RSS Feed MenuWhen it comes to economic conditions, I’m generally a glass-three-quarters-full kind of guy. Take unemployment. Quick—what was the risk in 2008 that an American worker would experience at least one bout of unemployment? Chances are you thought that that risk was higher than one in eight.* But figures from government surveys indeed suggest that thirteen out of fifteen workers (or would-be workers) had not a single day unemployed during the first year of the “Great Recession”.** (Incidentally, the recessions of the mid-1970s and the early 1980s were also called the “Great Recession” by some commentators.)
The 2009 data won’t be out until later in the year, but if last year ends up comparable to the depths of the early 1980s recession, then the average worker will “only” have had a seven in nine chance of avoiding unemployment.*** But these figures overstate economic risk because some unemployment is voluntary and much of it is brief. According to the Congressional Budget Office, the chance that a worker experienced an unemployment spell lasting more than two weeks during the three years from 2001 to 2003 was just one in thirteen—a period covering the last recession.
So as I’ve been following the debate about unemployment insurance and whether it actually worsens the unemployment rate, I’ve actually been open to the idea that being able to receive benefits for up to two years might create perverse incentives. The research is not as uniformly dismissive of the idea as some liberal assessments have implied (go to NBER’s website and search the working papers for “unemployment” if you want to check this out yourself).
In particular, the idea that there were 5 people looking for work for every job opening struck me as sounding overly alarmist. So I started looking into the numbers to determine whether I thought they were reliable. The figures folks are using rely on a survey from the Bureau of Labor Statistics called the Job Openings and Labor Turnover Survey, which unfortunately only goes back to December of 2000. But the Conference Board has put out estimates of the number of help wanted ads since the 1950s. Through mid-2005, the estimates were based on print ads, as far as I can tell, but the Conference Board then switched to monitoring online ads. You can find the monthly figures for print ads here and the ones for online ads here. The JOLT and unemployment figures are relatively easy to find at BLS’s website.
When I graphed the two Conference Board series (which requires some indexing to make them consistent–the print ad series being an index pegged to 1987 while the online series gives the actual number of ads) against the number of unemployed, and then the JOLT series against the unemployed, here’s what I found:
I’ll just say I was shocked and that I am much more sympathetic to extension of unemployment insurance than I was yesterday.
* * *
*The post originally said one in ten, which was wrong (the result of mistakenly using a figure I had computed for an older age range). Technically, the the figure was 13.2%, or 1 in 7.6.
** The original post said nine out of ten.
*** The original post said that if it reaches the depths of the 1990s recession, then the average worker will have had a five in six chance of unemployment. I located data for the early 1980s recession, which is a better comparison to the current one.
Cross-posted at The Empiricist Strikes Back.
LFC // Jul 14, 2010 at 3:30 pm
Matter of fact, after the bailout I felt extremely betrayed.
See, Easton! WillyP IS a true right-winger. All of the blatant Republican policy failures over the course of years were just fine, but he finally felt betrayed after the bailout.
Watusie // Jul 14, 2010 at 3:32 pm
WillyP: For the record, I’m not acting like a child. A child speaks of things that he does not understand as if he did. That is what you’re doing. I am acting like an adult who is very tired of hearing ridiculous, nonsensical, partisan rants that have no basis either in reality or logic.
Trust me – you are acting like a child. See your comments at 1:53PM and 2:11PM, wherein you pretend to not be capable of basic reading comprehension in order to avoid answering a question you find difficult.
Then see your comment at 2:30 wherein you insult me because I provided the most succinct and correct answer possible to a question that you asked. That’s when you switched from child to jackass.
Watusie // Jul 14, 2010 at 3:34 pm
WillyP:
To be clear: HOW DID REPUBLICANS CAUSE A HOUSING BUBBLE?
Through cheap money and refusal to regulate the banking industry.
WillyP // Jul 14, 2010 at 3:53 pm
lfc,
what somehow eludes you is the ability to think not in terms of political parties, but economic reality.
if the central bank inflates the money supply by $200 billion dollars, then you get a housing bubble, regardless of who is in power.
if a GSE makes a loan to an insolvent individual or family, they won’t get paid back.
if a private corporation does the same, and the government bails them out, i blame THE GOVERNMENT.
one who understands economics is not beholden to parties or ideologies based on mere labels. i am consistent with my views, and work through the REPUBLICAN PARTY to see my goals realized.
having said that, i am a conservative for a number of other reasons. if democrats were conservative, i’d be a democrat.
but they’re not conservatives; they’re liberals. and they’re not fixing the economy, they’re gutting it.
LFC // Jul 14, 2010 at 4:04 pm
WillyP said… For the record, I’m not acting like a child. A child speaks of things that he does not understand as if he did. That is what you’re doing. I am acting like an adult…
Translation: I know you are but what am I?
…who is very tired of hearing ridiculous, nonsensical, partisan rants that have no basis either in reality or logic.
I gave you a lengthy list of supposed “conservative” policies that caused the current economic collapse, and you refuted none. I tore apart your GSE claim, and yet you can’t refute any of my points concerning private underwriting vs. GSE underwriting, quality of loan conforming (i.e. it’s utter nonsense to intimate that the GSEs were responsible for underwriting loans to an “insolvent individual or family” … that was private companies that did that), or default rates from GSE loans vs. private loans.
The one place I see the GSEs being moronic was in their purchasing of bad mortgages to “get into the game”, but that was long after the damage was done and the collapse was already baked in by then. They bought after the peak and the mortgages they bought were existing, not new. But that’s being bitten by the collapse, not causing it … two VERY different things.
WillyP // Jul 14, 2010 at 4:04 pm
Well, I’m glad the leftists are finally thinking about the meaning “cheap money.” As for “banks not being regulated,” what is a bailout but the most costly form of regulation? An implicit guarantee of solvency by the Federal Reserve through extra-legal means and its discount window is the ultimate encouragement for reckless behavior.
And lest we forget, it was “Progressives” who ushered in the Federal Reserve System, not conservatives.
How long before you all start arguing for a new international gold standard, I wonder?
Really guys, I know you think you’re all so clever, and that Obama is just getting a bum rap for cleaning up Bush’s mess… but you’re going to get trounced this November, no matter how much you blame Bush!
LFC // Jul 14, 2010 at 4:13 pm
… but you’re going to get trounced this November, no matter how much you blame Bush!
Could be true, but it doesn’t change the fact that he left an unprecedented string of failures in his wake.
LFC // Jul 14, 2010 at 4:13 pm
It also doesn’t change the fact that Republicans have provided no real solutions to anything.
Watusie // Jul 14, 2010 at 4:14 pm
@ WillyP
Hey! You promised me a rigorous Socratic grilling, and then you bail after the first blind alley you take us down.
By virtue of your fail the resolution that “the Republicans caused the recession by allowing an asset bubble to develop through their policies of cheap money and lax regulation” is passed.
WillyP // Jul 14, 2010 at 4:14 pm
OK LFC,
you’re right. i’m wrong. it was fiscal conservatism and responsible lending that did this. it was not the government. it was all wall st. it was predatory consumer capitalism. it was the MAN.
we should all roll over and listen to LFC, and not fall back on millennia of tested societal values such as savings, personal responsibility, and thriftiness. we should institute government healthcare; we should cut armed forces; we should legalize all drugs; we should open the border; we should not let car companies fail; we should intimate private business; we should bail out banks; we should stimulate demand through low interest rates and currency debauchment; we should abandon israel and sympathize with terrorists; we should begin questioning the very rights that enable civilization – private property and respect for the individual’s domain; abortions should be legal and accepted as legitimate means to deal with unwanted pregnancy; oh what the hell, we should turn over the kids to the village and tear them away from their parents!
or, we could do the opposite of all those things that define modern “liberalism,” and see the country flourish.
Watusie // Jul 14, 2010 at 4:16 pm
No, WillyP, it was Republicans that did this.
WillyP // Jul 14, 2010 at 4:17 pm
watusie
define “cheap money” for me. then, identify the source of cheap money.
here’s your socratic dialogue. happy?
busboy33 // Jul 14, 2010 at 4:18 pm
Correct me if I’m wrong, but this jobless talking point (which seems to be popular among conservatives) reinforces that people are suffering unemployment.
If the point is to print up “This is Obama’s Deficit” fine. You will anyways, knock yourself out. But if it IS Obama’s deficit, then aren’t you admitting people need unemployment benefits? We’re in a deficit . . .so let’s strategize long-term? No. Get out of the deficit, THEN plot long term.
The point of the “Deficit” meme is that Obama’s policies have destroyed the economy, and that jobs have been lost. The unemployment is so high because the are more people than there are jobs. That’s what happens when you have a “Small Buisness Abortion Tax” funding your NAFTA Superhighway. He’s made it impossible for a buisness to make a buck. He’s trying to get us all enslaved to the public dole so RedFlag Socialism will feel more natural. It’s a trap!
The “No Unfunded Unemployment Benefits” meme is that people are just suckling at the public teat because they are lazy socialist slobs. Lower your god-damn standards, prissyboy, and go get a job. Your granddad worked as a streetsweeper during the Great Depression for 5 cents every month, 29 hours a day, and he was thankful to do it! People won’t get off their lazy ass as long as we pay them to couch surf. That’s the socialist plan, drive jobs away by refusing to work! It’s a trap!
Clearly one cancels the other out, right?
How can the Right keep harping on joblessness and deficits and then fight against unemployment benefits, which they just admitted are necessary? Am I missing something? Because those two things look like they can’t co-exist in the same space without some sort of fight.
WillyP // Jul 14, 2010 at 4:27 pm
busboy,
is that your profession?
what you’re missing in your somewhat accurate reporting is this: power. he is interested in power, and power alone. you can see that all those things you just wrote are not in any conflict when you apply this logic.
people on dole depend on generous benefits; people who are self-sufficient do not need gov’t benefits, but are being destroyed by more and more generous benefits and will soon enough become dependent. this is basically what happened under FDR, too – the citizens receiving benefits, particularly union members, had to vote for the president to maintain their lifestyle.
is that a perfect, clean theory of what’s going on? no, of course it isn’t. but is obama doing anything to HELP the country’s employed, productive people? haha, no, no way!
the proper course of action is to CUT SPENDING and CUT TAXES. wages will DROP, raising employment. prices will drop, naturally, as we deflate from the previous inflation. wealth and prosperity will spread. this is the natural course of events. and precisely what spending more and inflating more prevent.
jquintana // Jul 15, 2010 at 8:33 am
Watusie // Jul 14, 2010 at 3:34 pm:
“[Republicans caused the housing bubble] through cheap money and refusal to regulate the banking industry.”
You can blame “cheap money” for every bubble that’s happened since the mid-90s…it’s been routine policy at the Fed for nearly 15 years to cut the benchmark interest rate whenever we were faced with a looming crisis. As I’m sure most of you know, such a policy pumps liquidity into the economy and forestalls an economic downturn.
Unfortunately, it has some dire consequences: the lure of easy credit created financial bubbles, starting with the tech boom in the mid-90s, the dot.com bubble in the late 90s, the housing boom throughout most of the last decade, and even the short-lived but extremely destructive oil bubble in 2008. With the collapse of each successful bubble, investment capital drained out of the old bubble and poured into the new (everybody was looking for the next big thing), but the housing boom and eventual bust turned into a worldwide financial meltdown because of intrusive government policies and financial innovations put into place starting a full 14 years prior to the collapse.
Along the way, we’ve had Republican and Democrat presidents, and both a Republican and Democrat Congress, and nobody did anything to stop the runaway train. Some brave people spoke out occasionally, but they were drowned out in a chorus of accusations of racism or insensitivity.
jquintana // Jul 15, 2010 at 8:44 am
Barney Frank and Chris Dodd, who have been among the most vocal in blaming the Bush administration for the economic collapse, were, respectively, Chairman of the House Committee on Financial Services and Chairman of the Senate Banking Committee for a full 20 months before the meltdown. I didn’t hear them screaming about reforming the system during this time. In fact, it was quite the contrary. Barney Frank made this statement in 2007: “I want to roll the dice a little bit more in this situation towards subsidized housing.” Senator Dodd continued to maintain that Fannie Mae and Freddie Mac were “on sound footing.” Dodd made that statement in JULY OF 2008! Several months later, both Fannie and Freddie required over $300 billion in taxpayer funded federal bailouts.
If you want to avoid sounding like a partisan fool, then I would advise you all to stop solely blaming Bush for the financial meltdown. Sure, he had a hand in it…in 2002 the Bush administration pressured Congress to pass the American Dream Downpayment Act, which allowed low-income homebuyers to purchase a home with no downpayment whatsoever, and the Bush administration actually stipulated in early 2004 that 56% of all loans be non-traditional sub-prime or low-income loans to people that simply didn’t have the credit rating and/or didn’t have the income to support such a loan. After all, both Democrats AND Republicans argued, neighborhoods with greater percentages of homeownership were less likely to have crime, drug use, homelessness, etc, so it seemed like a worthy cause with all good intentions.
It’s interesting how social liberals blame Bush for the meltdown, but it was social liberal policies—BACKED BY BUSH— that were the actual cause of the problem in the first place. What, was Bush too liberal for you?
Joel // Jul 15, 2010 at 8:59 am
“people on dole depend on generous benefits; people who are self-sufficient do not need gov’t benefits, but are being destroyed by more and more generous benefits and will soon enough become dependent. this is basically what happened under FDR, too – the citizens receiving benefits, particularly union members, had to vote for the president to maintain their lifestyle”.
Because, you know, where there are no jobs at all to be found, people are not given the proper incentives to pursue what doesn’t exist. That would be terrible. Perhaps, on the contrary, there are enough people who are actually motivated by honor and dignity — such that if a job is available they will pursue it — to make conditions like today’s enough to extend unemployment.
Joel // Jul 15, 2010 at 9:26 am
jq
I’m curious, and you seem to know the math on this – what percentage of the total defaults and foreclosures were loans made under CRA? What was the foreclosure default rate of CRA loans vs non-CRA loans?
forgetn // Jul 15, 2010 at 9:31 am
WillP:
Yeah, we really like the “protection” of the US, especially since we are always confused with you guys. Living in the UK, France and Germany I felt a lot less “safe” than I do in Canada, NOT.
The truth, is that Canada is your buffer zone. We’re not protected by America we are the crumple zone. We know exactly how large we are, so what! China is 4x larger than America, does that make them better. Finally, on the “cheap medicine” issue — yeah lots of Canadians bitch about it, its just that you tone-def Americans never listen to what goes on beyond your borders.
Its not so much that we don’t like you, its that you are our neighbors, and we are concerned that you are royally screwing the pooch. With all your unemployed falling off the unemployment benefit rolls could lead to additional crime, and social break down. if you were all in Texas, we would not care, but you’re not. On top of that your states are announcing cuts in their police force and a fall in the number of prison guards. These are very worrying trends as far as Canadians are concerned.
Finally, as for Hockey can we have it back? We’ve given you back baseball, and we’re open to suggestion on basketball. As for Poutine — we’re really sorry about that. We are also sorry for Celine Dion.
LauraNo // Jul 15, 2010 at 9:55 am
It’s interesting how social liberals blame Bush for the meltdown, but it was social liberal policies—BACKED BY BUSH—
Could you point us to one actual economist who blames affordable housing for the meltdown of the financial sector, jquintana? Heritage fellows need not apply…
jquintana // Jul 15, 2010 at 9:59 am
Joel // Jul 15, 2010 at 9:26 am:
“I’m curious, and you seem to know the math on this – what percentage of the total defaults and foreclosures were loans made under CRA? What was the foreclosure default rate of CRA loans vs non-CRA loans?”
The CRA never made any loans, or even guaranteed them. They instead stipulated, starting in 1995, that any mortgage lending institution must dramatically increase its sub-prime lending or face financial sanctions if the lender didn’t have an adequate ‘lending grade.’
At the same time, various citizen activist groups like ACORN were putting pressure on lending institutions to lower their mortgage creditworthiness obligations and lower their down payment requirements, and ACORN would subsequently hold protest rallies against lenders who didn’t comply with their demands. During the Clinton years, the CRA used the information reported from groups like ACORN to evaluate a lender’s CRA grade to see if sanctions were in order against those lending institutions, sanctions such as heavy fines or not allowing banks to engage in interstate commerce. For example, Chase Manhattan and JP Morgan donated (bribed? paid hush money?) several hundred thousand dollars to ACORN while putting in an application for a merger. A look at ACORN’s tax return in 2000 show donations from Wells Fargo, Fleet Services, Fannie Mae, Bank of America, and Chase Manhattan adding up to nearly $5 million dollars. This obviously encouraged ACORN and other activist groups to engage in further such tactics.
jquintana // Jul 15, 2010 at 10:12 am
LauraNo // Jul 15, 2010 at 9:55 am:
“Could you point us to one actual economist who blames affordable housing for the meltdown of the financial sector, jquintana? Heritage fellows need not apply…”
How can I honestly answer such a question? Define ‘affordable housing’ for me first. If by ‘affordable housing’ you mean the asking price of a house is at a level where a low-income buyer can make a decent down payment and can afford to make the monthly payments, then my answer is no, there is no economist who would say that.
However, if by ‘affordable housing’ you mean mortgage lenders were forced by the government to dramatically undermine their time-honored standards of credit worthiness which led millions of unqualified or under-qualified buyers to flood into the housing market, then have those mortgage loans bundled into mortgage-backed securities to be purchased by investors around the world as ’safe’ triple-A rated bonds, then see those bonds become worthless paper when the mortgages started defaulting, then yes, there are plenty of economists who would say that.
Here’s a great start: read The Housing Boom and Bust by Thomas Sowell, a renowned Stanford economics professor.
LauraNo // Jul 15, 2010 at 11:40 am
My brother was one of those ‘account managers’ that pushed equity loans on people who couldn’t afford them. Of course he told himself he was helping them, but he was nowhere around when their mortgage payments skyrocketed 2 years later because they hadn’t read/ understood the fine print. No one was forcing anything on anyone, just tricking them and using cheap money to do it. By affordable housing I meant loans with little to no profit built into them, kind of like how banks actually get money. It seems to me a respectable economist would blame the rating agencies and not the little guy who wanted to buy a home and had no clue, unlike the banksters who at least should have had a clue and many of whom actually did. A lot of the people losing their homes are doing so because the value has fallen well below what they owe on it. I’m not sure how but I bet there are some who can blame the loss of value on the little guy too instead of the risk-taking (but not really) investment bankers/ con artists. Really, I just don’t see how blaming the little guy for financial shenanigans practiced with securities makes any sense. Even if the mortgages were defaulted on, this would have had nothing to do with the worthless paper they were bundled into and most certainly were not the little guy’s fault. Surely? My mortgages had been bandied about for the last 20- 25 years until I moved to Canada where guess what? The same bank I took the loan out with, still holds it after 13 years!
Joel // Jul 15, 2010 at 1:18 pm
“The CRA never made any loans, or even guaranteed them. They instead stipulated, starting in 1995, that any mortgage lending institution must dramatically increase its sub-prime lending or face financial sanctions if the lender didn’t have an adequate ‘lending grade.”
I think I understand that laws don’t make loans, but that’s for the clarification. What I asked, however, was what the percentage of CRA loans — meaning loans made by banks due to CRA — made up the total percentage of defaulted/foreclosed loans. Were loans made under CRA the majority of the total? The minority? 10% 70%? Moreover, out of 100% of CRA oriented loans, what’s the default rate? What’s the default rate of non-CRA oriented loans?
If increased government forced lending to bad credit risk poor people is important enough to be put center stage as a cause of the financial meltdown, these numbers surely must exist and must surely implicated CRA as a piece of legislation pretty clearly.
Also, I’m not sure what Acorn has to do with my question.
LFC // Jul 15, 2010 at 1:57 pm
Man, I’m glad I checked back in this afternoon. WillyP @ Jul 14, 2010 at 4:14 pm really had one heckuva’ beautiful meltdown. It’s like his comment had absolutely nothing to do with what I wrote, other than the fact that he did manage to spell “LFC” right.
It appears that facts are WillyP’s kryptonite. Losing all strength, he is forced into a passionate but ultimately powerless bout of crazy strawman ranting.