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Economists’ projections of interest rates and unemployment have proved too high

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Re: Economists’ projections of interest rates and unemployment have proved too high

#111

Post by deevolution »

JamesBarney wrote: post #109
aazaa wrote: post #87

> Economists have been casting around for the answer, a theory to explain their inability to peer accurately in the months ahead, let alone the years. ... No mention of "quantitative easing" anywhere. QE ran in various forms from 2008-2013. Short term rates were held at zero in the US from 2008-2015. Several industrialized areas now have negative nominal rates. The Fed has started QE back up again to prop up the fail…

Why is QE a market distortion? Is all monetary policy a market distortion? If we used a gold standard is that not a market distortion? If the price of gold changes drastically due to gold mines closing/opening changing interest rates is that a market distortion?

"Government manipulation"

Re: Economists’ projections of interest rates and unemployment have proved too high

#112

Post by rayiner »

hash872 wrote: post #94

It's fascinating to me that even august publications like the Wall Street Journal continue to use 'unemployment rate' as any kind of reliable metric, and says stuff like 'the unemployment rate is at a 50 year low now'. Unemployment just measures those who are actively looking for full-time employment but are unable to find it (and yes there is a separate underemployment metric, which seems a little more accurate). Th…

Labor market participation rate is not a great measure. Look at the breakdown of changes in labor market participation by age: https://www.bls.gov/emp/tables/civilian-labor-force-particip...

From 1998 to 2018 participation dropped just 2 points for those age 25-54. That is projected to stay stable through 2028. It went up for those 55+. The only place it dropped significantly was 16-24. I.e. our society is richer and we can afford to have more young adults spend their early 20s binge drinking instead of working.

As to disability—it’s hard to tell whether increasing numbers of people on disability is good or bad. If the government has simply gotten more generous and allowing more people with real problems to draw disability, that’s not a bad thing.

Re: Economists’ projections of interest rates and unemployment have proved too high

#113

Post by rayiner »

lotsofpulp wrote: post #110
bhupy wrote: post #105

Earlier quoted context omitted.

You're right, that information is captured by the median weekly inflation-adjusted earnings for wage and salary workers, which is actually at historic highs. https://fred.stlouisfed.org/series/LEU0252881600A Combining the U6 unemployment rate with the real median earnings paints a more complete picture.

I would have to combine it with changes in CoL in areas of economic opportunity versus those without. Parts of the country offer far more security in future income than others.

That would penalize the national statistics for the dysfunctional laws and policies of a handful of localities.

Re: Economists’ projections of interest rates and unemployment have proved too high

#114

Post by baja_blast »

ur-whale wrote: post #106
imglorp wrote: post #39

Someone please correct my impression here, but why aren't both macro- and micro-econ viewed as a largely academic ideal that completely ignores many realities of human civiliation? I'm thinking specifically of malice and manipulation, at all levels of all systems: if there is a way to enrich (ie steal), motivation is towards it happening and towards weakening rules and oversight. For example, who wants to quibble ove…

> why aren't both macro- and micro-econ viewed as a largely academic idea Because it's easier to get funding when you claim to be a science. The fact that the discipline has exactly zero predictive power is rarely brought up by practitioners (of course), nor particularly noticed from the people who consume the by-product of said discipline.

Economists are the Wizards/Shamans of today, both pretend to have special insight and knowledge of how future outcomes will unfold only difference is instead of cutting off the head of a chicken and seeing where it lands, they have "models".

Re: Economists’ projections of interest rates and unemployment have proved too high

#115

Post by tenpies »

ambernightcruse wrote: post #92
aazaa wrote: post #87

> Economists have been casting around for the answer, a theory to explain their inability to peer accurately in the months ahead, let alone the years. ... No mention of "quantitative easing" anywhere. QE ran in various forms from 2008-2013. Short term rates were held at zero in the US from 2008-2015. Several industrialized areas now have negative nominal rates. The Fed has started QE back up again to prop up the fail…

There's no mention about QE because QE is only about lowering the cost for the private sector to borrow money. The main threat to QE is inflation, which is hovering around 2% and stubbornly low, so QE is in the clear. The repo purchases are operating as intended, with new liquidity requirements for banks from Basel 3 reforms. Also you complain about negative nominal rates, which make banks less likely to lend; then y…

> The main threat to QE is inflation, which is hovering around 2% and stubbornly low, so QE is in the clear.

Obligatory comment that the measure of inflation used by the Fed - core inflation - intentionally under presents inflation. It literally takes a basket of all goods, sorts by least volatile, and picks the least volatile items possible.

Re: Economists’ projections of interest rates and unemployment have proved too high

#116

Post by paulddraper »

hash872 wrote: post #94

It's fascinating to me that even august publications like the Wall Street Journal continue to use 'unemployment rate' as any kind of reliable metric, and says stuff like 'the unemployment rate is at a 50 year low now'. Unemployment just measures those who are actively looking for full-time employment but are unable to find it (and yes there is a separate underemployment metric, which seems a little more accurate). Th…

> use 'unemployment rate' as any kind of reliable metric

All metrics are flawed, and each has their use.

The unemployment rate helps you understand how likely the average worker is to find a job if they look for one.

Obviously many potential workers will choose not to: health, wealth, sloth, depression, age, wages.

But one aspect of a functioning economy is being able to match willing workers to jobs.

For example: Though I don't put much stock in the "replaced by robots" forecasts, if it were to happen, the unemployment rate would rise.

Re: Economists’ projections of interest rates and unemployment have proved too high

#117

Post by paulddraper »

imglorp wrote: post #39

Someone please correct my impression here, but why aren't both macro- and micro-econ viewed as a largely academic ideal that completely ignores many realities of human civiliation? I'm thinking specifically of malice and manipulation, at all levels of all systems: if there is a way to enrich (ie steal), motivation is towards it happening and towards weakening rules and oversight. For example, who wants to quibble ove…

For the same reason that computer science focuses on academic ideals more than user privacy, social engineering, censorship, fraud, addiction, etc.

Those do affect how computing is done in the real world, but they are very squishy and opinionated topics.

Re: Economists’ projections of interest rates and unemployment have proved too high

#119

Post by paulddraper »

tuberelay wrote: post #23

The official US inflation measure is garbage. It doesn't include enough of the big 3 costs in people's lives : housing, education and healthcare. It includes whacky stuff like "oh your cellphone is faster now than 5 years ago, we're going to say that you're getting 10x the phone for roughly the same price and use that to disprove inflation". It ignores asset inflation (stocks, real estate, venture capital, everything…

???

You can read the weights here: https://www.bls.gov/news.release/pdf/cpi.pdf .

* Rent of shelter 33.1%

* Medical care services 7.1%

* Medical care commodities 1.7%

* Tuition, other school fees, and childcare 2.9%

* Educational books and supplies 0.1%

Rent is the biggest item in the entire report. The healthcare number seems about right. And remember that education is averaged over an entire lifetime.

It's objectively true that people are choosing to spend more on better/faster phones. That doesn't necessarily mean inflation; it means that phones have become more useful and capable and therefore worth a larger relative expense to people. If people started buying $100k self-driving cars, you can't claim that inflation did that.

Re: Economists’ projections of interest rates and unemployment have proved too high

#120

Post by lmm »

JamesBarney wrote: post #109
aazaa wrote: post #87

> Economists have been casting around for the answer, a theory to explain their inability to peer accurately in the months ahead, let alone the years. ... No mention of "quantitative easing" anywhere. QE ran in various forms from 2008-2013. Short term rates were held at zero in the US from 2008-2015. Several industrialized areas now have negative nominal rates. The Fed has started QE back up again to prop up the fail…

Why is QE a market distortion? Is all monetary policy a market distortion? If we used a gold standard is that not a market distortion? If the price of gold changes drastically due to gold mines closing/opening changing interest rates is that a market distortion?

QE is a market distortion because it consists of orders intended primarily to manipulate prices.
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