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Fuzzy Numbers: Jobs report bad at minus 533,000, but made to look better

Friday, December 5, 2008, 8:33 AM

As expected the employment report for November was bad having shed 533,000 jobs with unemployment advancing to 6.7%.

WASHINGTON (MarketWatch) - U.S. nonfarm payrolls plunged by an astonishing 533,000 in November, the worst job loss in 34 years, the Labor Department reported Friday.

It's only the fourth time in the past 58 years that payrolls have fallen by more than 500,000 in a month. Since the recession began 11 months ago, a total of 1.9 million jobs have been lost.

But it would have been worse had it not been for the mysterious positive addition of 30,000 jobs by the so-called birth-death model.  From here on out we'll just refer to it as the birth-birth model because no matter how bad the underlying economic data this model somehow always adds jobs in every month except typically January and July when the model backs out a few of its more irrationally exuberant additions.

However, keeping regular track of the amount of fudging in the Birth-Death model
is one of my favorite activities because I think it provides insight
into just how unreliable government statistical models really are.  For
a nation that drives economic policy "by the numbers" it's important
that the numbers are good.  The Birth-Death model provides a valuable
caution flag for anyone with a tendency to "believe the numbers" that
are being offered up for consumption.  

Birth-Death_12-5-2008.jpg

I found it odd that the birth-death model determined that construction jobs were neither gained nor lost across the Oct-Nov time frame as we saw record-breaking slowdowns in both construction spending and project starts during those months. One wonders what sorts of model inputs they are using at the BLS?

Even odder would be the 5,000 jobs added to the financial activities sector.  Based on this alone, we can be sure that this model does not use any sort of inputs from the real world.

And if we look a bit deeper into the jobs report we find more troubling trends with 1 in 8 people either out of work or forced to work part-time:

An alternative gauge of unemployment - which includes discouraged workers and those whose hours have been cut back to part-time - rose to 12.5% from 11.8%. 

The 'alternative measure' mentioned above is much closer to how Europe reports unemployment, as it includes the so-called "discouraged workers," who would work but can't find anything worth doing and have given up looking.

Definition:

Marginally attached workers are persons who are currently neither working nor looking for work, but who indicate that they want and
are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached,
have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those
who want and are available for full-time work but have had to settle for a part-time schedule.

Lastly, there is employment, but there is also under-employment. One measure of that is the number of people who are counting as "working," but who have part-time jobs when they would have preferred a full-time job. That measure has been trending upwards for quite a while and now totals more than 7.3 million people.

The number of workers forced to work part-time rose by 621,000 to 7.3 million.

The job losses are just beginning and will not peak for some time.  The hope is that this cycle of losses will be over by early spring.  

"It is blindingly obvious that the U.S. labor market is in a terrible state and is deteriorating rapidly," wrote Ian Shepherdson, chief domestic economist for High Frequency Economics. He expects the job losses "to accelerate over the next few months, peaking - hopefully - in the early spring."

The rate of decline may taper off in the spring, but the losses will probably continue throughout the year. "The eventual peak [in unemployment] will be close to 9%," Shepherdson said.

My own thought is that this cycle is not going to play out like past cycles and that job losses will not subside for another 12-18 months.  My reasoning?  The US economy is an 80% service economy and those jobs are sensitively dependent on an expanding economy.

Since our economy has not yet displayed any signs of responding to the trillions and trillions thrown at the banks I consider it very likely that the bottom is still out in front of us somewhere and that job losses will continue to mount until 3-6 months after that bottom is made.

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29 Comments

zekharyah1's picture
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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

I agree with Chis' view here.  There can be many ways to change statistical data.  The most important point of this blog was concerning how large services make up the economy.  If people aren't willing to spend there money, the economic numbers will continue to contract.  The process feeds on itself.  More people loose their job; therefore, less are willing or able to spend, bringing the result that more consumer related companies will cut employment. 

The scariest part of this situation is the enormous printing of money the government is currently doing to stave off the crisis.  These funds are jammed up in the system right now.  Once the get unclogged, massive inflation could be the result. 

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Chris,

Given there are so many extraordinary disconnects between the "information" that the "government" provides and the reality that is so painfully apparent to anyone with a brain cell and a pulse:

1) why has nobody come forward from one of the fuzzy number crunching crews and exposed what's going on?;

2) who exactly is "The Wizard," and where did he/she/they acquire a gall (as in "some gall...") of that size?

The models: I know people (non-thinking) often trust the tools/models they have, simply reporting whatever the guage or screen tells them; as you or any other sensible person who has a science/math background know, there are those students who punch the numbers into their calculators for, say, a simple volume calculation of a cube that will fit on the average desk, they get a number that represents the volume of the nearest dozen galaxies, they write the number down and proceed to the next problem...

Is that what we've got here? Fuzzy-number bots? People who haven't the common sense of zuccini?

And if that is the case, someone made the tools and models that are given to the bots to use; those people must at least question the models they've developed? No? Unless there truly is a curtain behind which they are sitting and purposefully manipulating The Show...

I am having a hard time reconciling the utter absurdity of the government's numbers with the conspiracy it would require to cover up such an enourmously brazen deception of a nation of people--among which there are one or two who should be challenging these things in court.

What exactly is this thing we have been calling the U.S. of A? I am beginning to think like people I used to call crazy! WTF is going on here?

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Nonzeroone: I'm with you on this.

 My own thoughts are that understanding the numbers takes a small bit of work or at least psychological strength to face the realtiy. Our population is weakened by its binge on entertainment and consumption. The mainstream media doesn't help this at all. 

It takes both intelligence and inner strength to admit we've got some big problems. It takes the same to admit our government has been dishonest with us. 

Eventually, the masses will wake from their slumber, I only hope that it is not then too late.

Mike

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

jobs are one thing but what about the small business owners who are closing up shop?.

are there any stats on those numbers?. i know many in construction who are self employed and are not eligible for unemployment and can not find work. where do they fall?

this is not to mention the vast numbers of immigrants who have gone home because there is no work,

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Joe2Baba:

I couldn't agree with you more!

We are getting clobbered now. Our residential work has shot up, even folks unemployed are paying and using us. Businesses are unable to pay us becuase they aren't getting paid. For the first time in 10 years she has had to turn stuff over to collections.

I truly feel that the USA is Enron. http://www.videosift.com/video/Enron-The-Smartest-Guys-in-the-Room

Our books are so cooked, I'm not even sure economists or politicans or govt. officials or wall street get this. To me, Ken Lay, Fastow, Scilling - all saying everything is good, buy, buy, buy - are just faces. The faces we see now are just different, Paulson, Bernanke etc.

The deck of cards is coming down. We will wake up as broke as the poor [email protected]@rds who worked and invested their life savings in Enron. I'm glad these guys (statiticians) don't have A&P (Airframe and Powerplant mechanic) liscenses for if they did the guages in the cockpit would all be in the green as the engines melted off the wings with two bumbling idots in the cockpit too suicidal or too stupid to know better.

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

It's not a "enormous conspiracy" in the traditional way people tend to think of such things with secret agreements to silence and all that.

Rather, it's as Kevin Phillips describes (somewhat brilliantly) in this Harper's article (which is in my Essential Articles section - everyone should read it).  How can our official numbers be so bad and how did they get that way?

"Pollyanna Creep" is an apt phrase that originated with John Williams, a California-based economic analyst and statistician who "shadows," as he puts it, the official Washington numbers. In a 2006 interview, Williams noted that although few Americans ever see the fine print, the government "always footnotes the changes and provides all the fine detail. Nonetheless, some of the changes are nothing short of remarkable, and the pattern over time is what I call Pollyanna Creep."

Williams is one of the small group of economists and analysts who have paid any attention to the phenomenon. A few have pointed out the understatement of the Consumer Price Index — the billionaire bond manager Bill Gross has described it as an "haute con job." In 2003, a University of Chicago economist named Austan Goolsbee (now a senior economic adviser to Barack Obama's presidential campaign) published an op-ed in the New York Times pointing out how the government had minimized the depth of the 2001-2002 U.S. recession, having "cooked the books" to misstate and minimize the unemployment numbers.

Unfortunately, the critics have tended to train their axes on a single abuse, missing the broad forest of statistical misinformation that has grown up over the past four decades.

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...
cmartenson wrote:

My own thought is that this cycle is not going to play out like past cycles and that job losses will not subside for another 12-18 months.  My reasoning?  The US economy is an 80% service economy and those jobs are sensitively dependent on an expanding economy.

Since our economy has not yet displayed any signs of responding to the trillions and trillions thrown at the banks I consider it very likely that the bottom is still out in front of us somewhere and that job losses will continue to mount until 3-6 months after that bottom is made.

Some thoughts and questions here.

Why would job losses subside in 12-18 months? Does subside mean stop hemorrhaging (reduced to a very small amount or perhaps flat) or does subside mean the restoration of growth, even at a minuscule rate? What would be the reasons for job growth -- and, therefore, most likely GDP or some other statistical growth as well -- in an economy that is on the trajectory that ours and the world's is currently on?

I hate to say this, but of course the bottom is out in front of us somewhere. I mean, if it weren't, what's the point of this very website? Well, to answer a rhetorical question, the purpose of this website is to alert people to what one man feels could be a significant and perhaps even disastrous change in the lifestyle and social conditions of the US and much of the world because of an overwhelming and compelling data set.

Also, when speaking of bottoms we should always say of what. The bottom of lost jobs, the bottom of the Dow, the bottom of the housing market, the bottom of foreclosures, etc.

In 12-18 months (mid-2010) we may well be experiencing the first food and fuel shortages, as the delayed reaction of the volatility of oil prices continues to ripple through the system. More ARMs are scheduled for reset in the 2010-11 than I believe have already reset. And as the housing market heads towards its nadir, perhaps sometime in the 2012-14 window, we're only headed for more foreclosures, more "underwater" mortgages, more abandoned and subsequently vandalized homes, more abandoned developments, more abandoned strip malls because of the abandoned developments. I'm not being negative here but simply following the mathematical trendlines.

Doesn't it seem like the global juggernaut has a lot more bottoming out to do before we reach something that vaguely could be called equilibrium, a place and a manner that could be sustained for decades?

Couldn't the absolute bottom (to maybe coin a new term) -- a place where everything has worked itself out, redundancies eliminated, sustainable practices attempted and sussed out, new financial infrastructures put into place, governmental structures rearranged along more regional and local lines -- be something like 20 years out?

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Another great site for everyone here to visit is Shadowstats.com. The real numbers are given there along with an explanation.

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Here is an article that is apropos of this conversation:

http://www.commodityonline.com/news/Revolution-food-riots-in-America-by-2012-13062-3-1.html

One might be inclined to dismiss it as the ravings of a lunatic, but this particular lunatic has an excellent prediction track record. At any rate, it's worth familiarizing ourselves with the worst case scenario. Better to be over prepared than underprepared, I think.

Arthur

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...
mainecooncat wrote:

Also, when speaking of bottoms we should always say of what. The bottom of lost jobs, the bottom of the Dow, the bottom of the housing market, the bottom of foreclosures, etc.

How about the bottom of Capitalism... 

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

I am looking forward to seeing some American ladies added to the "mail-order bride" catalogues. It is good to have variety.

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Was reading on another chat site that Several TV economists (haha) were saying the worst is over too. based on historical models. economy should be going back up by summer. Ha ha ha. Some people will say anything. I posted the article. Considering they are saying this before we even know if any of the big 3 will be seriously laying off more along with those little companies around them. I dare say they need to defog their rose colored glasses. ( Many pilots and other related workers have been laid off as well as freight pilots of companies that flew to different places bringing in parts for those cars they build at the main plants.) Some of pilots also fly the "bigwigs" around and those people are not even looking until early 2010 before they see a recovery worth noticing. It says a lot when they don't watch the same news that the "unwashed masses" watch.

http://www.cnbc.com/id/28069440/site...t%7C&par=yahoo
Huge Job Losses Could Be Signal That Worst Is Over

The sky has fallen. The sun also rises.

If there was ever a time to remind investors that the labor market is a lagging economic indicator, economists say today is such a day. Once the knee-jerk, doom-and-gloom reaction is over, something resembling optimism will prevail with the conclusion that the worst is over for the economy.

“This is history,” says veteran Wall Street economist Ram Bhagavatula. “December payrolls will be weak as well. The leading indicators will come from a slow re-activation of the credit markets and increases in consumer spending. You should begin to see that in the next couple of months.”

Bhagavatula is among a growing number of economists who say the seeds of recovery are already in place, even if they are revising their forecasts for GDP contraction in the fourth quarter to show an even greater decline.

"Every recession has its worst day, and this is probably the worst day," says Chris Rupkey of Bank of Tokyo-Mitsubishi.

Economists point to historical data and recent developments as solid grounds for optimism.

"This number is a unique number because it reflects an unprecedented economic situation, which began with the bankruptcy of Lehman on Sept 15, “ says long-time Fed watcher David Jones, of DMJ advisors. “The economy has never been shut down as quicly as it was following that bankruptcy. The economic response to that cut off in credit is unprecedented.”

Jones points to significant downward revisions in September and October payroll losses.

Indeed, the November payrolls decline of 533,000 was enormous and the biggest since December 1974, when they dropped about 600,000. But declines after that month—in what might be considered closer to the end of the recession than the beginning—were much less severe.

“Severe drops like this (the Sept.-Nov payrolls ) cannot be sustained,” says Robert Brusca, chief economist at Fact & Opinion Economics. “It suggests we are getting so weak there will be a turnaround."

One-off staggering declines in GDP are also not unheard of. At its worst in the 1980 recession, GDP fell by 7.8 percent. In the immediate aftermath of the jobs data release, some economists said the fourth quarter contraction could hit 8 percent. The consensus, which happens to be shared by Jones, is 5 percent.

“The fourth quarter will be the cathartic period,” says Brian Bethune, senior US economist at Global Insight. “Once you have a steep drop like that, even a steady weak state starts to look better.”

Economists say there’s a lot of tailwind to drive an economic recovery and already emerging signs of one.

“There's now starting to be some visibility about how this might end.” Says David Resler, chief economist at Nomura International.

Resler and others point to a host of mitigating factors, including sharply lower gas prices, the steady and gradual decline in Libor rates and the very recent improvement in the mortgage market, a revival in the corporate bond market and the massive stimulus package expected from the Obama administration as soon as possible in January.

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Economists point to historical data and recent developments as solid grounds for optimism.

This never ceases to amaze me. The "Pollyanna" approach to modern economics seems to me to be a lazy way out. "It happened this way before so it will happen this way again." Do any of these so-called "economists" bother to look at the larger picture? Do any of them actually use that lump of gray jelly in their skulls we like to call the "brain?"

I wish they were right, but I'm not counting on it.

Arthur

 

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

I'd like to refer the readers of this thread to a forum I posted several days ago. It addresses some of the things Arthur is mentioning above.

But for those who may not have the time to read it, some questions.

What will the source of an economic rebound or turnaround be? Or, how could there be a turnaround considering the following:

Household debt is maxed out.

Household savings are non-existent.

Credit is contracting, recent reports say by almost half over the coming year.

Unemployment and underemployment are at historically high levels (and going higher?) if one looks at the unmanipulated data.

Real wages have been stagnant for a quarter century.

Home prices will continue to sink, through perhaps as late as 2014.

Individual financial and economic literacy remains non-existent.

National debt is at an all-time high and definitely going higher.

The Federal budget deficit is at an all-time high and heading higher.

In fact all levels of government are drowning or about to drown: city, state, local.

Just to name a few.

Hardly the conditions one would imagine for a robust recovery or the feeling known as optimism.

 

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

You guys are so right. It reminds me of all the bottoms that they began calling to the housing market in late 2007 and early 2008 before it really began to crater.

I've seen the hands of altimeters snap, unwind and spin down slower than this thing.

Do you think we will get hyperinflation or the destruction of the bond/dollar before goods and services hyper deflate? I'm thinking until Benny Boy goes "willy nilly" with tax payer rebates, huge tax payer reabates, that this thing has too many holes to re-inflate. I mean really, who is going to buy even if foreigner sell bonds? 

Oh well, it is still entertaining to see Benny Boy go willy nilly giving money to corporations, overpaid retarted executives and bloated governments. 

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

I think an important thing to point out here is that the powers that be will do everything within their means to "engineer" a "recovery" just as they've done so many times in the past. They're so desperate right now (do Bernanke's eyes get redder and smaller by the week) that they're willing to take unprecedented measures to prop things up for mere months or perhaps even only weeks. Each day the illusion is maintained is a victory for them at this point. I wouldn't even be surprised if we get a little post-inaguration into early spring rally in stocks. Of course, it won't mean anything -- the stock market is pretty much decoupled from the real economy and is almost purely symbolic -- as most other "fundamentals" will continue their journey down the toilet bowl.

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...
cmartenson wrote:

"It is blindingly obvious that the U.S. labor market is in a terrible state and is deteriorating rapidly," wrote Ian Shepherdson, chief domestic economist for High Frequency Economics. He expects the job losses "to accelerate over the next few months, peaking - hopefully - in the early spring."

The rate of decline may taper off in the spring, but the losses will probably continue throughout the year. "The eventual peak [in unemployment] will be close to 9%," Shepherdson said.

My own thought is that this cycle is not going to play out like past cycles and that job losses will not subside for another 12-18 months.  My reasoning?  The US economy is an 80% service economy and those jobs are sensitively dependent on an expanding economy.

Since our economy has not yet displayed any signs of responding to the trillions and trillions thrown at the banks I consider it very likely that the bottom is still out in front of us somewhere and that job losses will continue to mount until 3-6 months after that bottom is made.

 

Chris and Others...

 

We must accept were dealing with incomplete data and questionable...flawed ASSUMPTIONS.  Add what is happening in energy (Oil...Alt. Energy), other commodities, plus reactionary government actions that harm more than help.   Were on a wild ride to somewhere with exact path and destination unknown...except its down economically.

 

Tend to be more inclined with a monthly longer term job loss slope of 300-600+K...take 12-18 months as Chris referenced is not unreasonable.  So...talking in ball park of unemployment rate 10 to 13 percent early/mid 2010 per BLS calculations.  If you look at "non-fudged numbers like shadowstats...were would be pushing 15-20 percent.

 

FWIW...since almost every "expert" has missed boat past 6 plus months (excluding Chris and a few others)...reckon I can speculate as well as them.   It's compelling how well Chris has discerned this past several months...for his acumen and others to continue we all must be using best decision-making principles in a dispassionate manner.

 

Question is...will we have marches...hyperinflation...tax revolts within 2 years.   In other words, how will "the people" react?

 

Nichoman  

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...
Damnthematrix wrote:
mainecooncat wrote:

Also, when speaking of bottoms we should always say of what. The bottom of lost jobs, the bottom of the Dow, the bottom of the housing market, the bottom of foreclosures, etc.

How about the bottom of Capitalism... 

 

Damnthematrix...

 

Not about Capitalism...but more an unsustainable path per Chris's CC.

 

My 2 cents.

 

Nichoman

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

There is nothing unsustainable about capitalism. The unsustainable aspects are the growth and the monetary system.

 And nichoman, I agree with you. I think at this moment, the potential political and military actions scare me the most. Too many Americans are over taxed and overworked while the elite continue to plunder their wealth. One way or another, that situation is unsustainable. Collectivism is not the answer as that just concentrates more power in the hands of an even smaller group of elitists. 

I believe the key linchpin that makes the recession "different this time" is oil. In the '20s and '30s, the USA was swimming in a sea of black gold. Today, the USA is very dependent on an increasingly small number of exporters.

In a broader sense, I don't know how I could even define a "bottom." Until we have resolved our issues with oil, I think the general trend will be downwards. We should embrace the recession and the restructuring it is creating. The truly unproductive occupations will hopefully disappear and everyone will work towards an economy that produces useful goods. As Chris has said "if we are clever about it, I believe we can work it out." Unfortunately, a lot of the lies, manipulation, and greed we see today might prevent cleverness from emerging.

 

Mike

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...
StudentOfJefferson wrote:

There is nothing unsustainable about capitalism.

True enough, insofar that capitalism is more or less a benign description of people interacting in economic freedom and liberty. But since the economic system we have now is clearly unsustainable and most people fancy it to be some incarnation of capitalism what part of our current system is leading towards our demise. Well, you correctly diagnose the problem next.

StudentOfJefferson wrote:

The unsustainable aspects are the growth and the monetary system.

Though perhaps a more accurate way to state it could be: The unsustainable aspect is the continual growth that is pre-ordained by the monetary system.

StudentOfJefferson wrote:

the potential political and military actions scare me the most. Too many Americans are over taxed and overworked while the elite continue to plunder their wealth. 

Clearly. Wars inevitably hurt the masses via inflation and the social polarization that usually results. Veterans are mistreated during the war and when they return home -- then they are used as political props by cynical politicians.

StudentOfJefferson wrote:

Collectivism is not the answer as that just concentrates more power in the hands of an even smaller group of elitists. 

What do you mean by collectivism? Old, Soviet-style stuff or any kind of community-based activity that stresses a collective effort, made up of individuals obviously, for a common good, like a community farm or water supply? I ask this sincerely because I think broadly many of the changes we need to make -- primarily because of the energy part of the equation -- will be a re-localization of production and, in many cases, a return to the actual production of things once again. Part and parcel of this will be an intensification of the relationships people have in their immediate locales. It will be the opposite of the outreach that the Internet has provided, where users talk in chat rooms with people from eight different countries at once. In short, I see more groups of people working together to produce things that they themselves will consume and use.I think and fear that many mis-label or mis-describe this as some form of communism or collectivism -- again, this means different things to different people -- instead of simply as how humans have lived for most of their existence. When I hear collectivism used it has the ring of a Cold War code word.

StudentOfJefferson wrote:

I believe the key linchpin that makes the recession "different this time" is oil. In the '20s and '30s, the USA was swimming in a sea of black gold. Today, the USA is very dependent on an increasingly small number of exporters.

As critical as any point you've made, though unfortunately still not understood by most.

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

mainecooncat: I thank you for your comments.

In my view "collectivism" is what is imposed under various authoritarian regimes: communism, fascism, socialism, and the like. I reject it because it crushes the rights of individuals under the pretense of what is best for the group. As theory and empirical evidence show, productivity and the prospects for "success" of imposed collectivism are very limited in the economic sense.

Now, on the other hand, free and voluntary cooperation makes perfect sense to me. Clearly, humans can accomplish more together than they can alone. As long as we have choice in the matter and have freedom, local communities are probably the best way to deal with the challenges we face. This is a lot different than having a government that produces nothing impose high taxes and regulations upon the people that produce. But leave the decisions and the rights with the individual, so long as they don't violate someone else's rights.

In my opinion, the transition that we inevitably will face towards a more sustainable, more localized culture will be very politically destabilizing. Taken at an extreme level, if you spend your whole life within 20 miles of your local community, what need will you have for a central government?

The governments of large countries will be forced to make some sort of choice: either they will relinquish some of their power and give it back to the local communities to manage themselves, or they will impose some sort of authoritarian regime (communism, socialism) that impoverishes people and effectively uses their labor more than ever to simply maintain a strong centralized system. This sort of choice scares me, because history seems to have few examples of governments and political systems that willingly relinquish their power for the betterment of the people.

Comments are welcome.

Mike

 

 

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Keeping in line with the forum topic, this comment was posted December 5, 08 on www.shadowstats.com "November Jobs Plummet 732,000 Net of Revisions, Down 873,000 Net of Concurrent Seasonal Factor Bias" So things are even worse than advertised.

StudentOfJefferson: man, you are cheating, one has to agree with you on the grounds of your name alone! ... Just kidding, I agree with you even after reading your posts.

I can't stop the urge to comment on the remark about the "bottom of capitalism." What capitalism? We don't have capitalism. Capitalism entails protection of private property, this is inconsistent with a monetary system that permits the surreptitious stealing of purchasing power by money debasement. The monetary system and the central bank are inconsistent with economic freedom. This was admitted even by Alan Greenspan himself  after he sold out! (http://www.dailypaul.com/node/2237) The economic and political power is highly concentrated. People don't seem to realize the power that a central bank has, as it reigns supreme over an economy. The central bank, through manipulation of the interest rates can control: the unemployment rate, the marginal profitability of productive capital, and the creation and destruction of bubble activities. Volatility in the interest rate structure has given rise to a huge financial speculative sector, totally unproductive, that through its activities hurts savers and producers to, as we may painfully see, its breaking point. The destruction of production is what may ultimately determine the ruin of the USA and more than a few countries around the world. In capitalism, a failed enterprise ... well... fails! The population's resources are not confiscated to support the few.

The polar opposites are not capitalism and socialism, as stated in other forums. Look at this from the libertarian perspective. As stated cleverly by someone in these forums a while back, libertarians of the left and the right meet out in the back. What this means is that if the fundamental value of the libertarian left (anarcho-syndicalism) and the libertarian right (anarcho-capitalism) is freedom, then they are basically at the same point in the political spectrum. Both need sound money. Whether in a free society a group of people decides to pull their resouces together in an enterprise under a classical scheme of ownership (the right) or by defining equity ownership by virtue of being a worker (the left: "the workers of the mills ought to own them"), is unimportant, as the people can decide on their own, without coercion. Both practices can coexist. But the point is that ownership and control are exercised locally, by the person in a community, not through some massive bureaucracy elsewhere.

The corruption of these terms (capitalism and socialism) by diverse propaganda systems is beyond belief.  The USSR was not socialist. The resources were not owned by "the people" but by a centralized bureaucracy that denominated itself "the people". You do not own what you do not control. The USA is not capitalist, although it has more capitalist traits than the USSR had socialist ones. In countries with social responsibility (I'm thinking the Scandinavian ones), the inflationary currency system is at least accompanied by a welfare state. In the USA we have the worst of both worlds: the confiscation of resources and the falling through the cracks. Note that in Scandinavia, the wealth of the population is related with the existing level of production. Without this, no welfare state can avoid poverty.

The polar opposites are centralized versus decentralized power. Totalitarianism versus liberty, that is what the conflict is.  The centralization of power in the USA should become evident when considering: a) the monetary system, b) the control of the housing market by the existence of Fannie Mae and Freddie Mac (which handle this market on a neighborhood-by-neighborhood basis), c) the redirection of savings into the coffers of Wall St. through mutual funds and 401k's instead of in investments at a local level, d) the emergence and continued nurturing of a massive "defense" contractor sector (one of the best ways to make fortunes by the way). No free market in the latter, as there can't be a free market with only one customer: the government, which pays cost-plus in its giveaway contracts. e) Consider also the actions of the legislature and the judiciary in their support of the all-powerful banking sector and a few select corporations. This is not capitalism. This is not even a democracy. A plutocracy might be a better word. But the idea of "democracy" has been jack-hammered into our skulls, fulfilling Bakunin's statement: the "beating the people with the people's stick."

Power will never be relinquished voluntarily. Whatever happens will be done in the name of "democracy", and to the extent that people don't notice the ploy, people will not defend themselves. That is the sad and tragic thing.

PS: I hope I didn't break the rules by my overextending and sounding like a scratched record on a few of my pet peeves. If I did, I hope that I'm notified to prevent this from happening again.

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Headless
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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Re: Hedonic adustment and the CPI 

From the Harper's article (on Fuzzy Numbers) Chris suggested (http://www.tampabay.com/news/article473596.ece )

"The hedonic adjustment, in particular, is as hard to estimate as it is to take seriously. No small part of the condemnation must lie in the timing.

If quality improvements are to be counted, that count should have begun in the 1950s and 1960s, when such products and services as air-conditioning, air travel, and automatic transmissions — and these are just the A's!"

OK. I can see the logic in better for less. So how about worse for more?

If we're going to wield the wild ax of hedonic adjustment, let's take a swing at everything we the "consumers" (who represent the "C" in CPI) pay for. If it's got a cost-to-quality ratio (C/Q), let's include it. Therefore, how about the G's?

Given: Government (as in George Bush and Sarah Palin) has a cost Cg; and since mathmeticians tell us we cannot divide by zero, we'll assume it has some non-zero quality Qg. (Note: Mathematicians do allow us to divide by negative numbers--which may be appropriate in certain political administrations. However, dividing by a negative number throws a monkey into the hedonically adjusted CPI sum, and every reasonable person knows you shouldn't add monkeys to hedonism. We won't go there.)

As per recent headlines, the cost of government, Cg, has apparently gone up. The quality of government, Qg (as painfully witnessed here:

) has gone down--and returned to the far north Forever, if misfortune has any sense of fair play at all. (Note: This returning north, to Alaska, is known in the economic calculus of hedonic adjustments as a Sadistic Retracement.) 

With no negligible amount of confidence, I think we can conclude that:

1. As the distance between Palin-like politicians and Washington, D.C. decreases, the cost-to-quality ratio of government, Cg/Qg, approaches infinity;

2. while our government seems to have no fear of infinite sums, hedonic adjustments and government cost-to-quality ratios will never meet. 

NZO

 

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Mike Pilat
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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

mred: you are absolutely right. History doesn't seem to offer us much hope in this area.

I'm saddened to say I work as an engineer for one of the aforementioned defense contractors. While it is more lucrative than many other competing industries in my region, I have found it far less fulfilling. I can see huge amounts of taxpayer waste, inefficiency, and even the signs of mild corruption, and my view is not from the crow's nest. I'm on my way out because I can't stand the fascist, war mongering tendancies of this sector. I will be transitioning to a career in alternative energy, if I don't become a subsistence farmer first!

 

Mike

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...
Arthur VIbert wrote:

Economists point to historical data and recent developments as solid grounds for optimism.

The "Pollyanna" approach to modern economics seems to me to be a lazy way out.

Oooh...not lazy at all.  It take hard work (money mostly) and brains to game the systems like it is.  What is necessary though is a ignorant and lazy populous for this to be pulled off.

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...
StudentOfJefferson wrote:

In my view "collectivism" is what is imposed under various authoritarian regimes: communism, fascism, socialism, and the like. I reject it because it crushes the rights of individuals under the pretense of what is best for the group. As theory and empirical evidence show, productivity and the prospects for "success" of imposed collectivism are very limited in the economic sense.

Your view is narrow on these.  Democracy is collectivism which is why an active democratic society becomes at odds with capitalism, which produces disparities in wealth.  I would also like to see all this theory(?) and empirical evidence.  There is just as much empirical evidence that indicates that failings of free markets and/or capitalism.  I know, I know..."there has never been truly free markets."  The same can be said for any of the other ideological frameworks mentioned.  Every single one of these is a model of human behavior..."if people would just be like this, then..."  These are all utopian frameworks that fail when human behavior does not live up to expectations.  For instance, people are socialized in particular ways from early ages...should children from less than desirable environs be penalized for circumstances beyond their control from the start?  It is rediculous to think that society should be devoid of any type of collectivism if you desire society to function in a particular manner.  Those who are ok with this are sociopaths (lack empathy) by definition and are not concerned that there will absolutely be extreme losers in society....many (or most) never having a real chance.

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Mike Pilat
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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

ajparrillo:

You raise some interesting points and I concede that utopian frameworks never truly exist. I simply point to the fact that frameworks that were de jure and de facto collectivist (i.e. the USSR, North Korea) tend to fail miserably. I honestly don't know where I would put the USA on a spectrum but I do assert that we have many of the facets of collectivism already in place here and I would argue that those collectivist tendancies are A) part of the reason we are in big trouble and/or B) will greatly hamper our prospects at any sort of recovery or stabilization.

As you are quick to point out that democracy can be viewed as collectivism, I would answer that you are right. In a sense, pure democracy is the most collectivist system around, since it can allow the 49% to be subjected to the decisions of the 51% all in the name of the "common good." Communism, socialism, and fascism are all authoritarian regimes that use the guise of collectivism to confiscate the wealth of the people and maintain the elite ruling class. The point is that all four of these frameworks share one thing in common: at some level, people are forced to change their behaviors to conform to the "system." And the key is that there are no real limits as to how much the individuals will be forced to conform.  In democracy, everyone must conform to the majority. In C, S, and F, everyone must conform (to one degree or another) to the person or party that is in power.

And that is why I argue that a republic is the finest form of government devised to date in that it protects individual freedoms and liberties to the greatest extent possible. Our Constitution never mentions "democracy" and is very clear in indicating that it is defining a republic. In a republic, it is law that forms the rules. The laws can be voted on by some form of democracy, but the point is the same: natural laws that protect the rights of individuals are instated. Outside of these basic, fundamental laws (don't kill, steal, commit fraud, etc.), individuals have as much freedom as possible and have the greatest incentive to work hard.

I will admit that while I believe a republic is the best form of government from the individual standpoint, it is also the least stable in the historical sense. This stems from the fact that there will always be political wolves that try to game the system and usurp disproportionate amounts of power. The law alone is not enough to maintain a republic. It is incumbent upon the morality and dilligence of the people to enforce the law to protect their basic rights. This, I would argue, is the price of liberty.

There is absolutely nothing wrong with free people choosing to collaborate and work together. But they should also have the freedom to decide if and when the system no longer serves their needs. That is, if the collaborative structure that they are a part of is unfairly taking advantage of their labor and efforts, they should have the ability to opt out and meet their needs in some other way, so long as they do not infringe on the basic rights of others.

Personally, I trust individuals far more than I trust large groups. The tendancy for groupthink can be very strong and the consequences devastating. It is not fair that the honest, hardworking individual should be forced to pay for the errors of others. Everyone should (and hopefully is able to) trust themselves. A free collaboration of individuals working together should satisfy every single one and also lead to the greatest productivity. On the contrary, forced collectivism will hurt and anger those that work the hardest and unfairly elevate those that work the least. Besides, I believe that individuals have an inherent altruism about them when they know they are sharing the fruits of their own labor. But people can get very stingy when they feel they are already devoting their time to serving the group rather than directly serving themselves.

Thank you,

Mike

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Mike,

Well stated and can't disagree with much in general.  A note on myself...I mostly interject in discussions that become fairly dogmatic, i.e. my ideology can beat up your ideology.  As for the US, I would suggest that we are progressing rapidly towards what the former USSR was in terms of real wealth distribution and control of this wealth.  While the ideology of a free market republic is appealing, is cannot and will not ever exist, primarily because wealth will be created and pooled (through generations) and we lead to a lopsided system.  I argue that once markets expand beyond localities and grow more anonymous, they become increasingly gamed for more powerful players.  Futher, the only way to protect our free markets (if we were to move towards this) would be to enable some protectionism in order to maintain local market and competition. 

I would also not group all collectivism together.  There are many forms and levels of what can be collectivism and these should no be ignored, especially if they may enhance liberty and economic competition.  There are no natural laws that define human action...some argue for social darwinism where the fat is cut from society.  However, fat is important, to a degree of course.  I prefer to believe that we are intelligent beings and can make thoughtful decisions that direct our lives even and especially through gov mechnisms.  We should rise above "natural" laws, which sets us apart from other animals.  In the end, is productivity the most important thing in society?  There is a balance.

Just some thoughts...good discussion.

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Re: Fuzzy Numbers: Jobs report bad at minus 533,000, but ...

Hi StudentOfJefferson and ajparillo:

Yup, ajparillo nails down the reason why even starting in an evironment of economic freedom, over time conditions of inequality would emerge. Thus giving rise to coercive institutions of some sort, as the relatively more powerful use their power to gain even more, thus limiting freedom. A society with fairness that may grow prosperous would need a tremendous degree of maturity and foresight by its citizens: constant awareness of the values that ought to be protected and the ground rules that may help preserve the fairness through the generations. From what I have written above, you may figure out that I resonate with the ideas of the libertarians. Anarchism may mean no ruler, but it doesn't mean no rules. 

The free market view is based on the idea that the collective decisions of the many in terms of deciding how resources ought to be invested, will outperform the decisions of a centralized bureaucracy.  The signals provided by free-market pricing may be very important in managing limited or scarce resources. Having said that, it is of course no panacea. Business tends to be short-sighted in its plans, if it focuses on the long term, the competitors that focused on the short term may ensure that the former will not even exist in the long term. Many of the most significant problems are, of course, long term. This is why I was bringing up the issue of maturity and foresight.

Productivity is important in the sense that it underpins a society's prosperity. Low production means that the effort that the members of the society must exert to secure the basic needs is high. High production means the reciprocal. Compare the levels of production of 50's America with the present. That goes a long way to explain why a single salary could support a family then, and at present, a two-income family may live in debt. There are more factors of course, but this is an important one.

Productivity may also have its impact with regard to sustainability. Here is where the maturity comes in again. A prosperous (high production per capita) society can impoverish itself by increasing its size, unless production increases also. Thus the sustainability problem. Imagine the kind of sophistication of a society that may choose to maintain a population level to keep a sustainable level of prosperity.

Two side comments: in the example of the 51% imposing its will on the minority, that is one reason that democracy doesn't "scale". The more people involved in decisions that affect you, the less freedom you have. But also note that we don't have even that at present, since the 51% simply gives a rubber stamp to the ruler to basically do whatever the elite wanted to begin with. It is sort of an elected dictatorship. 

And finaly, SOJ: I feel your plight with respect to your profession. I'm in the same boat.

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