I'm going to go out on a limb and say I don't trust these numbers. I expect them to be revised downward later along with those of the last few months. Even assuming these numbers are accurate and an accurate representation of the labor situation (two different things) the overal trend is clearly down despite the mostly positive news of the last few months.

Most gains seem to be seasonal (students). Health services has been increasing for some time - part of a long term rise in medical costs that will come under attack as Medicare and Medicaid bleed. In the financial services sector Mortgage brokers are the fastest growing area - their numbers will decline precipitously when the housing bubble bursts, I suspect.

An interesting quote: "The total employment-population ratio was up by 0.2 percentage point to 63.0 percent. This ratio was 0.6 percentage point lower than in September 2001 and 1.8 percentage points lower than its peak in April 2000. (See table A-1.)"

Another interesting quote from the actual report: "About 1.5 million persons (not seasonally adjusted) were marginally attached to the labor force in September, compared with 1.3 million a year earlier. These individuals reported that they wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as
unemployed, however, because they had not actively searched for work in the 4 weeks preceding the survey. The number of discouraged workers was 387,000 in September, up from 280,000 a year earlier."

Though I too think the numbers will be revised down, they are poor to begin with. Economic growht appears to be stalling. There is not enough price flexibility for companies to consider adding many employees. The recovery is in danger.

The massive losses in the stock market over the last 31 months do not seem to have cut comsumption, but I do not understand how that can continue.

The S&P is down 47%, the Wilshire 4500 is down 50%, the European index is down 45%, the Pacific index is down 52%.

What is happening to the plans of women and men who are in their 50's or 60's and had accounts in 100,000 dollar multiples that have fallen by half over 31 months?

This is a serious matter. Has there been a more serious financial crisis since WWII?

Merrill Lynch estimates that American household net worth has dropped 27% from January 2000. This strikes me as a major problem, but I am puzzled that economists do not seem worried about the drop. How deeply have we been hurt by the bear market? How long might it take us to recover?

Have we experienced a mere bear market or a financial shock that could ripple for years?

The bear market in 1987 was over in about 2 months. The market fell for 20 months in 1973-1974. This decline has been 31 months, and strikes me as far worse than 1973-1974 because of our dependence on stocks for retirement assets.

Please do comment.

The New York Times reports that American households had 63% of wealth in stocks before the bubble burst. Canadian household had 45% of wealth in stocks.

Should we worry more about this bear market?

The decline in stock market values has compassed both growth and value, large and small company stocks. The small company value index has fallen about 33% in the past 5 months. The large company value index is down about 38%, while large growth in down about 55% ove the past 31 months.

Also,

>>Employment definitions partly to blame, requires only a few hours a month to be "employed".<<

That's what I suspected, they're doing statistical cosmetic surgery. It's very common in Europe but I didn't know it was also the business of the US Administration. Don't forget people who compute these numbers are on the payroll of people whose goal in life is to be reelected on 11.05... I expect substancial revisions as time passes.

Anonymous, one thing is that economists don't understand wealth effects on spending very well, I think. To my best understanding, there is not a clear consensus on this question.

On the other hand, a simple life-cycle / permanent income approach to this question yields a simple conclusion: consumption has to dip by however much consumer think their expected lifetime income has been affected. And yet, personal consumption does not seem to reflect this so far.

I can only see two reasons at this poiny:
* people have discounted the current slump in stock markets as temporary; and/or
* what people look at is the sum of their stock market and real estate wealth. that sum has dived in less than the stock market alone, although there are strong suspisions there is a housing bubble as well. But it's like economic agents are known to handle bubbles in the most rational way anyway...

okay, a third one
* the Fed's interest cuts are actually being effective and people are stocking up on durables like cars etc. That can't last forever though...

P.S. Finally, it may be that a representative agent model of this problem is blinding us to the differenciated impact of wealth effects on consumption (and thus savings) when they impact different groups of individuals with different marginal propensities to consume. In plain English, wealthy people consume less as a fraction of their wealth and income than poor people.

The real pain will come when the housing bubble pops. For the middle class the pain of the stock market has been muted - though they are in the market they aren't in in a big way (on average). But the majority of most household's net worth is their home equity. And when that equity drops - well let's just say it's going to be much, much worse.

Real Estate agents regularly come about telling us how valuable our home is. Fine. We happen to like living here, have lived here for many years, and will live here for many more years. What difference does it make to us that our home may be rapidly rising in value? What does make a bigger difference to us is savings. We have a mix of investments which are meant to carry us through retirement.

What I do not understand is how people in their 40's and 50's and 60's are supposed to ignore such large losses in their stock accounts. Where will retirement funds come from?

Remember people use the value of their houses as collateral. Moreover many people use it as part of their retirment fund. You sell it or mortgage it and use the money to live on. It's very common in the middle class. House values make up most of the net worth of most people.

The massive losses in the stock market over the last 31 months do not seem to have cut comsumption, but I do not understand how that can continue.

I think a lot of people are taking cash out of their home equity, or running up credit card debt. (Everyone I know is doing that to extremes.)

I think there has been a generational shift in how people look at and understand debt. There's no stigma on debt now, while there is a stigma on having an older car, etc. There hasn't been a serious downturn for some time, so people in theeir 20's and even early 30's do not understand the risks of debt.

In my opinion Greenspan lowering interest rates so far will prove to have been a huge mistake - only a DELAYING action, not preventative - and what we have now is a huge additional housing and credit card debt load. After a bubble that size popped the economy was going to tank no matter what. Now we have a great deal more debt and a housing bubble because of the extent of the interest rate cuts, and the economy is STILL going to tank.

Re:

>>The massive losses in the stock market over the last 31 months do not seem to have cut comsumption, but I do not understand how that can continue.<<

It is remarkable...

Could it be that equity ownership is not as democratic a phenomenon and stock market wealth is a much less significant issue for the mass of American people than various hardly disinterested commentators would have had us believe?

Yes, I think it could.

Ian Welsh points out that homes make up most of the wealth of middle class women and men. Right.

Well then are we headed for a retirement problem for baby boomers who may not have saved nearly enough to add to social security?

Indeed, and that's why rising unemployment is much more of a concern... Unfortunately, stock market splumps are not without effects on hiring (and firing!) decisions as corporations struggle to show profits to lift their share value.

>>Well then are we headed for a retirement problem for baby boomers who may not have saved nearly enough to add to social security?<<

Anonymous, you're expecting too much foresight from the Dubya Administration. The answer is yes, it's going to hurt real bad starting around 2010, I believe. Unless a miracle happens. But by defenition, a miracle is a well-defined event with virtually zero probability of happening...

Jean Philippe

Thanks as always.
Important points as always....

Am I sensing a bit of irony there? :) I don't accept compliments unless I know who is making them...

>>Bush arrived at the economic summit in Waco last August with no set agenda—other than looking involved—and then impulsively latched onto Charles Schwab's suggestion to increase the amount of stock-market losses investors can deduct from their income. The House has passed a version of it, but Bush hasn't mentioned it much since.<<
From Slate: Bush League Economics, Can't anybody here play this game? By Daniel Gross, Posted Friday, October 11, 2002, at 1:51 PM PT.

That might be part of the picture for the few wealthy people it concerns (201k's are off the chart). Daniel Gross further comments:

>>And besides, what economic theory is served by providing an incentive for people to dump stocks between now and the end of the year?<<

I wonder...

Dubya and his team simply don't understand wealthy people don't spend much at the margin...