legislation:
"You may think me a dove,
But take notice of
My record-low rate of inflation."

Those Congressmen failed to point out
That, for all of his monet'ry clout,
He couldn't deflate
The very high rate
Of laborers laying about.

Along came an eminence grise
Saying: "High or low rates such as these
Are attributed less
To your skill or success,
And more to the global unease."

Friday, January 11, 2013

Back To Work

Unemployed short-term vs. long-term
The ranks of the long-unemployed
(A status you'd like to avoid)
Have started to thin
From the slow growth we're in;
Is it reason to be overjoyed?

The jobless in longer-term stages
Are fewer than they've been in ages,
Though many returning
To rolls of the earning
May settle for minimum wages.

There's a glimmer of good news for the long-term unemployed: your chances of finding employment are growing.  The proportion of job-seekers unemployed six months or longer was 39.1% in December, the first time this ratio has fallen under 40% in more than three years, according to the Wall Street Journal.  Although that still leaves 4.8 million long-term jobless, it's a considerable reduction from the peak of 6.5 million in 2010.  But, you say, haven't most long-term unemployment reductions come from discouraged job-seekers dropping out of the labor force?  The answer appears to be: not so much.  The number of jobless who report they've given up looking is estimated at 400,000 over the last year, while the number of Americans with jobs rose by 2.4 million over the same period.

Now for the bad news: wages of returning workers fall by 11% for every year they are out of the workforce, and unemployment benefits no longer last 99 weeks - it's now 73 weeks at most, depending on your state of residency.  Some of the long-term unemployed may have been motivated by their expiring benefits to take lower-paying jobs.  Finally, those poor souls who have gone three or more years without work had no holiday cheer in December, as their numbers have not yet reduced.

Friday, December 14, 2012

More QE, Please

Said Bernanke: "More QE is planned
To give job creation a hand"
(Though it's tricky to know
How banks full of dough
In the aggregate, pump up demand).

Ben Bernanke's announcement of a shift in Fed policy has baffled many in the markets, as Heidi Moore writes in the Guardian. Having moved from a regimen in which rate-setting was linked to both unemployment and inflation, to one in which low inflation is simply assumed while a jobless rate cap of 6.5% is targeted, has raised a number of questions as to implementation and projected timing of eventual interest rate hikes.

More broadly though is the question of how, when US banks already have over $1 trillion in reserves, flooding the system with even more cash will make a difference in the pace of hiring. Most economists agree that the proximate cause of our unemployment level is the lack of aggregate demand. The Fed's purchasing of more billions of Treasury and mortgage bonds may lower yields and therefore move investors into riskier assets such as equities. However, with regard to job creation, quantitative easing is more of a desperation play by a central bank that wishes that the Federal government would hire people to fix the damn infrastructure, already, but expects that they won't.

Friday, October 5, 2012

Good News is Bad News

Jack Welch, nursing a grudge,
Said: "The joblessness numbers are fudged;
Self-seekingly cooked,
Like the numbers I booked
At GE, so I'm able to judge."

When the Bureau of Labor Statistics announced this morning that the unemployment rate had fallen below 8% for the first time since January 2009, it disappointed many Republicans who were hoping for a weak number to strengthen the hand of their Presidential candidate. One of those Romney supporters, former GE CEO Jack Welch, took his disappointment a little too far: Economists such as Justin Wolfers leapt to the defense of the BLS, which, although part of the President's cabinet, has a proudly independent and non-partisan structure and tradition. Other commentators regarded Mr. Welch with irony and contempt, considering the earnings manipulation that occurred during his management, resulting in a settlement of SEC charges.

Shout-out to all the fans of Dr. Goose at the BLS!

Thursday, September 20, 2012


Narayana Kocherlakota President Federal Reserve Bank Minneapolis Fed
An economist known to propound
A theory he thought to be sound
Ignored a taboo
By changing his view
When facts that disproved it were found.

"You have to learn from the data," says Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis (pictured at right). This, he says in an interview with The Wall Street Journal, is why he set aside his concerns regarding "structural unemployment" and came to support the Fed's easing efforts more strongly. Structural unemployment results when the jobless lack the skills or mobility to fill open positions, while cyclical unemployment merely reflects a temporary economic downturn. Mr. Kocherlakota has been studying the problem of structural unemployment and concluded that it is less important than he previously espoused. In fact, he now believes that the Fed's most effective course is to keep interest rates low until the jobless rate falls to 5.5%.

The Minneapolis Fed president's comments, first conveyed in a speech on Thursday, appeared to move him from hawkish to the dovish side of the Federal Reserve board. However, Mr. Kocherlakota's public change of mind also serves as a reminder of the silliness and artificiality of "sides" in questions as complex as growth, inflation and employment.

Friday, September 14, 2012

Message from the Fed

"To counter employment fragility,
We promote cheaper funding ability,
But investors who yearn
For a decent return
Must accept more default probability."

The Fed Open Market Committee announced the details of its latest stimulus program on Wednesday, and it's a doozy: under the 3rd round of quantitative easing, the Fed will purchase up to $40 billion a month of mortgage bonds and Treasuries, in addition to its $45 billion of monthly machinations under the Operation Twist program. This massive QE3 intervention is intended to lower long-term interest rates, as the Fed long ago did for short-term rates. Chairman Bernanke and colleagues hope to drive the 10-year T-note, currently yielding 1.75%, back to its July low of 1.38%.

For bond investors, all this rate compression inflames an already acute yield pressure. Those who want to earn an attractive yield must either shift into riskier bonds, or reduce their fixed income allocation in favor of stocks or other more volatile asset classes. As one CIO expressed it to the Wall Street Journal, retail investors "are practically walking around in a daze; they don't know what to do. There is no safe yield out there, so they are redefining what is safe, which is a dangerous thing to do."

Thursday, September 13, 2012


It's expected the FOMC
Will finally enact QE3,
Prodigiously trying
By means of bond-buying
In some way to boost GDP.

If 500 billion is loosed,
There's a zero-point-one percent boost
In the rate of employed,
Which may leave one annoyed
With the gain this investment produced.

"Economists are skeptical about the benefits of another round of bond-buying by the Federal Reserve," writes Phil Izzo in the Wall Street Journal, but nearly all of them expect it, anyway. QE3, the third round of quantitative easing, will comprise more buying of Treasury and mortgage bonds, in a further attempt to reduce long-term interest rates and boost economic activity. Within the economic community, however, expectations for QE3's effectiveness could hardly be lower. 47 forecasters surveyed by the Journal estimate on average that, for every $500 billion in bond purchases, we can expect a 0.1 percentage point drop in the unemployment rate and a 0.2 percentage point increase in GDP. At least there will be no harm done: the group expects inflation to tick up by only 0.2 percentage points.

Monday, September 10, 2012

Out of the Labor Force

Labor force participation rate trend
Said an analyst, closely critiquing
The job market trends that are peaking:
"One is struck once again
By the outflow of men
From the ranks of employed or jobseeking."

"This development's long been projected
With retiring boomers expected,
But nothing so strong
Came to push it along
As the 2008 fiscal wreck did."

"Whereas once the laid-off might be prowlin'
For jobs from the ads they'd been scourin',
Many downsized afresh in
The current recession
Are optin' for throwin' the towel in."

Last Friday's non-farm payroll data incited more than the usual discussion for the fact that the unemployment rate declined even as more people were not working. This prompted much discussion (including limericks) of the labor force participation rate, which has declined sharply since 2008. The Atlantic's Derek Thompson anticipated this discussion when he asked earlier in the week: "Why Are So Many Men Dropping Out of The Workforce?" Not only has the LFPR declined in the last few years, but men's participation has been in decline for three generations.

Since the 1950s, men have slowly flowed out of the workforce as women have flowed in. Some of this male outflow stems from an aging workforce headed into retirement. In the Great Recession, older men may look pessimistically at their job prospects and decide, in many cases, that their wives' incomes and their social benefits comprise an acceptable fallback position. Thompson concludes that "the combination of an aging workforce (which we cannot control) and a weak economy (which we can control) has tugged down the participation rate, which in turn has tugged down the unemployment rate -- and threatens to make us poorer in the long term."

Saturday, September 8, 2012

Watch That Denominator

A fall in the joblessness rate
Would normally seem to be great,
Excepting, of course,
When there's less labor force,
Deflating the weight of that rate.

When the August unemployment rate was announced on Friday, its decline from 8.3% from 8.1% may have seemed like good news. In reality, the employment data were disappointing, because the number of nonworking people has actually increased. The growth in non-farm payroll employment of 96,000 fell short of the 
125,000 consensus forecast; neither did it meet the rate needed to accommodate new entrants into the job market.

However, not all nonworking people count as "unemployed" because the federal statistics only tally those who are working or actively seeking work. This is the definition of the labor force, which is divided into the number of unemployed job-seekers to give the unemployment rate. When the jobless become discouraged and stop looking for work, they are no longer considered "unemployed" or part of the labor force. Thus, they decrease both the numerator and the denominator of the unemployment rate by the same number, which lowers the rate. It is therefore also important to monitor the labor force participation rate, i.e., the labor force divided by the working-age population.

As shown in the graph, the labor force participation rate remained fairly constant at around 66% during the Bush years, until the onset of the financial crisis in the fall of 2008.  At that point, labor participation began a decline that has continued in the Obama years.  It now stands at 63.5%. A true recovery will have to bring those lost participants back into the labor force.

Thursday, August 30, 2012

School of Hard Truths

Said a grad whose finances were played out,
And whose face could not help but betray doubt:
"The lessons I learn
May improve what I earn,
But not at the prices I paid out."

College: can't afford it, can't live without it. That appears to be the message of mounting data on debt and employment. On the one hand, the New York Fed's latest Quarterly Report on Household Debt and Credit shows that, while the overall delinquency rate of US consumer debt improved from 9.3% to 9.0% in the second quarter, the student debt delinquency rate has worsened from 8.7% to 8.9%. These numbers are part of a trend; says the New York Fed: "Since the peak in household debt in 2008Q3, student loan debt has increased by $303 billion, while other forms of debt fell a combined $1.6 trillion." Clearly, student debt is on an unsustainable path.

On the other hand, there is clearly value (at some level) in higher education. The Wall Street Journal reports that the Brookings Institution recently surveyed US metropolitan areas, looking for the gap between the average level of education sought by employers vs. the average level of education attained by the population. The survey found that a lower "education gap" was associated with areas whose housing markets had best weathered the downturn. Moreover, Brookings found that, in 2011, for every unemployed worker with a college degree, there 5.6 openings requiring such a degree; for every unemployed worker with only a high school degree, there were only 1.6 openings.

It is evident then that a college education confers a great advantage in the job market, but is it worth any price?
Hat tip to Kelly Evans of CNBC for alerting us to the New York Fed consumer debt report.

Monday, August 20, 2012

Swing States

It's an axiom proven and tested
By candidates besting and bested:
If you're looking to win,
Mind the jobless rate in
All the states where the outcome's contested.

As we all know, the economy - especially employment - is the main issue in this 2012 Presidential campaign. If the pace of job creation quickens to the extent of reducing the national 8.3% unemployment rate, those undecided votes swing to President Obama; if it doesn't, the advantage goes to the challenger, Mr. Romney. That's why, in this summer of our discontent, it has to raise concerns and hopes respectively that the unemployment rate has ticked up in many of the so-called "battleground states".

According to the Wall Street Journal, 9 out of 10 pivotal states saw their unemployment rates increase in July. That includes Iowa, Florida, Michigan, Nevada, New Hampshire, Pennsylvania, Virginia and, somewhat less so, Colorado and North Carolina. Ohio held steady after 11 months of decline. In a cruel twist of statistics, many of the higher jobless rates resulted from an improving labor climate; that is, more workers got into the job pool with rising expectations of finding employment, thus increasing the denominator in the unemployment rate.

Monday, August 6, 2012

Proceed Cautiously

The economy, generally dreary,
Brings occasional news that is cheery,
But consider all facets
Before moving assets
Because of a bull market theory.

Marketwatch reports that "Asian stock markets were bolstered [today] after the U.S. economy added more jobs than expected in July." According to Paul Ashworth of Capital Economics, “The bigger-than-expected 163,000 increase in U.S. non-farm payrolls in July, alongside the small rise in the ISM non-manufacturing index, should ease fears that the U.S. economy is following Europe into recession.” However, there are three good reasons to proceed cautiously in reacting to a single, positive datapoint:

  1. The July number does not confirm a positive trend; the average NFP increase over the last three months is only 105,000, at the lower end of the 100,000-120,000 monthly increase considered necessary to accommodate new jobseekers. 
  2. The unemployment rate went up; unemployment is calculated based on a household survey "of people who are without jobs, who are available to work and who have actively sought work in the prior four weeks, and that number rose in July—by 45,000 to 12.8 million," says the Wall Street Journal's Phil Izzo. NFP is calculated from the number of jobs reported in a survey of businesses, so workers can be counted twice. 
  3. A single datapoint may be influenced by one-time factors; in this case, auto manufacturing layoffs that normally occur in July did not happen, raising the possibility that they may do so in August, depressing that month's jobs data.

Monday, July 16, 2012

Sales Slump

The heart of the market is rending
When retail is downwardly trending,
But is it a shock
When a nation in hock
Will at times prefer saving to spending?

The US government reported retail sales down 0.5% in June, making the first negative sales quarter since April 2008. These light sales figures will weigh on the reelection hopes of Pres. Barack Obama, confirming as they do the picture of a weak domestic economy. But: is it wise or realistic to expect an overly indebted, underemployed US consumer to reach out of his or her meager savings to jumpstart the economy? Better for Uncle Sam to use his still-first-class credit rating to fund the renewal of our national infrastructure, thereby picking up the economy and providing something useful at the same time.

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