Tilted Forum Project Discussion Community - View Single Post - If you scare enough people, you can change the economic mood (and political leanings)

Baraka_Guru · 08-02-2010, 07:35 PM

First, I don't know if anyone is actively trying to keep the economy down. The issue with the media, as it has always been, is that "if it bleeds, it leads." The media reports bad news, and to compete with ratings they do it with at least some spectacle, if not a lot.

While the employment numbers are still dismal, it's important to remember that these numbers are lagging indicators of the economy. They only reflect what has happened in the past (which is, not enough people were required to produce goods and services). It's a useful number as one of many for gauging the economy; but it isn't a very promising number to look at if you're unemployed or are hoping the economy gets better so you can keep your job. Basically, the unemployment numbers are the numbers calculated after the economy has already changed.

But employment figures are popular in the media because the idea of being unemployed is frightening to us all. I'm not surprised it gets a lot of coverage. But, remember, all the numbers are saying is, "This is what happened" (i.e. businesses laid people off in anticipation of not doing enough business).

If you want to look at indicators of what's currently happening or what might forecast economic activity, then there are two other categories: coincident and leading indicators, respectively.

Coincident indicators reveal what's happening in the economy right now. If you want know what the current state of the economy is, then stop looking at employment numbers and look at such things as income levels, GDP, industrial production, and retail sales. And I think it's rather popular to view GDP growth/loss as "the economy." But that's an oversimplification.

Leading indicators reveal what's likely to happen in the economy down the road. This includes such things as housing starts (which will require construction) and manufacturers' receiving new orders, especially for such things as consumer goods like cars and appliances. Another leading indicator is changes in stock prices, as these reflect on profit potential in the markets.

That said, I think that employment numbers receive too much attention in the media and the mindset of the public. It's a painful indicator, I know, but look at it for what it is: a reflection of the past.

If you consider the GDP (2.4% growth for the second quarter), you will note that economists are disappointed. The revised estimate was 3.7%. However, the GDP has been growing for the past several months. What this means is that the U.S. economy is recovering, but it's recovering much slower than anticipated. BUT, it's recovering.

If you consider retail sales, analysts are predicting a 3.1% increase for July, which is compared to a 5.1% drop over the same period last year. However, this increase, like the GDP, is lower than what people would like. What can we say? Consumers are still nervous about spending money, and many are unemployed. However, these figures reflect what's going on right now. We know shortly after each month just what retail was doing. An interesting measure of the current state of the economy: a direct indicator of consumer confidence, and an indicator that is tied into manufacturing and inventories.

As for leading indicators (what's coming up), it's a mixed bag: housing starts are flat-lining (prices have only started to recover this year) but auto sales are up by 15 to 20% compared to the same period last year, and stock index levels have recovered a good chunk of what they lost in '08 and '09, but recent months have shown ups and downs, as there is still a lot of uncertainty.

So there you have it. Pick your indicator depending on what view of the economy you want. Do you want to look ahead, look back, or look at what's going on right now?

If you've read this far (actually, even if you haven't), I've proven my point: not everyone wants to spend the time to learn what's going on and would just rather read headlines or watch news summaries on their favourite TV shows.

If you want to be spooked by employment numbers, then go right ahead and be spooked. But if you want a more level-headed view of how the economy works, then try looking at a few other things.

If more people did, maybe the recovery wouldn't be so modest.

08-02-2010, 07:35 PM	#3 (permalink)
Baraka_Guru warrior bodhisattva Super Moderator Location: East-central Canada	First, I don't know if anyone is actively trying to keep the economy down. The issue with the media, as it has always been, is that "if it bleeds, it leads." The media reports bad news, and to compete with ratings they do it with at least some spectacle, if not a lot. While the employment numbers are still dismal, it's important to remember that these numbers are lagging indicators of the economy. They only reflect what has happened in the past (which is, not enough people were required to produce goods and services). It's a useful number as one of many for gauging the economy; but it isn't a very promising number to look at if you're unemployed or are hoping the economy gets better so you can keep your job. Basically, the unemployment numbers are the numbers calculated after the economy has already changed. But employment figures are popular in the media because the idea of being unemployed is frightening to us all. I'm not surprised it gets a lot of coverage. But, remember, all the numbers are saying is, "This is what happened" (i.e. businesses laid people off in anticipation of not doing enough business). If you want to look at indicators of what's currently happening or what might forecast economic activity, then there are two other categories: coincident and leading indicators, respectively. Coincident indicators reveal what's happening in the economy right now. If you want know what the current state of the economy is, then stop looking at employment numbers and look at such things as income levels, GDP, industrial production, and retail sales. And I think it's rather popular to view GDP growth/loss as "the economy." But that's an oversimplification. Leading indicators reveal what's likely to happen in the economy down the road. This includes such things as housing starts (which will require construction) and manufacturers' receiving new orders, especially for such things as consumer goods like cars and appliances. Another leading indicator is changes in stock prices, as these reflect on profit potential in the markets. That said, I think that employment numbers receive too much attention in the media and the mindset of the public. It's a painful indicator, I know, but look at it for what it is: a reflection of the past. If you consider the GDP (2.4% growth for the second quarter), you will note that economists are disappointed. The revised estimate was 3.7%. However, the GDP has been growing for the past several months. What this means is that the U.S. economy is recovering, but it's recovering much slower than anticipated. BUT, it's recovering. If you consider retail sales, analysts are predicting a 3.1% increase for July, which is compared to a 5.1% drop over the same period last year. However, this increase, like the GDP, is lower than what people would like. What can we say? Consumers are still nervous about spending money, and many are unemployed. However, these figures reflect what's going on right now. We know shortly after each month just what retail was doing. An interesting measure of the current state of the economy: a direct indicator of consumer confidence, and an indicator that is tied into manufacturing and inventories. As for leading indicators (what's coming up), it's a mixed bag: housing starts are flat-lining (prices have only started to recover this year) but auto sales are up by 15 to 20% compared to the same period last year, and stock index levels have recovered a good chunk of what they lost in '08 and '09, but recent months have shown ups and downs, as there is still a lot of uncertainty. So there you have it. Pick your indicator depending on what view of the economy you want. Do you want to look ahead, look back, or look at what's going on right now? If you've read this far (actually, even if you haven't), I've proven my point: not everyone wants to spend the time to learn what's going on and would just rather read headlines or watch news summaries on their favourite TV shows. If you want to be spooked by employment numbers, then go right ahead and be spooked. But if you want a more level-headed view of how the economy works, then try looking at a few other things. If more people did, maybe the recovery wouldn't be so modest. __________________ Knowing that death is certain and that the time of death is uncertain, what's the most important thing? —Bhikkhuni Pema Chödrön Humankind cannot bear very much reality. —From "Burnt Norton," Four Quartets (1936), T. S. Eliot Last edited by Baraka_Guru; 08-02-2010 at 07:41 PM..