Mitchell's Musings

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  • 08 Sep 2014 12:56 PM | Daniel J.B. Mitchell (Administrator)

    On September 5, the latest “Employment Situation” release for August became available from the U.S. Bureau of Labor Statistics (BLS). One of the closely watched numbers in that release is the latest month-to-month (July to August) change in nonfarm payroll employment. According to the release, the preliminary seasonally adjusted estimate is that there was a net increase of 142,000 jobs in August. Commentators immediately pronounced this number to be disappointing because it was lower than (someone) expected and lower than recent employment gains.


    Download this week's Musing.


    Some readers may recall the Al Jolson’s line from The Jazz Singer, “Wait a minute; wait a minute, you ain’t heard nothing yet.” (If not, go to https://www.youtube.com/watch?v=22NQuPrwbHA or watch here.)



    The problem with getting excited or disappointed as a result of the reported monthly change in employment is that the preliminary data, which already reflect the vagaries of seasonal adjustment, are subject to major revision. So we need to stand back and “wait a minute” before reading the monthly figures as guides to policy or to the general state of the economy. Maybe we haven’t heard “nothing” when we get the monthly number, but the “something” we have heard is pretty fuzzy.


    The chart below shows the reported preliminary monthly changes for 2013 versus what now (as of September 2014) appears on the BLS website:



    As it turned out for 2013, not only are the deviations of the preliminary figures relative to the current figures large, but they don’t even average out over that year. That is, except for July 2013, the preliminary numbers consistently understated what is now taken to be the true figure. Only in July 2013 was there an overestimate. Almost all of 2013, as seen initially, was disappointing relative to 2013 as seen today. The average error was a monthly understatement of about 30,000 jobs, i.e., something like 360,000 jobs over the year.


    In past musings, I have made the heretical statement that maybe we don’t really need monthly releases and maybe, say, quarterly releases would be better. Of course, we will continue to do monthly releases because that’s how it has always been. Moreover, any change in frequency would become the subject of conspiracy theories about manipulated figures. But it would be nice if commentators just focused on changes over longer periods than just one month. Why not use August 2013 to August 2014 (a full year)? If you do it that way – and use just the numbers that are not seasonally adjusted since you are covering a full year – it turns out that we are creating net jobs per month at a rate of around 209,000. You can then decide whether that number is disappointing or not and what policy response, if any, should be taken. You may be right or wrong in your thinking but at least you won’t be basing it on statistical noise.
  • 01 Sep 2014 9:42 AM | Daniel J.B. Mitchell (Administrator)

    Sometimes, unusual things happen that seem unique to our time. Sometimes, however, the seemingly new developments may be echoes of events in the past. For this Labor Day musing, surely the unusual event de jour is the semi-strike and now settlement of a dispute at Market Basket, a family-owned supermarket chain in New England. There are a variety of unusual elements of the Market Basket story, not the least of which is that smaller regional supermarket chains are being swallowed up by national giants.

     

    Read entire article...

  • 23 Aug 2014 10:37 AM | Daniel J.B. Mitchell (Administrator)

    It’s rare when you find an article in which you agree with the title but almost nothing else. However, I found one in an op ed entitled “Don't believe that a sluggish economy must be the new normal” by Stephen Moore, president of the Heritage Foundation and available at http://www.losangelesregister.com/articles/economy-603678-growth-percent.html.


    I have expressed the view in previous musings that the “new normal” thing is being way overdone. Whenever there is an adverse blow to the economy, it seems as if someone begins promoting the idea that what has happened was some kind of structural shift and things will be bad from now on. During the Great Depression, for example, when the cause was clearly a negative macro shock, there were voices saying that new technology meant that unemployment would be high forever. The idea persisted until the unemployment rate fell to record low levels during World War II.


    ...click for more

  • 19 Aug 2014 1:58 PM | Emily Smith (Administrator)

    You could grow bananas at the North Pole. How? With enough subsidy for insulation, heating, solar lamps, etc., it would be possible. Since there would be a need to construct the facilities and then maintenance, there would be jobs created at the North Pole. But would such a project be worthwhile? Surely not. The North Pole is clearly not the best place for growing bananas.


    It is also true in less extreme circumstances that you can artificially create jobs. Providing a subsidy can induce economic activity in the location offering the subsidy. But you can always ask whether it is worthwhile.

     

    MitchellMusings 8-18-14.pdf

  • 11 Aug 2014 9:01 AM | Daniel Mitchell (Administrator)

    A few weeks ago, Los Angeles Times columnist Michael Hiltzik ran a piece entitled “A new right-wing claim: Obama must be lying about inflation!” which was about a new conspiracy theory concerning government price change data.1 The theme, as the headline suggests, is that some folks believe that the official inflation statistics are being kept too low, i.e., the books are being cooked. So let’s look at the data and see what the fuss is all about.


    MitchellMusings 8-11-14.pdf

  • 04 Aug 2014 2:24 PM | Daniel Mitchell (Administrator)

    California has long had a system of direct democracy – the initiative, referendum, and recall – going back to the early 20th century. The idea was that politicians – corrupted by special interest money – needed to be checked by the electorate. At the time, the villain de jour was the Southern Pacific Railroad, often depicted back in the day as an octopus strangling commerce and buying politicians. Reform was needed.


    MitchellMusings 8-4-14.pdf

  • 25 Jul 2014 8:50 AM | Emily Smith (Administrator)
    In recent times, much has been said about technology being “disruptive” as if this was a new idea.  Yet the modern era has been characterized by a stream of innovations that led to disruptions.  Look at pictures from the 19th century of city streets and you will see horse-drawn vehicles.  Then the automobile came along and the horses disappeared.  One could go on and on: electricity, steam power, broadcasting, movies, airplanes, the telegraph, railroads, etc.


    Read More


  • 02 Feb 2014 12:00 AM | Emily Smith (Administrator)
    A recent California poll suggests a turn in public opinion toward skepticism about unions. What happened? MitchellMusings 2-3-14.pdf
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