This post is the latest update to a series of blog posts seen on the CalculatedRisk.com blog. The original blog post of April 12, 2010, is titled “Recession Measures.” In it, Bill discussed key measures that the NBER uses to determine recoveries, and posted four charts. Here are those charts, updated in his April 29, 2012 post titled “Recovery … Read moreRecession Measures – Updated
Here are three charts from the St. Louis Fed depicting the velocity of money in terms of the MZM, M1 and M2 money supply measures. All charts reflect quarterly data through the first quarter of 2012, and were last updated as of April 27, 2012. As one can see, two of the three are at all-time lows: … Read moreThe Velocity Of Money – Charts Updated Through April 27, 2012
On March 28, 2011 I wrote a post (“The STLFSI“) about the STLFSI (St. Louis Fed’s Financial Stress Index) which is supposed to measure stress in the financial system. For reference purposes, the most recent chart is seen below. This chart was last updated on April 26, incorporating data from 12-31-93 to 4-20-12 on a … Read moreSt. Louis Financial Stress Index – April 26, 2012 Update
Bernanke’s responses as indicated to the various questions:
Thank you Mr. Chairman, Darren Gersh, Nightly Business Report: Some of your critics, I’m sure you’re not going to be surprised think that you’re still being too cautious that unemployment is still high, the economy may be slowing, inflation is subdued, but I know you just talked about the balance sheet. But given that, is the Committee now any closer to QE3 than it was at its last meeting?
Chairman Bernanke: Well first, the Committee has certainly been bold and aggressive in terms of easing monetary policy. We’ve maintained the Federal Funds Rate close to zero since late 2008. We’ve had two rounds of so-called quantitative easing. We’ve had a Maturity Extension Program which is ongoing. We have offered a guidance about the Federal Funds Rate that goes into at least late 2014. So we had been very accommodative and we remained prepared to do more as needed to make sure that this recovery continues and that inflation stays close to target. So in particular, we will continue to assess, you know, looking at the economic outlook, looking at the risk, whether or not unemployment is making sufficient progress towards this longer run, normal level, and whether inflation is remaining close to target. And if appropriate and depending also on assessment of the costs and risks of additional policy actions, we are–remained entirely prepared to take additional balance sheet actions if necessary to achieve our objectives. So those tools remain very much on the table and we will not hesitate to use them should the economy require that additional support.
Here is an update on various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts: The April Chicago Fed National Activity Index (CFNAI)(pdf) updated as of April 26, 2012: – The USA TODAY/IHS Global Insight Economic Outlook Index: An excerpt from the March 22 update titled “Index … Read moreUpdates On Economic Indicators April 2012
Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator. For reference, here are a few charts depicting this measure. First, from the St. Louis Fed site (FRED), a chart through March, last updated on April 25. This March value is 202,568 ($ Millions) : (click on … Read moreDurable Goods New Orders – Long-Term Charts Through March 2012
This post, in five parts, will discuss the unemployment situation in the United States.
As a prelude, I am of the strong belief that the unemployment situation – and its underlying drivers has, and will, impact the entire U.S. population, not just those unemployed. This impact will be experienced through an adverse combination of individual-specific factors including reduced employment prospects, reduced career advancement probabilities, and reduced compensation and benefits – not to mention an array of adverse macroeconomic factors that have, and will, impact the country’s economic situation as a whole.
A few disclaimers with regard to this post:
First, this unemployment aspect of our current economic situation is very complex. This series of posts will present a summary discussion of the topic, as to avoid excessive complexity and length.
Second, the current and future unemployment situation varies widely among demographics, industries, and professions. As such, while every employment situation is unique, there is enough commonality as to be able to generalize to some extent.
Third, the overall employment situation is, of course, dependent upon the overall economic environment.
Fourth, a precursor to this series of blog posts is the July 2009 series of five blog posts titled “Why Aren’t Companies Hiring?”, which discusses various aspects of the topic, many of which lack recognition.
Of course, there are other interpretations of the actual unemployment rate. One is seen on the ShadowStats.com site’s Alternate Unemployment Charts page. On this page, there is an interesting chart of what John Williams refers to as the “Alternate Unemployment Rate,” which he defines as:
The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.
The U-3 unemployment rate is the monthly headline number. The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.
Here is the accompanying chart, indicating the U-3, U-6 and his “SGS Alternate Unemployment Rate.” One sees that there is a different trajectory for the SGS Alternate rate, currently at 22.2%, vs. the official U-3 and U-6 rates:
I like to use these three unemployment rates – the U3, U6, and SGS Alternate Unemployment Rate – as benchmarks; they also serve to (disconcertingly) illustrate how one concept, that of the unemployment rate, can have three vastly different values.
As to my belief of the actual unemployment rate, I think that the answer is conditional on many different factors, including – most importantly – how one chooses to define an “unemployed person.” As well, I don’t believe that the framework and methodologies currently used to calculate the official unemployment rate are optimal.
Given my misgivings with the framework and methodologies currently utilized, I find it nebulous as to what exactly the actual unemployment rate may be. However, from an “all things considered” standpoint, taking into account my definition of an “unemployed person”, the official unemployment statistics, an array of arguments supporting and refuting the validity of the official unemployment statistics, empirical data, etc., I surmise that the “actual” unemployment rate may well be above 20%, as suggested by the SGS Alternate Unemployment Rate. Of course, if this is actually the case, it would be highly worrisome on a variety of fronts, and have vast implications.
The April 23 edition of Barron’s has a cover story titled “Reason To Cheer.” The story contains the results of the “Spring 2012 Big Money Poll” and related commentary. As described in the story: THE BIG MONEY POLL is published twice yearly by Barron’s, in the spring and fall. The latest survey, prepared with the help of … Read moreMoney Manager Forecasts – Notable Excerpts From Barron’s