Posts filed under “Taxes and Policy”

Disappearing Economic Indicators

First M3, now . . .

Sometimes, when the data is (how shall we say this) less than delightful, politicians pressure bureaucracies to modify their models. This attempt to misrepresent reality goes back at least to JFK, and probably much further. It is not party specific, but is a characteristic of the all too common creature, Politico Disinguousi.

Yesterday, we discussed the unprecedented seasonal changes to CPI (Pre-Revision CPI: 9%) that managed to all but eliminate inflation reporting. And the absurdity that is the birth death adjustment has all but completely bastardized the Non-Farm Payroll (NFP) data series. Of course, the cowardly scam that was the Boskin Commission was the most outrageous change in modeling over recent decades.    

More brazen politicos don’t even bother gunking up the models — they simply press to stop reporting the data. The most egregious example of this in the recent past was M3 reporting. We noted as it happened that once the Fed decided to save a few pennies stopping M3 reporting, you knew that M3 was going to skyrocket.

And so it has

Recently, there was an attempt to close; That was a warning the economy was about to worsen. Thanks to readers and NY Senator Schumer, it was successfully beat back.

The latest such attempt at reducing economic information is brought to our attention by the WSJ’s Real Time Economics. They note that:

"A statement from the chair of the NABE’s statistics committee, Haver Analytics President Maurine Haver, asserted that “just when reliable and timely indicators are needed most, resources devoted to their production at our federal statistical agencies have been cut, requiring the termination of data series or a reduction in sample sizes used to produce the data.”

Ms. Haver catalogs the casualties of budgetary tightening, writing that “the Bureau of Labor Statistics (BLS) has been forced to terminate all hours and earnings data reported for local areas as well as payroll employment for 65 small metro areas. The BLS International Price Program has also eliminated a number of series including prices of transportation services such as passenger air fares, air freight, and crude oil tanker freight. The Census Bureau will discontinue its Survey of Alterations and Repairs in May. The Bureau of Economic Analysis will reduce the level of industry detail in its county data and will eliminate the benchmark capital flow tables that provide baseline data on industry-by-industry investment by type of investment. This may only be the beginning.”

Let’s draw the appropriate conclusion from this: First M3 reporting stopped, and shortly thereafter, M3 skyrocketed. Next was the attempt to stop aggregating general economic information, and then we learned that GDP fell off the cliff.

Now comes the attempt to reduce the reporting of hours and earnings data. Gee, can you guess what coincidence is about to happen?

Let me end your suspense: Workers Get Fewer Hours, Deepening the Downturn.

"Throughout the country, businesses grappling with declining fortunes are cutting hours for those on their payrolls. Self-employed people are suffering a drop in demand for their services, like music lessons, catering and management consulting. Growing numbers of people are settling for part-time work out of a failure to secure a full-time position.

The gradual erosion of the paycheck has become a stealth force driving the American economic downturn. Most of the attention has focused on the loss of jobs and the risk of layoffs. But the less-noticeable shrinking of hours and pay for millions of workers around the country appears to be a bigger contributor to the decline, which has already spread from housing and finance to other important areas of the economy.

While official unemployment has risen only modestly, to 5.1 percent, the reduction of wages and working hours for those still employed has become a primary cause of distress, pushing many more Americans into a downward spiral, economists say.

Moreover, this slippage is a critical indicator that the nation may well be on the verge of a recession, if not already in one.

Last month, the hours worked by those on American payrolls dropped, compared with six months earlier, according to an index maintained by the Labor Department. The last time the index moved into negative territory was February 2001, when the economy was on the doorstep of recession. A similar slide emerged in August 1990, one month into what proved an even more severe downturn."

Now what were the odds of that ?



Can M3 be Saved?

WTF? Feds Shutting Down Economic Data Site

A Slump in Economic Indicators   
Matt Phillips
April 14, 2008, 12:02 pm

Workers Get Fewer Hours, Deepening the Downturn
NYT, April 18, 2008

Some key statistics as prediction aids: M3, 2008

Alternate Data Series   
John William’s Shadow Stats

Category: Data Analysis, Employment, Psychology, Taxes and Policy, Wages & Income

Quote of the Day: Uptick Rule

Category: Markets, Taxes and Policy, Trading

Jubak on the Paulson Plan

Category: Markets, Taxes and Policy

Hank Paulson’s Cognitive Dissonance

Category: Credit, Derivatives, Psychology, Taxes and Policy

Uh-Oh: Cars/Vacations/Flat Panels Not Tax Deductible

Category: Economy, Employment, Real Estate, Taxes and Policy, Wages & Income

SFAS 157: Market Prices Too Low? Just Ignore Them!

Category: Credit, Derivatives, Markets, Taxes and Policy

Grant Calls Fed’s Balance Sheet an `Economist Nightmare’

Category: Credit, Derivatives, Federal Reserve, Taxes and Policy

Bailout Nation

Category: Corporate Management, Psychology, Taxes and Policy

Changes in US Withholding Taxes

Category: Consumer Spending, Credit, Economy, Taxes and Policy, Wages & Income

Housing Bust Blame Game

Back in August of 2007, we looked at the The Ongoing Impact of the Housing Sector.   

At the time, I had assigned blame for all of the problems in the credit
market to a variety of institutions and people. The blame went as follows:

    * Federal Reserve (FOMC)
    * Borrowers
    * Mortgage brokers
    * Appraisers
    * Federal Government
    * Fannie Mae
    * Lending banks
    * Wall Street firms
    * CDO Managers
    * Credit agencies
    * Hedge funds
    * Institutional Investors (pensions, insurance firms, banks, etc.)
    * And back to regulatory role of the Federal Reserve

Today’s WSJ has a front page article looking at the same issue: Housing Bust Fuels Blame Game. However, they assess blame somewhat differently, with a bit of a political slant:

Democrats are quick to blame Republicans, who were in
power during the housing bubble and subprime lending frenzy. For years,
America’s leaders failed to restrain the markets, companies, investors
and consumers from the missteps that led to the most pervasive
financial crisis in decades.

But in hindsight, the failure stretches across
government and across party lines. At bottom are two strong currents.
From the Republican president to urban Democratic congressmen,
homeownership was pushed as an overriding and unquestioned goal. And
many significant attempts at regulation were obstructed by the
prevailing belief that the economy did best when financial markets
operated as freely as possible.

While the headline writer tries to call this a "Bipartisan Failure," the bulk of the actual article is find less kind to the GOP. The Journal blamed:

* The Bush administration for cheerleading homeownership and pressuring government-sponsored mortgage lenders
Fannie Mae and Freddie Mac to provide funding for riskier mortgages.

* Congress for allowing Fannie and Freddie to invest
heavily in securities backed by subprime loans.

* While Democratic congressmen
pushed federal law to restrain sub-prime lending practices Republicans (with some Democratic allies) blocked or countered with
weaker versions;

* Federal Reserve, Chairman Alan Greenspan,
revered for not using the
Fed’s authority to more aggressively regulate lender behavior.

* California — where the country’s subprime lenders where — saw Democratic state lawmakers
refusing to impose tougher regulations on a
prized local industry.

Perhaps its bias on my part, but that list looks a little one sided to me . . .


graphic courtesy of the WSJ



Housing Bust Fuels Blame Game
Democrats Seize On Opponents’ Role;
Bipartisan Failures
WSJ, February 27, 2008; Page A1

Free version


Read More

Category: Credit, Economy, Politics, Real Estate, Taxes and Policy