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The US economy shrank at an annualized rate of 2.9 percent in Q1

washingtonpost.com

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Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#61

Post by pessimizer »

DangerousPie wrote: post #45
sillysaurus3 wrote: post #31

Earlier quoted context omitted.

That unemployment graph is rather breathtaking, both because it illustrates how impactful the '08 crash was, and how little we've recovered since then. Is there any chance that the graph could be misleading, or should it be believed at face value that one in four people are unemployed?

Very misleading Y axis. Here is the same plot with a proper axis: http://i.imgur.com/k4ClDSF.png

That one is the misleading one. We're interested in the magnitude of the change vs. the recovery, not the numbers 0 to 100.

A graph of GDP plotted as a percentage of current GDP at that scale could make the recession seem like a tiny little 2% blip.

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#62

Post by crassus »

dclowd9901 wrote: post #53
cs702 wrote: post #43

TL;DR: annual US GDP declined 2.9% because consumers spent less. In fact, they are not yet spending at rates anywhere near the rates at which they were spending before the financial crisis in 2008. When consumers spend less, businesses in the aggregate sell less of everything, because every dollar spent by a consumer is a dollar earned by someone else -- usually a business. Before the financial crisis, consumers borr…

Part of this slowdown in consumer spending also has to do with the tightening of credit as well, making it more difficult for people without means to spend. In my opinion this is a great thing. When people are backed against a wall because they have no other way to pay for their livelihood than their salary, they're not going to be ok with stagnant wages and companies low balling them. Bring on the pain, I say. Real…

I know that people will make political hay of this, but there is danger to managing to quarterly statistics. If your economy needs some adjustments to achieve long-run sustainability then it's possible that GDP may fall for a quarter or two and there's nothing wrong with that.

GDP is a great metric for long-term or inter-national comparison. It's terrible as a quarterly national management metric.

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#63

Post by pessimizer »

jonnathanson wrote: post #59
pessimizer wrote: post #55

Earlier quoted context omitted.

The funny thing is that consumption is actually historically very, very high: http://www.tradingeconomics.com/united-states/personal-savin... Savings rate, now: 4% Pre stock-bubble average: 8% edit: "Personal Savings in the United States increased to 4 percent in April of 2014 from 3.60 percent in March of 2014. Personal Savings in the United States averaged 6.82 Percent from 1959 until 2014, reaching an all time hig…

A lower Personal Savings Rate doesn't necessarily mean people are "consuming" more. At least not the sort of consumption (discretionary) that many businesses care about. It simply means that the proportion of income being saved is lower. There are any number of factors that could make that true, including rising costs of living or inflation vis-a-vis stagnant income. In fact, while personal income has been increasing…

I'm having trouble understanding what you're saying here. What's left after saving and spending?

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#64

Post by jonnathanson »

pessimizer wrote: post #63
jonnathanson wrote: post #59

Earlier quoted context omitted.

A lower Personal Savings Rate doesn't necessarily mean people are "consuming" more. At least not the sort of consumption (discretionary) that many businesses care about. It simply means that the proportion of income being saved is lower. There are any number of factors that could make that true, including rising costs of living or inflation vis-a-vis stagnant income. In fact, while personal income has been increasing…

I'm having trouble understanding what you're saying here. What's left after saving and spending?

It's not that there's something left after saving and spending; it's that there are different types of spending. PSR is a useful starting point, but not a complete story, in assessing consumer health and markets.

For instance, it is not incongruous right now to say that a) people are saving proportionately less, and b) people are not buying as much stuff. Obviously they are spending in direct proportion to what they're not saving -- but the categories of their spending matter a great deal.

Tl;dr is I'm not disagreeing with you at all; I'm just expanding.

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#65

Post by opendais »

toomuchtodo wrote: post #36
opendais wrote: post #32

Earlier quoted context omitted.

The graph represents a 4% chance in the size of the active labor force. In good times, 1 in 5 people don't work. So saying 1 in 4 is a massive change [when it is 5%] isn't really correct. It also is only 'prime' so 25-54. 55-65, people still work. Same with under 25.

> It also is only 'prime' so 25-54. 55-65, people still work. Same with under 25. Does the Social Security Administration release data on the number of people collecting SS benefits who are also working? Very interested in the number of people delaying retirement in order to keep working (either because base SS doesn't cover their living expenses, or because they're delaying collecting SS to increase their monthly be…

Its done by the Census, the SSA doesn't track it that I noticed:

http://money.usnews.com/money/retirement/articles/2013/02/11...

Turning 65 is no guarantee that you will be ready or willing to retire. A rapidly growing number of Americans are continuing to work beyond their 65th birthday. The proportion of people age 65 and older in the workforce grew to 16.1 percent by 2010, up from 12.1 percent in 1990, according to a recent Census Bureau report. And the percentage of people between ages 65 and 69 who are working grew 9 percentage points to 30.8 percent in 2010.

Its still age 65 for the people who have hit age 65 so that is close enough I think?

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#66

Post by gone35 »

mikeash wrote: post #17

Can anybody who understands this stuff better than I do comment on the winter weather factor? To me, the "winter sucked" excuse sounds like complete BS, a transparent lie along the lines of, "Well, I just didn't want to order the tide to stop right now." This is a massive change (down a total of 7% or so from two quarters prior) and surely the weather, while unusual, wasn't that strong. But maybe it really is a big f…

It's not intuitive, but since building sites must halt work during strong winter days, a large increase in the number of 'snow days' has an outsize effect on the total output of the construction sector --one of the largest sectors of the US economy-- during Q1.

This past winter was peculiar in that regard because not only there were more snowstorms overall than the previous year, but also there were major snowstorms in regions that seldom see that kind of weather like the South. And it shows in the figures for residential and commercial building during the quarter.

These seasonalities however are well understood and don't matter nearly as much, in part because construction companies often catch up on their delayed projects during the subsequent quarter. This is one the reasons why reading too much into annualized quarterly fluctuations can be misleading at times [1].

[1] http://jaredbernsteinblog.com/whoa-whassup-with-that-big-neg...

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#67

Post by cs702 »

ctl wrote: post #58
cs702 wrote: post #43

TL;DR: annual US GDP declined 2.9% because consumers spent less. In fact, they are not yet spending at rates anywhere near the rates at which they were spending before the financial crisis in 2008. When consumers spend less, businesses in the aggregate sell less of everything, because every dollar spent by a consumer is a dollar earned by someone else -- usually a business. Before the financial crisis, consumers borr…

Your comment makes no sense. GDP is slightly down compared to 2013 . Why are you talking about 2008? The article implies that the main driver here is reduced consumer spending from a harsh winter.

> Why are you talking about 2008?

I'm talking only about consumer borrowing and spending prior to the crisis in 2008. My understanding is that, five years after the crisis, consumer spending still has not recovered[1], which seems rather unusual for an economic recovery.

PS. I modified the first paragraph in my comment above, so it more clearly conveys what I actually meant to say.

--

[1] For example, see http://www.clevelandfed.org/research/trends/2014/0214/01houc...

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#68

Post by mtdewcmu »

rayiner wrote: post #20
memossy wrote: post #15

The most interesting component of this was the healthcare drag in the revisions taking it down from the initial ones. While a large element of this was the affordable care act, it is also notable that healthcare inflation went negative for the first time in 20 odd years last quarter (education did too, but thats another story). Given the US currently spends twice the amount of other countries on its health care as a…

The healthcare example is a very good illustration of why the GDP calculation is susceptible to the broken window fallacy: http://en.wikipedia.org/wiki/Parable_of_the_broken_window . The root of the problem is that GDP doesn't measure changes in capital stock. For example, after Fukushima, Japan's GDP ticked up slightly because of the expenditures from disaster recovery. Obviously it's absurd to conclude that Fukushi…

>Obviously it's absurd to conclude that Fukushima was good for the economy--the loss of capital more than outweighed the money spent fixing things.

That depends on your definition of "economy," doesn't it? When I picture an economy, I picture goods and services being consumed and money changing hands. That's what GDP measures. Should money locked up as capital be counted as part of the economy?

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#69

Post by nostrademons »

pessimizer wrote: post #48
nostrademons wrote: post #40

Earlier quoted context omitted.

The graph doesn't start at 0 on the Y-axis. It would be a lot less striking if the scale ran from 0-100 instead of the cherrypicked 74-81 scale. Also, this is labor force participation, not unemployment. If you carried this back to the 1950s, it would be around 60%, because most women didn't work back then. http://research.stlouisfed.org/fred2/series/CIVPART

Are you really accusing the Bureau of Labor Statistics of cherry-picking the scale, or do you mean to use a different word?

The scale is cherry-picked to fit the change in the graph - you can see that just by looking at the Y-axis. It makes sense for what I assume the BLS assumed the purpose of the graph is, visualizing the direction of the trend over time. However, you can't draw conclusions on the magnitude when the magnitude is arbitrarily chosen.

So yes, I am really accusing the Bureau of Labor Statistics of cherry-picking the scale. I don't assume any malice on their part, only that they intended the graph to be used for purposes other than how it is used here.

Re: The US economy shrank at an annualized rate of 2.9 percent in Q1

#70

Post by nostrademons »

pessimizer wrote: post #61
DangerousPie wrote: post #45

Earlier quoted context omitted.

Very misleading Y axis. Here is the same plot with a proper axis: http://i.imgur.com/k4ClDSF.png

That one is the misleading one. We're interested in the magnitude of the change vs. the recovery, not the numbers 0 to 100. A graph of GDP plotted as a percentage of current GDP at that scale could make the recession seem like a tiny little 2% blip.

The recession is a tiny little 2% blip, if you're one of the ~85% of people who were not laid off and didn't have any trouble finding a job. And it's a very large 2% blip if you're one of the people who are.

My point is that perspective matters - a lot. By the numbers, this recession is worse than any since the Great Depression. By the numbers, this recession is only a small percentage of the total U.S. economy. Which numbers are correct? Well, they're actually the same numbers, what matters is how you use them and what conclusion you're trying to draw.

From my personal perspective, the recession was great. It meant I could actually get decent rents in the Bay Area for the first two years after I moved out here, and I could pick up stocks for relatively cheap, and I had no problem getting a job. I realize this is not the perspective of many other people, and the numbers help tell me how many other people. And one of my professional startup interests is finding better ways to help people manage their careers, so I'm quite interested in hearing other people's perspectives (if you have stories or want to vent, feel free to e-mail me...I'm quite happy to listen, my e-mail address is in my profile.) But understand that numbers always require interpretation - whether the graph is misleading or not depends entirely on where you're leading people.

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