Zogby: No Economic Recovery seen on Main Street USA

The optimism of a rebounding economy hasn't yet trickled down to Main Street, USA (despite the best efforts of the media)according to a new Zogby poll.

According to this survey 16% of US voters ages 18 + have lost a job in the past year.

20% fear losing a job this year (2004).

21% are working for less $$ than the previous job they held.

In a Clinton-era June 1999 Zogby poll, just one in ten (10%) feared losing a job in the coming year, and the same number said they were working at a job paying less than an immediate previous job.

Per Zogby:
"How Main Street views the economy will be as signficant as the view from Wall Street in 2004. While previous structural recessions in '82 and 90-91 provided bad news for manufacturers and blue collar workers, today's slowdown means worries have spread to white-collar workers, including higher-end workers. Look for the tracking numbers as both parties vie for votes in the suburbs and among knowledge workers."

http://www.zogby.com/news/ReadNews.dbm?ID=760

The massive economic propoganda we're witnessing sickens me. There's no emoticon adequate to express my disgust...

This whole "Manufacturing at 2 Decade High" story is disgustingly reminiscent of Soviet propoganda about toilet paper production...

It is very Soviet like, downright creepy. How can you make someone believe the economy is on the upswing when they have lost their job, and their freinds and family have lost jobs? Pretty damn hard to do. There's no such thing as a jobless recovery either. Jobs ARE the recovery!

Multinational Corps with a US address and the top 1-10% may be doing well, but your neighbors are still treading water. American corps who seek worker slaves overseas may sell more goods overseas due to a weakened dollar- but that isn't helping American workers or consumers who see no change on the horizon.

:puke:

Not even close...But thanks for trying! ;-)

. . .i monitor and model econometric data at least every other week and i KNOW the numbers are cooked.

The news media is running with the "analysis" of bought and paid for economists, using single data points, and trumpeting an untruth.

U.S. Manufacuturing, per the Commerce Dept.'s own numbers, is still operating at 74% of capacity. This is statistically unchanged for the last 7 quarters. So, "2 Decade High" thing is a complete falsehood.

It is truly appalling.
The Professor

I was trying to reconcile the trumped up news with the capacity numbers and it didn't compute. Momentary lapse on my part that the "news" is actually news and not propaganda.

numbers that are being bandied about. It strikes me that these numbers must be derived from assumptions and marginal statistical data, such that the only thing a politician has to do is get the number purveyors to change the assumptions, or add/substract sample sets from the statistical data, and viola, you have a politically acceptable number.

Can you point me to resources where I can get a handle on how GDP is derived?

I am befuddled as to why the Democrats don't attack these numbers specifically, rather than just complaining about no job growth. It seems like a great opportunity to enhance the message that this administration is lying, lying, lying, and trying to convince you that things are wonderful, in spite of the bare-assed evidence of continuing downsizing and no capital investment staring everyone in the face.

Sorry if i insult you by telling you things you already know:

Quick summaries of GDP are calculated by an equation that predicts the ultimate consumption (for the most part retail, but not completely accurate) of goods and services based upon:

Durable Goods Orders
Wholesale Price Index
Corporate Purchasing Volumes
Retail Forecasts

These things are cobbled together in a time weighted equation to estimate, fairly accurately, the eventual Consumption, or C. After a couple of months, actual retail numbers are fully reviewed and the assumptions in the estimation model are validated or revised. The actual consumption values are then re-estimated, mostly by the Commerce Department, using the likely "true" consumption based upon sales of goods and services at the final stage of sale.

The other components of GDP are direct Gov't Spending (the salaries, benefits, goods and services paid for direct operation of gov't) and the Transfer Payments, which is essentially the redistribution of wealth. These are direct payments for Social Security, Disability, Veterans Benefits, Welfare, and the like. (GS and TP)

These two components are basically EVERYTHING the gov't sends out as cash.

Finally, the GDP adds in Net Exports, or the goods and services produced here but bought beyond our borders minus the goods the services produced elsewhere but purchased here in the States. This number has been negative for a pretty long time.

So, we the equation is GDP = C + GS + TP + (-NE). The 8.2% number bandied about conveniently left out the negative trade balance, which is why it's so inflated, and the special appropriations for Iraq & Afghanistan that were spent in the third quarter grossly inflated GS.

Now, the projections for growth are done as quarterly compounded values. In other words, if growth is actually 2% for a quarter in a row, the annulalized growth rate (which assumes all 4 quarters being the same) would be 1.02 to the 4th power, or about 8.2% So, if you see 8.2% GDP growth, it really means that one quarter grew by 2%.

It shouldn't be reported the way it has been, because that requires unacceptable extrapolation of the curve and an interpretation of future behavior of the economy based upon a single data point. This is REALLY poor analytical reporting.

The numbers i use in my causative models (some of which have been published in the past) come from Treasury and Dept. of Commerce from the Statistical Abstract of the United States database. (A subscriber service i can access through a university.)

On your point about lying, there is one problem. Some of the economists who state these numbers are "independent" or non-governmental. The problem is, that if you say the administration is lying, they'll point to folks (who i think are either bought and paid for or are incompetent despite any credentials) who are external to the gov't that agree with them.

So, it's hard to make the political case that they're lying. They are, but it's hard to make the case.

I'm from the school of economics that states that there are no hard and fast definitions for economic growth and retraction. I think, as do about 40% of all economists and analysts, that all conclusions should be drawn by time series comparisons and models vs. the most recent trends of various indicators and inputs.

For instance, i don't believe that a recession starts with 2 consecutive negative growth quarters and ends with 2 quarters of positive growth. I think that a recession begins when a statistically significant shift in the monthly mean occurs and ends when the same thing happens in the opposite direction. That hasn't happened yet, so we are still in a recessionary period. The other definition assumes that the macroeconomy is the same, static entity over the course of time and that extrinsic influences are ineffectual. Neither are true.

So, since 60% of the community buys these "hard and fast" canards about macroeconomics, we can pin this on the Bushies. They aren't so much lying as they are simply wrong. And so are the private sector folks who agree with them.
The Professor

Ignoring the bandying about we've had lately.

When did Net Exports get removed from the "official" GDP numbers and what (if any) adjustment was made to make comparisons possible to earlier numbers?

You mention (correctly) that quarterly figures really shouldn't be extrapolated over the whole year (though everyone does it). This reminds me of the car salesman who tried to get me finance the car instead of paying cash because I could "stick that 20k in a three month CD at 3% and the (working calculator in front of me if you can believe that) six hundred dollars you'll earn every three months will almost make the payments for you."

The fact that my business card showed I was a banker for the company that floorplans most of his cars still didn't stop him from assuming I was clueless. "Slick" is not an adequate derrogative for these guys.

On a lighter note. It's nice to see that you now agree that credentialls don't imply correctness. :-)

I also agree with your take on the "official" start and end of a recession. I think I come down about half way between the two. Doesn't the monthly mean consumption/household leave out too big a chunk of commercial activity? Aren't you really saying it "feels like a recession" when families' economic lives are not improving? In other words "who cares if GE makes a billion selling something to the Japanese if they don't hire anyone as a result?" Less "business cycle" and more "human impact"? (which I like from a personal standpoint).

No, credentials don't imply correctness. DATA & ANALYSIS confirms correctness. So, that was a nice subtle shot at me, and i commend you for your diplomacy, but that doesn't change my POV.

On the "feels like recession" point; no, that's not what i'm saying, exactly, since everything i use as a basis for conclusions is what the analysis of the data says.

What i'm saying, i guess, is that the data don't support that it's "likely" that there will be families experiencing economic improvement. Their improvement, or lack thereof, isn't a variable. It's a probable outcome concluded from the analysis.

However, i also think the "human impact" ought to have more to do with policy making than "business cycle". The data are what the data are, but fiscal and monetary policy moves should be made with the intention of letting the market forces redistribute, not concentrate the wealth. This way, we get a more broadly based capitalism in which the middle class is strengthened and empowered, and very rich people still get richer. But, there is too much tops down thinking, rather than multi-layered thought that looks at simultaneous effects and factors that focus on improvement. Probably too deep for many policy makers.

My base expertise is in the mathematics of modeling. So, i'm a stickler for basing my definitions on what really happens rather than some hypothetical constructs. Much of economics is not, indeed, theory, but merely hypotheses. The data have been, in many circles, underexamined for causative relationships and predictive purposes. Far too often, the analysis is intended to fit a pre-existing hypothesis, which is very dishonest science and analysis.

As to your NE question: They aren't removed from the equation. But, the trade deficit numbers were not out when the news media trumpeted those growth rates. Three days later (last Friday) the trade numbers came out. If you look at the Dept. of Commerce numbers, you will find that the NE value was undetermined, or not yet estimated as of 11/21/03. So, there was no number to plug in. The numbers used were an extrapolation of prior quarter numbers. The trade imbalance, however, went up dramatically in the 3rd quarter, as i'm sure you've seen in the business section. So, so much for that estimate, i guess.

For the 8.2% growth, however, using the numbers in Commerce's database, the only way you get that is 2% quarter growth. But, the numbers from that same source don't show 2% growth unless you leave out negative net exports. I conclude, therefore, that someone did just that, which is why the numbers went from 7.25% (with NE estimated) and 8.2% (NE excluded).

Lastly, the GDP doesn't leave out the commercial activity you mentioned. You're right that there is a lot of such activity out there, but ultimately, that all ends up in the consumption figure at some determinable, but variable time lag. If we counted the other activity, there would be double counting at some point. Iron ore is bought; it gets transported to the steel mill; we make steel; we sell steel to Detroit; Detroit builds a car; they sell it to the dealer; the dealer sells it to us. There are several transactions there, but in the end, the consumer pays the full price. If we counted all those, we would constantly be counting the same goods and services multiple times. So, you're right about that, but the way the number is generated takes all that into account.

Nice sparring with ya.
The Professor

But no comment on my "slimy dealer" story?

This helps alot.

I assume the estimate of consumption is a greater number than the governmental spending factors and as such is a "heavy" factor in the calculation. And it strikes me as a problematic number.

If the number is substantially based on sales figures from publically traded companies with some estimate for all other retail operations, how accurately can it reflect the "Wal-Mart" affect?

It seems that as Wal-Mart increases market share quarter by quarter, you have a positive upweighting of the consumption number based on Wal-Mart's increasing sales figures. But that positive weighting is unwarranted if it doesn't account for the private retailers whose sales are declining or going to zero. The accuracy of the consumption number would be suspect if it cannot capture this. Unless retailers are required to report sales numbers to the government, I don't see how this number can be trusted.

And how can they possibly leave out the negative trade balance? Without that factored in, the GDP says nothing about DOMESTIC product. So we can watch GDP explode upwards, while our economic infrastructure collapses around us until we have no more cash to buy the imports, and then GDP starts going down again?

It seems like under this model, we would want to promote a negative GDP, because the positive GDP is a measure of the dislocation of our economy to be completely import driven. Without the means to generate cash to pay for the imports, the US will soon get red-lined.

The GDP does take into account the Walmart factor, because their increasing market share is a zero sum game when it detracts from other retailers. If it didn't, then it would be good for growth, since their share would increase as a fraction of GDP by increasing GDP, not by shifting the direction of the dollars.

They don't leave out negative trade balance. They did this time for a matter of convenience, since it wasn't available when they ran out and beat their chest for the media. It's available now and shows the 8.2% number to be bogus. I don't suspect, however, we'll be seeing that in any headlines.

So, there is no alternative model. What happened with economic reporting in the last month is called propaganda.
The Professor

We should find out pretty soon if they just dropped a big negative number. I somehow doubt they could get away with that, but we should know fairly quickly, shouldn't we?

Q3 should be finalized around now, but with the three holidays in November, the work may be slowed a bit. I'd have to look back in the past, to see if the Q3 numbers lag into December more than normal.

However, we'll have to be vigilant, because i seriously doubt we'll see any downward revision on Page 1. And, BTW, the numbers i get off Commerce already are WAY lower than those in the headlines. They're good, but they're not as good as advertised.
The Professor

I agree that the Walmart factor is accounted for as you point out, but that would only be true if the dollars Walmart redirects through growth were accounted for in the last calculations.

I am questioning whether we really know that number or not. If the model used to estimate the revenues for non-public retailers are accurate, then it is indeed a zero sum game. But there are thousands of Joe's Bicycle Shops and other such off the radar retailers that have gone out of business or lost sales due to the consolidation of retail by Walmart, HomeDepot, etc. If their sales figures were not accurately reflected in the past, and their disappearance shows up in publically available numbers, then it is no longer a zero sum game, and GDP is mis-stated in the upwards direction.

Doesn't this type of issue speak to who gets to set the model assumptions and estimates that are in the calculation?

It does speak to who gets to set the model. It's why i'm a minority in the economics community. The model has been set for quite some time, and it's hard for those of us who believe there is a more mathematically sound approach to change the definitions.

All that being said, however, in the long run, the velocity of money smooths all this out. Those dollars spent at "joe's" eventually appear elsewhere in the economy and are eventually part of it. That means there's a timelag before everything is counted and the number is never wholly accurate, but that's ok by analysts like me, since i use averages of averages over long periods of time to run models.

I never pretend that my modeling predicts the causative impact of a single factor for a single month, or week, or whatever. The point is to understand which factors are economically critical and how, indeed, they are likely to affect the economy in the future. It's not a prediction to a point. It's a prediction of the effect and the leverage of those effects. So, you're concern, while valid, is one that doesn't really bother me.
The Professor

and why it wouldn't concern you as an economist.

But it bothers me because politicians use these singular data points to justify policy, which takes effect much faster than the averaging out of numbers over time.

Already Bush is integrating praise for the upturn and tying it into stump speeches giving praise to his policies being the causal factor.
For intelligence challenged ideologues like Bush that have never demonstrated that the comprehend cause and effect, we should expect him to champion for more war and tax cuts, since these policies are generating 20 year records in economic performance.

From my view, these econonmic numbers are masking a deleterious tectonic shift in the fabric of our economy. We can't let the politicos and media get away with misrepresenting what is happening to us. So it bothers me a great deal.

My view is jaundiced because I am in an industry that is collapsing (computer software consulting). All of my customers have gone bankrupt, outsourced their work to India, or are no longer doing projects and have no vision for when they will start again. I don't have a clue what I will do when the contract I am engaged on now ends this June, with the customer relocating the business to China.

I'd like to consider starting another business in another area, but every business owner I speak with is on their heels and retrenching. No industry that is within the grasp of what I can fund is healthy. The only thing that seems even remotely viable to me is something selling directly to consumers, but I don't trust the economy to sustain consumer's income, given that so many businesses have become marginal.

In the best of all worlds, I would like to see some numbers that I could trust, that don't leave me feeling that while things look calm, there are underlying forces that are not accounted for, ready to level us with a 9.2 earthquake.

Just my daily rant... Thanks for your input, I really appreciate it.

They need to add some questions for those who have the same job they held. "Do you have less disposable income?" "Are you working longer hours for the same pay and/or less benefits?"

Edit, one more question: "Do you rely on overtime pay to meet monthly expenses?"

Not all Americans are part of the labor pool

Remove the spin and the numbers are much worse

asking "Who is seeing economic recovery in their daily lives?" - I posted because of the great disparity I see between the "news" and reality. Most people replied that they were much worse off and so were friends and family. Although it was unofficial, it kind of reflected what seemed to be true on "Main Street."

:evilgrin:

I laughed at the economic noise this regime is tauting. A couple reasons:

1.) The rises are based on the past year...one that even the rosiest Repugnican spinner can admit was crappy...or against the past two and even three years of steady, downward slide. Any upward movement was going to look big considering how low we are.

2.) These bumps come in third quarter...the time when companies are gearing up for the hoped-for big fourth quarter (aka xmas). Some are downscaled and re-stocked low inventories in hopes of big sales/aka profits, while others are slashing budgets and jobs thus rising their bottom lines that way. In either way, it's nothing but a sidewards move in the overall economic picture.

3.) Those who made the most were the ones who invest the most, but in percentage of their wealth spend the least. These are those who are fortunate to have money in securities and can play the market who saw their portfolios rise...only enhanced by the tax giveaway...both that have little to no effect for someone earning less than $50G a year. It's the rich getting richer, and this somehow is portrayed as everyone prospering.

The indicators I always watch are debt, cost of living and various retail sales indicators. People aren't going to max out cards or buy large ticket items if they're not doing well themselves, thus we'll see how things pan out in January. My sense is this will be an average to slightly above average holiday season...but nowhere near the gangbusters this regime is hoping for.

This economic bubble is sure to turn south, as economies usually do, in the first and/or second quarter of next year...and if the war drags on (which it will) and millions either remain un or under-employed or face downscaling...the economy will quickly turn into a liability to this regime.

What is very heartening is the rising screams from the "Economic Conseratives" (Buchanan for eg) who are going more vocal and vocal about this regime's loose spending and could sit things out next year if the defecits continue to zoom.

...business. Then look at the record number of foreclosures on homes, small businesses, etc. And how about the number of people that are selling homes for less than what they paid for them originally?

Do a little research on food lines/soup kitchens, and you will discover that even rural America is hard hit.

Add it all up, and it's becoming very clear that we're in the middle of something almost as bad as the Great Depression.

when people are hearing it shivering because they can't afford the big gas bill. Not quite effective when they hear it as they get their pink slip. Not quite effective when they hear it as they receive the last unemployment check. Only people who are riding high will believe the false reports. Most people haven't ridden high since the rational Clinton administration.

next time we see a Zogby poll that isn't flattering towards Dems and/or the left?

I actually like Zogby. He was one of the few pollsters at the end of the 2000 election who detected the last minute swing towards Gore.

Thank you for your analysis. I believe that it confirms our everyday experiences. The media is saying that the recession is over, but we're not feeling it.

However, I don't believe that the numbers are too "cooked". I believe that the numbers reflect three things: (1) Incredibly cheap debt (2) A de-valued dollar and (3) massive government spending. IOW, the GDP figures are close to being real, but they're based on government manipulation, not true economic growth.