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January 08, 2005

The National Review Clown Show Continues...

Wearing the makeup, the rubber nose, and the oversized shoes, Larry Kudlow writes:

Larry Kudlow on Greg Mankiw and Nonfarm Payroll Jobs 2004 on NRO Financial: Friday’s job report shows that White House economist Greg Mankiw was very nearly right when he projected almost a year ago that jobs could rise by 2.6 million in 2004. Of course, he was widely ridiculed inside Washington after making this statement, and at one point even the White House turned its back on the Harvard professor’s estimate...

The problem with this, of course, is that the administration payroll job growth forecast for 2004 made a year ago was not for 2.6 million, but for 3.8 million. The forecast for the December 2004 payroll employment level was not 132.7 million, but 134.3 million* (compare to the actual outcome of 132.4 million). The 2.6 million number is the difference between the average employment level in 2003 and the forecast average level for 2004**--it is not the difference between the December 2003 level and the December 2004 forecast.

Why then does Larry Kudlow pretend otherwise? There are two possible answers: stupidity, and mendacity.


Why wasn't the December forecast equal to the December 2003 level--130.0 million--plus 3.8 million? Because the forecast also assumed very rapid job growth in late 2003 that did not happen.

**The average employment level for 2004 was 131.3 million--1.3 million higher than the average employment number for 2003.

Posted by DeLong at January 8, 2005 09:55 AM

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» Fun With Numbers from Political Animal
FUN WITH NUMBERS....Brad DeLong has made this point many times before, and makes it again today, but I'd like to expand on it slightly myself. Why? In the forlorn hope that people who write about this stuff will see it... [Read More]

Tracked on January 8, 2005 01:14 PM

» Fun With Numbers from Political Animal
FUN WITH NUMBERS....Brad DeLong has made this point many times before, and makes it again today, but I'd like to expand on it slightly myself. Why? In the forlorn hope that people who write about this stuff will see it... [Read More]

Tracked on January 8, 2005 01:19 PM

» Fun With Numbers from Political Animal
FUN WITH NUMBERS....Brad DeLong has made this point many times before, and makes it again today, but I'd like to expand on it slightly myself. Why? In the forlorn hope that people who write about this stuff will see it... [Read More]

Tracked on January 8, 2005 05:40 PM

» Fun With Numbers from Political Animal
FUN WITH NUMBERS....Brad DeLong has made this point many times before, and makes it again today, but I'd like to expand on it slightly myself. Why? In the forlorn hope that people who write about this stuff will see it... [Read More]

Tracked on January 8, 2005 05:44 PM

» Fun With Numbers from Political Animal
FUN WITH NUMBERS....Brad DeLong has made this point many times before, and makes it again today, but I'd like to expand on it slightly myself. Why? In the forlorn hope that people who write about this stuff will see it... [Read More]

Tracked on January 8, 2005 06:05 PM

Comments

http://bigpicture.typepad.com/comments/2005/01/an_interview_wi.html

An Interview With Jeremy Grantham - Barrons

Asset allocators will be sorely tested in the coming year, says a skilled practitioner of the art:

Duck and cover. That about sums up this investing great's view of how best to cope with what he thinks is likely to be a difficult year in the financial markets. A founder of Boston-based Grantham, Mayo, Van Otterloo, and steward of $80 billion for institutions and the wealthy, Grantham sizes up asset classes and seizes the best opportunities across the broad spectrum of available investments. Now, for the first time in his career, he's faced with what he calls the "asset-allocator's nightmare": asset classes of all stripes are either overpriced or fairly priced. So, what's an investor supposed to do? Grantham offered his advice in an interview conducted in late December. For some of the best advice in the business, please read on:

"Underweight equities globally because they are expensive. Only emerging-market equities are close to fair value, and now could be considered a little overpriced."

Posted by: anne at January 8, 2005 10:28 AM


http://bigpicture.typepad.com/comments/2005/01/an_interview_wi.html

EXCERPT from Barrons:

Q: The past few years have been very rough on short sellers. Are you suggesting a new golden period for them?

A: It will probably be a pretty darn good period, and conservative hedge funds are the answer to a maiden's prayer. Even if they turn out to deliver a lower return than you expect going in because of the sheer volume of the competition -- say you expect 10% but get 5% -- that may turn out to be brilliant in the next couple of years. I personally have 50% of my money in such funds, which includes a net short fund but mostly conservative market-neutral funds. Of the balance, I'm very long emerging and international. I've shorted a few S&P 500 contracts against them, just to take some of the sting out of the next few years. Our highest-confidence strategy would be going long emerging markets and short S&P 500 contracts.

Our seven-year forecast for asset classes expects a real return of around 6% from emerging markets. We expect to add three or four points to that from active management for a total return of 9%. We expect the S&P 500, on the other hand, to deliver minus-2%. That's an 11-point spread. And emerging markets have never looked higher-quality than now. Their reserves are fabulous. Their currencies, consequently, all look pretty good. Their growth rates are fabulous. The back page of the Economist lists the 24 emerging countries. If you were to take the gross-domestic-product growth rate of the European Union for the last year and add it to that page, it would rank dead last on a list that includes Egypt, Israel, Turkey and Slovakia. They are all beneficiaries of China, have a terrific fundamental strength at the moment and a good qualitative position. Still in all, they may go bump in the night. But on a three-year basis, I think they are going to hammer the S&P again.

Posted by: anne at January 8, 2005 10:40 AM


http://www.epinet.org/content.cfm/webfeatures_econindicators_jobspict_20050107

Payrolls up 157,000 for the month, 2.2 million for the year, but recovery still lags past experience

According to today's report from the Bureau of Labor Statistics, the nation's employers continued adding jobs in December, with payrolls up 157,000. This increase closes out the first year since 1999 with job growth in every month and confirms that the jobless recovery is safely behind us.

That said, the rate of job growth continues to lag other recoveries. Over the year—December 2003 to December 2004—employment is up 2.2 million. While this is the best year for job growth since 1999, it still lags the 3.3 million jobs added at the analogous stage of the last recovery. On average over the past year, monthly employment grew by 186,000, compared to 272,000 at a similar stage of the 1990s recovery.

In fact, the average annual growth rate for payroll employment at this stage of a recovery is 2.8%, well above the 1.7% achieved this year. Had that average growth occurred this year, we would have added 3.6 million jobs since last December, 1.4 million more than the actual number. Thus, in historical context, the recent pace of job growth has been subpar....

Finally, earnings data from today's report reveal this to be an important trouble spot in the labor market recovery. Relative to last December, the hourly wage is up 2.7%, likely below inflation, which was up 3.5% in the most recent data for November 2003 through November 2004. Wage growth started the year considerably slower than in 2003, and averaging over all of 2004, hourly earnings were up only 2.1%. This increase was well below inflation and marked the lowest growth rate for hourly earnings on record, going back to 1964.

The good news is that the jobless recovery is reliably behind us, and we just completed the best year for job growth since 1999. Most industries are expanding, though there are signs that employers have not fully abandoned their cautious hiring practices, especially relative to past recoveries. Had employment grown at its historical pace in the third year of an expansion, we would have added 1.4 million more jobs. Also, the remaining slack in the job market has led to wage growth that is uniquely weak in historical context. Thus, while the current level of job growth is likely enough to sustain an ongoing recovery, if that recovery is to reach more working families, much stronger employment growth will be needed in the coming months.

By EPI Senior Economist Jared Bernstein, with research assistance from Yulia Fungard.

Posted by: lise at January 8, 2005 10:55 AM


If one is advocating good policy the facts should be enough to use in defending the policy. But the right wing consistently is fundamentally dishonest about their policies. I have watched them for years be extremely dishonest -- I am trying not to accuse them of lying.

I keep wanting to ask them, "if your policy is so good, why do you have to lie about it".

The perfect example is Iraq. We are tied up in a no win situation largely because they lied up into the situation.

Can any of the Republicans that read this Blog answer my question of why they feel they have to lie about their policies? I would really love to see an answer.

Posted by: spencer at January 8, 2005 11:38 AM


Spencer:

http://www.nytimes.com/2005/01/08/national/08education.html?pagewanted=all&position=

TV Host Says U.S. Paid Him to Back Policy
By DAVID D. KIRKPATRICK

Armstrong Williams, a prominent conservative commentator who was a protégé of Senator Strom Thurmond and Justice Clarence Thomas of the Supreme Court, acknowledged yesterday that he was paid $240,000 by the Department of Education to promote its initiatives on his syndicated television program and to other African-Americans in the news media.

Posted by: lise at January 8, 2005 11:46 AM


http://www.nytimes.com/2005/01/09/national/09jobless.html

For Unemployed, Wait for New Work Grows Longer
By JOHN LELAND

About 3.6 million American workers ran out of unemployment insurance benefits last year, the most in at least three decades.

Posted by: lise at January 8, 2005 11:54 AM


Brad is being kind, there is a third reason for Kudlow's pretending otherwise - PAYOLA! Why would anyone not consider that Kudlow "the coke user" wouldn't do the same as Williams? Be brave enough to look behind the green curtain.

Posted by: notanumber at January 8, 2005 12:14 PM


The economy is growing, and we are beyond a jobless recovery, though not beyond one in which wages and benefits lag in growth. Care must be taken by the Federal Reserve that the tightening sequence does not slow us and further interfere with job creation or wage increases.

Posted by: anne at January 8, 2005 12:22 PM


"How many of America’s estimated 290 million are unemployed? Supposing current unemployment really is 6 percent with some 131 million currently employed, there are some 8.4 million Americans unemployed. This isn’t really how many are unemployed, is it? Isn’t it really the number of jobs needed, those capable who need to work, less the number with jobs? The number of unemployed is the number of jobs needed less the 131 million Americans with jobs. In the 2000 census, there were some 166 million Americans between the ages of twenty and sixty-five plus some 20 million between fifteen and twenty. If 80 per cent of these 186 million Americans between the ages of fifteen and sixty-five are capable and seeking work, America needs some 149 million jobs. Our current 131 million jobs is some 88 per cent of these 149 million jobs needed meaning that actual current unemployment is 12 per cent. Some 21 million of the current 131 million jobs are part time. These underemployed are partially unemployed. When 20 per cent of the underemployed, 4 million, is added to the above 18 million unemployed, total unemployment is 15 per cent. Amongst those working are an estimated 6 to 8 million illegal immigrants. This forces citizen’ unemployment up another some 4 percent to 19 per cent. And, there are millions of seniors over sixty-five who need to work.

Alternatively: If we presume unemployment to have been 5 percent in 2000 with 140 million of 147 million employed and we now have 131 million employed, unemployment has increased by some 9 million to about 16 million of 147 million, or about 11 per cent. Again, using 147 million jobs needed, if we accept that only 1 million jobs have been lost and that the population growth demanded an additional 3 million more jobs; unemployment equals 7 million plus 1 million plus 3 million or 11 million of 150 million, or some 7.3 per cent. If, in fact, since 2000, unemployment increased by 9 million, i.e., 140 million less 131 million, and population growth increased the number of jobs needed by 3 million; unemployment is now 7 million plus 9 million plus 3 million or 19 million of 150 million, or some 13 per cent.

Currently, September 2004, unemployment is least 7.3 per cent. It is much more likely some 11 to 12 per cent. It may be as high as 18 per cent, or even higher. Seems hardly fair to arbitrarily lop those who have given up off the unemployed roles."

Posted by: ken melvin at January 8, 2005 01:33 PM



Now that the election is over, coverage of the job growth numbers is a little bit better than the "100,000 jobs created!!!" coverage of much of 2004. To my eyes, it appears that more of the coverage notes that the 157,000 growth rate is not especially impressive.

Still missing is commentary to the effect that this mediocre growth is coming in spite of strongly expansionary fiscal and monetary policies and in spite of the fact that wages aren't keeping up with inflation.

There's a lot of poop building up behind the dam.

Posted by: Ottnott at January 8, 2005 04:09 PM


"Why then does Larry Kudlow pretend otherwise? There are two possible answers: stupidity, and mendacity".

That's my man Larry. A rare combination of two complimentary character traits!

Posted by: SW at January 8, 2005 04:27 PM


And then there was the line that employment does not have to rise as much to keep the employment rate constant if labor force participation declines. He is full of excuses for the weak labor market, which he calls booming.

Posted by: pgl at January 8, 2005 05:05 PM


Anne, the Granthum article was very good.

As for Kudlow, I vote for pure mendacity. Gollum wasn't stupid either, but merely in thrall to something evil. Plus, look at their teeth. Very similar. Kudlow rots from the bones out.

Let me add that Cramer is a world-class coward, sitting there and fawning over the second-class liar.

Yeah, the Armstrong Williams scandal is the end of a long string which unwinds much of the past 4 years. Follow it. It explains the media today.

Massive, rotting corruption.

Posted by: John Thullen at January 8, 2005 06:53 PM


One thing in the NYT story about Armstrong Williams really makes me wonder about where "fair and balanced" journalism is taking us.

After reporting Williams' dishonesty, which nobody seems to dispute, including Williams, the Times feels duty bound to add that, "The Clinton administration was probably even more active than the Bush administration" in "distributing news segments promoting its policies", an assertion by Laurence Moskowitz, "chairman and chief executive of Medialink, a major producer of promotional news segments".

Why don't they leave that crap to Hannity, O'Reilly and Limbaugh?

Posted by: Steve at January 8, 2005 08:07 PM


The problem with this rant and the excellent comments is that even the "sensible" right wing really doesn't care, because they have an unshakable tenant of faith: "Under Gore it would have been worse." Now modified to "under Kerry", of course.

So we can compare recoveries and deficit spending and prime rates all day long, and they won't care.

Posted by: a different chris at January 9, 2005 05:28 AM


The article from which Kudlow based his remarks (The Atlanta Fed) was worth the read IMHO. [I'd say Kudlow didn't read it very thoroughly.] Not perfect but shed some light on the role that demographics plays in this unemployment issue.

Posted by: calmo at January 9, 2005 07:26 AM


Calmo is right. Link to the article can be found over at Angrybear. And too bad Kudlow failed to read it more carefully.

Posted by: pgl at January 9, 2005 01:36 PM


"Why then does Larry Kudlow pretend otherwise? There are two possible answers: stupidity, and mendacity."

I was going to say there is a third one: cocaine. But, as J.J. Cale reminded us, "she don't lie." Which is a lot more than you can say about Larry Kudlow.

Posted by: Billmon at January 9, 2005 08:45 PM


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