Economists’ projections of interest rates and unemployment have proved too high • Hacker News Board

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

#151

Post by ramblerman » Tue, Dec 17, 2019, 6:47 AM UTC

throwaway743 wrote: post #136

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…

What you'll never hear is how the bottoming of unemployment has preceded the last 9 or so market crashes. So it's quite the opposite in terms of being an indication of the market's good health.

That's a bit like saying, the patient seemed to be in good health right before he got sick the last 9 times.

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

#152

Post by AmericanChopper » Tue, Dec 17, 2019, 7:02 AM UTC

Can_Not wrote: post #149

AmericanChopper wrote: post #107

Earlier quoted context omitted.

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.

Yeah not really. It depends on a lot more context than just number of skilled people unable to find employment. If I became the best person in the world at playing Pac-Man, but couldn’t find a job as a professional Pac-Man player, it would be ridiculous to say I was underemployed.

The only situation I would find it reasonable to describe underemployment as a problem is when people who’s skills were marketable at the time they acquired them, are no longer marketable. But even then, it takes more context to describe that as a market failure. If I decided to never learn another skill at work, then my skills would eventually become obsolete. In that situation, the market hasn’t failed me, I have failed me.

Then you have people who’s skills were known to be completely unmarketable at the time they acquired them. This isn’t a market failure in any way. The most common context where this occurs could be described as a governance failure though. The fact that you can get huge amounts of credit to pursue an education that doesn’t have any market value at all isn’t a market failure. It’s a failure of government for financially guaranteeing something that doesn’t have any value. When people who made bad decisions fail, that is a market success.

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

#153

Post by finebalance » Tue, Dec 17, 2019, 8:02 AM UTC

lazulicurio wrote: post #145

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.

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?

Possibly: low income earners lost jobs in substantial enough numbers to affect the median (that to some extent is robust to outliers).

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

#154

Post by tonyedgecombe » Tue, Dec 17, 2019, 8:19 AM UTC

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

We saw that in the UK with some areas in the North having huge levels of disability. The government cracked down on it in the normal ham fisted way they do. There was a recent story about a man with no arms or legs being deemed fit for work.

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

#155

Post by tonyedgecombe » Tue, Dec 17, 2019, 8:23 AM UTC

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.

It does include part time workers who would like to be full time, so can't be "entirely subjective".

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

#156

Post by coldtea » Tue, Dec 17, 2019, 8:29 AM UTC

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.

>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.

Like probabilities in research, with the right adjustments everything can be painted to be at historic highs.

First the graph starts at 310 and focuses on 310 to 360 on the y-axis, so that the meagre 330 (1979) to 355 (today) change (despite productivity/GDP etc soaring in between years) to seem huge.

Second, the inflation-adjustment heuristics are such a creative field for governments that can be used to paint pictures of wage triumph in the Weimar Republic even. Sometimes you don't even have to mess with the heuristic, just leave criteria the same when totally different costs of living have emerged.

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

#157

Post by AmericanChopper » Tue, Dec 17, 2019, 8:51 AM UTC

tonyedgecombe wrote: post #155

AmericanChopper wrote: post #107

Earlier quoted context omitted.

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.

It does include part time workers who would like to be full time, so can't be "entirely subjective".

Well that sounds quite rational. But I don’t think that’s what comments here are referring to. Those discussions tend to be focused on people employed below their level of skill. Like a college graduate working in a job that doesn’t require a degree.

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

#158

Post by qubex » Tue, Dec 17, 2019, 10:41 AM UTC

Mirioron wrote: post #148

qubex wrote: post #73

Earlier quoted context omitted.

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?

If you’re concerned about future politicians’ probity, surely you should be partially worried that they may choose to default and keep all of those gains for their constituents and stiff the bondholders?

See? Thinking about the future is pernicious in that policy makers have both more and less latitude than one tends to assume.

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

#159

Post by bhupy » Tue, Dec 17, 2019, 2:49 PM UTC

coldtea wrote: post #156

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.

> 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. Like probabilities in research, with the right adjustments everything can be painted to be at historic highs. First the graph starts at 310 and focuses on 310 to 360 on the y-axis, so that the meagre 330 (1979) to 355 (today) change (despite productivity/GDP e…

> First the graph starts at 310 and focuses on 310 to 360 on the y-axis, so that the meagre 330 (1979) to 355 (today) change (despite productivity/GDP etc soaring in between years) to seem huge.

Okay sure, we're now arguing something completely different: whether or not the inflation-adjusted increase in median income is "meagre". Keeping in mind that, in real-terms, we saw a 12% increase in the real wage since 1981 (6% increase since 1979, following a plunge between 1979-1981), check out [1] and scroll down to Table A-7 (it's an Excel file). It's the real earnings data (in 2018 dollars), by gender, from 1960 to 2018 (though it's kind of spotty before 1967). What sticks out:

* For men (looking at Total Workers), real earnings are currently around 10% higher than they were in the 70s (moving from low-$40K's to recently just past mid-$40K's, with some peaks and valleys along the way). Doesn't sound like much, but...

* For women, earnings have roughly doubled in that timespan

* The number of men in the workforce has increased by almost 50%

* The number of women in the workforce has increased by almost 100%

From a certain perspective, it's kind of amazing that real earnings haven't gone down significantly. The share of people eating from the economic pie has dramatically increased, and that too, equitably across the genders.

And none of this takes into account that while the real median income has increased a modest amount, the composition of the distribution is constantly in flux. That is to say, a given individual does not remain in the median for their lifetime, on average (THAT would be meagre). Looking at IRS tax filing since 1968, ~70% of Americans spent at least 1 year in the top 20 percent of the income distribution [2][3]. So while the shape of the distribution looks similar over time, the composition of it changes dramatically.

[1] https://www.census.gov/library/publications/2019/demo/p60-26...

[2] https://journals.plos.org/plosone/article/figure?id=10.1371/...

[3] https://journals.plos.org/plosone/article?id=10.1371/journal...

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

#160

Post by Can_Not » Tue, Dec 17, 2019, 3:21 PM UTC

AmericanChopper wrote: post #152

Can_Not wrote: post #149

Earlier quoted context omitted.

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.

Yeah not really. It depends on a lot more context than just number of skilled people unable to find employment. If I became the best person in the world at playing Pac-Man, but couldn’t find a job as a professional Pac-Man player, it would be ridiculous to say I was underemployed. The only situation I would find it reasonable to describe underemployment as a problem is when people who’s skills were marketable at the…

> If I became the best person in the world at playing Pac-Man, but couldn’t find a job as a professional Pac-Man player, it would be ridiculous to say I was underemployed.

It would be ridiculous, because we're not talking about one person with a fringe occupation as a strawman, we're talking about large groups of normal people facing systemic problems.