April 02, 2003

Time to Start Worrying About a Double-Dip

Time to start worrying about a double-dip recession:


Factory orders drop 1.5% in February - Apr. 2, 2003: WASHINGTON (Reuters) - Orders for U.S. manufactured goods slumped sharply in February, the Commerce Department said Wednesday in a report hinting at increased caution among firms ahead of the start of the Iraq war.

The Commerce Department said orders fell a larger-than-expected 1.5 percent to $321.16 billion in February, following a revised 1.7 percent increase in January. Orders for durable goods -- items such as cars and appliances meant to last three or more years -- fell 1.6 percent, a bigger fall than the previously reported 1.2 percent drop.

Wall Street analysts had been anticipating a smaller drop in overall factory orders, with the average forecast in a survey by Reuters calling for only a 0.6 percent decline.

Orders in almost all major categories of manufactured goods were down. Non-durable orders were also down, falling 1.4 percent, their largest decline since February 2002, the department said.

Posted by DeLong at April 2, 2003 06:12 PM | TrackBack

Comments

If a double dip is a real threat, what fiscal policy options -- ex-tax cuts -- make sense?

Posted by: Bucky Dent on April 2, 2003 10:26 AM

The economic slowing has cost about 2 million jobs over the past 2 years in spite of dramatic interest rate cuts and a tax cut. Another economic decline would come at a time the Federal Reserve has far less room for stimulative policy. The tax cuts proposed by the Administration would also seem to have little stimulative effect.

We might try a temporary cut in the payroll tax, and some federal revenue sharing with the states to ease the need to cut state budgets.

The federal budget is going to go deeper and deeper to deficit unless there are dramatic cuts in social benefit programs such as Medicare, or the coming tax cuts already passed are reined in and the cut in taxes on stock dividends is set aside.

Europe is growing very slowly. Latin America has stopped growing. Japan is growing very slowly. Now, even growth in China and surrounding countries is treatened by the SARS threat. Stimulative fiscal and monetary policy in Europe and Japan would be welcome. My sense is that a world recession, growth below 2.5%, is very possible, even likely.

Posted by: anne on April 2, 2003 11:00 AM

> federal revenue sharing with the states

Borrow and spend?

Posted by: Bucky Dent on April 2, 2003 11:06 AM

I thought monetary policy and the lowest interest rates in forty years were supposed to avoid this.

By the way, if there's a double dip recession, does this mean that Krugman made a mistake locking in those low long-term interest-rates today?

Posted by: Andrew Boucher on April 2, 2003 11:23 AM

>does this mean that Krugman made a mistake locking in those low long-term interest-rates today?

Only if he loses his job. :)

Posted by: Bucky Dent on April 2, 2003 11:26 AM

Even though the economy appears to have weakened significantly over the past 6 weeks, it is hard to imagine that interest rates will go much lower. My guess is the bull market in bonds is over, with rates have fallen to the lows of early March. Waiting for lower mortgage rates makes no sense. Locking in long term mortgage rates makes great sense.

The domestic and foreign trade deficits alone are probably going to keep interest rates from falling much more.

The bond bull market really appears to have ended.

Posted by: jd on April 2, 2003 11:45 AM

Borrow and spend to help out the states as a short term stimulus. I can not recall a period when the macro data turned so quickly and uniformly negative, and remember we were growing too slowly from last autumn.

Posted by: anne on April 2, 2003 11:57 AM

>Borrow and spend to help out the states as a short term stimulus.

Is there any reason to think bailing out the states, which grew their expenses shamelessly during the 90s, would be more stimulative than, say, tax cuts?

Posted by: Bucky Dent on April 2, 2003 12:02 PM

The administration attacked this recession with the wrong fiscal policy from the beginning. The problem in 2001 was the dot bust and overcapacity in the tech sector. With billions of investment dollars sitting on the sidelines and no place to go how can a tax cut that goes predominantly to the wealthy and is backloaded be stimulatory? The net effect of the tax cut is as follows: The wealthy (including those millionaire senators waving their $300 checks) used their tax cut to buy government bonds issued to cover the mounting deficit. Where is the economic stimulation in that?

Meanwhile the states are freezing hires, canceling all new projects, laying off employees and doing all those things that exacerbate a recession. The correct fiscal policy decision in 2001 was not a tax cut, but revenue sharing with the states to keep state spending on track. It is not as if the states could not use the money with all the unfunded federal mandates and increased medicaid and unemployment costs due to the recession. Policy that would have increased demand in the overbuilt tech sector would also have helped.

However, the Bush administration does not approach economics from a practical point of view. They view economics from an ideology of supply side big tax cuts for the wealthy, reduced spending on social programs and trickle down economics. Their ideology leads to a plantation economy of the antebellum South and a sharp divisions of the haves and have nots as seen throughout much of Central and South America.

Posted by: bakho on April 2, 2003 12:03 PM

>Borrow and spend to help out the states as a short term stimulus.

Is there any reason to think bailing out the states, which grew their expenses shamelessly during the 90s, would be more stimulative than, say, tax cuts?

Posted by: Bucky Dent on April 2, 2003 12:07 PM

Then, I would settle for a payroll tax cut.

Posted by: anne on April 2, 2003 12:12 PM

"Is there any reason to think bailing out the states, which grew their expenses shamelessly during the 90s, would be more stimulative than, say, tax cuts?"

What kind of tax cuts?

As for the "shamelessly", I live in a state whose population grew "shamelessly". What's the government supposed to do? Hold expenditures constant while the number of students, firemen, policemen, and inmates grew, "shamelessly"?

Posted by: Russell L. Carter on April 2, 2003 12:15 PM

Shamelessly, as in outstripping population and income growth.

Posted by: Bucky Dent on April 2, 2003 12:19 PM

Russell Carter makes an important point. I do not fault the states I know well for spending during the 90s, rather for cutting taxes to assure there would be no reserve when the expansion slowed or halted. There was a determined Republican drive to cut taxes at the state level during the 90s.

Posted by: jd on April 2, 2003 12:21 PM

>a determined Republican drive to cut taxes at the state level during the 90s.

California is the state I had in mind. Davis is neither a Republican nor a tax cutter. And I believe his State Govt grew at a pace exceeding underlying demographics and income, spending the funds enjoyed during the capital gains blowoff in Silicon Valley. And leaving no reserve.

Posted by: Bucky Dent on April 2, 2003 12:27 PM

April 2, 2003

Andy Xie (Hong Kong) [Morgan Stanley]

We have cut our estimate of GDP growth in East Asia ex-Japan to 4.5% from 5.1% for 2003. Our revision takes into account a 15% YoY decline in tourism revenue as a result of the severe acute respiratory syndrome crisis (SARS).

Our house view on the US economy is still a 2% YoY growth rate for this year. Our forecast for Europe is 0.8% and for Japan 0.7% for the current calendar year....

Posted by: jd on April 2, 2003 12:29 PM

"Shamelessly, as in outstripping population and income growth."

I live in Arizona. According to wingnut publications, population grew 36%, spending 63%. Not counting inflation. Growth costs money, over and above steady state costs. War on Drugs cost money. I don't think that, given the lousy state of the schools (and this I am quite expert on, due to being a father, and a member of a Charter School Board), that it is excessive at all. We have incredibly low tax rates here, compared to say California, which gets to spend its taxes on things like Kenneth Lay's homesteaded estates.

Yeah, I've read all the Goldwater Institute's wishful propaganda. At the end of the day, they identify < $300M in waste. The deficit is in excess of $1.6B.

Your "shamelessly" is an exaggeration, to say the least.

And I ask again. What kind of tax cuts? Why so coy?

Posted by: Russell L. Carter on April 2, 2003 12:41 PM

Yes, helping the states will be more stimulative than a tax cut because the states are guaranteed to spend every penny.

Alan Greenspan has about fired all of his bullets. Unless you think interest rates can go negative he has about 1.25% to go at most.

That leaves a temporary fiscal stimulus as the only tool left in the box (apart from getting rid of the external uncertainties like war and its aftermath). Unfortunately, the Administration is fixated on permanent tax cuts for those with the lowest propensity to spend. So, they minimize the short run impact while adding a negative impact in the long run.

My solution? Vote the know-nothings out of office as soon as possible. There really is a "right thing to do" in economic terms but the current guys seem incapable of doing anything but chanting right wing mantras.

Posted by: Steven Kyle on April 2, 2003 12:44 PM

A global recession is growth below 2.5%, that sets the Morgan Stanley estimates in line for recession unless there is a dramatic turn for the better.

Posted by: jd on April 2, 2003 12:50 PM

>population grew 36%, spending 63%.

Thanks. That is fairly straightforward.

As for *specifying* tax cuts, I claim no expertise. I only ask the macro question of growing vs. not growing the State as fiscal actor.

BTW, I too am a parent in a place with crappy and outrageously expensive public schools. And I pay full load private school tuitions for my kids, while shouldering a 20% increase in my already silly property taxes. None of this pain is news to me.

Posted by: Bucky Dent on April 2, 2003 12:54 PM

>population grew 36%, spending 63%.

"Thanks. That is fairly straightforward"

If you think that proves your point, you're having problems with accounting. Capital costs are a lot different than maintenance. And as for "outrageously expensive public schools", I just redid our school's budget, and from what I saw, you don't have the slightest clue about school expenses. Could be different in Manhattan.

Posted by: Russell L. Carter on April 2, 2003 01:01 PM

Obvious question: how much of the decline was because of the weather? How much will be restored with the onset of spring here on the East Coast?

Posted by: Jim Harris on April 2, 2003 01:05 PM

So Bucky, is cutting billions of dollars in spending by the state during a recession a good thing? What do the workers do when the projects they work on are eliminated- move to Colorado?

Posted by: bakho on April 2, 2003 01:07 PM

> Could be different in Manhattan.

It is. That's where I live. We're up to around $11,000 in spending per student now, with, to be gracious, scant cause for glee at the results.

There've been other threads here on problems with public education, so there's no need to re-visit the issue here.

Naturally, I am familiar with capital accounting. But when your spending rises at nearly double your population growth rate, there are other things going on. If you can't find them, that just means someone isn't interested in looking hard enough.


Posted by: Bucky Dent on April 2, 2003 01:11 PM

> is cutting billions of dollars in spending by the state during a recession a good thing?

Is raising taxes on the remaining private-sector entities a better solution?

Posted by: Bucky Dent on April 2, 2003 01:17 PM

I assume the rise in spending in Arizona was for the decade of the 90s. The rise then is quite in line with population growth and inflation for the decade, and since Arizona was run by cost conscious Republicans for the decade, I suggest the rise was easily proper. Perhaps, Arizona ought to have spent more on infrastructure and human services in light of the very rapid population growth.

Posted by: jd on April 2, 2003 01:28 PM

Funny thing about being short-sighted. There was a wonderful surplus in the federal budget at the end of the last Administration. The new Administration was sure that the surplus would last forever, and equally sure that a surplus was not needed. So, with Alan Greenspan's blessing lest the surplus devour Minneapolis, we cut taxes, especially cut taxes for the rich, and got little stimulus from the cut but a return to deficits as far as the eye can see.

We have terrible fiscal policy, and the fault is this Administration!

Posted by: dahl on April 2, 2003 01:35 PM

http://www.nytimes.com/2003/03/26/national/26HEAL.html

March 26, 2003

Medicare Recipients Face 12.4% Rise in Premiums
By ROBERT PEAR - NYT

Medicare beneficiaries face a large increase in premiums next year, and doctors' fees will probably be cut because Medicare spending surged unexpectedly last year, federal officials said today.

Richard S. Foster, chief actuary of the Medicare program, estimated that the Medicare premium would rise to $66 a month, an increase of $7.30, or 12.4 percent, the largest increase in 11 years....

Posted by: lise on April 2, 2003 01:55 PM

With interest rates so low, older women and men are going to have a difficult time earning income from bond funds for some time. Since living costs will keep rising, the economic slowing we have experienced could be an extra problem for older Americans.

Posted by: lise on April 2, 2003 02:02 PM

Anne strikes me as right. We could easily begin a new recession. We may already be in a decline. Another round of job losses would be awful. There is reason to worry, and to set aside the excuses of bad weather and war worries, and look for ways to dampen the effects of this new slowing.

Posted by: bill on April 2, 2003 02:17 PM

>>Is there any reason to think bailing out the states, which grew their expenses shamelessly during the 90s, would be more stimulative than, say, tax cuts?

What's "shameless" about doing more for your citizens? It is STIMULATIVE, while cutting spending, laying off workers, reducing services, etc. is not stimulative.

What's so great about cutting taxes? Unless you cut taxes to people who would use the money in a stimunative way - the poor and middle class - it does nothing for the economy and likely winds up in the Cayman Islands. Cutting taxes for the rich HURTS the economy because it shifts the tax burden down to those who actually need the money from those that have the ability to pay it without even noticing any difference in lifestyle.

Meanwhile we pay out over $300 BILLION per year interest debt as a result of pervious wingnut tax cuts. Is THAT stimulative?

Posted by: IssuesGuy on April 2, 2003 03:33 PM

"Russell Carter makes an important point. I do not fault the states I know well for spending during the 90s,..."

Then you probably don't know enough states well.

State and local governmental spending increased significantly in the 1990s.

In 1947, state and local government spending was 6% of the national income. Today, it is a whopping 17% of the national income.

http://mwhodges.home.att.net/state_local-a.htm

As Ronald Reagan correctly noted about the federal government...state governments don't have deficits because they tax too little; they have deficits because they spend too much.

Posted by: Mark Bahner on April 2, 2003 04:25 PM

>What's "shameless"....?

Spending all the money that arrives during a boom, while creating overhead that can't possibly be paid for during the inevitable down-phase of the economic cycle, and then pleading poverty, is shameless.

Recall the old joke about the kid who slays his parents and then pleads for mercy because he's an orphan.


Posted by: Bucky Dent on April 2, 2003 04:30 PM

Note: The expansion of the state and local governments has been relentless, since WWII. It wasn't just in the 1990s that state and local government spending increased:

http://www.house.gov/jec/growth/govtsize/fig-4.gif

Posted by: Mark Bahner on April 2, 2003 04:36 PM

Wait. You mean until now I didn't *have* to worry about a double-dip recession??

And here I've been fretting about one for months. Damn, all that effort wasted!

Posted by: Canadian Reader on April 2, 2003 05:29 PM

Mr. Bahner,
Unfortunately, the site you linked to didn't give many details about how it calculated the values you mention. A quick look at Table 15.1 of the 2004 Budget of the U.S. (http://w3.access.gpo.gov/usbudget/fy2004/sheets/hist15z3.xls) clearly contradicts those sensationalistic statistics. in 1947, total state and local spending was 4.4% of GDP; in 2002, it was 10.1%. Moreover, that value has largely been constant since 1991; it saw a dip in the mid-90's, and it's now back to 1991 levels. By contrast, state and local revenues (as a percent of GDP) have been decreasing since 1993.

Of course, nothing you or the page you linked to mentions anything at all about why the spending has gone up, so it's really a logical leap to assume the spending increases over the last 60 years are not justified.

Bucky,
It's pretty obvious from the data that, as a percent of GDP, state and local spending has remained fairly constant over the last decade (again, with a dip in the mid 1990's), whereas revenues have been decreasing over that time period.

Posted by: Jonathan on April 2, 2003 07:56 PM

You guys are missing the forest for the trees. You're missing the one obvious data point: the neoconservatives WANT a recession. They WANT to cut tax revenues drastically, so they have an excuse to cut "too expensive" social programs. Neocons are prepared to wreck our country to get what they want: tax cuts for the rich, less government spending on "liberal" projects like education, medicare, social security, etc.

Posted by: Charles on April 3, 2003 01:12 AM

>as a percent of GDP, state and local spending has remained fairly constant

Budget imbalances are not evenly distributed, with CA and NY, for instance, both facing far worse squeezes than many other States.

And as noted above, AZ's state govt growth was rather high in the 90s too.

But this is thread drift. The topic at hand is what to do at the national level level regarding the economy.

Posted by: Bucky Dent on April 3, 2003 03:57 AM

I realize that any reference to Brad's original post at this point will seem hopelessly outdated, but...

While I agree that the economy is looking shakier now than in January/February, I'm not so sure that the point became any clearer or more urgent with the release of the factory orders data. Factory orders very commonly decline following a strong rise - a pretty clear saw-tooth pattern. Orders rose more in January than they fell in February. Smooth things out a bit and the picture in the factory report is far from grin. Core capital goods orders, ex-defense and aircraft, have risen at a 5.3% annualized pace over the past 3 months, the best in forever. Weather was likely a factor in driving down orders and shipments in February.

Now for the bad news. The ISM data of a day earlier are a far uglier sight, and more forward looking. New York non-factory PMI data and European services PMI data for March suggest that today"s ISM non-factory report might be a stinker. Let's at least look at data that are compelling before we allow ourselves to be frightened out of our socks.

Posted by: K Harris on April 3, 2003 04:54 AM

Question for K Harris: Obviously economic pros know you are right in counseling a "don't panic" analysis of the sawtooth, war/weather-impacted data.

Why do you think the info is yet presented in a "start worrying" context?

Posted by: Bucky Dent on April 3, 2003 05:29 AM

Bucky shares with us:

"But this is thread drift. The topic at hand is what to do at the national level level regarding the economy."

Not quite yet. I'm locked and loaded.

Bucky also writes:

"Naturally, I am familiar with capital accounting. But when your spending rises at nearly double your population growth rate, there are other things going on. If you can't find them, that just means someone isn't interested in looking hard enough."

I don't have to look very hard, because I've got highly motivated wingnut ideologues at the Goldwater Institute (remember him?) looking for me. After 15 years of pell mell growth, surely the lugubrious outcome of the "nearly double" rate of expenditure growth would be revealed by the numbers on the ground, no? Well those cowboys found, as I said previously, $300M in waste that could be cut this year. Out of $6.5 Billion. That's 5%. The AZ deficit is $1.6 Billion.

Apparently, infrastructure supporting cops, teachers, and firemen is popular in Paradise Valley, even. Knock off the sky is falling rhetoric about spending growth, please.

"It is. That's where I live. We're up to around $11,000 in spending per student now, with, to be gracious, scant cause for glee at the results."

What does your kid(s) private school cost? You might have found a bargain, but you can google this:

"In general, kindergarten through 12th grade tuition costs from $14,000 - $23,000 per year, with the older grades costing more."

Sound's like Manhattan public schools aren't that far out of line. (And yup, I agree with you, school quality is a vexing issue, I'm not going to say anything more about it)

Hey Bucky, you still haven't coughed up what kind of tax cut you want. I'm guessing it's a payroll tax cut, right?

Posted by: Russell L. Carter on April 3, 2003 06:13 AM

Using the WayForward Machine, to get a look at an upcoming business magazine article:

"Clearly, there are two factors underlying the present economic difficulties. The first, of course, is the EVUL LIBRUL KLINTON. The second, of course, is Iran. Once the war starts, the economy will rebound. In fact the Bush Crony Capitalist Index is growing at 10%/months - definitely a good investment opportunity."

Posted by: Barry on April 3, 2003 06:38 AM

Russell, as detailed on another thread here weeks ago, parochial schools in NYC charge ~$3,000/kid/year, and by most accounts do a better job than the far costlier public schools, even accounting for differences in student populations.

And you will note I led off this thread with a question specifically excluding tax cuts as a fiscal solution. I was interested in other ideas that seem to get less airplay.

Posted by: Bucky Dent on April 3, 2003 08:28 AM

Back to K Harris's point and Brad's original post. If this is a double dip, how does this fact square with an earlier post about the NBER Business Cycle Dating procedure: a double-dip means the same recession, or have I missed something?

Actually K Harris, I would keep watching the housing data, they will be the decider one way or another.

Posted by: Edward Hugh on April 3, 2003 08:29 AM

and don't forget shifting of spending burdens from federal to state levels for social services (and unfunded homeland security mandates).

plus all those drug offenders need new prisions.

Posted by: jjj on April 3, 2003 08:47 AM

Today's report on last week's new filings for unemployment looks pretty bad (445,000):

http://www.dol.gov/opa/media/press/eta/ui/current.htm

Posted by: Jonathan on April 3, 2003 08:49 AM

"And you will note I led off this thread with a question specifically excluding tax cuts as a fiscal solution. I was interested in other ideas that seem to get less airplay."

Sorry, I missed that, and I agree, it's an important topic to discuss. However, looks like tax cuts are what we're going to get:

http://www.washingtonpost.com/wp-dyn/articles/A15025-2003Apr2.html

It's interesting that there haven't been counterproposals from the other side, just reactionary sniping.

Posted by: Russell L. Carter on April 3, 2003 09:05 AM

NYTimes
4/3/03

Lizann Sonders, the chief investment strategist at Charles Schwab & Company, said the tax cut is "the answer to the economy, is the answer to the stock market and maybe most importantly it's the answer to bringing back trust and fairness and faith in the system."

- slices dices Wall Streeters know THEIR economics -

Posted by: lise on April 3, 2003 10:30 AM

Who Needs the Needy -

http://www.nytimes.com/2003/04/03/opinion/03HERB.html

April 3, 2003

Mugging the Needy
By BOB HERBERT - New York Times

With the eyes of most Americans focused on the war, the Bush administration and its allies in Congress are getting close to agreeing on a set of budget policies that will take an awful toll on the poor, the young, the elderly, the disabled and others in need of assistance and support from their government.

The budget passed by the House is particularly gruesome. It mugs the poor and the helpless while giving unstintingly to the rich....

Posted by: lise on April 3, 2003 10:36 AM

Yes, yes, yes. The rich deserve it more, darn it, and there will be losts of trickle down trickle trickle.

Posted by: dahl on April 3, 2003 10:50 AM

Russell,

The Democrats do have an alternative budget. It has been posted on the House web site for months.

http://www.house.gov/budget_democrats/

However, it gets zero press coverage. Partly the Washington media has devolved into Bush cheerleaders and don't discuss opposing views. But also, the GOP holds all the cards. They control the House, the Senate and the White House and therefore control the debate. The Democrats are powerless to do anything about it, so all the proposals they make will certainly never go anywhere and probably won't even be discussed.

I hear people snipe at Democrats all the time for not doing anything. Don't they realize that the Democrats are totally out of power and do not even have a seat at the table?

Posted by: bakho on April 3, 2003 11:03 AM

Bucky,

If one is seriously worried about the economic outlook, as Brad has been for some time, then taking any opportunity to make the point makes sense, even if you have to hang your hat on one month's factory orders data. Factory orders are also a more basic, long-term measure of what is going on in the economy than the ISM data, so might have a greater appeal to big-picture folk like Brad. No harm done in looking at factory orders, but ask Brad why he likes ‘em. ISM data are more forward looking, which is nice for short-term “up-and-down” sorts of folk.

Edward,

I would agree on the housing point, to the extent that refis have been very important as a source of funds to households. The housing sector is not, however, a great source of employment or income as far as I know, so cannot push the overall economy very hard in either direction. It certainly has been a counter-cyclical influence so far in the slowdown, but I expect housing activity to remain pretty sensitive to changes in borrowing rates. If that is correct, then any upswing in the economy strong enough to boost rates will mean housing plays a declining role in the expansion. So between limited size and the likelihood that housing will cool as the rest of the economy picks up, it seems to me unlikely that housing will be the bellwether sector.

By the way, I regret to report that non-factory ISM data were absolutely awful.

Posted by: K Harris on April 3, 2003 11:06 AM

About who has a seat at the table - NONE of the most prominent Wall Street economists were invited to the latest White House booster session for the tax cuts and budget plan - Doh!

NYTimes
3/3/03

"The group did not include any of Wall Street's most prominent economists, many of whom are lukewarm on the plan. Nor did it include representatives from Wall Street's most prestigious investment firms: Goldman Sachs, Merrill Lynch, Morgan Stanley and J.P. Morgan Chase."

Posted by: jd on April 3, 2003 11:20 AM

jd, if the Bushies solicited economic opinions from those firms under the legal microscope after profiting mightily during the 90s bubble, the Left would understandably howl about foxes and chicken coops.

Posted by: Bucky Dent on April 3, 2003 11:32 AM

K Harris

Can you recall a period of about 8 weeks when the macro data have been this uniformly bad? Every report I read is discouraging.

Posted by: jd on April 3, 2003 11:33 AM

The point is that the Administration tax plan is disastrous for all but the very rich, and honest Wall Street economists know this. So, find sham economists, or economists who will sell a reputation, to support what we want is the Administration course. Who needs an American middle class, anyway. Bah.

Posted by: dahl on April 3, 2003 11:50 AM

NYTimes
3/3/03

"Nothing is more important in the face of a war than cutting taxes," the House majority leader, Tom DeLay, blithely told CongressDaily.

Love those compassionates....

Posted by: bill on April 3, 2003 12:48 PM

>honest Wall Street economists

Given all that we know about the bubble, it is very VERY hard to believe the uninvited suits owe their banishment to unflinching honesty.

Posted by: Bucky Dent on April 3, 2003 01:38 PM

jd,

Sure I can. The data were this bad in late 2001, till the auto companies change the picture.

Posted by: K Harris on April 4, 2003 05:14 AM

Bucky,

Umm,... did the firms represented by the economists at the Bush meeting not profit enormously during the 1990s? The list of invitees was pretty clearly of like mind with the Bush administration on tax cuts, though not all to the same degree.

Posted by: K Harris on April 4, 2003 06:28 AM

The big IPO shops are conspicuously absent from the list of invitees.

Also, I personally know a couple of the folks who were there. They are totally dedicated, professional economists without political agendas. Any notion that they are grasping climbers or hacks for hire is just 100% false.

Posted by: Bucky Dent on April 4, 2003 06:51 AM

Did anyone here notice the increase in the pool of available workers (PAW)? The PAW includes those counted as unemployed by the official measure plus everyone not employed who wants a job but did not actively seek work in the last four weeks.

Those who want a job (J) rose 558,000 March to 5.020m.

U=8.445m
J+U=PAW=13.465m
L+J=145.793m

u(official)=5.79%
u(PAW)=8.93%

By my calculations u(PAW) has not been this great since 11/1996.

Posted by: Eric on April 4, 2003 11:44 AM

>u(PAW) has not been this great since 11/1996

By many accounts, profits and equity prices are similarly unchanged since the mid-late 90s, so it all fits.

Posted by: Bucky Dent on April 4, 2003 11:50 AM

The so-called economists who flocked to the White House to tell us how the stock dividend tax cut would save middle America are nothing if not shams. The Administration budget and tax cut plan are calculated to increasingly undermine middle class well-being.

Administration economic policy is an economic disaster.

Posted by: bill on April 4, 2003 12:41 PM

JP Morgan has been pretty bullish but this is what they had to say in their report this week:

Expectations that March would deliver dreary economic news proved overly optimistic. Data releases were generally dismal and point to a downside break in activity from recent trends. In the US, business surveys and labor market indicators moved to their lowest levels in a year. The March PMI surveys in Europe and Asia also took a dive. Adding to the gloom is more timely evidence about the month end— notably the spike in US jobless claims and the significant
disruptions in Emerging Asian economies arising from the SARS outbreak.

There is genuine comfort too: the main drags producing the abrupt downshift— war fears and rising energy prices— appear to be lifting. Still, it would be wrong to conclude that the global economy is poised for a quick turnaround. The US data strike an important cautionary note: labor market and other business indicators are sending a weaker signal than they did after past temporary shocks— including the 1998 LTCM crisis, the 1995 Mexican crisis, and the 1987 stock market crash.

Posted by: GT on April 5, 2003 05:52 AM
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