Blogging the Economytag:typepad.com,2003:weblog-868430590013990522012-06-28T15:15:34ZMuhlenberg Economics professor Dr. Samuel M. Laposata presets a blog on the state of the economy in the Lehigh Valley and how to make sense of it.TypePad
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Cheating, Lies and Mistruthstag:typepad.com,2003:post-6a00d8341c4fe353ef017615d7fe3d970c2012-06-28T11:15:34-04:002012-06-28T15:15:15Z2012-06-28T15:15:34ZOne of the most fundamental requirements for a functioning democratic society is that most of us are simply telling the truth. Therefore, we expect that what we hear is also the truth. Sure, some people lie or stretch the truth, but they are in the vast minority, and we cannot create laws that catch those liars without doing major harm to the rest of us. These dealers in mistruths are often better at creating non-truths than we are in catching them. Consider a simple example: cheating in school. From my many, many years of teaching, I know that there are some students who are much better at cheating than I am at catching them. They are experts at the game; truth matters little to them as they hone their cheating skills, and I imagine that they will continue in their ways long after graduation. They enter all types of jobs, and we know that some of them cause terrible problems, and most will not be caught. Some are caught: remember Bernie Madoff? Martha Stewart’s perjury? Barry Bonds and steroids? If you want a good book about this subject, I recommend the book by James B. Stewart titled “Tangled Webs: How False Statements are undermining America: From Martha Stewart to Bernie Madoff.” Stewart writes of the damage done to society by those who lie, and most importantly, he describes how difficult it is to find those creators of non truths. Though far less consequential than those discussed by Stewart, I have...Dr. Samuel LaposataIt's Election Time. Manipulate the Truth. Spread the Exaggerationstag:typepad.com,2003:post-6a00d8341c4fe353ef0168e9bc668b970c2012-04-09T14:01:45-04:002012-04-09T17:59:39Z2012-04-09T18:01:45ZFor too long, I haven't written on my blog, and I feel that an explanation is in order. It's the election season, and until the election is over, economics takes a back seat to the political process. Huge issues like the budget deficit and Medicare funding are put aside until the election is over. And I have a hard time listening to the platitudes each candidate says to enhance their probabilities of election. I become sarcastic, and I'm told that it's not very pleasing. Simply put, economic truth is too often manipulated to mislead the public. For example, each candidate can look at the same data and spin the data to their advantage. Here's a simple example. In the upcoming months, you will hear that there were about 3 1/2 million jobs created during the current Obama administration! Sounds impressive, doesn't it? I've heard this number several time already, and it makes this administration look good. On the other hand, you will hear from the opposing side that there are almost a million fewer jobs now than when this administration took office in early 2009. Which is correct? In fact, the numbers are both correct. The statements depend upon when you start counting. President Obama took office in early 2009, and for the next 13 months, the U.S. economy shed 4.3 million jobs - that's about 330,000 jobs lost per month. The number of jobs bottomed out in February 2010, started to rise and since that point 3.6 million jobs...Dr. Samuel LaposataJobs, Jobs, and Jobstag:typepad.com,2003:post-6a00d8341c4fe353ef0162fe6b136d970d2011-12-30T12:01:25-05:002011-12-30T01:05:52Z2011-12-30T17:01:25ZSince I last wrote on this blog, political issues, not economic issues, have dominated the nation’s attention. Repeated stalemates in Congress, the failure of the “super committee” to address deficit reduction, and now the upcoming elections have rendered the government impotent on the three most important economic issues of this time: jobs, jobs and jobs. Sure, the most recent published data on jobs and unemployment have been better than previous months, but they are still rather putrid for this late in the recovery. For example, the administration was pleased to see the unemployment rate fall to 8.6%, but it seems that part of this drop was due to people leaving the labor force by stopping looking for work – hardly a positive sign. By the way, could you ever imagine that we would think that an 8.6% unemployment rate is anything other than awful? If this is the “new normal,” it stinks. I find the discussions about the reasons for the recession off focus at this moment. Every recession has its culprits and mistakes, but it’s long been time to focus on the recovery. By analogy, if you think of a recession as a tornado that sweeps through a town damaging physical structures and harming humans, the recovery is the period afterwards when we put things back together. In this economic recovery, many are still blaming the tornado but paying less attention to the debris scattered around us. It was obvious to many of us that this recovery would be...Dr. Samuel LaposataNew Data About Jobs - Can You Guess?tag:typepad.com,2003:post-6a00d8341c4fe353ef01539239e9c5970b2011-10-11T13:51:01-04:002011-10-11T17:50:48Z2011-10-11T17:51:01ZLast Friday, the Bureau of Labor Statistics (BLS) released the data about jobs and unemployment for September 2011. As you have probably guessed, these are not good numbers – again – a repeat of similar poor, discouraging data over the past two years. The unemployment rate in September remained at the August rate: a very high 9.1 percent. In terms of the number of people unemployed, this 9.1 percent represents 14 million people unsuccessfully looking for work. Just for perspective, if these unemployed persons became a state in the union, they would be the 4th most populous state, more people than live in Illinois. One more note of misery: 44.6 percent of these 14 million unemployed have been unemployed for more than 6 months. The second statistic from the BLS calculates the net change in jobs from August to September, and our economy added 103,000 jobs in this month. Again, numbers by themselves don’t have much meaning, so let me give you a benchmark for comparison purposes. The economy has to add about 100,000 jobs every month just to provide jobs for the new people entering the labor market. Otherwise, the unemployment rate will rise as the new entrants are unable to find jobs. Therefore, if 103,000 represented your monthly salary, it would be great, but since it measures the increase in jobs, it’s, well, just not OK. We should be adding 200,000, 300,000 and more jobs each month, and there’s little indication that we will have that data any...Dr. Samuel LaposataNo New Jobs in August! Another Dreadful Reporttag:typepad.com,2003:post-6a00d8341c4fe353ef01543520d40c970c2011-09-04T15:47:40-04:002011-09-04T19:47:28Z2011-09-04T19:47:40ZThough we have been hoping that the the monthly jobs report would improve, that wish was not granted in August. As reported by the Bureau of Labor Statistics, there were, on net, no new jobs added in the past month. Amazing, isn’t it? Zero new jobs when we should be adding hundreds of thousands of new jobs every month. There’s very little in this job report to suggest optimism in the near future. The unemployment rate stayed at the very high rate of 9.1 percent, representing 14 million unemployed people in the American labor force. Even more striking, 6 million of those 14 million unemployed (42.9 percent) have been unemployed for more than 27 weeks. Every time I write this monthly report, I give you the numbers. Here they are again, updated for August 2011: 8,750,000 jobs were lost in this Great Recession. We regained only 1,886,000 (that’s 21.6 percent) of those lost jobs. Therefore, just to get back to the number of jobs we held before the Great Recession, we have to add, on net, 6,864,000 jobs. If we add 100,000 jobs per month, it will take about 69 months to regain all the lost jobs – that’s 5 years and 9 months from now. If we add 200,000 jobs per month? Well, you can do the math, but it’s scary when we have a month with zero new jobs. Is it any surprise that many (most?) people feel that this recession is not over? Furthermore, is it any...Dr. Samuel LaposataThe Demise of The Euopean Uniontag:typepad.com,2003:post-6a00d8341c4fe353ef015434bbc8aa970c2011-08-23T15:50:11-04:002011-08-23T19:50:11Z2011-08-23T19:50:11ZThe cover page of the August 22, 2011 issue of Time magazine is titled “The Decline and Fall of Europe (and Maybe the West).” The lead article explains the demise of Europe, in large part, on the basis of a basic flaw in the structure of the European Union (EU). That defect is something that has often been discussed since the creation of the Euro: the existence of a European central bank based on the Euro as a common currency without the accompanying creation of a strong central European government. Under this structure of the EU, fiscal policy (like the U.S. stimulus plan) with all the accompanying issues about debt and deficits is the responsibility of each individual nation, but monetary policy (related to stimulating the economy through monetary factors such as interest rates) is centralized in the European Central Bank for all the nations using the Euro. The article says that the current economic crisis will force one of two choices: either the European Union will create a strong centralized government (like the U.S.) or monetary policy will be returned to central banks in each individual nations. This latter choice would likely kill the Euro as a common European currency and lead to lower, if any, economic growth in Europe. But what of the first choice: a strong central government in Brussels, the seat of the European Union? I’ve been fortunate to spend some time in Europe because I have twice been the Resident Director for our program, "Muhlenberg...Dr. Samuel LaposataA Better Jobs Report, but Inklings of a Backlash from the Electoratetag:typepad.com,2003:post-6a00d8341c4fe353ef0154346268e6970c2011-08-09T16:47:22-04:002011-08-09T20:47:12Z2011-08-09T20:47:22ZDuring a recession, two large events happen: (1) the economy, as a whole, produces fewer goods and services than before, and (2) the number of jobs falls - two declines, one in output and one in jobs. In June 2009, the economy started to produce more and more goods and services. In fact, the economy now turns out more goods and services than it has ever produced before in our history. But the same cannot be said about jobs. The most recent job report, released today, indicates that unemployment fell slightly to 9.1 percent, and the gain in jobs was 117,000 net new jobs in June 2011! This is a better report than last month's report. However, 117,000 net new jobs is only a trickle compared to the hundreds of thousands new jobs needed right now. Most people, when asked if the recession is over, will reply no. It is over, you know, because output recovered. However, until jobs return with vigor, it’s hard for the everyday citizen to think this recession is over. As I write this, I am on vacation close to Buffalo, NY. Here we read The Buffalo News (yes, we are still newspaper people), and over the years I've read this paper, it has been consistently very liberal. However, the editorial today titled "Failure to Lead" criticized President Obama's performance and ended with the quote, "We needed a Franklin Roosevelt and we got a JImmy Carter." On the next page in the Buffalo News, an Op-Ed...Dr. Samuel LaposataTo Find the Truth, Keep Asking "Why?"tag:typepad.com,2003:post-6a00d8341c4fe353ef014e8a6179c7970d2011-08-04T19:02:20-04:002011-08-04T23:00:31Z2011-08-04T23:02:20ZI once met a group of engineers that lived by the mantra: “In every situation, ask “Why?” seven times." Well, I think it was seven times, but it was more times than you would ask “Why?” in normal conversation. Suppose, for example, that the lighting in your room becomes dimmer. Why? You might answer that it was because a light bulb went out. Why? The answer to this why could be simply that the light bulb had just used up its lifetime, but something could also be wrong in the circuitry that would be far more serious. The sequence of “Why?” questions then would get to the root of the problem. Understanding what’s happening in the job market is also well served by this method. I hear and read some pundits say that (1) we live in an age of the disposable worker, or (2) there has been a fundamental shift in the way the job market works and how employers view the use of labor or (3) businesses have pursued structural cost reduction and flexibility. I don’t think there’s anything sophisticated in these statements, but “Why?” are these events happening? Why are workers disposable now? Why has the job market changed? If workers are now disposable, there must be an easily obtained substitute for labor. That answers the first “Why?” question, but let’s ask again. Why is there now a good substitute for labor that wasn’t there 50 years ago? One answer is that technology has become a good...Dr. Samuel LaposataThe Debt Crisis – Understanding from Otto Van Bismarck and Winston Churchilltag:typepad.com,2003:post-6a00d8341c4fe353ef014e8a29dad4970d2011-07-28T11:11:27-04:002011-07-28T15:10:38Z2011-07-28T15:11:27ZThe current deficit/debt crisis is so overloaded with politics that it is difficult to isolate the true economic issues. For example, if no agreement is made in Congress, will the United States default on its debt payments on August 2nd? Will Social Security checks stop after August 2nd? The answer is 'no' to both of these questions (see my earlier blogs), but much of the media consistently (and erroneously) calls August 2nd the day when America will default on its debt. This reinforces the political scare tactics, and we are caught in the middle. Therefore, I think that we can find more meaning about the current debt crisis in the statements of important past politicians. I've picked two persons who have left us with deeper understanding of the political process, and since they are dead now, they cannot be influenced by either of our political parties. Otto Van Bismarck was a central, very dominant person in German and world politics in the late 1800s. In 1871, he was the first Chancellor of the German Empire, but what I remember most about Bismarck are the quotes that have survived because of their relevance to current affairs. He was a master of politics. Here’s the first quote that seems relevant to the current debt crisis: “There are two things that you don’t want to see made: sausages and laws.” In all the negotiations between the parties and the president, we are being given a first-hand, up close look at the operations in...Dr. Samuel LaposataAngry Old People and Social Securitytag:typepad.com,2003:post-6a00d8341c4fe353ef014e89ff7ab8970d2011-07-22T10:43:01-04:002011-07-22T14:43:01Z2011-07-22T14:43:01ZI’m amazed, but not surprised, at the anger aroused in older Americans at the mere mention of any changes in Social Security. There is a new TV ad warning politicians and goes something like this: “Mess with my Social Security and we will vote you out of office. Remember, old people vote!” To gain political leverage, I think, the President shamefully taped into this anger by saying that if the debt talks are not resolved, he can’t be certain that Social Security checks will be sent out after August 2nd. That's a very, very, very unlikely situation. So, what are the problems with Social Security? Will Social Security "run out of money?" I wonder if the old guy on the TV ad who speaks into the camera understands Social Security. If he does, he must be a good actor because Social Security does have a real problem - but it’s in the future, beyond this actor's lifespan. His threats, however, are having a real impact on the current group of workers because that bullying keeps this nation from having a good discussion about Social Security. How can we solve problems if we don't allow ourselves to talk about them? So, here’s a quick primer on Social Security. There are three important dates: 1983, 2017 and 2037. Social Security is a pay-as-you-go system where the current payroll taxes are used to pay the current benefits to retired people. When there are more workers paying taxes (money in) and fewer people collecting...Dr. Samuel LaposataA New and Good Source of Government Revenuetag:typepad.com,2003:post-6a00d8341c4fe353ef01538fdd930e970b2011-07-13T14:01:39-04:002011-07-13T18:01:39Z2011-07-13T18:01:39ZThe ominous debate on how to close the budget deficit has recently centered on the issue of tax increases. Some in the Congress and the Administration want a combination of tax increases and spending cuts, but others refuse any increases in taxes insisting that the deficit be reduced only through spending cuts. If you’ve been following the news, you know this. It’s time to think about new sources of revenue, time to be more innovative, and I’m suggesting that there is a large untapped source of revenue for state and local governments: fines on traffic speeders. Americans have no problem raising tax revenues from “sin” taxes. For example, the tax on cigarettes is very high and the same can be said for the tax on liquor. Taxes on cigarettes and liquor are often thought of as a way to change the behavior of individuals or a way to force the smoker and/or drinker to pay for the negative impacts they impose on others. Speeders, in the same way, would drive slower if they knew that they had to pay for their speeding, saving not only their lives but also the lives of others. Here is my proposal, and it depends upon something that I think is a feasible new technology. Suppose a device – let’s call it a Hidden Speeder Device (HSD) - could be hidden and installed in a car that would measure the speed and capture the license plate of speeders who pass this car. The information could...Dr. Samuel LaposataJobs! Another Dreadful Report in June 2011tag:typepad.com,2003:post-6a00d8341c4fe353ef014e89b34817970d2011-07-08T13:26:03-04:002011-07-08T17:26:03Z2011-07-08T17:26:03ZDuring a recession, two large events happen: (1) the economy, as a whole, produces fewer goods and services than before, and (2) the number of jobs falls - two declines, one in output and one in jobs. In June 2009, the economy started to produce more and more goods and services. In fact, the economy now turns out more goods and services than it has ever produced before in our history. But the same cannot be said about jobs. The most recent job report, released today, indicates that unemployment rose to 9.2 percent, and the gain in jobs was only 18,000 net new jobs in June 2011! This is a dreadful report. Eighteen thousand net new jobs is only a trickle compared to the hundreds of thousands new jobs needed right now. Most people, when asked if the recession is over, will reply no. It is over, you know, because output recovered. However, until jobs return with vigor, it’s hard for the everyday citizen to think this recession is over. This next election will be dominated by these job issues, just like the election of 1992 when the relatively unknown governor of Arkansas, Bill Clinton, managed to beat the seemingly invincible George Bush. Here are some numbers for those who like to make comparisons. (1) Have we replaced all of the 8,750,000 jobs we lost during the recession? Not even close. We have added only 1,771,000 jobs since the lowest point in jobs during the recession, and that’s only 20.2...Dr. Samuel LaposataScare Tactics and the Debt Ceilingtag:typepad.com,2003:post-6a00d8341c4fe353ef01538f8d5928970b2011-07-06T11:28:15-04:002011-07-06T15:24:51Z2011-07-06T15:28:15ZScare tactics are part of American politics, and now more of these frightening messages are being aimed at older people. The political reasons are simple: the number of old people is growing, many older people feel economically vulnerable, and old people vote. Some of these messages, however, have little basis in fact and some simply distort the truth. Let me give you an example. In the current debate about raising the debt ceiling, I hear political statements claiming that Social Security payments are in jeopardy. The reasoning goes like this: (1) After August 2nd, the federal government will be unable to pay all of its bills; (2) the federal government will then decide to stop paying the required interest payments on U.S. treasury obligations; and (3) this will bring so much worldwide economic chaos that the government will have to stop paying Social Security to older Americans. Really? Let’s suppose that step (1) is correct and then ask what you, in your personal life, would do in step (2). If you don’t have enough money to pay all of your bills but you can pay some of your bills, which bills do you pay? Obviously, you pay those bills that, if left unpaid, will create the most harm. For example, if you knew that not paying your mortgage would put you on the street, wouldn’t you pay that bill first? Of course. So, why would the federal government decide to not pay the interest on Treasury obligations when they know...Dr. Samuel LaposataThe Tradeoff Between Job Creation and Deficit Reductiontag:typepad.com,2003:post-6a00d8341c4fe353ef0154335a28ac970c2011-06-30T12:45:23-04:002011-06-30T16:45:09Z2011-06-30T16:45:23ZBecause we've just emerged from a big recession and jobs are picking up very, very slowly, now is not the best time to be dealing with deficit reduction. Deficit reduction requires either increasing taxes or decreasing spending or both, and those actions are contrary to stimulating the job market, at least in the short run. As I’ve been writing in this blog, the nation is a long way from recovering all jobs we lost in the recession – only 20 percent of the lost jobs have been regained. The best time to deal with the deficit? When the economy was growing, of course, but we didn’t do that. Instead, while the economy was growing over most of the past 30 years (the exceptions were the Clinton years), we continued to spend more than we had available to spend. Now, when we don’t have strong positive economic growth, we find ourselves forced to deal with the deficit because it is so large. The estimates of future deficits and future debt are beyond the imagination of most Americans. However, the trade-off between job creation and deficit reduction is becoming clearer - that deficit reduction means slower job growth and faster job growth means higher deficits, at least in the short run. The public seems to prefer job creation to deficit reduction, and the upcoming elections will probably be affected. It's not hard to imagine that candidates who run on a platform of strong deficit reduction may face difficult elections. However the election...Dr. Samuel LaposataAn Awful Month for Job Creation - May 2011tag:typepad.com,2003:post-6a00d8341c4fe353ef01538f5639bb970b2011-06-21T13:47:45-04:002011-06-21T17:47:46Z2011-06-21T17:47:45ZThere were more jobs added in May 2001, but it was far, far below what we should be adding at this point in our economic recovery. Only 54,000 net new jobs appeared in May 2011. Does this sound like a lot of jobs? Well, it isn't, so let me give you some benchmarks for comparison. Please excuse me for the numbers, but it's the only way you can understand what's happening. 1. We lost 8,750,000 jobs in the Great Recession, which ended in June 2009 - that's 23 months ago - and we've added only 1,797,000 jobs since then. That is, we've replaced only 20.5 percent of the jobs we lost. We have to add 6,953,000 more jobs just to get back to where we were before the recession. Adding 54,000 jobs is just a small drop in the bucket. 2. In normal times, we need to add about 100,000 jobs per month just to meet the new people entering the job market. Again, these 54,000 jobs didn't even meet the needs of new first time job seekers. 3. Do the math: if we add 300,000 jobs per month (which would be exceptional in this recovery), we will not get back to pre-recession levels until April 2013. Just ask anyone if the Great Recession is over (remember that the recession is over because the nation is producing more than ever before), and most people will tell you that it is not over. Why? Jobs have not come back, and that's...Dr. Samuel LaposataThe Simple Calculation for Deficit Reductiontag:typepad.com,2003:post-6a00d8341c4fe353ef014e88c26843970d2011-05-29T20:38:36-04:002011-05-30T00:38:36Z2011-05-30T00:38:36ZThe annual federal deficit is about one trillion dollars. As you know, this means that the federal government spends about one trillion more dollars than it takes in with taxes - annually. There is quite a bit of discussion about reducing that deficit, but one simple calculation illustrates how hard that will be. There are about 300 million people living in the United States. So, one trillion dollars divided by 300 million people equals $3,333.33 per person. For a family of 5, that means that the deficit for this family is 5 times $3,333.33 which equals $16,666,67 for this family. So, if we want to get rid of the deficit through tax increases, it will take a $3,333.33 tax increase per person (even babies) to bring the deficit to zero. Not a likely scenario. On the other hand, if the deficit is $3,333.33 per person, we are individually getting some government services that we are not paying for with our taxes. Given that we don't know what these services are until the government starts to cut back spending, we are not going to easily accept deficit reduction through spending reductions alone. This is going to be messy. I'm bothered by those who think the answers are simple and deficit reduction will not involve any reductions on their part. Dream on. Somewhere we will accept the truth of deficit reduction: it is hard, it will involve each of us giving up something - but we have to do it now.Dr. Samuel LaposataThe April Jobs Data - More Jobs but Unemployment rises a bittag:typepad.com,2003:post-6a00d8341c4fe353ef014e884f3a43970d2011-05-08T11:19:01-04:002011-05-08T15:19:01Z2011-05-08T15:19:01ZIn April 2011, the number of jobs increased by 244,000, but unemployment inched up from 8.8% in March to 9.0% in April. We are still very far from getting back all of the 8,750,000 jobs we lost in the Great Recession, and unemployment is stubbornly high. The recession officially ended in June 2009, almost 2 years ago, but most people don't believe that the recession is over. Until the job market improves, it still feels like we are in recession. Here are some summary facts about the state of the American labor market: 1. We have recovered only 20.4% of the lost jobs during the 22 months since the recession ended. We are starting to grow faster, but it will be years (years!) before we regain all the lost jobs and can start to employ more people than before the recession. 2. Jobs will certainly be a key issue in the elections. 3. Even though there were more jobs last month, the unemployment rate can increase when more people start to search for jobs but cannot find them. In order to be an unemployed person, that person cannot be working but they must be looking for a job. A person who is not working but not looking is not unemployed - they are considered out of the labor force.Dr. Samuel LaposataIs the Economy Really Improving?tag:typepad.com,2003:post-6a00d8341c4fe353ef01538e3b989e970b2011-05-01T10:48:58-04:002011-05-01T14:48:58Z2011-05-01T14:48:58ZIn today's Morning Call (Sunday 1 May 2011), the front page article is "Economy improving...really" with the subtitle "Are we recovered yet?". Spencer Roper writes of of the potential effect of rising gas prices on this recovery and then discusses some other indicators that suggest the recovery may actually be here. This is an excellent article, especially his comments from area businesses. However, the government officially declared that the recession ended a long time ago, in the summer of 2009. But as Roper's article points out, that fact is still lost in the reality of very, very slow job recovery. If you've read this blog, you know that we lost a ton of jobs in this recession, but we regained only a bit above 14 percent of those lost jobs. In the meantime, the economy is producing more goods and services than ever before, having regained all the lost output from the recession. Jobs and output are dislocated from each other in this recovery. Until the job machine really turns on again (and it seems that's going to be a slow process), people will continue to think we are in recession. Recessions are very personal events. If you were not directly affected, you know someone who has been. Until the job machine picks up again, we will continue to think that the recession is still upon us. Obviously, this fact will be a large factor in the upcoming elections, so look for the economy (jobs!) to be the central focus...Dr. Samuel LaposataA Refusal to Increase the Debt Ceiling - What does it mean to us?tag:typepad.com,2003:post-6a00d8341c4fe353ef014e88099446970d2011-04-23T18:18:17-04:002011-04-23T22:18:03Z2011-04-23T22:18:17ZA reader of this blog asked if I could write about the debt ceiling and its impact on people with fixed incomes. So, let me try and start with some background. The United States has a debt ceiling, a limit placed on the total amount of debt that the federal government can accumulate. The debt ceiling was imposed by Congress in 1917, and as you know from reading and watching the news, our current debt is very close to the current ceiling. It will certainly hit that ceiling in the near future. Actually, we've reached it many times before, but every time we approached the debt ceiling, the Congress simply voted to increase the ceiling. Now, some congressmen and congresswomen are saying that they will not vote for another increase of the debt ceiling. So what? What impact will that have on us? Well, we don't have history to see what happens. We've never refused to increase the ceiling, and since the debt climbs daily, something is going to happen. Moreover, since we owe much of the debt to other countries, you can be certain that there will be a strong reaction. A 2008 report by the Congressional Research Service says that if the debt ceiling is not increased, the federal government will be unable to meet its financial obligations. But that's still not enough detail. Which financial obligations? Would the federal government shut down some operations? Cancel pay checks? Refuse to pay interest on the debt? Who knows? But...Dr. Samuel LaposataA Picture is Worth a Thousand Wordstag:typepad.com,2003:post-6a00d8341c4fe353ef014e87eeb979970d2011-04-20T15:58:43-04:002011-04-20T15:16:44Z2011-04-20T19:58:43ZSometimes a graph can say much more than a list of numbers, and today one of my bright students showed me how to copy a graph from the Bureau of Labor Statistics to this blog. The graph below shows the path of employment over the period from January 2000 to March 2011. You can clearly see the fall in jobs after the 2001 recession, bottoming out in mid 2003. Then the strong increase in jobs for almost 5 years topped out in early 2008, and the steep decline in jobs during the Great Recession. Finally, we bottomed out in early 2010. Graph: Total Nonfarm Employment Can you see how little we've recovered in jobs? It's that little uptick that remains far, far below the number of jobs we had before the Great Recession. I'll remind you again: the recession is over. It ended in June 2009, and the economy is now producing more goods and services than it did before the Great Recession started. It's no wonder that many people think that we are still in recession - jobs have not recovered much at all.Dr. Samuel LaposataThe March 2011 Job Data - Better But Not Nearly Enoughtag:typepad.com,2003:post-6a00d8341c4fe353ef014e60e28415970c2011-04-13T08:24:38-04:002011-04-13T12:24:39Z2011-04-13T12:24:38ZOnce each month, the Bureau of Labor Statistics (BLS) releases labor force data for the previous month on their web site www.bls.gov. In this blog, I've been writing about this "jobless recovery," a recovery from the Great Recession characterized by (1) a rise in the output of our economy but (2) stubbornly high unemployment rates and very slow growth in the number of jobs during the recovery. That is, the recession is over because firms are producing more, but the job market is lagging far behind. So, here's quick summary from the March 2011 data, but if you want more detail, look at the information at http://www.bls.gov/news.release/pdf/empsit.pdf A Quick Recap: The Great Recession started in December 2007. In that month, the unemployment rate was 5.0 percent. One month later, the number of nonfarm jobs peaked at 137,996,000 jobs in January 2008 before starting a long decline that ended in February 2010. The Great Recession officially ended in June 2009, and in that month, the unemployment rate was 9.5 percent. While the recession ended in June 2009, the unemployment rate continued to rise reaching 10.1 percent in October 2009. The number of jobs continued to fall until February 2010 when nonfarm jobs were 129,246,000. Therefore, the unemployment rate more than doubled and 8,750,000 nonfarm jobs were lost in the Great Recession. The March 2011 Data: OK. How have we done since? The unemployment rate fell slightly to 8.8 percent in March 2011, and there were 13.5 million persons unemployed. The number...Dr. Samuel LaposataHow Not to Run a Pension Fund - a Real Life Example - Part Itag:typepad.com,2003:post-6a00d8341c4fe353ef0147e38db397970b2011-03-30T18:18:05-04:002011-03-30T22:18:05Z2011-03-30T22:18:05ZA pension fund is a fund established by an employer to gather and grow contributions by the employer, employee or both. That is, employers (and sometimes employees) contribute dollars into a pension fund, and those dollars are invested so that the money will be there to pay promised pensions upon the retirement of the employees. Therefore, three items are necessary to manage pensions: the size of the regular contributions into the pension fund, the size of the promised retirement benefits and the assumed rate of growth of the dollars in the fund. Of the three, only the promised retirement benefits are known for certain. Employees who are eligible for a pension are usually told that when they retire, "these are the monthly benefits you will receive from the pension fund." (As you know, this is different than a 401K plan where the employee (and sometimes the employer) contribute into a fund that is managed by the employee.) However, the assumed rate of growth of the invested pension funds has to be determined by experts who study these issues. After all, this is a forecast of rates into the future, and that forecast should be done by someone who is independent and "knows their stuff." One of the expert groups are actuaries who have special expertise in this field, so it's reasonable to turn to an actuary and ask, "At what rate should we assume that our investments will grow?" And you would expect that the managers of the pension funds...Dr. Samuel LaposataAccelerating Technology and the Jobless Recoverytag:typepad.com,2003:post-6a00d8341c4fe353ef014e86b6bcf6970d2011-03-15T16:08:03-04:002011-03-15T20:07:52Z2011-03-15T20:08:03ZThe Great Recession has produced many stunning statistics. High unemployment numbers. Large drops in output and jobs. But the most amazing fact is that while the output of the U.S. economy has returned to its previous peak before the start of the recession, the economy is now producing that output with over 7,750,000 fewer jobs than it used before. Here are the numbers that may help explain what I mean: In late 2007, right before the economy began to slip into the Great Recession, the output of the U.S. economy peaked at $13,363,500,000 (Real GDP) and we needed about 137,881,000 jobs to achieve that level of output. In late 2010, our economy had recovered and now produced $13,370,100,000 worth of goods and services (more than before), but only 130,128,000 jobs were needed. More output with fewer American jobs. I think that these statistics are important to understanding what is happening in our economy. In fact, the trend has been clear for quite a while now: jobs are changing because technology is playing a larger and larger role in the workplace. For a long time, this intrusion of technology impacted only low wage job, but that is no longer true. Techonolgy is having an impact at all levels of American jobs. Consider the article in the New York Times, "Armies of Expensive Lawyers, Replaced by Cheaper Software." In a litigation in 1978, lawyers examined 6,000,000 documents at a cost of $2,200,000. Now, in a recent case, new software allowed an examination...Dr. Samuel LaposataFebruary's Labor Force Data - A Glimmer of Hope!tag:typepad.com,2003:post-6a00d8341c4fe353ef0147e3044733970b2011-03-05T14:46:56-05:002011-03-05T19:46:56Z2011-03-05T19:46:56ZOnce each month, the Bureau of Labor Statistics (BLS) releases labor force data for the previous month. If you go to www.bls.gov, you will find labor force information about unemployment and jobs. I've been writing about this jobless recovery, a recovery from the Great Recession characterized by (1) rising and/or high, stagnant unemployment rates and (2) falling number of jobs during the recession and then falling and/or very slow growth in the number of jobs druing the recovery. So, here's quick summary from the February 2011 data, but if you want more detail, look at the information at http://www.bls.gov/news.release/pdf/empsit.pdf A Recap: The Great Recession started in December 2007. In that month, the unemployment rate was 5.0 percent. One month later, the number of nonfarm jobs peaked at 137,996,000 jobs in January 2008 before starting a long decline that ended in February 2010. The Great Recession officially ended in June 2009, and in that month, the unemployment rate was 9.5 percent. While the recession ended in June 2009, the unemployment rate continued to rise reaching 10.1 percent in October 2009. The number of jobs continued to fall until February 2010 when nonfarm jobs were counted as 129,246,000. Therefore, the unemployment rate more than doubled and 8,750,000 nonfarm jobs were lost in the Great Recession. NOTE: These data have changed slightly from the previous monthly updates I've written due to a once-a-year benchmark revision by the Bureau of Labor Statistics. The February 2011 Data: OK. How have we done since? The unemployment...Dr. Samuel LaposataTumultous Budget Battles - The Future is Heretag:typepad.com,2003:post-6a00d8341c4fe353ef014e863e7ec7970d2011-02-22T16:01:47-05:002011-02-22T21:01:21Z2011-02-22T21:01:47ZFor years, federal and many state governments have been able to pass off budget problems by borrowing the shortfall and transferring the problem to the future. With the exception of the 4 years from 1998 to 2002, our federal government has operated with budgets that spent more than they brought in with taxes - for the last 42 years. In the Sunday Morning Call, our newspaper presented concise and clear graphs, data and explanations about both the deficit and the debt. If this subject interests you, you should find those pages. They are excellent summaries. The fact is that we, the populace, have become accustomed to getting more than we paid for. Of course, we'd like to keep it just the way it is. We often think of budget cutting in an adversarial way. That is, we fight any cut that affects us, thinking that we can be immune to the impacts of putting some fiscal sense back into our society. To resist those cuts, we make the debate personal, and the media is quick to present the personal side of these budget problems. For example, if there is a proposal that public broadcasting will receive little or no funding from the federal government, PBS threatens the loss of Sesame Street characters for later generations of children. When state government spending cuts hit education, the schools systems threaten cancellation of popular school programs and layoffs of the young and bright teachers in our public schools. In the news right now,...Dr. Samuel Laposata