01-02-2002 22:11									#361
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Roland: It looks to my uneducated eyes like the recession has ended and the Kasriels of the world have been vindicated. If that's a tunnel, then I'll buy it. However, I'm less sanguine going forward. Outlook = so so. The stock market will continue to trade in the range that we have been seeing over the last couple of years. Do you think this is incorrect?

Re unemployment...

http://www.bls.gov/news.release/empsit.nr0.htm

Colon: One reason that I've been thinking about is the possibility that it is becoming harder (in a general sense) to add employees--an employee is becoming more valuable to keep. For many years, we experienced job growth, but not much in the way of real wage growth for men. Employers found it easy to add female employees. But that pool of new employees is about tapped out, even when you consider increased unemployment and the continuation of mass immigration.

	01-02-2002 22:40									#362
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"...eyes like the recession has ended"

Well if Q4 stays positive, it hasn't even begun, technically. If it drops and Q1 is negative, it's still on. But those are minor timing issues...

"Re unemployment...

http://www.bls.gov/news.release/empsit.nr0.htm "

Exactly. "The civilian labor force fell by 924,000 in January..."

	02-02-2002 00:20									#363
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Dan, actually, I’m viewing this as a cyclical phenomenon because compensations growth has accelerated to this level only since 2000. You’re describing a long-term trend and in the LT compensations grows on par with productivity while compensations/hour has consistently outpaced productivity/hour. (see this BLS productivity report about Q3)

	02-02-2002 01:03									#364
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Colon: yeh, taking a look at the numbers again, the long-term labor participation hasn't changed enough to make that much of an effect.

	02-02-2002 01:36									#365
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Here’s a quote from an article in this week’s economist (I won’t bother providing the rest )

” As companies draw up their pay budgets for 2002, they are being even tougher than they were in 2001. A survey last October by William M. Mercer, a pay consultancy, found that 19% of companies had cut the pay increase they originally planned in their budgets. Steven Gross, head of Mercer's employee compensation practice in America, expects more to do so: in 1990, a year of recession, 1% of employers froze budgets, but that figure climbed to 9% by 1992, as the recession abated.”

Guess I’ll have to wait and see.

	06-02-2002 22:08									#366
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Interesting productivity numbers...

1.8% annual isn't so bad.

Also, I wonder when Japan will stop contracting... Doesn't look good. Deflation sucks! And I sort of get the feeling that they don't have an end game in mind.

edit yet again: This "Crony Capitalism" headline wrt the US is such BS, but I assume Roland will want to know when the headline is used.

http://news.ft.com/ft/gx.cgi/ftc?pa...25CXC&live=true

Cleaning the stable floors...

Last edited by DanS on 06-02-2002 at 23:02

	07-02-2002 00:04									#367
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DanS,

Remember at the top of the boom when I was worrying about the net financial position of US Households.

Well the figures for the fourth quarter are scary indeed.

In Q1 2000 US net household saving (that gross saving less investment, mainly in housing) was -5.4% of disposable income.

Despite an upward blip caused by the tax rebates in Q3 that figure had actually deteriorated by Q4 2001 to -5.5%.

The long term average (for 1950-95) is +1.9% and during recessions figures of +4% are the norm.


The worrying thing is that the main financial imbalance that I thought would cause recession in the US has not improved at all, and no other country has been able to keep spending so far ahead of incomes without there being a nasty correction later.

If US household's were just to bring their financial balance back to the long-term average by 2005 and their disposable income increased at 3% a year (the average for the last 20 years) that would imply that spending by households (which accounts for 77% of GDP) would rise at an annual rate of only 1.3% - only as fast as population in other words.

This compares with an averages of 4.5% during the boom of 1996-2000 and 3.4% since 1980.

	07-02-2002 00:49									#368
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Does the savings rate include contributions to things like IRA's and 401K plans?

	07-02-2002 03:58									#369
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The data is from national accounts.

The savings rate is a residual it is the difference between Disposable Income - that's income after taxes and benefits - and personal outlay's, which is personal consumption, interest payments and transfers overseas.

As this is the total difference between income and spending it must, by definition, include any kind of saving.

	07-02-2002 14:31									#370
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"1.8% annual isn't so bad."

Oh it isn't. But then, we have barely begun to cut back inflated investment, to rebalance the economy, to liquidate malinvestments....

"edit yet again: This "Crony Capitalism" headline wrt the US is such BS, but I assume Roland will want to know when the headline is used."

Well, after enron I prefer calling it "Idiot capitalism". That okay ?

Btw, that article in the FT is piss funny.

"Enron was allowed to collapse" - lol.
"its practices are being investigated with vigour" - ROTFL.
"and accountants and others are scrambling to reform." - Hahahaha.
"The changes must be convincing if the Washington consensus is to retain its authority in the eyes of the wider world." - "authority" ? Did she really write "authority" ?

pchang:

"Does the savings rate include contributions to things like IRA's and 401K plans?"

The savings rate in the national accounts books them as savings. The savings rate el-f mentioned though is more the household financing position (if I understand correctly?) where those would be counted as an expense.

	07-02-2002 20:05									#371
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Re the savings rate, let's call Q4 a "Fed Bonus". Quite a few people refinanced to a lower rate, then bought a car with the resulting wiggle room. I realize this is a one-off deal, though, and eventually it will revert somewhere close to the mean.

ef, the memory of my one survey econ course in college is failing me ( ). Isn't that %-age of GDP consumption number higher than normal? For instance, I seem to remember a 70% figure. Maybe 72%. If that is the case, shouldn't the remainder grow from ~ 23% to 30% (is it gov't spending? biz spending?) and give the economy at least a small pop?

	07-02-2002 20:29									#372
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"and accountants and others are scrambling to reform." - Hahahaha.

Roland: Actually, I think they are/will. Andersen is probably caput because of this. The accountants will see Andersen fall and eventually will get tired of being the scapegoat for companys' natural inclination to use aggressive accounting. They are pretty much immediately separating their consulting and auditing businesses. Of course, this is a red herring, IMO, but it does show that the impetus for reform is real and large.

"Did she really write "authority" ?"

Well, as you know, I don't think this is a political issue at heart. But one regulatory area that needs to be deepened is the disclosure rules at the SEC. I think the US does very well at this (do any other countries do better?), but maybe we're seeing too many 500-page filings that say as little as possible. Maybe the NYC law firms who do all of these filings need to be taken to the woodshed.

For instance, we'll probably see stricter insider trading disclosure laws--more timely disclosure of trades would be helpful to all.

	07-02-2002 20:30									#373
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quote: Originally posted by DanS Isn't that %-age of GDP consumption number higher than normal? For instance, I seem to remember a 70% figure.

I'm not 100 % sure about el ef's numbers there, but household spending is more than consumption - unless you're the US. Yet consumption is about 70 % of GDP - and don't forget that currently, all US consumption and investment is about 104+ % of GDP.

ElF's number could also be private sector spending though. I'm a bit confused.

	07-02-2002 20:39									#374
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"They are pretty much immediately separating their consulting and auditing businesses."

Well that doesn't change the problem that auditors are de facto hired and paid by the audited.

"I think the US does very well at this (do any other countries do better?), but maybe we're seeing too many 500-page filings that say as little as possible."

The best rules are wasted on a market that is gaga. So much of this will auto-correct. Transparency is nice, but can be outmanouvered by information overkill. As for comparisons, I wonder why we had little accounting fraud so far. I'd expect some to surface, especially for those companies listed in NY too.

I wonder if anyone from Enron will do time for all this. If you can pull such a thing off legally or escape punishment, it's pretty much an invitation to gamble.

	08-02-2002 02:22									#375
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The figure I used was:

Disposable Income - Gross Saving + Residential Investment

For Q4 2001 that's:

$7438.8bn - 39.0bn + $447.4bn = $7847.2bn

As GDP was $10,221.6bn that amounts to 76.8% of GDP.

	08-02-2002 03:16									#376
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quote: The savings rate el-f mentioned though is more the household financing position (if I understand correctly?) where those would be counted as an expense.

Waaaaaaiit a minute. Is this right? In other words, every time people take advantage of tax law changes to put more money in 401k's, IRA's, 529 plans and the like, the savings rate measured in this way goes down? If so, we have a misleading statistic if I ever saw one.

	08-02-2002 04:31									#377
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Adam Smith,

They would be included in the savings rate, I think Roland said that because he was not sure what I deducted to get 'net savings', because I only deduct residential investment then those savings are included.

	08-02-2002 15:02									#378
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quote: Originally posted by Adam Smith Waaaaaaiit a minute. Is this right? In other words, every time people take advantage of tax law changes to put more money in 401k's, IRA's, 529 plans and the like, the savings rate measured in this way goes down? If so, we have a misleading statistic if I ever saw one.

Nope. El F is actually using something between financing position and savings rate.

If you have 100 in disposible income, take 10 in credit, and spend 90 on consumption, 10 on residential investment, and 10 on a 401k:

Your financing position is -10.
Your savings rate is +10.
Your ElF rate () is 0.

That is simplified because we haven't dealt with depreciation.

EF:

"In Q1 2000 US net household saving (that gross saving less investment, mainly in housing) was -5.4% of disposable income."

Net saving in the usual definition would rather be gross saving minus depreciation of assets, would it not ?

The personal savings rate is a net savings rate though; the main depreciation is in residence and that is already reflected (IIRC it is subtracted from proprietor/rental income; another way would be to look at it as part of consumption).

So if you use the savings rate from the personal income and outlays, you have a net savings rate. I'm not sure why you'd subtract "investment" - if you subtract all accumulation of assets, you arrive at the financing position anyway.... why use something inbetween ?

	11-02-2002 19:05									#379
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Here’s an interesting piece by Kasriel I’d like you to read. (I assume Roland already has)

	12-02-2002 06:45									#380
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Still planning on visiting us here in the US? If so, I probably have some more useful information for you.

	12-02-2002 19:14									#381
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Yes, SF for certain, this summer... In case you'd like to email it to me, my adress is cesar.raes@pi.be

	14-02-2002 01:21									#382
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Continuing the article passing while I try to digest what ef has said, here's an FT article about comparative productivity--the point being that there is a possible continuation of divergence rather than convergence. I think that Wolf overplays the strengths of the US and the weaknesses of the EU, except when it comes to an area that isn't productivity-related--demographics. So I started thinking about demographics. The US has a beautiful demographic picture for the foreseeable future, which should moderate inflation. Even though Roland downplays how bad Europe's looks, I think it doesn't look good at all.

Last edited by DanS on 14-02-2002 at 01:39

	14-02-2002 01:36									#383
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Take a gander...

United States (Beautiful)
China (Tough times)
India (The success story of the next century, if they can weather the changes)
Italy (Awful--looks like depopulation on a black death scale)
Germany (Not too good)
France (Not too good)
UK (Not as bad as Italy, but...)
Russia (Oof...)

	14-02-2002 03:19									#384
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What exactly is the point wrt demographics here?

I don’t understand why Wolf is making so much use of arbitrary and short time ranges. Y-Y productivity growth has been stronger up to now than it was in previous recessions and so what? Japan trounced US during the entire 80’s, so why should one be impressed by a merely good comparative performance over just half a decade?

	14-02-2002 03:51									#385
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I think what is being ventured here is that the US has returned to pre-'73 productivity growth, while Europe is experiencing something lower but different--the first part re the US seems plausible to me, while the second part re Europe doesn't. I guess that the reason why it's the timeframe that he uses is because that's the only timeframe that supports the argument that he's cautiously putting forward.

WRT demographics, I just like to look at top-line numbers and cheerlead for my country. Since population growth (and the configuration of that population) is a main determinant of economic growth, I was interested in it. Particularly interesting to me is India's demographics. India will be a behemoth, with a nice look demographic profile, barring nuclear exchange with Pakistan (edit: or mass starvation, or a plague, or a massive tsunami or whatever. ).

Last edited by DanS on 14-02-2002 at 04:04

	14-02-2002 05:07									#386
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I don't really see much difference between the demographic trends of the USA and China. I would like to see Japan. I have heard that theirs looks worse than Italy. (2050 would be a very pointy inverted triangle).

	14-02-2002 06:20									#387
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Japan (not as bad as Italy)

Look at 2050 for the starkest difference of China versus the US.

I keep going back to India and look at what will be a huge population explosion. Everybody talks about China rising, but India will be the real 5,000 lb. gorilla. Very smooth distribution.

	14-02-2002 14:40									#388
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quote: Originally posted by DanS Even though Roland downplays how bad Europe's looks, I think it doesn't look good at all.

We can debate that but not on those animated blink-crap. My eyes!

Demographic projections to 2050 are just wild guesses, btw. And how they influence output is another thing. My favourite projection is that France's population would drop to 27 million. That was projected in 1930 for the year 2000.

About the FT: The Commission (and esp Laakinen) are desperate to paint a US challange to get some pet projects through, and some in the press may take up that line. The article is incredibly silly, but I'm sure he just copied and intrapolated a bit one from those late 80s Articles about the Japanese challange....

	14-02-2002 16:16									#389
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Dan, regarding pre-'73 productivity growth, what is it? Why assume this is the ‘right’ level in the first place? Don’t forget the post WW2 period was a time a lot of deferred investments were implemented that were delayed due to the depression and the war, so this time period was exceptional as well. For reasons mentioned previously, the depression and war periods aren’t representative either, and neither do I believe to roaring 20’s to be which would only leave the pre-WW1 period “as normal”. (and that only because I haven’t thought of reasons to consider this period exceptional )

Anyway, IMO isn’t much point in talking about a “return” to a “normal” productivity growth, because I think it's an empty concept.

	14-02-2002 21:07									#390
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Does anybody have a basic explanation of what productivity is, from an economics standpoint? Four or five paragraphs would do nicely. From a layman's perspective, productivity always seems like a black hole, even though it's an important concept for top line numbers. Almost like some place for economists to put things that they can't explain fully.

Colon: '48-'73 = 3.3%, '74-'95 = 1.5%, '96-'01 = 2.6%, '48-'01 = 2.5%

I feel at a disadvantage of understanding when discussing the numbers immediately following WW2. From my cursory reading of all of the numbers, productivity in the US died in '73 with the first oil shock (and probably a host of other factors). Or maybe it was '77 with the second one. I have anecdotal evidence to suggest that US productivity was ripe for a "correction" in many sectors (e.g., auto workers who didn't do a lick of work), once exposed to external competitors.

I do recognize that productivity gains fluctuated before '73 and that a 5-year stretch normally isn't remarkable, but there isn't a 5-year stretch pre-'73 that was below 2.6% ('69-'73 was 2.7%). So these number seem to break the 20-year mold in their duration and strength.

Roland: Do you have a feel for what pet projects the Brits as a whole are trying to get through? It seems to me that the Brits focus on comparative issues an awful lot, and Wolf isn't much of a hand-wringer. This wasn't near the doom and gloom of the report linked earlier in the thread. That one was scary. Anyway, I guess the Brits feel like a Euro-US bridge of sorts.

"Demographic projections to 2050 are just wild guesses, btw."

Probably not for the US. We have a pretty clean growth trend that is supported by known variables. I would agree that European numbers may not be as well known, especially in places like Russia, where good economic times may encourage a baby boom.

Last edited by DanS on 14-02-2002 at 21:18