Monday, January 30, 2012

Economic Trajectory And The Green Bay Packers


I'm going to reiterate what I wrote in the previous post regarding Wisconsin's governor and economy:

... I'm not necessarily of fan of Gov. Walker's approach to laying a big chunk of the fiscal burden on the backs of teachers, many of whom have been driven into dangerous economic straits by changes in their benefits funding.  The argument was that teachers were paying little or nothing for their benefits... all true.  What hasn't been said is that many teachers, not all, have been paid a relatively low salary as an offset to those benefits and that taking a large chunk of their current salaries to now fund the benefits... as much as 25%... placed an enormous and inordinate burden on individual teachers. 
 An example of the manipulation going on: the premium pay for a Masters degree was less than $3.00 per hour... not enough to pay for the cost of degree, but absolutely required for some teaching positions... and now the premium pay is being taken away... but the requirements remain.  Try doing that in the private sector.

Yesterday, I mentioned that I enjoyed a variety of blogs.  One is Econbrowser.  Recently, there have been a couple of posts targeting the economic performance of Gov. Walker of Wisconsin.

The most recent post disputes Gov. Walker's notion that the state is "heading in the right direction."  Based on the data charts shown below lifted from Econbrowser, the author is correct to dispute that notion. [Note the recent trajectory differences between Wisconsin and Michigan]
Figure 1 provides a comparison of Wisconsin's performance, in terms of economic activity, using data released on Thursday by the Philadelphia Fed.
Figure 1: Log coincident index for Wisconsin (WI, bold blue) and US (bold black), and other state indices associated with the Federal Reserve District 7 plus Minnesota, all rescaled to 2011M01=0. Vertical line at 2011M01. Source: Federal Reserve Bank of Philadelphia and author’s calculations. 
...Returning to the macroeconomic indicators for Wisconsin, the Philadelphia Fed provides this map identifying three month trends:
Source: Federal Reserve Bank of Philadelphia, "State Coincident Indexes: December 2011" (January 26, 2012).
I posted a couple of comments about this.

First, I noted that in absolute levels for all measures of unemployment [U1 through U6], Wisconsin was below the national average and well below Michigan [a state doing very well in the trajectory charts], although the author argued that such positional metrics were not that meaningful.  That despite the fact that the period-to-period change of those metrics was similar for the different geographies. So, then I made the following observation:
I understand the trajectory arguments and that recently Wisconsin has had some less than stellar results while Michigan, for example, has had stellar results [fig. 1 and Fed. map]. 
Let's frame this differently. 
The Green Bay Packers had a regular season record of 15-1 while the Detroit Lions had 10-6. Last year the Green Bay Packers had a regular season record of 10-6 while the Detroit Lions had 6-10. Overall, the Packers ... 5 more wins ... improved slightly versus the Lions... 4 more wins. 
Last year, the Packers won the Super Bowl while the Lions failed to make the playoffs. This year, the Packers lost in the first round of the playoffs, while the Lions finally made it to the playoffs also losing in the first round. The Lions improved significantly versus the Packers when compared to last year. 
Overall, the performance trajectory for the Lions was much better than the Packers, indicating that the Packers are being lead poorly by Aaron Rogers while the Lions are being led superbly by Matt Stafford. 
Trajectory versus position....
Let's look at some 2nd half summaries for states from the Bureau of Labor Statistics and note that three states [Illinois, Minnesota, and Indiana] had positive numbers for Total Non-farm Employment [near the bottom of each table] when comparing July with December.



[Why did Indiana have a sudden improvement in yr/yr % in December?]

Three other states [Ohio, Michigan, and Wisconsin] had a loss of non-farm employment when comparing July with December.



[Could Wisconsin's small December yr/yr % be due to an earlier recovery than other states?]
[One thing is certain, government jobs ... teachers?... took a big hit in September accounting for about 1/2 the total decline.  Excluding the one-time government jobs fall-off, the decline in Wisconsin's total non-farm workforce would be quite similar to Ohio and Michigan.]

This may be a case of Econbrowser being right about certain numbers showing poor performance for Wisconsin's economy, but it would seem that if Gov. Walker's actions in the first half of the year were unique and led to loss of jobs in the second half, what accounts for similar occurrences in Michigan and Ohio?

Wisconsin's unemployment percentages are lower than all these other states except Minnesota, so if the loss of non-farm jobs isn't unique, I'd really like to know what specifically caused the changes in other states before making a risky assumption that Gov. Walker was able to cause Wisconsin's losses [beyond the change in government jobs] versus the losses in other states.  Sometimes, numbers raise more questions than answers.

The point is that Gov. Walker may be taking the blame for changes in the Wisconsin economy that are not significantly different from changes in nearby states.  Wisconsin may have recovered jobs faster than some of these nearby states... maybe too fast... and now may be forced to take a "breather" due to outracing the national economy and the real economic situation last year.

If Wisconsin continues to show job losses over the next six months and surrounding states show job growth [absolute number of non-government, non-farm jobs], then it will be proper to point the finger at Gov. Walker.
Regardless, Matt Stafford did not perform better than Aaron Rogers and Michigan's economic situation is not better than Wisconsin's.  Total won versus total lost... versus change in the number won and change in position in the playoffs.
I'll take 0.5% of $1 million over 50% of $1,000 any day.  Position counts... short-term trajectory, maybe.

Wisconsin Unemployment - Blame Gov. Walker

2012 IS HERE


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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
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Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)