Posted Saturday, April 17 2010
This week it seems like I've got nothing but Calculated Risk posts for you. That's not terribly surprising I guess. Not only does the site offer some of the best analysis of economic data on the web, but I also find that CR explores topics that I naturally gravitate towards — a broad array of economic topics that really can be thought of as social issues since they end up influencing the country and the world so significantly. I expect this will not be the last time I point out the site here.
Recession: To start off, CR had a great post on the declines in the major indicators the NBER uses to determine recession start and end dates. In addition to GDP and employment, he looked also at the percent decline of industrial production and real personal income (less transfer payments). In short, GDP and industrial production have probably turned the corner. Employment and personal income still have a long way to go.
Unemployment & Jobs: The BLS released state unemployment data on Friday and CR pointed out that California, Florida, Georgia and Nevada unemployment rates all reached new highs. I think it's also worth noting, however, that 3 out of 4 of those states saw gains in employment (California, Florida and Georgia). California actually gained 53,586 jobs last month. The state lost over 1 million jobs during the recession, so there's a long way to go, but a turn around in employment may be established now. The high unemployment rate is clearly bad, but it's not entirely surprising. As the economy picks up steam, lots of people will reenter the labor force to look for jobs and this will tend to keep the unemployment rate statistics from falling as quickly as one might hope. In short, the unemployment rate is not the entire story. It is worth pointing out the Nevada doesn't seem to have positive jobs momentum right now. Falling employment numbers and rising unemployment rates are certainly not a good combination.
Consumer Confidence: This morning CR posted a great chart that suggests that falling consumer confidence leads rising unemployment by a few months. This is an intuitively reasonable relationship, but seeing the chart (expressed as consumer confidence vs. the inverted unemployment rate) was a really nice demonstration. Consumer confidence is pretty choppy, but we're now off the bottom a good bit from 2009. CR suggests that monthly employment changes might be more illuminating and I agree with him. I look forward to that analysis.
Goldman Sachs: The big financial story of the week was certainly Goldman Sachs getting sued by the SEC. The New York Times sums up the evidence that has come to light (in public at least) over the past few weeks regarding financial firms creation of securities that they probably expected to fail yet sold to clients without disclosing this risk. Goldman and others will take the stance that they were just hedging themselves by betting against these instruments and that they actually lost money on the deals, but the details that reveal the process of creating these things seem to demonstrate an intent to make something that was built to fail.