Professor Elam

Long experience has shown me that it really pays to read beyond the financial headlines. You usually have to dig into two or three articles about the same story to get all the relevant facts — or even to learn what the real news is.

 

Like today's big story about "651,000 Jobs Lost in February." It's tempting to give that a glance and just move on — the job news is bad and everybody knows it. But, here's what you might well conclude if you did some digging: The 651,000 figure is probably way off, perhaps by as much as 30% — meaning the jobs losses would be more like 846,000.

 

Why a 30% difference? Not for some nefarious reason, but instead because economic data nearly always undergoes several revisions after the initial report. When more data than usual is coming in on a given economic activity — like a labor market that loses at least 2.6 million jobs in four months — the revisions tend to be large. The people who crunch the numbers literally have more work to do.

 

For example, the initial report for December 2008 was a loss of 524,000 jobs; a month later that December figure was revised up to 577,000; another month later (today), December's figure was revised up to 681,000. That's a 29.9% increase over the initial report.

 

Since you've read this far, I may as well fill in the rest of the ugly picture. The New York Times and Wall Street Journal each ran stories about how today's unemployment rate of 8.1% itself understates joblessness. If you include people who want a job but have stopped looking and part-time workers who want a full-time job, unemployment stands at 14.8%.

 

Professor Elam's take

 

While indeed 14.8% sounds bad, wait, if one is laid off, one is usually eligible for unemploymnent.

But today's headlines warn that state unemployment funds are already running dry. My personal experience observing the unemployment skyrocket in West Texas in the lat 1980s was that  most folks got very comfortable very fast on unemployment. I suspect it should decline from the second week, driving home the point that this is a temporary aid, not a new position.

 

Right now the US Dollar is strong because the Euro is weak, how long before New York and California are demanding that the FEDS replenish their unemployment funds?  How long can the US borrow from the world to do that?  How long before states in better shape, like Texas, realize they are subsidizing the inefficiencies of failed states. For example, California has enacted all sorts of special environmental formulas for their gasoline, meaning the gasoline refined in Texas cannot be sold in California.  The new administration has actually favored such irregularity. 

 

Pre Khomeni, Iraq was a reltively westernized country.  Sadam Hussein set it back a century or so, its collapse brought on a virtual 800 AD midevil environment, Mad Max circa 800 AD  but with modern weapons. And it all happened in a matter of months.  Here we will have swelling resentment over illegal immigrants taking jobs (remember)American do not want, hmm, do they want those jobs now?  You bet they do or will.  Oh I forgot, for those of you in your 20s, Mad Max was a series of movies that brought Mel Gibson to international attention. Made in Australia, it depicted a society in utter chaos, fighting over what little fuel was left. Society, what there was of it, had descended into anarchy.

 

On my return to this campus in August  I warned of the trend to negative attitudes. With unemployment at 8.1%, prepapre to see those attitudes up close and personal on the evening news.