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Politics : Don't Blame Me, I Voted For Kerry -- Ignore unavailable to you. Want to Upgrade?

To: Brumar89 who wrote (9401)	3/21/2004 8:23:57 PM
From: CalculatedRisk	Read Replies (2) \| Respond to of 81568

First, on the household survey: "I wish I could say the household survey were the more accurate," Alan Greenspan, the Fed chairman, said in congressional testimony on Feb. 11. "Everything we've looked at suggests that it's the payroll data which are the series which you have to follow." To test the self-employment theory, the Fed adjusted the household survey by taking out all the kinds of workers who did not show up on the payroll survey - including self-employed people but also farm workers and family workers in family-run companies. Even then, Greenspan said, the discrepancy remains large. The Fed's conclusion was that the household survey's results had been inflated by overestimates of population growth. Because the household survey is a sample, the statistics bureau infers the total change in jobs by multiplying the ratio of employed to unemployed workers in the household survey by its estimate of the total population. If the population estimate is too high, the estimated number of jobs will also be too high. . The bureau bases its population estimate on the 2000 census, but it then updates that estimate yearly with data on births, deaths and immigration. But immigration numbers are largely guesswork, because so much immigration is illegal. Fed officials suspect the immigration estimate is inflated because it fails to reflect tighter immigration controls since Sept. 11, 2001, as well as declines caused by the economic slowdown. The bureau, in fact, lowered its population estimate in January. . Plugging the new estimate into previous household surveys, the bureau found that nearly half of the apparent increase in jobs during the past three years vanished. Not content, Greenspan also devised a "synthetic" population estimate by crossing the household survey's ratio of employed workers and work force data in the unemployment insurance system. The result? "A significantly slower pace" of population growth, according to the Fed chairman. . The New York Times Feb 23, 2004 Other issues: I agree that this is not a bad economy. The early '80s (with double digit unemployment) was far worse. The early '90s, especially in California with all the defense cutbacks under GHW Bush, was definitely worse. The biggest issue is that the economy has structural problems that are NOT being addressed. This means we will have serious problems in the future (unless we change course and address the problems). To keep the economy afloat, the Fed has had to keep interest rates at record lows (this has stimulated the economy far more than Bush's tax cuts). But this monetary stimulus is like pumping air into an inner tube with a weak spot in the tire. The tube (our economy) will not inflate, but the weak spot will bulge out (like housing). Creating asset bubbles is not an effective long term solution. But it does keep employment up, especially in housing related industries. But the weak spot is being created by Bush's policies: trade, misdirected tax cuts (and associated deficit), and policies that ignore science. I will return to the tax cuts in a future post. But first a little history: The Sumerians in about 4000 BC (located in what is now southern Iraq) invented the wheel, irrigation, metallurgy, the plow and the pottery wheel. What an amazing period of innovation! Then a ruling class emerged of Priests and by definition, innovation became heresy. This presaged the eventual ruin of Sumer. The Bush administration is doing the same thing; ignoring science. As an example we could be leading the World in alternative energy ... creating jobs and improving our environment. Instead we are primarily focused on fossil fuels for our energy requirements. I will return to why the tax cuts are failing (that deserves its own post) ... isn't it interesting that so many prominent economists thought the Bush plan would not create jobs? Letter from Feb 10, 2003 (over one year ago predicting no increase in number in employed): epinet.org The lack of jobs isn't a surprise to everyone!