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Dec 31, 2012 Fiscal Cliff --- Increased Spending
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Dec 13, 2012 November Jobs Report
Nov 28, 2012 Regulation and the Financial System
Nov 17, 2012 Employment Escarpment - Moving the Jobs Needle
Oct 31, 2012 Update on Shale Gas and Tight Oil
Oct 11, 2012 Restructuring of an Industry: US Light Vehicles
Sep 4, 2012 Resuscitating the Moribund US Economy
August 4, 2012 Unemployment Rises Again
July 21, 2012 Misguided Fiscal Policy: Is it a case of fool’s gold, or the Consequences of Economic Ignorance?
July 6, 2012 Let Freedom  Ring!!! The Shale Gale
June 26 Productivity Macro
June 11, 2012 Painted into Corner
June 4, 2012 Encouraged Worker Effect
May 28, 2012 European Honeymoon Over
May 14, 2012 Back to Basics
May 4, 2012 Labor Force Participation Rate Shrinking
Apr 26, 2012 Income Distribution
Apr 15, 2012 Energy Independence
Apr 6, 2012 Jobs Jobs Jobs
Mar 27, 2012 Gas Prices Killing Economic Growth
Mar 15, 2012 Rough Road or Smooth Sailing?
March 9, 2012 Employment Challenges Ahead
Mar 6, 2012 Stalled US Economy?
Mar 1, 2012 FED Profitabiility
Feb 22, 2012 Population Changes
Feb 13, 2012 Bernanke on Unemployment
Feb 8, 2012 Lower Unemployment - Bad News?
Feb 3, 2012 Chinese Miracle???
Jan 12, 2012 Low Interest Rates - Why so low?
Jan 9, 2012 Labor Force Participation Rate
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Economic Newsletter for the New Millennium


February 13, 2012

 
Editor
Donald R. Byrne, Ph.D.
dbyrne5628@aol.com  
 

Associate Editor
Edward T. Derbin, MA, MBA
edtitan@aol.com


For a downloadable version, click here


Bernanke Pessimistic Forecast Feb 2012.pdf



...a bit more compressed version of same


Bernanke Pessimistic Forecast Feb 2012-compressed.pdf


FED CHAIRMAN BEN BERNANKE: A FELLOW PESSIMIST OR JUST A FELLOW RATIONAL REALIST


We have been criticized for being overly pessimistic about what many are claiming is occurring in the U. S. economy, a slow but positive recovery with declining unemployment and rising employment.  In a recent article on the website we proved this optimism to be ill founded as we examined the data from various Federal Government agencies such as the Bureau of Labor Statistics and the Census Bureau.

 

On February 7, 2012 before the Committee on the Budget, U.S. Senate, the Chairman of the Federal Reserve Board of Governors, Ben Bernanke, was asked why the FED wasn’t moving to a policy of more restraint now that the unemployment rate was falling.  He said what we have said on this website several times, the employment /unemployment picture is still grim at best.  He referred to the Discouraged Workers who are not counted as being unemployed because they are defined as having opted out of the labor force by no longer working for work.  The improvement in the U-3 measure clearly understates the grimness in the labor market.  The U-6 measure is a better measure because of the way it treats the Discouraged Workers.  That is why the U-6 measure, the more realistic one, is much higher than the sugar coated &-3 measure with which most of the media and wishful thinkers are preoccupied.

 

Here is what Chairman Bernanke had to say: 

http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=1bd47569-ca34-4a3a-97a8-691d60c7fd06  

Opening sentence in his remarks…

“Over the past two and a half years, the U.S. economy has been gradually recovering from the recent deep recession. While conditions have certainly improved over this period, the pace of the recovery has been frustratingly slow, particularly from the perspective of the millions of workers who remain unemployed or underemployed.”
 

And a bit later in his remarks…


“Nevertheless, as shown by indicators like the rate of unemployment and the ratio of employment to population, we still have a long way to go before the labor market can be said to be operating normally. Particularly troubling is the unusually high level of long-term unemployment: More than 40 percent of the unemployed have been jobless for more than six months, roughly double the fraction during the economic expansion of the previous decade.”

 

Watch the entire Hearing…

http://budget.senate.gov/democratic/index.cfm/committeehearings?ContentRecord_id=05d1eaea-8ff6-4ca5-9180-af864db58499&ContentType_id=14f995b9-dfa5-407a-9d35-56cc7152a7ed&Group_id=d68d31c2-2e75-49fb-a03a-be915cb4550b&MonthDisplay=2&YearDisplay=2012#archiveTab  

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Martin Crutsinger, from the Associated Press

http://jobs.aol.com/articles/2012/02/08/bernanke-job-market-remains-weak-despite-gains/?icid=maing-grid10%7Chtmlws-sb-bb%7Cdl8%7Csec3_lnk3%26pLid%3D133944  

“Ben Bernanke says the job market isn't as strong as the steadily declining unemployment rate might suggest.

Responding to questions at a Senate hearing Tuesday, he noted that the unemployment rate doesn't capture the plight of millions of people who have stopped looking for work or part-timers who can't find full-time jobs.”

Bernanke, in the question and answer period noted:

“It's very important to look not just at the unemployment rate, which reflects only people who are actively seeking work.”

“There are also a lot of people who are either out of the labor force because they don't think they can find work. ... There are also a lot of people who are working part-time, and they'd like to be working full-time but they can't find full-time work.”

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As we have consistently argued, the picture looks far better than it really is because the labor force participation rate (LFPR) has been falling due to such things as the Discouraged Worker Effect.  Once the unemployment rates are adjusted to a more realistic LFPR, as we have shown in more than one article on this website, the unemployment rate is not only significantly higher than reported, and has not been falling of late, but actually rising.


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Lastly...

http://www.huffingtonpost.com/2012/02/13/conference-board-us-economy_n_1265884.html

Conference Board Economists: U.S. Economy Transitioning To A New Normal

""The economy that we had before the recession is gone," said Kenneth Goldstein, economist at the Conference Board. "It's not coming back."The U.S. economy is transitioning to a new normal in which businesses invest less and consumers spend less than before the recession, Goldstein told The Huffington Post in an interview last week. As a result, he said, economic growth and job growth will be slower than before."


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Food for thought…

We are adjusting for the higher Labor Force Participation Rate to capture more of the truly discouraged workers who have departed from the labor force (keep in mind that Civilian Labor Force = Unemployed + Employed)



Unemployed with Labor Force Participation Rate Adjusted to 67%.jpg


Adjusting for the higher Labor Force Participation Rate*, it is plain that the Unemployment Rate would have actually risen in January 2012  (* 67%...meaning 67% of the Civilian Noninstitutional Population is in included in the Labor Force...either employed or unemployed)




U-3 Unemployment Rate Labor Force Participation Rate Adjusted to 67%.jpg


Again, while the U-6 supposedly captures the Discouraged Workers, our adjustment using the higher LFPR shows that U-6 would be even higher in January 2012



 

U-6 Unemployment Rate Labor Force Participation Rate Adjusted to 67%.jpg


The median weeks unemployed has been above 20 since March 2010




Median Weeks Unemployed.jpg



This long-term unemployment measure (27 weeks and over) has been an ongoing issue above 40% of those unemployed since December 2009




Umemployed over 27 Weeks in Duration.jpg


Employment-Population Ratio: The proportion of the Civilian Noninstitutional Population 16 and over that is employed...mired below 59% since 2009




Employment Population Ratio.jpg