Saturday, September 6, 2008

Latest labor stats good or bad?

Is there anything good to say about yesterday's report from the Bureau of Labor Statistics that the U.S. unemployment rate jumped up to 6.1% while seasonally adjusted nonfarm payrolls declined by another 84,000 jobs?

That's the subject of Jim Hamilton's post over on Econbrowser in which he says the economy is now in recession. I'm hesitant to do the same just yet, given my recent concerns with the way we tend to interpret the BLS data and the rising unemployment of unskilled workers due to the recent minimum wage increase. But nonetheless, it is another indicator that conditions are not rosy.

Another unsettling report came just last week, when the Census Bureau released its annual study of household incomes, poverty and health insurance -- often called the nation's "economic report card." Its hard numbers seemed to confirm how many Americans feel. Sure, we're prosperous, but prosperity is fraying. Except for the rich, living standards are stagnant. Poverty is up; health insurance coverage is down. Naturally, both Barack Obama and John McCain seized upon the report to claim that their policies would restore progress.

Superficially, the conventional wisdom seems convincing. The Census Bureau found that median household income in 2007 was $50,233. Though up 1.3 percent from 2006, that was still less than the peak of $50,641 in 1999 (all figures are in inflation-adjusted 2007 dollars). Meanwhile, the share of people below the government's poverty line -- about $21,000 for a family of four -- was 12.5 percent, up from 11.3 percent in 2000. Finally, the ranks of the uninsured have increased in six of the past eight years. They're now about 15 percent of the population. Case closed right? Not exactly.

A previous Mark Perry post pointed out one of the problems with historical median household income from the Census Bureau income data is that it doesn't adjust the declining household size over time. After adjusting for household size, real median income is at an all-time high.

Robert Samuelson points out three more problems with poverty and income data from the Census Bureau: (1) comparing real household income or poverty rates in 2007 to the year 2000 is unfair because 2000 was an artificially high benchmark because of the "tech bubble," (2) immigration distorts commonly cited statistics for both poverty and income, and (3) Census figures understate income gains by not counting fringe benefits.

Greg Mankiw cites yet another problem with Census income data, citing the NY Times, which reported that "The current poverty measure only counts cash as income, and doesn't include government assistance like food stamps, housing subsidies and tax credits. Such aid has been devised to help support the poor, but its impact is not calculated by the current measure."

There you have it -- a mixed bag of apples and oranges. "Lies, darn lies, and statistics" as the old saying goes. What's the bottom line? Whether you call it a recession or not, times are tough; not all over and not to the same extent, but we have more work ahead of us to weather this storm. We have serious problems and its going to take some serious people to lead us through them.

But regardless of who is in national leadership positions, Green Industry businesses must be proactive about conserving cash and emphasizing perceived value in the minds of customers. We must make our products and services more inelastic among our consumers or we will fall the way of other luxury goods in tight times.

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