Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

wsj.com

Post reply on HN
Print view View original

141–150 of 164 posts

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

#141

Post by rayiner »

hash872 wrote: post #138
rayiner wrote: post #112

Earlier quoted context omitted.

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…

FRED seems to have some different results https://fred.stlouisfed.org/series/CIVPART . These are huge numbers in a country the size of the US. Anyways, 'projected' is meaningless. It's pretty widely acknowledged that disability is abused, it seems to be a mix of people with real problems and those without. The very high disability rates in a few counties I think shows that it's not always legitimate usage

The FRED data is identical and probably the same source. It shows labor force participation rate dropping from 67% in 1998 to 63%, same as the BLS data I posted. But the chart you linked to doesn’t break things down by age group. When you do, you can see that the drop is almost entirely due to the 16-24 age group. Participation for people 25+ is stable since 1998.

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

#142

Post by hash872 »

rayiner wrote: post #141
hash872 wrote: post #138

Earlier quoted context omitted.

FRED seems to have some different results https://fred.stlouisfed.org/series/CIVPART . These are huge numbers in a country the size of the US. Anyways, 'projected' is meaningless. It's pretty widely acknowledged that disability is abused, it seems to be a mix of people with real problems and those without. The very high disability rates in a few counties I think shows that it's not always legitimate usage

The FRED data is identical and probably the same source. It shows labor force participation rate dropping from 67% in 1998 to 63%, same as the BLS data I posted. But the chart you linked to doesn’t break things down by age group. When you do, you can see that the drop is almost entirely due to the 16-24 age group. Participation for people 25+ is stable since 1998.

>drop is almost entirely due to the 16-24 age group. Participation for people 25+ is stable since 1998

This is simply not true at all. FRED specifically tracks prime-age labor participation rate. Gallons of ink/pixels have been written by academics about how the prime-age rate is lower since the early 2000s, it's a well-understood phenomena:

https://fred.stlouisfed.org/series/LNS11300060

Here's a few academic pieces on the issue, including 3 by regional Fed branches:

https://www.piie.com/system/files/documents/wp19-1.pdf

https://www.frbsf.org/economic-research/publications/economi...

https://www.kansascityfed.org/en/publications/research/er/ar...

https://www.dallasfed.org/research/economics/2019/0219

And here's a piece by the Brookings Institute on it too

https://www.brookings.edu/blog/up-front/2018/08/02/the-recen...

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

#143

Post by rayiner »

hash872 wrote: post #142
rayiner wrote: post #141

Earlier quoted context omitted.

The FRED data is identical and probably the same source. It shows labor force participation rate dropping from 67% in 1998 to 63%, same as the BLS data I posted. But the chart you linked to doesn’t break things down by age group. When you do, you can see that the drop is almost entirely due to the 16-24 age group. Participation for people 25+ is stable since 1998.

>drop is almost entirely due to the 16-24 age group. Participation for people 25+ is stable since 1998 This is simply not true at all. FRED specifically tracks prime-age labor participation rate. Gallons of ink/pixels have been written by academics about how the prime-age rate is lower since the early 2000s, it's a well-understood phenomena: https://fred.stlouisfed.org/series/LNS11300060 Here's a few academic pieces…

The chart you linked to was for total labor force participation rate, not prime age. The articles you linked confirm the same thing I said:

> US labor force participation of prime-aged workers (aged 25–54) fell by 1.8 percentage points between 1995 and 2017,

Falling from 84 to 82 percent is “stable.”

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

#144

Post by esoterica »

roenxi wrote: post #140
esoterica wrote: post #132

Earlier quoted context omitted.

Gold is fairly volatile and you are cherry picking dates. The spot price of gold fell 45% from 2010 to 2015, do you think consumer prices fell 45% over the same period?

No, I specifically said the gold price change suggested the consumer price inflation rate wasn't measuring real inflation; so obviously I don't think changes in the gold price are having an immediate reflection in consumer prices. And I think in the timeframe you indicate they stopped QE and people noticed the gold price had risen much faster than new money had been created so scaled back. Picking 2010-2015 is cherry…

What exactly is your definition of “real inflation”? If you’re including the prices of financial assets then you are using a nonstandard definition of inflation.

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

#145

Post by lazulicurio »

bhupy wrote: post #105
coldtea wrote: post #103

Earlier quoted context omitted.

What they never measure is the big rise in BS near-substinence hand-to-mouth jobs over higher quality gigs - which is the case in many (most?) countries...

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.

Genuine question: looking at that graph, it's saying that median weekly earnings reached a peak in 2009 then dipped 2010 through 2013. I find it rather counter-intuitive that a peak in median earnings would occur during the recession. What would be the explanation behind that peak?

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

#146

Post by roenxi »

esoterica wrote: post #144
roenxi wrote: post #140

Earlier quoted context omitted.

No, I specifically said the gold price change suggested the consumer price inflation rate wasn't measuring real inflation; so obviously I don't think changes in the gold price are having an immediate reflection in consumer prices. And I think in the timeframe you indicate they stopped QE and people noticed the gold price had risen much faster than new money had been created so scaled back. Picking 2010-2015 is cherry…

What exactly is your definition of “real inflation”? If you’re including the prices of financial assets then you are using a nonstandard definition of inflation.

Persistent decline in the purchasing power of money. I forget the technical definition of a 'good', but I count assets as part of 'goods and services' that people want to purchase.

Anyway, if the technical definition of inflation is only consumer goods, that shouldn't be the focus when talking about QE. If we are creating money we should focus on what that money is being used to purchase. If inflation is only going to be consumer goods then the main threat of QE obviously isn't inflation because it isn't being used to buy consumer goods. The risk is nobody being able to afford non-consumer goods like houses and other financial assets needed for retirement.

My motivation is knowing how much my salary is worth in assets, because I don't spend most of what I earn and I think the political situation would be a lot more stable if everyone got to retire into their own home without having to spend years paying for a banks endorsement that they are worthy to own a home.

I dunno, what do you want to call the steady erosion of purchasing power? We have to adjust asset prices by something to account for expected change caused by creation of new money. My understanding is people use CPI, which is not a good choice for reasons under discussion - the CPI isn't capturing the effects of QE.

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

#147

Post by daxorid »

esoterica wrote: post #144
roenxi wrote: post #140

Earlier quoted context omitted.

No, I specifically said the gold price change suggested the consumer price inflation rate wasn't measuring real inflation; so obviously I don't think changes in the gold price are having an immediate reflection in consumer prices. And I think in the timeframe you indicate they stopped QE and people noticed the gold price had risen much faster than new money had been created so scaled back. Picking 2010-2015 is cherry…

What exactly is your definition of “real inflation”? If you’re including the prices of financial assets then you are using a nonstandard definition of inflation.

I don't know what a good yardstick would be, but CPI is definitely not it.

US CPI weights the entire Medical Products & Services category at 8.68% vs its actual weighting of 18.1% as a fraction of GDP.

The average price of a new vehicle hasn't materially changed in 22 years in the CPI due to hedonic adjustments, whereas the actual sticker price is 55% higher.

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

#148

Post by Mirioron »

qubex wrote: post #73
Mirioron wrote: post #72

Earlier quoted context omitted.

The percentage paid as interest of the budget seems to be increasing. Current forecasts put it at over 12% by 2023. That's double what it was in 2016. At that point it'll rival US military spending in size. When would you say it becomes a problem? Does it have to become the highest cost item on the budget? The government is borrowing money that future taxpayers have to bear the burden of. Does the return on that extr…

Really it comes down to the present net value of future opportunity cost: of economic growth outgrows the compounded future cash flows to service the debt (particularly if debt principal and at least part of the interest due) can always be rolled over for the foreseeable future within the temporal horizon, it makes sense to accrue debt. We’re arguably lumbering future generations with just as much when we do not inve…

I get what you're saying, but how sure are we that this spending actually ends up improving lives more than the cost it will have in the future? Politicians aren't always the most honest and with a complex system it's possible to obfuscate people enriching themselves at the expense of the taxpayer. How sure are we that this won't be abused at any point?

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

#149

Post by Can_Not »

AmericanChopper wrote: post #107
duxup wrote: post #29

Is it because say unemployment has proven to be a strange concept these days with "underemployment" being a larger concern? Perhaps they were simply predicting the wrong thing / things that don't seem as relevant.

Underemployment is an entirely subjective concept though. Having skills that that you can’t sell due to insufficient demand doesn’t necessarily say anything about the market at all.

One person not being able to sell their skills is a personal problem, a significant number of people who can't find work with their skillset and a significant number of employers unable to find people with skills is a market failure. We're at a market failure and there is economic loss as a result.

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

#150

Post by esoterica »

roenxi wrote: post #146
esoterica wrote: post #144

Earlier quoted context omitted.

What exactly is your definition of “real inflation”? If you’re including the prices of financial assets then you are using a nonstandard definition of inflation.

Persistent decline in the purchasing power of money. I forget the technical definition of a 'good', but I count assets as part of 'goods and services' that people want to purchase. Anyway, if the technical definition of inflation is only consumer goods, that shouldn't be the focus when talking about QE. If we are creating money we should focus on what that money is being used to purchase. If inflation is only going t…

The cost of housing is included in the inflation number via rent, not house prices. Rent is the true cost of housing; when you purchase a house you are not only purchasing shelter but also a speculative investment that you expect to appreciate. Only the former is relevant to cost of living.

> The risk is nobody being able to afford non-consumer goods like houses and other financial assets needed for retirement.

You need to buy financial assets for retirement only so they can be later exchanged for non-financial goods like good and gas. Only the latter prices are relevant to you. It makes a difference whether you pay $1 or $10 for gas, but there is zero difference between buying stock at $100 and selling it later at a X% return, and buying stock at $1000 and selling it later at an X% return.

The future rate of return might be relevant for your retirement, but that is both outside the scope of inflation and not proxied by the current asset price increases (which is what you are claiming inflation is supposed to also measure).

Post reply on HN