Professor Mark J. Perry's Blog for Economics and Finance
From University of Virginia economics professor Lee Coppock's blog Long Run Equilibrium.
We still have a long way to go before the jobless rate equals the levels of the early 1980s. So before we make comparisons to the 1930s and declare that we are in Great Depression II, how about first making comparisons to the 1980s?
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
11 Comments:
I think we don't compare to the 1980's because comparing to the 1930's sells a lot better, marketing-wise. Facts aren't as important as perception.
If you re-add the discouraged workers that the Clinton and Bush 1 administrations removed from the U-6 unemployment rate (like ShadowStats does), "real" unemployment and underemployment is nearly 18%. I think this reflects the reality of the economy much more than the artificial 7% of the official U-3.
"Once a decade" items and luxuries (toasters, iPods, etc.) cost less than ever before (post-inflation), but essentials (food, gas, etc.) are curving away from their "forever" bottoms and increasing 25% to 50% (or more, in some cases) from their prices of 1-2 years ago. This squeezes the monthly budgets of people who have placed themselves on the edge with overbought houses, cars, and other big-ticket items.
The unemployment rate is one metric. Another metric is the cumulative percentage decline of nonfarm payroll employment from the business cycle peak.
The Minneapolis Fed has the data here.
By this measure the 2007 recession is not as bad as the 1981 recession but worse than the 1973 recession.
These statistics are meaningless comparisons without facts.
Who WAS employed in the 1930's? What impact did the strikes and lockouts have on the unemployment statistics? If there was no formal welfare system in place to provide relief to the unemployed, how can we be assured that the reported rate of unemployment percentages are accurate and not skewed - particularly when we acknowledge that American citizens were bristling at immigrants who were "taking their jobs". Do the unemployment statistics being offered as "official numbers" include or exclude immigrants who may have been here illegally? Do the unemployment statistics include strikers who willfully left their jobs?
Is it possible that the union-coordinated worker strikes and lockouts on the manufacturing sector themselves caused the domino effect impacting the primary industries (agriculture, mining, logging, etc) that FED the manufacturing sector ?
It is dangerous to make these cross-decade comparisons in a vacuum.
I don't understand. Shouldn't there be 50% unemployment before women entered the workforce.
joke.
me too what Kentucky Packrat said. shadowstats.
The ShadowStats fanboys are steadily working towards cult status.
Yeah, we've had double-digit plus unemployment for 2 decades and no one but some guy on a website has noticed.
Subscribe now for only $175 and we'll send you this tinfoil hat as our special gift.
The ShadowStats fanboys are steadily working towards cult status.
Shadowstats denuded and debunked.
Anyway you cut it, that's an ugly trend line for the last 12 months.
I'm glad I have a job, but wishing I hadn't bought a house last November.
stilettoheels (with a denuded profile!) says:
"The ShadowStats fanboys are steadily working towards cult status.
Shadowstats denuded and debunked."
I clicked on the link and this was my favorite part:
«the response is more philosophical than quantitative.»
This is such a comical statement! The BLS states currently that:
«the CPI's objective is to calculate the change in the amount consumers need to spend to maintain a constant level of satisfaction.»
Which is not just "philosophical" instead of "quantitative", but outright delusionary.
How can the BLS measure "quantitative"ly a "constant level of satisfaction" across time and across a population? Even philosophy does not succour here.
So the BLS approach is not actually to measure that level of satisfaction, but even more delusionarily to *assume* that given changes in specific goods correspond to specific changes in the level of satisfaction that they provide (and of course, even more laughably, "coeteris paribus").
I'd love to see the "methodology" in determining "a constant level of satisfaction."
To paraphrase Kentucky Packrat -
"Try comparing apples to apples instead of making fruit salad."
And what is the illustrious professor's take on http://www.shadowstats.com? I betcha think it's a lot of hooey.
It's hard to take you seriously when you never saw this economic crisis coming. Your supposed to be a professional in the field.
I'd love to see the "methodology" in determining "a constant level of satisfaction
Well, poorboomer, perhaps I can assist you to understand the difference between a linear and an exponential function. If the BLS inflation rate is 3% per year and the shadow stats inflation rate is 6% per year and your income increases at the BLS inflation rate, then (using the rule of 72) you would only be able to purchase one half of a kitchen toaster after 24 years.
But I will offer some "quantitative data". Perry has posted some recent posts on the price of household kitchen appliances relative to the average wage. In 1990 households spent 0.465% of total personal consumption expenditures (PCE) on kitchen appliances. In 2007 households spent 0.480% of total PCE on kitchen appliances. There is no shadowstat inflation in kitchen appliances relative to PCE for the last 18 years.
See line 30 of BEA Table 2.5.6.
But there has been deflation in food excluding alcoholic beverages from 14.3% to 11.8% of PCE over the last 18 years (line 8 of Table 2.5.6).
BTW, John Williams on September 10, 2008, indicated that he would prepare a more comprehensive response to the BLS "debunking" economists. I quickly reviewed his "public" site and could find no subsequent response.
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