That’s the title of an article in Bloomberg yesterday.
“I remain concerned, particularly in an environment where you’re talking about cutting the budget, that a victim in that exercise could be the production of good data,” Glenn Hubbard, who served as chairman of President George W. Bush’s Council of Economic Advisers from 2001 to 2003, said Monday in Washington.
I think funding is only part — albeit very important part — of the story. The issue begins with the person at the top of the Executive Branch, and his feelings about “data”.
From a transcript in Time, last August:
If you start adding it up, our real unemployment rate is 42%.
Now consider this graph of the official unemployment series, the “Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons” rate of unemployment, aka U-6, and Trump’s “estimate” of the true unemployment rate.
Figure 1: Official civilian unemployment rate (blue), U-6 (green), and Trump’s “estimate” quoted August 18, 2016. NBER defined recession dates shaded gray. Source: BLS via FRED accessed 3/7/2017, and Time.
Since the quote is from August, I assume Mr. Trump’s estimate pertains to July, 2016. The gap between U-6 and Mr. Trump’s estimate is 32.3 percentage points.
If you were hoping that the economic policy making team had a less-detached-from-reality view of the world, you would not gain any succor from hearing Secretary of Treasury Mnuchin’s views:
“The unemployment rate is not real,” Mnuchin told lawmakers. “I’ve traveled for the last year. I’ve seen this. And the president-elect understands that very clearly.”
Add to this the proposal to report alternative trade statistics, and anyone who wants the government to collect accurate data can become really worried.
This is what occurs when you elect a fruit loop as President. all very predictable unfortunately.
What will he do to the Fed?
By no means do I intend to defend Trump, but in an article regarding the validity of data, and one that deals with the measurement of employment conditions, some consideration of the 4% drop in the participation-rate would be fitting. Of course, that 4% doesn’t account for Trump’s crazy estimate of 42%, but that other 4% of the workforce disappearing into oblivion does keep things apolitical. And the article is after-all about the political damage to the validity of information, and the ‘new-normal’ is not normal.
The 4% did not disappear into oblivion. There is this thing called the internet and you can find out a lot of things. http://equitablegrowth.org/research-analysis/declining-labor-force-participation-rate-causes-consequences-path-forward/
Secular reasons for the decline in participation:
1. Aging and retirement of the large baby boom cohort. Some have enough wealth and income to voluntarily retire, particularly after hitting age 62 or older. Some have suffered health issues which become more likely and chronic as one ages and can no longer work due to disability. Although the participation rate of those older than 54 and 65 have increased, because the absolute numbers of this cohort their retirements drop the overall participation rate.
2. Other secular factors are the unfriendly policies toward families in the American political economy encourage at least one parent, usually the woman, to stay home with minor children. Women participation in the work force, which sent the participation rate to its peak in 1999-2000 has been declining since then. Reference men, many in the 24-54 group have to drop out for retraining as their skills are rendered obsolete and their former employers fold the market for their old job skills vanishes. Related, to this is that if a community was very much one-industry (lumber and paper mills Oregon and Maine and tire & steel manufacturing, Akron and Youngstown, Ohio), and that industry collapses, a large subset of people who don’t move a away and become chronic long-term unemployed and drop out. Finally, criminal convictions and drug abuse render certain numbers unemployable.
3. Finally, the cyclical hysteresis of long term unemployed and part-time unemployed caused a cyclical decline in the participation rate. Increasing pay and benefits may lure increasing numbers back into the labor force the next two years.
Mnuchin does say “Those who have given up on looking for a job entirely […] because they’re retired or in school – aren’t counted.”
The ratio was Employment-population ratio was 59% (NSA) as of January last year. Presumably Trump thought things had got a lot worse between January and August, which would account for the extra 5%. Or he could just be expecting everyone to give their full 105%!
Anyway, that does tally (very approximately) with his 46%. I suppose 41% is, strictly speaking, the unconditional not in employment rate. Does he have a target in mind, and if so, how many children or/and retirees does this involve having to work?
BLS: https://www.bls.gov/news.release/empsit.t01.htm
Well, Trump and the Republicans can dream can’t they! Repealing Social Security and Medicare and bringing back child labor. Why don’t we go whole hog and get rid of the 13th Amendment as well?
“Presumably Trump thought things had got a lot worse between January and August, which would account for the extra 5%.”
and presumably somebody who takes the position of POTUS seriously would actually know the number, rather than assume a convenient one. is it laziness or dishonesty on trump’s part? either way, its wrong.
“Anyway, that does tally (very approximately) with his 46%. I suppose 41% is, strictly speaking, the unconditional not in employment rate.”
if this is the rate he meant, rather than the unemployment rate he stated, then that is the rate he should have stated. again, either ignorance or intent to deceive. neither are traits you really want in POTUS.
Wasn’t G Hubbard the guy who told G Bush,, cut cap gains tax, economy will soar ?
And wasn’t Prof Hubbard on the CEA when the Bush tax cuts were sold, misleadingly (keeping it PG here) as middle class tax cuts ?
Why is he an authority on data integrity ?