Don't Quit Your Day Job…

A .4 percentage point drop from 9.0% in October to 8.6% in November? I’ll take it! Maybe there really are green shoots sprouting in the economy? (Look, Bernanke gets a pass if Greenspan gets a pass for being premature on his famous “Irrational Exuberance” call)

There are arguments on both sides of the political aisle about how good the unemployment report actually is… Is the lowered rate really just a function of discouraged workers dropping out of the workforce? Could the news actually be masking even more encouraging signs? I’m not going to let you comment before you stare at the charts I produced for you on various measures of employment.

As you may recall, the United States implemented a huge package of stimulus – about $787 billion worth – in 2008, President Obama’s first year in office. Included in that package was a fair amount of temporary tax cut measures, increased funding for programs like unemployment and food stamps, and a large list of spending on various projects identified as “Good Investments”. This is relevant for two reasons. First, President Obama proposed in a recent speech $447 billion in new spending along similar lines to the original stimulus (do the math, that will be $1.2 trillion in ‘stimulus’, not including the plethora of other stimulus programs like Cash for Clunkers) . Second, it is relevant because the Congressional Budget Office recently declared the original stimulus a success based upon the models which were used to propose the stimulus.

A popular topic in the blogosphere, given new life after comments by Nobel prize winning economist Paul Krugman, is the relative success of the United States vs. the states that make up the European Union. The European Union is a loose confederation of 27 countries in Europe, ranging from Spain to Estonia. Krugman goes so far to suggest that “[y]ou should always bear in mind that when the question is which to believe — official economic statistics or your own lying eyes — the eyes have it.”

Now we’re betting with house money. In the second quarter of 2009, Americans’ net worth increased by $2 trillion dollars. Yes; the run-up in the stock market was felt by a large number of you – your stocks increased by 22% and your mutual funds by a solid 15% in the quarter. What’s not to like?

A recent unemployment report from the Bureau of Labor Statistics introduced some light into the dreary situation in which the economy finds itself. Yes; the official U-3 unemployment numbers are in- and the headline unemployment number is now 9.4% unemployment compared to the previous 9.5%. U-6, a broader measure of unemployment (specifically the total employed, marginally attached workers and part time workers who want to work full time in the civilian labor force and marginally attached workers) ticked down from 16.5% to 16.3%. On the surface, a pretty good report. However, some signs of weakness are right below the surface.

One of the most contentious issues of the past couple of decades has regarded policy debates on how to benefit lower-income individuals (colloquially referred to as ‘Welfare’ programs). This article will not deal with the benefits or disadvantages of Welfare programs in general, but instead will compare the various forms of implementing Welfare. Also, I will show (in the next article) a very important unintended consequence that arises from the current preferred Welfare program, the Earned Income Tax Credit.

There are 12 branches of the Federal Reserve Bank: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. Eight times a year they get together and compile a report, the Summary of Commentary on Current Economic Conditions, better known as the ‘Beige Book’. On July 29, the most recent version of the Beige Book was posted. The summary reports, anecdotally, that conditions are moderating since the report issued June 10.