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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

#81

Post by zghst »

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 wouldn't say that credit is driving up the costs of Bay Area homes, but the amount of wealthy workers in the area.

And also consider that homes built today have to go through tons of regulatory costs (building codes, politics with permits), there are new technologies installed, AC, internet, upgraded roofing, better foundations, upgraded wiring, possibly an HOA, rec center, etc, paved sidewalks in front of every house. The US Census Bureau has also determined that the average size of a home is 2,480 square feet vs 1,600sqft in 1970. All the progress that we have made with homes today costs.

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

#82

Post by malandrew »

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

Neither are really misleading or particularly enlightening by themself. In this particular case the Y-axis alone is not enough to draw conclusions because we don't know what magnitudes of movement are normal, what are healthy and what are unhealthy.

Choosing 0 to 100 doesn't add anything because what does it even mean to have 0% employment or 100% employment. Those are not even reasonable bounds to start with given the topic at hand. I can't even imagine any conditions under which either extreme is plausible.

A peers comp here would be far more illustrative than choosing any particular Y-axis scale. If for example the same employment figures for all other countries were plotted on the same graph, we would see extremes, from the country with the lowest employment rates to the highest employment rates. Those figures would serve to provide reasonable bookends for a graph. If no economy in the world has an employment rate of less than 45%, then a lower bound of 40% would be reasonable. If no country exceeds 85%, than an upper bound of 90% would be reasonable. The scale chosen should illustrate plausible ranges of employment for any modern economy.

What does matter in all this is the time series plotting and whether or not this data suggests that there may be a virtuous/vicious feed back loop when the employment deviates from some stable level. For example, once employment falls below a certain point, does that contribute to a perception that businesses should be tightening their belts, further exacerbating the problem. Likewise, when the figures are moving up, businesses anticipate economic growth and therefor start hiring in preparation for the growth.

This graph is the equivalent of measuring distance, when measuring the first (velocity) or second (acceleration) derivative might be more illustrative of how serious all this is. When matters is not how much something has fallen or rising, but how fast it is falling or rising and if it is starting to speed up or slow down.

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

#83

Post by SilasX »

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…

Normally, I make the same point[1], but I think you're falling into the opposite mistake here: if you're using GDP as a proxy for economic activity, regardless of cause, then it is correctly capturing the insight that "people started doing more stuff as a result of the disaster [though they may be poorer]". This (usefully) distinguishes it from e.g. "people were impeded from rebuilding, and so continued on as before".

The problem you allude to, rather, is that:

1) People use GDP as a proxy for some kind of "economic goodness" (not simply "activity").

2) The two concepts generally correlate.

3) But there are known cases where the two diverge -- when economic badness happens, and yet GDP goes up.

4) But people still call it good despite the recognition of the special case.

[1] I think the appropriate way to economically characterize window-breaking/repair scenarios is: "It used to be hard to identify good uses of scarce resources; now that vital stuff got destroyed, it's easy." See: http://blog.tyrannyofthemouse.com/2011/12/broken-windows-par...

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

#84

Post by esbranson »

endersshadow wrote: post #42
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?

This is an employment to population ratio, so 1 in 4 people, ages 25-54 do not work. That does not mean that they are unemployed! Unemployed people are those looking for work that don't have employment. Plenty of people voluntarily leave the "labor force" (employed + unemployed people), such as stay-at-home parents, trust fund kids, or independently wealthy and retired folks. That said, "unemployment" is a very tough…

It does mean that they are unemployed. Merriam-Webster defines unemployment as "the state of not having a job". Its very binary: you either have a job or you don't.

You have mistaken bureaucratic doublespeak for English. I think it clear we are speaking in standard international English here. Letting the US government redefine words such as "unemployment" to mean something other than "the state of not having a job" is something straight out of a dystopian novel.

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

#85

Post by [deleted] »

pessimizer wrote: post #25

A stock market recovery is not a "recovery." Prime-age employment: http://data.bls.gov/timeseries/LNS12300060 Median wealth, and the median wealth of various segments: http://finance.yahoo.com/blogs/daily-ticker/for-most-familie... Median income: http://advisorperspectives.com/dshort/updates/Median-Househo... Wealthy people cannot drive consumption, because they spend a far smaller part of their income on it. edit: I…

[deleted]

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

#86

Post by jcampbell1 »

cs702 wrote: post #67
ctl wrote: post #58

Earlier quoted context omitted.

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.…

Consumer spending is much higher than prior to 2008. The article you link to says the opposite of what you are saying.

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

#89

Post by nostrademons »

pessimizer wrote: post #76
nostrademons wrote: post #69

Earlier quoted context omitted.

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.…

You honestly think that the scale was hand picked, rather than being determined by the software being used to generate every graph on the site? The scale looks to be determined by the floor of the lowest value, and the ceiling of the highest.

I didn't say hand-picked. By cherry-picked I mean that the software picked out two arbitrary values that are just outside of the range of the data. The values are still arbitrary: they show direction well but magnitude poorly.

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

#90

Post by esbranson »

muzz wrote: post #87

What does this article have to do with Hacker News? Note the decidedly different tone from this entry on the same Washington Post Wonkblog: http://www.washingtonpost.com/blogs/wonkblog/wp/2014/06/25/t...

Everything and nothing. Nothing to do with computers, everything to do with hype and name recognition.

Besides, computers are just tools. A means to an end. To the hammer designer, is a discussion about home building relevant? The economics of home building? The economics of people buying homes? The psychology of homebuyers? Is psychology relevant to hammer design? Maybe. Relevance is complicated.

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