Singapore Preliminary GDP Estimate for 2009Q1 and Revised Forecast for 2009

On April 14th, Singapore's Ministry of Trade and Industry released its preliminary GDP estimate for the first quarter of 2009. It has also revised its economic forecast for 2009. Below are some of the highlights:

On the GDP Estimate for the First Quarter of 2009:

On a seasonally adjusted annualized basis, real GDP contracted by 19.7 per cent compared to the previous quarter, worse than the 16.4 per cent contraction in the fourth quarter of 2008. Compared to the same period last year, real GDP is expected to contract by 11.5 per cent, compared to the 4.2 per cent contraction registered in the last quarter.

The decline in the first quarter of 2009 affected every sector, with the exception of the construction sector. Falling external demand in late 2008 and early 2009 has severely affected domestic manufacturing output. In year-on-year terms, the manufacturing sector is estimated to have contracted by 29.0 per cent in the first quarter, compared to the 10.7 per cent contraction in the last quarter of 2008. The manufacturing decline was led by the electronics and precision engineering segments, but the chemicals cluster and the biomedical manufacturing cluster also saw large declines. With most of Singapore's key trading partners still in recession, the manufacturing sector will continue to remain weak for the rest of the year.

The services producing industries contracted by 5.9 per cent in year-on-year terms. The collapse in global trade in recent months severely affected the wholesale & retail trade sector and the transport & storage sector in the first quarter of 2009. For the rest of 2009, these sectors will continue to be weighed down by the poor prospects for global trade. ... The hotels & restaurants segment also contracted because of lower tourist arrivals. Financial services also continued to contract, but at a more moderate pace compared to the previous quarter.

The construction sector was the only sector that showed signs of robust growth. It is estimated to have grown by 25.6 per cent in the first quarter of 2009, supported by the strong pipeline of committed projects in both housing and infrastructure.

On 2009's GDP Forecast:

While there are tentative signs of some stabilization in the housing, financial and manufacturing sectors in the US, they do not point to a clear turnaround in economic activity. In recent months, the International Monetary Fund, the World Bank and the Organization for Economic Co-operation and Development have successively slashed their 2009 growth forecasts for the world, the developed economies, and regional economies.

Taking into account the sharp deterioration in the first quarter of 2009, and the weak global outlook for the rest of the year, MTI is revising the economic growth forecast for 2009 to -9.0 to -6.0 per cent.

A pdf copy of the report can be found here.

US Unemployment Rates - March 2009

The March US regional and state unemployment figures were released on April 17th. The figures, overall, continue to worsen, although there was some slight signs of improvement in several states. One state, North Dakota, and the District of Columbia had declining unemployment rates, while three states recorded no change in the past month. On the other hand, Indiana has joined the ranks of states with double-digit unemployment rates, which now total eight. Here are some of the highlights:

• Overall, the "official" national unemployment rate (U-3) increased by 0.4%, from 8.1% to 8.5%, over February's number. For the past twelve months, the national rate has increased by 3.4%.
  
• For the most inclusive unemployment rate measured (U-6), the increase was 0.8%, from 14.8% to 15.6%. For the past twelve months, U-6 has increased by 6.5%.
  
• In terms of monthly change, the state with the largest increase was Oregon, with an increase of 1.4%. Washington and West Virginia tied for the second largest increase, at 0.9%, while Wisconsin came in fourth with a 0.7% increase.
  
• On an annual basis, four states have increases over 5.0%: Oregon at 6.6%, South Carolina at 5.5%, North Carolina at 5.5%, and Michigan at 5.0%.
  
• The states with the lowest annual increases are North Dakota at 1.2%, Iowa at 1.3%, Nebraska at 1.5%, Louisiana and Wyoming at 1.6%, Arkansas at 1.7%, and Utah at 1.9%.
  
• A total of eight states now have double-digit unemployment rates, up from seven in February. The state with the highest unemployment rate is Michigan, at 12.6%, up 0.6%. Oregon comes in second with a rate of 12.1% (up 1.4%), and South Carolina places third with a rate of 11.4% (up 0.5%). In fourth place is California with a rate of 11.2%, up 0.6%. In fifth place is North Carolina at 10.8% (up 0.1%); in sixth is Rhode Island at 10.5% (no change), and in seventh is Nevada at 10.4% (up 0.4%). The newest state in the ranks of the double-digit unemployment rates is Indiana, at 10.0%, up 0.6%.
  
• The state of North Dakota and the District of Columbia both had positive (i.e., negative) changes in their unemployment rates. Both dropped down 0.1% each, from 4.3% to 4.2% for North Dakota, and from 9.9% to 9.8% for Washington D.C.
  
• As mentioned above, Rhode Island (10.5%) had no change in its unemployment rate between February and March; the other two states with no change are Georgia (9.2%) and New York (7.8%).
  
• The states with the lowest unemployment rates continue to be North Dakota (4.2%, down 0.1%), Wyoming (4.5%, up 0.6%), Nebraska (4.6%, up 0.3%), South Dakota (4.9%, up 0.3%) and Utah (5.2%, up 0.1%).
  
• In terms of non-farm payroll employment (i.e., number of jobs), the states with the biggest decreases since February are California (-62,100), Florida (-51,900), and Texas (-47,100).
  
• For annual changes in non-farm payroll employment, the states with the biggest decreases are California (-637,400), Florida (-424,300), Michigan (-270,500), and Illinois (-232,600).

The PDF version of the Bureau of Labor Statistics press release can be found here.

The Big Money: China's Stimulus is Working

A very short but interesting - and I dare say important - article from Slate's The Big Money. Important for two reasons: first, because it reinforces Paul Krugman's argument that the size of the stimulus package matters and that the recently passed economic stimulus bill is most likely too small; secondly, because it refutes the noise coming from the hysterical wing of the Republican party as to why the stimulus bill needed to be passed in the first place.

Many commenters, including TBM's Charles Wallace, have argued that the Chinese stimulus package is superior to America's. Partly that's because it represents a larger proportion of GDP and partly because it is more focused on housing and infrastructure, which can create jobs quickly and thereby circulate money through communities. Those points will continue to be debated.

But there's a case to be made that the Chinese stimulus package is now working, both on a psychological level and an economic level. A Reuters story yesterday pointed out that the mere promise that China will increase its stimulus if it needs to boosts confidence and might therefore paradoxically make more stimulus unnecessary. Now comes today's Wall Street Journal, reporting that both housing sales and construction starts are on a mild upswing in China. This is crucial because the world's metal and oil markets are dependent on Chinese demand; not surprisingly, reports the Financial Times, both experienced a jolt yesterday.

True, the Chinese economy will not grow in 2009 at the dizzying pace of the last decade or so. But it's also not going to shrink, and that will provide a needed cushion for the drops occurring elsewhere. The bottom line, as David Leonhardt wrote in yesterday's New York Times, is: "Yes, stimulus works." Critics can say it's too expensive or doesn't stimulate fast enough or deeply enough. But consider the alternatives.

HT: Economist's View

US Unemployment Rates - February 2009

The February US regional and state unemployment figures were released on March 27th. The figures, overall, continue to be bad, although some of the over-the-month rate changes between January and February were not as severe as they were the month before. One state, Nebraska, also had a declining unemployment rate. On the other hand, the number of states with double-digit unemployment rates has increased to seven. Here are some of the highlights:

• Overall, the "official" national unemployment rate (U-3) increased by 0.5%, from 7.6% to 8.1%, over January's number. For the past twelve months, the national rate has increased 3.3%.
  
• For the most inclusive unemployment rate measured (U-6), the increase was 0.9%, from 13.9% to 14.8%. For the past twelve months, U-6 has increased by 5.8%.
  
• In terms of monthly change, the states with the largest increases were North Carolina and Oregon, with changes of 1.0% each. One state, New Jersey, had a 0.9% increase, while four states had 0.8% increases. Those states are Georgia, Hawaii, New York and West Virginia.
  
• On an annual basis, three states have increases over 5.0%: North Carolina at 5.5%, Oregon at 5.4%, and South Carolina at 5.3%. Michigan and Nevada are tied for fourth at 4.6%.
  
• The states with the lowest annual increases are Iowa at 1.0%, Wyoming at 1.1%, Nebraska at 1.2%, and North Dakota at 1.3%.
  
• A total of seven states now have double-digit unemployment rates, up from four in January. The state with the highest unemployment rate is Michigan, at 12.0%, up 0.4%. South Carolina comes in second with a rate of 11.0% (up 0.6%), and Oregon places third with a rate of 10.8% (up 1.0%). In fourth place is North Carolina with a rate of 10.7%, also up 1.0%. Tied for fifth place is California and Rhode Island, both with a rate of 10.5%, up 0.4% for California and 0.2% for Rhode Island. The seventh place state, Nevada, also has double-digit unemployment with a rate of 10.1%, up 0.7%.
  
• The states with the lowest unemployment rates continue to be Wyoming (3.9%, up 0.2%), Nebraska (4.2%, down 0.1%), North Dakota (4.3%, up 0.1%), South Dakota (4.6%, up 0.2%) and Iowa (4.9%, up 0.1%).
  
• In terms of non-farm payroll employment (i.e., number of jobs), the states with the biggest decreases since January were California (-116,000), Florida (-49,500), and Texas (-46,100).
  
• For annual changes in non-farm payroll employment, the states with the biggest decreases are California (-605,900), Florida (-399,400), Michigan (-277,000), and Ohio (-222,100).

The PDF version of the Bureau of Labor Statistics press release can be found here.

US Unemployment Rates - January 2009

The January US regional and state unemployment figures were released on March 11th. The figures, overall, continue to get worse, although there was one minor bright spot in the District of Columbia. Here are some of the highlights:

• Overall, the "official" national unemployment rate (U-3) increased by 0.4%, from 7.2% to 7.6%, over December's number. For the past twelve months, the national rate has increased 2.7%.
  
• For the most inclusive unemployment rate measured (U-6), the increase was 0.4%, from 13.5% to 13.9%. For the past twelve months, U-6 has increased by 4.9%.
  
• In terms of monthly change, the states with the largest increases were North Carolina, Oregon, and South Carolina, all with a 1.6% increase; four states had a 1.4% increase, California, Indiana, Michigan, and Ohio, while three states had a 1.3% increase, Alabama, Maine and Washington.
  
• On an annual basis, two states tied for the largest increase, North Carolina and South Carolina, both at 4.7%. The next three are Oregon (4.6%), Indiana (4.4%), and Michigan (4.3%).
  
• The states with the lowest annual increases are Iowa at 0.9%, Wyoming at 1.0%, and North Dakota and West Virginia at 1.2%.
  
• The state with the highest unemployment rate is Michigan, which increased 1.4% to 11.6%; South Carolina comes in second with a rate of 10.4% (up 1.6%), and Rhode Island places third with a rate of 10.3% (up 0.9%). California also has a double-digit unemployment rate of 10.1%, up 1.4%.
  
• The states with the lowest unemployment rates continue to be Wyoming (3.7%, up 0.3%), North Dakota (4.2%, up 0.7%), Nebraska (4.3%, up 0.3%) and South Dakota (4.4%, up 0.5%).
  
• In terms of non-farm payroll employment (i.e., number of jobs), the states with the biggest decreases since December were California (-79,300), Michigan (-60,800), Ohio (-59,600) and Texas (-50,600).
  
• The one bright spot in terms of non-farm payroll employment was an increase in the number of jobs in the District of Columbia, up 5,800 (perhaps due to the change in administration and a corresponding ripple effect through the local economy).
  
• For annual changes in non-farm payroll employment, the states with the biggest decreases are California (-494,000), Florida (-355,700), Michigan (-263,800), and Ohio (-214,600). Wyoming is the only state that continues to have a positive annual change in employment, up 7,000 jobs for the year.

The PDF version of the Bureau of Labor Statistics press release can be found here.

US Employment Levels Analysis

After publishing my previous post yesterday, I decided to take a closer look at the numbers.

My first thought was, while comparing the current recession to the previous two downturns makes sense, I didn't know how this recession compared to the others before 1990-91, such as the big recession in 1981-82 (a vivid memory for myself). Were there any recessions that were worse than either 1981-82 or 2007-09? (For my analysis, I'm using November 2007 as the start of the current recession.)

What I did was to download the US employment levels data, seasonally adjusted, from the Bureau of Labor Statistics (BLS) for the period of January 1948 to the present. From this data, I found nine downturns in which employment sank on a significant basis, followed by a recovery period. I then took percentages from the nine downturns in which the highest level of employment prior to the downturn (the peak month) is equal to 100%. Following months, through to the point where the employment level once more reached the level of the peak month, were then compared as a percentage to the peak month.

What I found is that the 2007-09 recession is already the eighth worst downturn of the nine. Through January 2009, the employment level is at 96.89% of the peak month's level, a drop of 3.11%. Only the 1953-54 recession is worse (-3.82%). And, of course, there is no bottom in sight yet for the 2007-09 data; if current trends continue, 1953-54's record will be broken in either February or March at the latest.

Adding to the distress is the fact that 2007-09 is already in its fourteenth month past the peak. Only two other downturns took longer: 1953-54, which lasted sixteen months, and 1981-82, which lasted twenty months.

Eventually, of course, previous recessions reached a bottom and then began a period of economic recovery. Of the eight previous recoveries, the average length of time was 12.38 months from the trough month through to the level where employment reached the previous peak. (It should be noted, though, that the previous two recoveries, 1991-93 and 2002-03, took twenty-one and seventeen months respectively, which were by far the two longest recoveries since 1948.)

If the 1953-54 recession is any guide to what may be in store for this recession, any recovery back to November 2007 employment levels will not occur prior to March 2010 at the earliest, and quite possibly not until August-December 2010.

Let's hope I'm wrong, and that we reach the trough and the recovery months more quickly.

3,600,000 and Counting

Here's a graph to make you wet your pants a little. As The Gavel points out, the current recession is much, much more serious in terms of job losses to date (3.6 million and counting) than the previous two. And there's no bottom in sight.

This chart compares the job loss so far in this recession to job losses in the 1990-1991 recession and the 2001 recession – showing how dramatic and unprecedented the job loss over the last 13 months has been. Over the last 13 months, our economy has lost a total of 3.6 million jobs – and continuing job losses in the next few months are predicted.

By comparison, we lost a total of 1.6 million jobs in the 1990-1991 recession, before the economy began turning around and jobs began increasing; and we lost a total of 2.7 million jobs in the 2001 recession, before the economy began turning around and jobs began increasing.

US Unemployment Rates - December 2008

The December US regional and state unemployment figures were released in late January. The figures, overall, continue to get worse. Here are some of the highlights:

• Overall, the "official" national unemployment rate (U-3) increased by 0.4%, from 6.8% to 7.2%, over November's number. (November's percentage was revised upward by 0.1%.) For the past twelve months, the national rate has increased 2.3%.
  
• For the most inclusive unemployment rate measured (U-6), the increase was 0.9%, from 12.6% to 13.5%. For the past twelve months, U-6 has increased by 4.8%.
  
• In terms of monthly change, the states with the largest increases were Indiana and South Carolina, both with a 1.1% increase; six states had a 1.0% increase: Massachusetts, Michigan, Nevada, New Jersey, New York and Oregon.
  
• On an annual basis, the state with the largest increase continues to be Rhode Island with an increase of 4.8%. North Carolina remains in second place with an increase of 4.0%, and Nevada has jumped into third with an increase of 3.9%.
  
• The states with the lowest annual increases are North Dakota at 0.3%, Arkansas at 0.7%, and Iowa and Oklahoma at 0.8% each.
  
• The state with the highest unemployment rate is Michigan, which increased 1.0% to 10.6%; Rhode Island remains in second place, with a rate of 10.0% (up 0.7%). South Carolina comes in third at 9.5% (up 1.1%).
  
• The states with the lowest unemployment rates continue to be Wyoming (3.4%, up 0.2%), North Dakota (3.5%, up 0.2%), and South Dakota (3.9%, up 0.5%).
  
• In terms of non-farm payroll employment (i.e., number of jobs), the states with the biggest decreases since November were California (-78,200), Michigan (-59,000), and New York (-54,000).
  
• For annual changes in non-farm payroll employment, the states with the biggest decreases are California (-257,400), Florida (-255,200), and Michigan (-173,000). Texas continues to be the nation's bright spot, with an annual increase of 153,700, down 67,500 from November.

The PDF version of the Bureau of Labor Statistics press release can be found here.

Singapore Preliminary GDP Estimate for 2008Q4 and Forecast for 2009

Singapore's Ministry of Trade and Industry has released its preliminary GDP estimate for the fourth quarter of 2008. It has also released forecasts for both 2009's GDP and consumer price index (CPI) inflation. Below are some of the highlights:

On the GDP Estimate for the Fourth Quarter of 2008:

Preliminary estimates for the Singapore economy show that real gross domestic product (GDP) contracted by 3.7 per cent in the fourth quarter of 2008, following the decline of 0.2 per cent in the preceding quarter. On a seasonally adjusted, annualised quarter-on-quarter basis, real GDP fell by 16.9 per cent, compared to a decline of 5.1 per cent in the third quarter of 2008. ... For 2008 as a whole, the economy is estimated to have grown by 1.2 per cent, compared with 7.7 per cent in 2007.

The manufacturing sector is estimated to have contracted by 4.1 per cent, down from an expansion of 5.8 per cent in 2007. Several clusters - electronics, precision engineering, and chemicals - were affected by the rapid decline in demand in Singapore's key export markets, especially in the last quarter of 2008. Industry-specific factors also exerted a negative impact. ... The construction sector grew by 17.9 per cent in 2008, compared to 20.3 per cent in 2007. The healthy level of construction output in 2008 was sustained by robust activity in the residential, industrial and civil engineering building segments. Construction demand was also supported by an upswing in the number of public housing and infrastructural projects committed.

Growth in the services producing industries moderated from the strong growth rates in 2007. Growth in the wholesale & retail trade and the transport & storage sectors moderated to 2.6 per cent and 3.2 per cent respectively in 2008, from 7.3 per cent and 5.1 per cent in 2007. After a robust 16.9 per cent growth in 2007, the financial services sector grew by 7.1 per cent in 2008. As a result of the global financial crisis, there was a significant decline in fund management and stock broking activities in the second half of 2008. ... The business services sector grew by 7.3 per cent, compared to 7.8 per cent in 2007, although segments such as real estate, legal services and accounting services slowed down in the last two quarters of the year.

On 2009's GDP Forecast:

MTI expects the economic downturn to continue in 2009. The weaker outlook for the Singapore economy compared to earlier forecasts reflects two factors: global economic activity has declined faster and deeper, and the spillover effects on key sectors of the economy will be stronger. ... [E]xternal demand conditions have weakened to a greater extent than earlier estimated. ... The electronics purchasing managers' index for Singapore posted a record low in December 2008. The chemicals cluster is expected to weaken with lower oil prices and lower global demand for other manufactured goods. Global trade is expected to contract in 2009, which will affect trade-related sectors such as wholesale & retail trade and transport & storage. The weak economic performance in the fourth quarter of 2008 reflects these spillover effects, and suggests that growth will weaken further in 2009.

Taking into account the above factors, MTI is revising the economic growth forecast for 2009 to -5.0 to -2.0 per cent.

On CPI Inflation:

The forecast for CPI inflation in 2009 has been revised to -1.0 to 0 per cent. This is largely in expectation of a continued downward correction of commodity prices from the peaks in 2008, in line with the weakening global economy. These global developments will ease upward pressures on domestic retail prices. ...

A pdf copy of the report, including further statistics, can be found here.

How to Protect Your Job in a Recession

The blog Advertising is Good for You linked to a Harvard Business Review article (published September 2008) entitled How to Protect Your Job in a Recession. I thought the article's executive summary had some good advice, so I'm posting it down below. All of the emphases are mine.

As the economy softens, corporate downsizing appears almost inevitable. Don't panic yet, though. While layoff decisions might seem beyond your control, there's plenty you can do to make sure you retain your job. In this article, Banks, a former HR executive at Chase Manhattan and FleetBoston Financial, and Coutu, an HBR senior editor and former affiliate scholar at the Boston Psychoanalytic Society and Institute, describe how to improve your chances of survival. It's mostly a matter of coolheaded planning, they observe. When cuts loom, the first thing to do is act like a survivor. Be confident and cheerful. Research shows that congeniality trumps competence when push comes to shove. Look to the future by focusing on customers, for without them, no one will have work. Survivors also tend to be versatile; tight budgets demand managers who can wear several hats, so start demonstrating what other capabilities you can offer. If you're, say, a manager who once worked as a teacher, take on a training role. Remember to be a good corporate citizen: Participation matters now more than ever. It isn't the time to behave as if work is beneath you or to argue for a new title. When one executive's department was folded under the management of a less-experienced colleague, she swallowed her pride and wholeheartedly supported the new hierarchy. Her superiors noticed her commitment and eventually rewarded her with a prestigious appointment. It's also important to offer leaders hope and realistic solutions. Energize your colleagues around change, like the VP of learning at a firm undergoing major staff reductions did. He organized a humorous in-house radio show that revived spirits and helped management communicate with employees-and ended up with a promotion.

US Unemployment Rates - November 2008

The November US unemployment figures were released recently. The figures, overall, are continuing to get worse. Here are some of the highlights:

• Overall, the "official" national unemployment rate (U-3) increased by 0.2%, from 6.5% to 6.7%, over October's number. For the past twelve months, the national rate has increased 2.0%.
  
• For the most inclusive unemployment rate measured (U-6), the increase was 0.7%, from 11.8% to 12.5%. For the past twelve months, U-6 has increased by 4.1%.
  
• In terms of monthly change, the state with the largest increase was Oregon (again), with a 0.9% increase; North Carolina had the next largest increase, at 0.8%, and the District of Columbia and Indiana had increases of 0.7% each.
  
• On an annual basis, the state with the largest increase continues to be Rhode Island with an increase of 4.1%. North Carolina has moved into second place, with an increase of 3.2%, and Georgia and Idaho are tied for third with increases of 3.0% each.
  
• The states with the lowest annual increases are Nebraska at 0.4%, Iowa and South Dakota at 0.5%, Wisconsin at 0.8%, and Kansas, New Hampshire and Utah at 0.9%.
  
• The state with the highest unemployment rate is Michigan, which increased 0.3% to 9.6%; Rhode Island, which was tied for the highest rate in October remained at 9.3% to place second. California and South Carolina are tied for third with a rate of 8.4%.
  
• The states with the lowest unemployment rates continue to be Wyoming (3.2%), North Dakota (3.3%), and South Dakota (3.4%). Utah has been joined by Nebraska at 3.7% each.
  
• In terms of non-farm payroll employment (i.e., number of jobs), the states with the biggest decreases since October were Florida (-58,600), North Carolina (-46,000), California (-41,700), Michigan (-36,900) and Georgia (-30,000).
  
• For annual changes in non-farm payroll employment, the states with the biggest decreases are Florida (-206,900), California (-136,000), Michigan (-112,700), and Arizona (-82,200). Two states continue to have statistically significant increases over the past year: Texas (221,200; down 9,200 from October) and Wyoming (8,200; down 1,300).

The PDF version of the Bureau of Labor Statistics press release can be found here.

All Recessions are Not Created Equal

In an announcement that was of little surprise to most of us, the National Bureau of Economic Research (NBER) finally declared that the United States has been in a recession since December 2007. What may not be quite as well known is that not every state is necessarily undergoing an economic recession at any given time. I thought it might be interesting to see which states are doing well despite the recession and which states are suffering the most.

To do my analysis, I downloaded the historical data spreadsheet (Excel file) of the State Coincident Indexes, which is published by the Federal Reserve Bank of Philadelphia. This is a long-running series of indexes that has been published since 1979. What the coincident indexes do is:

...combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average).

Based on this index number, individual state economies can be compared against each other and the nation as a whole to see how well the state is doing. The Philadelphia Fed also create month-by-month color-coded maps so that one can see at a glance each state's performance. Below is the most recent map available, from October 2008. (You can find all of the previously published maps since January 2005 here.)


Looking at the data since December 2007, when the recession officially started, what we find is that fourteen states have actually had economic growth as a percentage change over the past eleven months. Thirty-five states have had a contracting economy while one state (Kansas) has had neither a recession nor growth (a 0.0% "change"). (There is no data for the District of Columbia.) The fourteen states, in order of decreasing economic performance, are: Wyoming, Texas, South Dakota, New Hampshire, North Dakota, Virginia, New York, West Virginia, Colorado, Oklahoma, Louisiana, Nebraska, Massachusetts, and California. What's surprising to me is that California is in this list as they currently have the third highest unemployment rate in the country.

On the other side, the bottom ten states since last December are Delaware (41st), Arizona, South Carolina, Pennsylvania, Rhode Island, Michigan, Idaho, Nevada, Washington, and Oregon (50th). All of these states have had their index drop by at least 2.2% since December and, in the cases of the latter four, by over 4.0%. (Oregon's index has dropped by a whopping 6.1%.)

Of course these index numbers can change significantly from month to month. Both Oregon and Nevada have seen their index numbers drop by double digits within the eleven-month span (and not for the better). However, while things may look gloomy for some individual states, the economy may become better for them within a short period of time while the rest of the country labors under the current recession.

U.S. Unemployment Rates: Where Do We Stand?

The October US unemployment figures were recently released and, with very few exceptions, the numbers are rather dismal. (Highlights can be found here.) The numbers that were released, however, are only the "official" statistics. Meaning, the official unemployment rate that the U.S. Bureau of Labor Statistics gives out in its monthly press release is only one of six unemployment rates that it actually calculates. The "official" unemployment rate is the not-so-imaginatively named "U-3." There are two smaller unemployment rates (U-1 and U-2), and three larger (U-4 through U-6). What I'm concerned about is U-6.

The official definition of U-6 is:

Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.

...where...

Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.

Yada yada yada.

In essence, U-6 covers everyone who's either unemployed, whether they receive unemployment benefits or not, or might be working a part-time job but who really want to be working full-time (i.e., they're underemployed).


On to the statistics then. In October, the "official," U-3 unemployment rate was 6.5%. This is the highest unemployment rate we've seen since March 1994. However, the U-6 unemployment rate in October was 11.8%. This is the fourth month in a row that U-6 has been over 10%, with the lowest rate this year having been in February, at 8.9%. The last time U-6 was this high was in January 1994, when it was 11.8%. (Ironically, this is also the very first month U-6 was published.)


As most economists are presuming today, the country is almost certainly in a recession at this time (even though it hasn't been officially announced yet). How do these unemployment rates, then, compare against the last three recessions? U-6, being a rather limited series of data, only covers one time period when unemployment was almost as bad as it is today. In June 2003, U-3 peaked at 6.3%, while U-6 peaked in September, at 10.4%; the largest spread between the two unemployment rates that year was 4.3%.

The next earliest spike in unemployment rates happened in June 1992, when U-3 reached 7.8%. However, there wasn't any U-6 rate at that time, so we can only guess what it might have been. Doing a little spreadsheet analysis, my own guess is that the spread between U-3 and U-6 at the time was about 5.3%; add that to the 7.8% and the hypothetical U-6 unemployment rate may have been about 13.1%. The worst of the three recessions, though, was that of the early 80s. U-3 peaked in November and December 1982 at 10.8%; this is the only time U-3 has ever peaked above 10% since 1948, when the current series of unemployment rate data starts. Assuming that the spread between U-3 and the hypothetical U-6 was still around 5% at that time (and I think it may have actually been larger), total unemployment and underemployment probably would have been around 16% in late 1982.

So. Unemployment is bad now. It's slightly worse than it was six years ago, but it's also not as bad as it was back in the early 90s or the early 80s, which was much, much worse. Consider that your positive thought for the day. ;)

US Unemployment Figures - October 2008

The October US unemployment figures were released on Friday. Unsurprisingly, the numbers were not good, although there were a few positive surprises. Here are some of the highlights:

• Overall, the national unemployment rate increased by 0.4%, from 6.1% to 6.5%, over September's number. For the past twelve months, the national rate has increased 1.7%.
  
• In terms of monthly change, the state with the largest increase is Oregon, with a 0.9% increase; Alaska and South Carolina have the next two largest increases, at 0.7% each.
  
• On an annual basis, the state with the largest increase is Rhode Island, which has nearly doubled in the past twelve months, from 5.1% to 9.3%, an increase of 4.2%. Florida had the second largest increase, at 2.7%, followed closely by the states of Idaho (2.6%), California, Georgia and Nevada (all at 2.5%).
  
• The state with the highest unemployment rate are the states of Rhode Island and Michigan, both of which are at 9.3%. California is in third with a rate of 8.2%, followed by South Carolina with a rate of 8.0%.
  
• States with the lowest unemployment rates are primarily located in the west and upper mid-west: Wyoming and South Dakota (3.3%), North Dakota (3.4%), and Utah (3.5%).
  
• In terms of non-farm payroll employment (i.e., number of jobs), states with the biggest decreases since September were Washington (-29,300), Florida (-27,300), Michigan (-19,600), and Arizona (-17,700).
  
• For annual changes in non-farm payroll employment, states with the biggest decreases are Florida (-156,200), California (-101,300), Michigan (-71,200), and Arizona (-70,400). However, two states had statistically significant increases over the past year: Texas (230,400) and Wyoming (9,500).

The PDF version of the Bureau of Labor Statistics press release can be found here.

China Beating the US in the Global Oil Game

A very interesting article at Money Morning about how China is beating the United States in the global oil game. (Actually, The Economist tackled the larger issue of China's thirst for natural resources and how they're going about getting them, particularly in Africa, in a noteworthy special report back in March.) Below are some of the article's highlights:

While this deal, on its face, appears to be just another global oil-services contract, it’s actually a very significant development in the hunt for long-term energy supplies. In fact, it actually demonstrates that – when it comes to nailing down those long-term oil supplies – China is an expert, and is playing a very deep game. And the outcome of that game will certainly have substantial long-term implications for consumers and investors both here in the United States, and in markets abroad. Here’s why:

• With estimated reserves of 115 billion barrels, Iraq is tied with Iran for the world’s No. 2 position, trailing Saudi Arabia, which has estimated reserves of 264 billion barrels, according to estimates from the Energy Information Administration.
  
• In a country where electricity is in short supply, the oil produced from the Ahdab Oil Field will help fuel a planned power plant that would be one of the largest in Iraq. By helping Iraq with this key initiative, China can expect to gain a solid foothold in one of the most oil-rich nations in the world, analysts say.
  
• At the end of the day, the deal clearly highlights something that most U.S. investors haven’t focused on yet – namely that the eventual winners in this game may not be such well-known giants as Chevron Corp. (CVX), ExxonMobil Corp. (XOM), or other household names. Deals like this one and the host of others that are undoubtedly close behind suggest that tomorrow’s winners may have names most English-speaking investors can’t pronounce, since they’ll be distinctly Arabic or Chinese in nature.

...

While China won’t participate in the profits from the oil it helps pump, it is shrewd enough to realize there will be long-term benefits. Analysts who see the bigger picture here agree with our view.

“There are some political profits for China,” Ibrahim Bahr al-Ulum, a former Iraqi oil minister, told The Times. “They need access to Iraq, and when they need oil, at least the Iraqi people will feel that China has done something for them.”

...

By invading Iraq, the United States dealt China’s central planning commission an embarrassing wakeup call when the second Gulf War summarily wiped out China’s oil interests in Iraq.

When that happened, China’s central planners realized two things:

• The status quo in the global oil game had changed.
  
• And China’s double-digit economic miracle could not be sustained with only a few oil suppliers.

What China fears most is that there will not be enough oil to go around in the very near future and that a U.S.-dominated supply chain could effectively “strangle” China’s growth.

So, it has done what the United States and other great powers have done at other times in history and gone on a buying spree from Darfur to Peru that’s turned heads and ruffled feathers all across the world.

What’s been especially frustrating for hapless Western leaders who do not understand that their actions caused this in the first place, is that China’s not afraid to do business with rogue nations like Iran, Sudan and Burma. It has even gotten chummy with Venezuela and Russia – much to the consternation of our present administration.

It’s a virtual certainty that China will maintain this policy going forward. My contacts in China and Africa have told me point blank that China’s leaders “don’t care about human rights or nukes or hostile governments. What matters is anyone who provides oil to China no matter what the rest of the world thinks.”

So, in as much as the U.S. media has dismissed this deal as only one in a long string of recent Chinese oil purchases, it’s arguably the most important deal yet. The reason: It suggests that China will go to extraordinary lengths to obtain the oil it wants and needs.

To add to its stable of captive oil suppliers, China will pay far more money, endure limitless criticism for ignoring human-rights issues and endure harsher business conditions than our companies can or will undertake. While U.S. firms must worry about sanctions, bad publicity or simply security, China worries about one thing, and one thing only – getting oil.

HT: Informed Comment

Want a Strong Economy? Vote for a Democrat!

Yesterday, I highlighted a post over at Angry Bear that showed that every Democratic president since World War II has left office with a lower unemployment rate than the one he inherited from his predecessor, whereas only one Republican president, Ronald Reagan, could make the same claim. The moral of that story: if you want a job, you should vote for a Democrat.

Today, the folks at Angry Bear have ranked the last fourteen presidents (since Herbert Hoover) as to how the American economy did in real terms (i.e., adjusted for inflation) during each administration. Interestingly enough, five of the top seven presidents were Democrats, and only one Democratic president (Truman) was in the bottom seven. Below is the listing of presidents and the last two paragraphs of the essay; you can read the entire post here.

1. FDR
2. LBJ
3. JFK
4. Clinton
5. Reagan
6. Carter
7. Nixon
8. Ike
10. GW (that's 10 so far – don't be surprised if he sinks further into the mire)
11. Ford
12. Bush Sr.
13. Truman
14. Hoover

What the list shows us, is that, the top half of the spots are dominated by Democrats. Two Republicans, Reagan and Nixon, make it in (5th and 7th, respectively). It also shows us that the bottom half of the list is populated almost exclusively with Republicans. The one Democrat in the bottom half of the list, not incidentally, is the Democrat most beloved of Republicans today: Harry Truman. George Bush has compared himself to Truman, and a few weeks, Sarah Palin told us how she too was comparable to Truman. What are the odds that prominent Republicans would compare themselves with FDR or LBJ? (Snarky answer – probably about the same as the odds a Republican administration would produce a growth rate comparable to FDR or LBJ.)

Now, after 70 years of data, after observing what we've observed over all sorts of conditions, it is hard to conclude anything but this: one party advocates policies that produce rapid economic growth, and one part dismisses those policies with epithets like "socialism" and advocates instead policies that produce dismal economic growth. And dismal economic growth has consequences. Poor economic growth makes people worse off, and hits them in their pocketbook. And when people are hurting financially, their health suffers, the rate of divorce goes up, suicides increase, and the abortion rate increases. So those who advocate the policies that bring us lower incomes, poorer health, break up families, increase suicides, and increase the rate of abortions are doing us all a lot of harm. More, in fact, than Osama or Saddam could possibly have done. And yet, the folks who advocates those policies question the patriotism of the rest of us. It's very, very strange.

The Economic Version of "Final Destination 3"

There is someone, walking behind you
Turn around, look at me
There is someone, watching your footsteps
Turn around, look at me
One more post on economics (for now), this time an unusual look at housing prices. The New York Times produced a graph of Robert Shiller's American housing price index, which shows what prices have been like from 1890 through 2006. For example, if a standard house cost $100,000 in 1890 (in 2006 dollars), a similar home would have sold for $199,000 in 2006. What's interesting, though, is that someone has taken Shiller's data and transformed it into a roller-coaster ride using Atari's RollerCoaster Tycoon (R)3 software. (Be sure to look at the bottom right corner to view the year.)



The problem with this video, though, is that it stops short of what's happened in the past two years. Back in late May, The Economist, which I do read (apparently this is a political joke now), produced a graph that shows this past year's plunge. To give an idea of what the end of the roller-coaster ride should look like, one wit at Angry Bear suggested the following video:



HT: Angry Bear

State Coincident Indices Through August 2008

The State Coincident Indices, published by the Federal Reserve Bank of Philadelphia, have been released through the month of August. The top graph is from the month of May, which I've republished to provide some continuity from the previous set of graphs; the latter three graphs are for June, July and August.

As you can see, there has been some strengthening in the Gulf states of Texas and Louisiana (one wonders how the graphs will look after taking into account Hurricanes Gustav and Ike), the western half of the upper Midwest, and West Virginia, which went from deep red to dark blue in a matter of two months. Trouble spots include the Pacific Southwest and the Midwest, although the latter region may be improving; we'll have to wait and see.

From the August 2008 press release [pdf]:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for all 50 states for August 2008. The indexes increased in 12 states for the month, decreased in 31, and were unchanged in the remaining seven (a one-month diffusion index of -38). For the past three months, the indexes have increased in 12 states, decreased in 35, and were unchanged in the other three (a three-month diffusion index of -46). For comparison purposes, the Philadelphia Fed developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index was flat in August and has remained unchanged over the past three months.

Want a Job? Vote for a Democrat!

A couple of interesting posts on unemployment today, the first being from Spencer at Angry Bear:

So much for Sarah Palin's claim that Republican tax cuts create jobs. In the post WW II era every Democratic President has left office with a lower unemployment rate than they inherited from their predecessor while only one Republican president left office with a lower unemployment rate than they inherited. That was Ronald Reagan, but his first term still holds the record for the highest average unemployment rate of any post - WW II four year Presidential term.

George Bush inherited a 3.9% unemployment rate and the results of all his tax cuts has been a rise in the unemployment rate to 6.1%, so far. By contrast Bill Clinton inherited a 7.4% unemployment rate and with his prudent fiscal policy left Bush a 3.9% unemployment rate.

Leave it to Team Bush to be the only American President to throw a war that failed to stimulate the economy.

Another scary graph comes from Economist's View:

A grim morning: Double plus ungood news on multiple fronts this morning. The credit crunch is getting worse: LIBOR jumped again, the TED spread is at a new record. Bad news on employment: payrolls down 159,000, average work week down, official unemployment rate flat at 6.1 percent but broad measure (U6) up from 10.7 to 11.

We are going over the edge.

The track record: This chart shows U6, the broadest measure of unemployment and underemployment from the Bureau of Labor Statistics. (No data available before 1994.)

State Coincident Indexes

Every month, the Federal Reserve Bank of Philadelphia produces a "State Coincident Index" that allows economists to see how well each of the individual states are doing economically:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

What the graphs below show is a state-by-state analysis of the economy. The first three maps show the month of January for 2005, 2006 and 2007, respectively. (Note that in these maps, a five-point scale is used with dark blue being the best and dark red being the worst.) The last six maps are for the last six months available, December 2007 through May 2008. While the scale has been increased from five points to seven points, the same basic color scheme is still used; i.e., dark blue is the best, dark red is the worst.

As you can see, the American economy has gotten quite bad over the past six months, especially in the Northwest and, to a slightly lesser degree, in the Midwest and South. Some of the states in the Mountain West and Northeast are doing well, with the best state currently being Texas. (I'd be tempted to say that Texas is doing well because of the multiplier effects from higher oil prices, but if that's the case, then why isn't Alaska doing well too?)










HT: Economist's View