May 10, 2008

The Economy Is Improving, While Old Media Remains Mired in ‘Recession’ Talk

Note: This was originally posted at Pajamas Media Thursday morning under the title “Economy Improves, Old Media Ignores.”

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Those who are rooting for the economy to go into a tailspin cannot be pleased.

First, the government told us that the economy grew 0.6% in the first quarter.

I wasn’t happy, because I’d like to see the economy get back to at least the 3.2% average growth it experienced from the second quarter of 2003 through the third quarter of 2007.

But many in the business press seemed displeased for the opposite reason — that the number wasn’t negative. Since the everyday working definition of a “recession” is “a decline in GDP for two or more consecutive quarters,” it meant that there is no solid evidence of a recession.

Nevertheless, the Associated Press’s Jeannine Aversa insisted that “A growing number of economists believe the economy is in a recession and is indeed contracting now.”

Rex Nutting at MarketWatch.com went way over the top, as you can see from these article excerpts:

U.S. could have recession without drop in GDP
Analysis: Growth isn’t everything; jobs and incomes count more

….. the economy may be on track for the first recession in U.S. history without any quarterly decline in growth.

….. GDP is a pretty crude measurement of economic well-being.

….. GDP is a quarterly accounting gimmick that may not be an accurate reflection of the economic reality.

….. With GDP showing a small positive number in Wednesday’s report, no doubt many people will cheer that the economy has therefore avoided a recession. But that’s not what the other economic numbers show.

Nutting, MarketWatch’s Washington bureau chief, quoted no outside economist, analyst, government bureaucrat, think-tank researcher, or anyone else to back up his extraordinary claims. I have never seen anyone call GDP a “crude measurement” or an “accounting gimmick.” If I were working at Uncle Sam’s Bureau of Economic Analysis, I’d feel insulted.

Fortunately for the rest of us, the “other economic numbers” that followed last week’s GDP report do not support Nutting’s peculiar notion of “recession with growth.”

On Friday, the government’s employment report showed that the economy added over 700,000 jobs in April.

That’s right. Here’s the proof:

BLS0408NotSeas

As you can see, government’s best estimate is that 703,000 more real people were actually working in April than were in March, and that 1,810,000 more were really doing so in April than in January.

If you’re surprised, I don’t blame you. Rex Nutting may be too.

That’s because the “official” jobs increase or decline and the unemployment rate are both adjusted for seasonality, or changes in real employment levels that have occurred in previous years. The fact that the number of jobs added in April 2008 was less than the number added in previous Aprils goes a long way towards explaining why the most recent seasonally adjusted jobs change was a loss of 20,000.

The business press has abused the seasonally adjusted job-loss numbers for the past three months by pretending that they represent actual people thrown out of work. They do not.

The AP’s Aversa was a primary offender last Friday, as she wrote:

Employers eliminated 20,000 jobs in April …..

….. It was the fourth straight month that employers cut jobs — bringing total losses to 260,000.

….. Businesses are handing out pink slips as they cope with an economy that is teetering on the edge of a recession, or possibly in one already.

….. On the employment front, construction companies, manufacturers, retailers, mortgage brokers and temporary help firms were among those shedding jobs in April.

Almost none of what Aversa cited above happened in the real world. Except for manufacturing, every major sector of the economy had more workers in April than in March.

To be clear, compared to previous years, April’s jobs increase was not as great as one would hope to see. But it was at least closer to the previous two Aprils (within 157,000, on average) than January’s decrease or February’s and March’s increases were to their comparable 2006 and 2007 figures. More improvement is needed, but April at least headed in the right direction.

Oh, and April’s unemployment rate, seasonally adjusted, fell 0.1% to 5.0%; the unadjusted rate fell from 5.2% to 4.8%.

Finally, the recent news from the Institute for Supply Management (ISM) has been very good.

Last Thursday, ISM reported that manufacturing’s 15% of the economy, while still slightly contracting, held steady. Its Manufacturing Index came in at 48.6% (any reading above 50% indicates expansion; below 50%, contraction).

On Monday, ISM’s Non-Manufacturing Index, covering the remaining 85% of the economy, including the troubled housing and financial services sectors, leaped into expansion mode with a reading of 52%. That was up 2.4% from the previous month and confounded the “experts,” who had predicted that it would go down.

Then on Tuesday, ISM had the nerve to issue its Spring 2008 Semiannual Economic Forecast, which said: “Economic Growth to Continue Throughout 2008.”

If you think you heard “How dare they!” murmurs from the business press, you may be right.

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24 Comments

  1. You should send a note to the White House to correct the president, because in his radio address last week he said: “And after a record 52 months of uninterrupted job growth, April was the fourth month in a row in which our economy lost jobs, although the unemployment rate dropped to five percent.” What an ignorant fool he is — spouting the MSM’s tired old line instead of touting the 700k jobs that were actually created.

    Comment by Invictus — May 10, 2008 @ 3:02 pm

  2. #1, Bush assumes you’re smart enough to know that he meant “April was the fourth month in a row in which our economy lost jobs (on a seasonally adjusted basis), although the unemployment rate, also seasonally adjusted, dropped to five percent.”

    He assumes his audience knows what seasaonal adjustments are, as does BLS. Whether that assumption is expecting too much is another matter.

    His sentence, however, has the advantage of being true.

    The Media’s crap that “pink slips were handed out” and that many sectors reduced actual employment has the disadvantage of being false.

    What an ignorant fool you are for not getting that. Nice try, though. :–>

    Comment by TBlumer — May 10, 2008 @ 5:35 pm

  3. Sorry, Tom, but what part of “our economy lost jobs” — which you claim has the “advantage of being true” — don’t you get? Read his lips: Our. Economy. Lost Jobs. For four months running. He said it, I didn’t. I know there are folks like you all over the web trying to make economic chicken salad out of economic chickensh*t, but come on, enough is enough. Oil’s at $125/barrel (take your stimulus check right to the gas station, thank you very much), the consumer’s hanging on by a thread, home prices are still falling, the inventory of unsold homes is huge, the Fed’s Senior Loan Officer Survey (just released) indicates that credit is becoming ever-tighter, and yet folks like you want to dance the jig because GDP printed with a “+” sign instead of a “-” sign. Big deal. Six-tenths is anemic, and beneath the surface the report showed final domestic demand was negative for the first time in 17 years. We got 0.8 out of inventory and 0.2 out of exports. What happens if/when the dollar stages any significant recovery and exports trail off a bit? What happens when the inventory build gets worked off? What happens if those both occur while the consumer is still retrenching? Come on, man, take off the rose-colored glasses and get a look at what’s really going on. Oh, and by the way, recessions have started with GDP in positive territory, and we have also had them without two consecutive quarters of GDP contraction.

    Comment by Invictus — May 10, 2008 @ 5:52 pm

  4. Sorry, Invictus, our economy lost seasonally adjusted jobs. Bush was assuming that you know what he was referring to. Sorry you don’t get it.

    The housing sector is part of ISM’s non-mfg index, which means the rest of the econ besides housing, finl services, and mfg (i.e., about 70% of it) is chugging along okay. All of your complaints about housing and credit are, like Ragu spag sauce, “in there.”

    No rose-colored glasses here — I’ve said GDP was anemic the past two quarters. We’re just not in a recession. And YOU have to acknowledge at least that we’re not in one YET. One may yet come, and you’ll get your fond wish. 5% unemployment, and you’re claiming recession NOW? (4.8% not adjusted) That’s crazy.

    Comment by TBlumer — May 10, 2008 @ 6:48 pm

  5. I’m left wondering why you’re the only person on the internets (at least that I’ve found) who trumpets the non-seasonally adjusted number. What do you know that no one else (including BLS, who report the seasonally adjusted number in their first graf, and the president) knows? And, if your metric is a better gauge, I’d think Bush would have used it and said, “Last month our economy added 700,000 on a non-seasonally adjusted basis.” That would certainly play much better than what he actually said, wouldn’t it? And let’s take a closer look at your preferred metric: April 2007 the number was 137,341. April 2008 the number is 137,722. That’s a gain of only 381. I’ll be real generous and say that we only need to create 100k/month (1.2MM/year) jobs to keep up with population growth. That means — using YOUR numbers — we fell 819k jobs short over the past year. And what say you about final domestic demand and the fact that inventories and exports carried the day? You think the consumer’s coming back any time soon?

    Comment by Invictus — May 10, 2008 @ 7:00 pm

  6. #5, oh deliberately being obtuse one –

    To your question — the answer doesn’t matter. What does is the truth, which I pursue.

    I NEVER said it’s a BETTER gauge, and I NEVER said that the results are impressive. I said that anyone who says that net “pink slips” were being issued by the tens of thousands during the past three months — as the media has, repeatedly — is lying. If you won’t admit that, we’re wasting our time.

    I’m NOT impressed with job growth in the past year, BUT with 5% unemployment, it could just as well mean that a lot of people are moving into retirement (lots of boomers are 60 up to 62, when Soc Sec kicks in).

    If you won’t admit that a recession has NOT started, at least thru about April 15, we’re wasting our time.

    Comment by TBlumer — May 10, 2008 @ 7:45 pm

  7. So I take it you’re not going to answer any of the questions I’ve raised, and that your overarching mantra is simply “no recession,” right?

    Comment by Invictus — May 11, 2008 @ 7:41 am

  8. #7, see #6. You’re wasting my time.

    Comment by TBlumer — May 11, 2008 @ 9:18 am

  9. I always wonder why it’s “wasting one’s time” to point out the holes in their arguments. As I find repeatedly on the web, when confronted with actual facts, people whose positions are discredited become dismissive of those making the superior argument. I guess I shouldn’t expect any different here. Instead of arguing the merits of your case on the facts (which other than a very flimsy GDP print don’t support it), you simply shoo me away with a glib “you’re wasting my time.”

    By the way, the Washington Times made an interesting point in its editorial on Friday; maybe you’d care to respond: “If there wasn’t a recession in 2001 [GDP did not decline two consecutive quarters], then it would be tough to partly blame the previous administration for converting a $236 billion budget surplus in fiscal 2000 into a $413 billion deficit four years later (or for replacing a $114 billion reduction in the national debt in 2000 with a $3.7 trillion increase since then).” And please don’t blame it all on Iraq/Afghanistan, thank you.

    I’ll be around in the event you change your mind and actually want to debate the facts instead of just running and hiding.

    Comment by Invictus — May 11, 2008 @ 9:34 am

  10. #9, see #6. I guess I’ll have to spell it out:

    - I said that anyone who says that net “pink slips” were being issued by the tens of thousands during the past three months — as the media has, repeatedly — is lying. If you won’t admit that, we’re wasting our time.

    - If you won’t admit that a recession has NOT started, based on econ data as it currently exists, at least thru about April 15, we’re wasting our time.

    You admit both things unconditionally, we’ll resume. Not a second sooner.

    Comment by TBlumer — May 11, 2008 @ 6:37 pm

  11. So now you’re going to suppress my dissent to the pablum you spew by demanding I concede two points as a precondition to further discussion. Not gonna happen. You’ve built a nice straw man, but he’s a straw man nonetheless. You don’t want to debate the state of the economy on the facts — you simply want me to cower in the face of 0.6 GDP. Your straw man is meaningless to me. The facts are what they are, notwithstanding your attempts to twist them. Any readers of this exchange will plainly see that it is you who chose to disengage and not have a discussion on the facts by setting absurd preconditions. I hope your readership will take your cowardice to heart; it is you who is wasting their time.

    Comment by Invictus — May 11, 2008 @ 7:17 pm

  12. #11 – I guess I’ll have to spell it out, AGAIN:

    - You won’t concede the obvious that net “pink slips” were NOT being issued by the tens of thousands during the past three months —- and that by reporting as if it has been, the media has been repeatedly lying.

    - You won’t concede the obvious that a recession has NOT started, at least thru about April 15, based on econ data as it currently exists:
    — anemic but positive growth;
    — unemployment that is lower than 30 of the past 40 years’ annual averages;
    — overall ISM economic improvement in April;
    — and, looking further, an ISM projection of weighted-average 2.4% growth (1% in mfg, 2.7% in the rest).

    Given that you won’t concede the obvious — Why would any reader of these comments believe that you’re capable of having an intellectually honest, coherent discussion?

    “Suppressing dissent”? ROTFLMAO.

    Comment by TBlumer — May 11, 2008 @ 8:41 pm

  13. There you go again Tom, talking over a 6th grade level. Sweetie, this moveon.org ignoramus obviously went to a really bad public screwal (redundant) or was home schooled by an illiterate parent.

    Perfect example of a liberal whacknut… I may print this out and read it on the radio.

    Comment by Rose — May 12, 2008 @ 6:58 am

  14. Rose, way to present some actual facts. Seriously, is ad hominem all you folks know? Whatever happened to an actual analysis of the facts, or did that go out the window when they all turned against you? Nice job. You go ahead and read it on the radio. That’ll sure show me, huh?

    Comment by Invictus — May 13, 2008 @ 5:48 pm

  15. And by the way, Tom, at the risk of incurring Rose’s ire again (shiver), three of the four most important metrics that matter to NBER are in decline or stalled: Employment (peaked in December), Real Personal Income (less transfer receipts; peaked in December), Industrial Production (stalled). Tell you what, I did think that today’s Retail Sales number was better what I would have guessed, but the consumer’s still on life support, and the stimulus check will either pay down debt or buy a few tanks of gas.

    Hey, Rose, what did your listener (singular) have to say when you told him/her that some crackpot on the intertubes claimed the economy lost jobs last month (just like the president did in his radio address).

    Comment by Invictus — May 13, 2008 @ 7:31 pm

  16. #15, “Rose” has been heard on almost every major talk radio program both in and out of town.

    Your possession of “facts” about her is about equal to those you “possess” on the economy.

    Even if you’re right about “stalled,” (i.e., not growing — but you aren’t), “stalled” doesn’t equal recession. It equals “stalled.”

    You really need to stop embarrassing yourself.

    Comment by TBlumer — May 13, 2008 @ 9:31 pm

  17. You guys sound like arguments that I’ve had with a crazy right-winger buddy of mine (except for Rose of course – aside from sheep ditto, I don’t know what to make of her/him). The real point, at this time, is that right-wingers are struggling to make all Americans feel like they are struggling alone against a machine – the economic machine of the U.S. If they are hurting, according to right-wingers, it’s their own damn fault; after all, You’re On Your Own. This subverts democracy and falsely implies that we cannot collectively (in the true spirit of collectivism) find solutions to the problems that we all face together.

    Comment by Matta — May 13, 2008 @ 9:46 pm

  18. #17, next time you comment here, don’t put words in my mouth.

    None of what you railed about is in the post, or can be implied from the post, and it is therefore irrelevant.

    Comment by TBlumer — May 13, 2008 @ 10:03 pm

  19. Where Rose has allegedly been heard is of no consequence to me whatsoever, so let’s dismiss that. Rose contributed nothing but an ad hominem attack, but I guess that’s okay by you. Whatever.

    So two of the four NBER metrics are in decline, one is stalled, and the jury’s still out on the fourth. At least one of us is talking about what matters in recession dating, and guess what, it ain’t you.

    As for embarrassing myself, I don’t think so. And, even if I were — which I’m not — who’s my audience, you and Rose? And I should worry about that?

    Comment by Invictus — May 13, 2008 @ 10:07 pm

  20. #19, “Where Rose has allegedly been heard” was of plenty of consequence in #14 when you ridiculed her, wasn’t it? What a two-face.

    The unemployment rate went DOWN last month. Recessions occur when unemployment goes up. You also seem to forget that the jobs numbers have been corrected upwards in major ways, and by over a million jobs, in after-the-fact comprehensive annual revisions in 2 of the past three years.

    The ISM projects a weighted average 2.4% growth. They’re not infallible, but they have their ears much closer to the ground than you, I, and most of the rest of the pundit class.

    Stalls and flatness don’t make recessions; serious contractions do. Even in manufacturing, you’re technically wrong. ISM doesn’t consider the overall economy to be in recession until its manufacturing index gets down to about 43. It’s at 48.6. It must really suck to be stock on the “stupitide” of claiming we’re already in a recession.

    I’m saying we’re not now, but who knows for sure how future quarters will turn out? This would appear to be too rational for you to handle.

    And, as you know, I believe that NBER has partisan blinders on, as shown when they “somehow” moved the late 2000/early 2001 recession they originally called to mid-2001 through early 2002 and disappeared the data relating to the original call. I would be more correct to call the whole period they considered 6-8 quarters of mediocrity.

    Comment by TBlumer — May 13, 2008 @ 10:40 pm

  21. Tom, please point out in #14 where I “ridiculed” Rose. Let’s be clear about one thing: Rose has contributed less than zero to this discussion. I’m disappointed you seem to condone the use of ad hominem attacks. If you see any value in what Rose wrote about me, feel free to point it out.

    Now, on to more weighty matters. It almost pains me to see you so desperately throwing out red herrings. Let’s dispense with the BS and focus on the facts that matter:

    NBER does not look principally at unemployment (if in fact they look at it at all). They look much harder at employment. Specifically, they look at Total Nonfarm on a Seasonally Adjusted basis (as much as you might chafe at that). I have posted a chart of that here: http://www.blah3.com/images/nber_nonfarm.gif It peaked in December. FACT.

    NBER looks at Real Manufacturing and Trade Sales (BEA table 2BU). I have posted that chart here: http://www.blah3.com/images/nber_sales.gif It peaked in October. FACT.

    NBER looks at Industrial Production (Federal Reserve release G.17). I have posted that chart here: http://www.blah3.com/images/nber_ip.gif It peaked in January. FACT.

    NBER looks at Real Personal Income using the following formula: Table 2.6, (Line 1 minus Line 14) divided by Line 1 of Table 2.8.4. I have posted that chart here: http://www.blah3.com/images/nber_income.gif It peaked in September and has been flat ever since. FACT.

    I was wrong in my earlier comment — it’s actually three metrics down and one flat plus anemic GDP. And you expect me to unconditionally state there’s no recession?

    I have provided you with some facts, charts, and the underlying sources for the data. Are you gonna show me something, or just come back with some ISM projections? Or will you come back with the “NBER’s rigged” refrain?

    Oh, and P.S., the NBER does consider “stalls” and “flatness” in its decision making: “The NBER’s practice has been that if economic activity is roughly flat at the end of a recession or expansion, the turning point is placed at the end of the flat period.” So clearly “flat” does figure into their thinking, not necessarily just “serious contractions.”

    Comment by Invictus — May 14, 2008 @ 8:59 pm

  22. That’ll sure show me, huh?

    That’s ridicule, and you’re acting like a complete jerk by not even being willing to own up to the obvious.

    In fact, you owe Rose an apology, and until she gets one, we’re done with this thread, PERIOD. I’ll let her know to stop by and check for it.

    As to recession:
    - Metric 1: Growth up, and projected by people who know more than you and me to keep going up, and by more.
    - Metric 2: Unemployment rate down; a lower percentage of people actively looking for work isn’t finding it. Real jobs have been gained in each of the past three months. The seasonally adjusted numbers are useful, but don’t represent real bodies thrown out on the streets, and you know it (but like a jerk, even when you’re wrong, you have so much “stupitude” that you won’t admit it).
    - Metric 3: Mfg output is not recessionary (ISM says it has to be down to 43 before it is). Mfg is not as important as it was anyway. ISM NMI is in E-X-P-A-N-S-I-O-N mode. Weighted average, the whole econ per ISM is in E-X-P-A-N-S-I-O-N mode.
    - Metric 4: Income — That’s probably up too, but I don’t care, because I already have three out of four positives, and you’re full of baloney to claim, at least at any time prior to April 15, that we’re in a recession.

    But you won’t admit it even when PROVEN wrong, which is why this has been a royal waste of my time (and yours, because you’ve demonstrated nothing).

    Comment by TBlumer — May 14, 2008 @ 10:10 pm

  23. Invictus, I said this thread is over.

    Apologies are unconditional, and don’t depend on getting an apology from someone else for something you don’t like.

    I’m not responding to NBER arguments becasue NBER itself says this:

    http://www.nber.org/cycles/july2003.html

    There is no fixed rule about what weights are assigned to the various indicators, or about what other measures contribute information to the process.

    In other words, your alleged indicators may or may not be very relevant, and they may use others. The whole idea that you can presume to read into what they’ll do and how they’ll do it, when they don’t even know, is an exercise in “stupitude.”

    Comment by TBlumer — May 15, 2008 @ 7:53 am

  24. Invictus: I said no apology, no comment.

    You thought I didn’t mean it. I did.

    How clear does it have to be?

    Comment by TBlumer — May 15, 2008 @ 10:03 pm

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