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Hiding a Depression?

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December 30, 2010 – Comments (8)

This post gives a good argument for how the economic problems are being hidden and I suppose with the level of unsustainable government borrowing, put off to deal with in the future.

I haven't read it close enough to decide if he is counting some bad numbers twice, but most certainly the depth of the problem is being misrepresented by how the numbers are manufactured.

8 Comments – Post Your Own

#1) On December 30, 2010 at 10:42 AM, drgroup (69.10) wrote:

Great article, the author is right on the money.

Merry Christmas and Happy New Year!!

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#2) On December 30, 2010 at 12:04 PM, outoffocus (23.08) wrote:

I'm not so sure if its hidden so much.  I agree more with Robert Kiyosaki that we are merely in the midst of the "eye of the storm".

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#3) On December 30, 2010 at 12:21 PM, vriguy (71.56) wrote:

Yes, we are in trouble just like the rest of the developed world.  Crooked politicians (sorry for the tautology) are spending taxpayer money recklessly. The numbers quoted are real, but what is not explicitly stated is that the worst case scenario is only one of several possible outcomes.  I grant you that almost all the outcomes for us are in some sense bad, but they range from the merely difficult (p>0.3) to the apocalyptic (p<0.05). I cannot make realistic plans for the latter; so I will just try to build a buffer against the former.

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#4) On December 30, 2010 at 1:26 PM, leohaas (31.52) wrote:

Nonsense. Most of it.

I have a MSc Degree. When I was unemployed after the dot com bubble, I took a job for which a BSc was sufficient. So I was underemployed. But no doubt the guy/gal with a BSc from whom I took the job ended up taking a job for which an Associate's degree would have been sufficient. And the Associate probably ended up with a job for which highschool with a few years exerience would have been enough. And this guy or gal took away a job from a recent highschool graduate. And the recent highschool graduate kept on flipping burgers for a little longer, preventing the juniors in highschool from getting their first job.

That's just the way it is in every recession. During and in the aftermath of a recession people take jobs below their education and experience. So what that each and everyone in my example was underemployed? This was all rectified when ONE MSc-level job opened up: everyone in my example got to move into the slot where he/she belonged.

Statistics such as your U6 count all of these "underemployed" folks. Again, just one job opening at the right level will fix all of this. So why would you count this multiple times?

Don't get me wrong: I know what it is to be unemployed, to have a hard time finding a job, and to take a job below your experience and education (and pay, of course). I feel for those folks. Really. That's why it is good that extended unemployment benefits are available for another year. 

Another problem with this article is that it compares 2007 and 2009. Are 2010 numbers not available?

Then of course there is this thing they call "Deficit Employment". Are those somehow not real jobs? Do people not get paid for them? Why don't you ask someone who holds one of these jobs? So should we really count these people as "unemployed"? The whole purpose of deficit spending during and shortly after a severe recession is to prevent a depression, not to "hide" it!

The figures labeled "Box 1", "Box 2", and "Box 3" are misleading. If you use percentages in a graph, the bottom should be 0% and the top should be either 100% or whatever the highest percentage the graph is showing (like in the figure labeled "Government Versus Private"). That puts things in the scientifically correct perspective. By starting the graph at 60% (rather than 0), the numbers represented on the graph look a lot bigger than they actually are. That is manipulation. Isn't that ironic? Someone alledging that the Government data is manipulated uses manipulation to make his point...

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#5) On December 30, 2010 at 3:42 PM, davejh23 (< 20) wrote:

"The whole purpose of deficit spending during and shortly after a severe recession is to prevent a depression, not to "hide" it!"

If GDP less deficit spending contracts 10%+ and unemployment still rises to depressionary levels, was the depression really prevented?  Trillions of dollars in deficit spending merely "hide" a gaping hole in the economy.  If those trillions created millions of sustainable jobs, it would be easy to pull back the stimulus and let the economy run, but the spending hasn't created anything sustainable...it's given temporary boosts to select individuals and companies without fixing anything.  The Keynesian theory you discuss may be a good one if applied correctly, but I believe Keynes would argue that what we've done is entirely unproductive and unsustainable.

"This was all rectified when ONE MSc-level job opened up: everyone in my example got to move into the slot where he/she belonged."

This doesn't work when jobs disappear for good.  For example, I have multiple friends that worked in construction management making $100K+ leading up to the housing crash.  All of them are out of work, and will likely never work in construction management again.  I know several people that worked in mortgage finance for years...some moved to low level corporate finance making 25% of what they were earning before...they will likely never make as much as they made before.  I know realtors that were making $500K/yr leading up to the housing crash...most have given it up entirely and are not qualified for anything more than $12/hr. administrative work.  I believe this can be extended to millions of people across the country that have likely had their earning power permanently reduced by 50% or more.  Collectively, this represents a significant hit to GDP that can never be fixed with stimulus spending...there are no jobs that will be, or can be, created to "rectify" this...unless you support "re-blowing" the housing bubble.

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#6) On December 31, 2010 at 12:16 PM, dwot (49.06) wrote:

leohaas, I experienced similar, but by far it was worse.  I had the job interview with a BSc for the so called associate kind of position and 24 applicants were invited to write a 3 hour exam to qualify for an interview.  Half the applicants had PhD and Masters and the job that I was way over qualified for did go to some with a higher degree.

I talked to a lot of people via the internet that were getting twice the money for the qualifications that I had, and even close to 3 times the money.  There were some of those good paying jobs in Vancouver, but there were also hundreds of applicants for them everytime they came up.

I could be wrong, but I think we are seeing more of what Vancovuer had in a micro economy from a more global perspective.

And certainly when I was dealing with it there was far more blame the person for not doing enough and really very little recognition of how bad the economy was for those trying to get a job, grossly declining wages and massive competition.

I just did a quick read and I my sense was that something was being counted that should not, but that overall the picture is worse then it is being reported and significantly worse.

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#7) On December 31, 2010 at 12:28 PM, dwot (49.06) wrote:

I missed the "one MSc-level" job.  There was a report of Ph'D graduates taking an average 6 years to find a position the met their qualifications.  That's a long time to wait to move into your "slot."

Seriously, just needing one MSc-level job to open to move people along sounds like a fairly mild underemployment scenario to me and nothing like what I have seen.

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#8) On December 31, 2010 at 12:32 PM, dwot (49.06) wrote:

davejh23,

And add to that is the gross level of people retraining for jobs that aren't there.  I went back to do a BSc first and in the 5 year period from when I started until I graduated the size of the graduating class grew 400%.  And that is what people do when the economy isn't working for them, they retrain and by the time they have retrained jobs aren't there anymore.

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