Wednesday, March 25, 2009

Bring Home the Bacon

After a much needed break, MPGD is back with the opinions.

First, the boy is fine. He is sleeping most nights and beginning to notice the dogs. It's sort of neat.
Second, our President is doing many things correct and well. The past few days have shown me, even as a crazy progressive liberal, that his mind is on the right place and in the right scenario. His cool demeanor is doing a very good job at CALMING people the hell down. If we, as a group, stop looking at the damn stock market every minute and we can take a deep breath, we might even think that things are not so bad.

Not to say that things are not bad. They are. Trust me, they are. The noted Economist Paul Krugman believes the following: "...the banks really, truly messed up: they bet heavily on unrealistic beliefs about housing and consumer debt, and lost those bets. Confidence is low because people have become realistic." This is probably true. I know that I am not as confident in the economy as I once was. I see people around me, granted I do not know any firsthand, losing their jobs and developing problems with their credit bills and such, but they are still in the minority.

The funny thing about Unemployment numbers is this: you cannot believe them. They are always lower than what is actually happening. However they do not track all things in the correct way. They do not track people who have either quit finding a job or are "underemployed" in the big indicator number you hear about. In order to see it correctly, you need to multiply the jobless rate by about 2.3 or so. Thus, the jobless rate as of mid march was posted at 8.1% and it should actually be about 18.6%. That is pretty scary huh. Well, stop for a second. Underemployment is based on three separate definitions: Underutilization of skills, Underuse of economic capacity & Underuse of employed workers. I am not going to explain the three and their differences . . .use the internet and come back, I will wait.

. . .

The important thing about the underemployment indicator is that it does a horrible job at tracking cross-industry gains as well as non-lateral employment. Cross-Industry gain is understood as a person who leaves one industry and joins another with utilizing the skills that were necessary and used for the other. For instance, if a printing press operator was to lose his job and quickly get another job as a nighttime security guard making more money. In this case, the person is not utilizing their primary skill and is working a different "shift", thus changing the fabric of both industries. This person is underemployed as far as manufacturing is concerned, but is just employed as far as nighttime security. Keep that in mind for a second.

People who work on "tips" or gratuity are counted as non-wage earning service providers. So, Servers, Taxi-Drivers, Hair Stylists, etc are all underemployed. I have friends who wait tables that more employed than I am by far.

So that Unemployment indicator is probably is around 5.5% or so. And when you add underemployment, it might be around 7.8% or so. This is still not good. But it is not the end of the world. We need to relax a little and look around and decide if things are really as bad as it seems to be. Better yet, put it on hold for 3 months. Do not look at the market more than once every couple of days. Do not make any large purchases for 3 months. Eat out at least once per week for next three months. Buy summer clothes now. Basically, put the blinders on for a little while and live your life without looking at the 24 hours news cycle.

You would be amazed at how much better you might feel.

1 comment:

Paradisef said...

Thanks for the great post on your blog, it really gives me an insight on this topic.