We’ve had a lot of sweet economic news lately. The Gross Domestic Product was announced to have grown at an annualized rate of 3.5% in the third quarter, which even after it was revised down to 2.8% seems like a decent number. The number of new unemployment claims was down to 474k last week, and the unemployment rate fell from 10.2% to 10.0%. It’s all good, right?
Plus, we have less than two weeks until Santa arrives! Better make cookies!
The problem with the numbers that tell the story of our economy is that they are all heavily processed by the time we get them. Like so much cookie dough in a tube, the numbers do not exactly make for the kind of diet that encourages anything other than obesity. The problem is, of course, that this is the time of year and the culture when good, fattening news goes down pretty easily.
Let’s start with the 2.8% annualized GDP growth. That may sound impressive, but the total Federal deficit is running about 12% of GDP. If you take away the “stimulus”, the rest of the economy is collapsing about as fast as it did in the last Depression. Granted, that’s why we run a deficit in hard times, at least according to modern Keynesian theory. But we haven’t had a positive GDP without this stimulus since 2001. At what point does the cookie dough stop being a treat or a pick-up and more of an addiction?
Then there’s the issue of declining initial claims as reported by the Bureau of Labor Statistics. The 474k reported is what we call “seasonally adjusted”, which is to say that like everything this time of year it comes with some extra lard and sugar. The actual number is 665k new jobless claims, – a 95k improvement over last year, but not exactly the stuff gingerbread dreams are made from.
But we can say that continuing claims for unemployment are falling, down to a total of 5.16M people, yes? Well, not really. What happens is that the “continuing claims” number of people on unemployment is based on people taking state unemployment insurance for 26 weeks – after that, they go on what’s called the “extended benefits” rolls, which are paid by the Feds. The total number of people collecting benefits is about 10 million, all totaled, averaging about 33 weeks. That means that those losing their jobs now can expect to be on the Government Cheese until way out into nearly Labor Day.
The unemployment rate? That doesn’t count “discouraged workers” who haven’t been looking for 4 weeks. Anyone out of work who hasn’t gotten into that “holiday spirit” since they collected Halloween candy doesn’t count – and if they did, that number would be 10.5%.
So what does our holiday diet of economic numbers look like? If you listen to the nooze, you can expect the kind of feast that is more likely to start a diabetic coma. A more cynical person might tell you that a kind of coma is exactly the plan, but not me. No, I’m only going to hint at it strongly and let you decide. That way, it’s not my fault when you decide to ditch the eggnog and just go right for the holiday Tequila.
Happy holidays, everyone! Don’t forget to put something out for Santa!