Actually knowing something about economics is depressing.

Unless you are Hillary Clinton, and refuse to bother with those "elite economists," things start looking dark.

This month, Harper's magazine published a 'sky is falling' article on its cover (uploaded here in pdf format, or read an abridged version here), stating that the economy is worse than we know. It charts how the calculation of government numbers (like the Consumer Price Index) has shifted and shifted again to make sure things look like they are moving in the right direction. For example:

[Nixon] proposed albeit unsuccessfully—that the Labor Department, which prepared both seasonally adjusted and non-adjusted unemployment numbers, should just publish whichever number was lower. In a more consequential move, he asked his second Federal Reserve chairman, Arthur Burns, to develop what became an ultimately famous division between "core" inflation and headline inflation. It the Consumer Price Index was calculated by tracking a bundle of prices, so-called core inflation would simply exclude, because of "volatility," categories that happened to he troublesome: at that time, food and energy. Core inflation could he spotlighted when the headline number was embarrassing, as it was in 1973 and 1974. (The economic commentator Barry Ritholtz has joked that core inflation is better called "inflation ex-inflation"—i.e., inflation after the inflation has been excluded.)

The adjustments continued: Reagan shifted the mechanism for accounting for housing costs, and pulled military servicemembers and suddenly classified them as 'employed' instead of outside the labor force. And then under Clinton, employment statistics shifted again:

Although expunged from the ranks of the unemployed, discouraged workers had nevertheless been counted in the larger workforce. But in 1994, the Bureau of Labor Statistics redefined the workforce to include only that small percentage of the discouraged who had been seeking work for less than a year. The longer-term discouraged—some 4 million U.S. adults—fell out of the main monthly tally. Some now call them the "hidden unemployed." For its last four years, the Clinton Administration also thinned the monthly household economic sampling by one sixth, from 60,000 to 50,000, and a disproportionate number of the dropped households were in the inner cities; the reduced sample (and a new adjustment formula) is believed to have reduced black unemployment estimates and eased worsening poverty figures.

This week the Inquirer wrote about just these people: outside of the statistics but not in a viable job. They talked to a former rower with a biochemistry degree who was laid off and is cobbling together work landscaping, financial consulting, and Ebay selling. And they talked to YPP's Mark Price about the gap between what the numbers show and how people are living here in the Philadelphia area:

As the bad economic news piles up, most people focus on the unemployment rate. But economists say these other measures of underemployment are also important indicators of economic distress. They tend to rise with unemployment, compounding the negative numbers. ....

Mark Price, a labor economist with Pennsylvania's Keystone Research Center, lists the ingredients for what he terms "the most liberal definition of unemployment": people who are unemployed and looking for work, people who want jobs but have given up looking for one, and people who have taken part-time jobs because they can't find full-time work.

These measurements provide the broadest measure of labor underutilization, according to Price.

Last month, 9.2 percent of the workforce fell into one of these three categories.

These are among the numbers to watch if economic woes deepen, especially because the job market never fully recovered from the recession of 2001, Price said.

The 9.2 percent, which better captures the lived reality of people trying to pull together paychecks that will pay their bills, is huge. Stark.

And the debate goes back and forth over whether violence has to stop before eonomic development occurs (see this weekend's New York Time Magazine on an anti-violence initiative that is modeled after attempts to contain contagious disease). But in 2005 almost forty percent of working-age African American men in Philadelphia were unemployed or outside the labor force (see page 8). It's that number, not the manipulated overall federal unemployment rate, that determines what life is like in communities like Philadelphia's:

Two University of Washington social demographers analyzed 1970 and 1990 census data to examine all forms of violent deaths in Chicago - homicide, accidental death and suicide - and determine whether race or economic opportunity was the key predictor.

"Both black and non-black communities show generally similar responses to endemic joblessness in terms of mortality," Gunnar Almgren, lead author of the study, said. "Race is not an explanation for differences in violent death rates. It's about jobs. If you isolate any group from jobs, it is going to have negative effects, and inner-city black-community levels of joblessness are higher than any other group."

PS I don't actually know anything about economics

that is, personally. So I'd be interested to hear from all of you experts (professional and armchair).

Also, here's a Wendell Berry article from the same Harper's. It's just as depressing, but really moving: Wendell Berry, "Faustian Economics".

If you don't actually know anything about economics...

... that puts you on par with most economists.



I couldn't get either of the PDF's from that downloading site to work. Those sites never seem to work for me.

This Too Will Pass, for the guts in your cerebrum.

A quieter cost of unemployment

One thing which is not always realized is that financial woes are the #1 thing which lead to divorce. And, needless to say, extended periods of unemployment- especially for a family's primary wage earner- are the source of *extreme* financial woes. Therefore, it wouldn't surprise me to extended periods of unemployment- which are most common under GOP regimes- being strongly correlated with rising divorce rates.

Another victory for family values, don'tcha think?


thanks jennifer!

this was interesting. And Mark's comments are interesting to me, in that his definition of "unemployed" does not account for what seem like more and more people with bachelor's, and even masters who live off of a variety of independent contracts. so like how do they fit into the schema of unemployed classification?

i think this speaks to the need, once again, (forgive me) for a new New Deal.


It also speaks to the need for more sociologically (and maybe even ethnographically) varied study of employment and unemployment in American cities. It does seem like there are more white-collar folks who scramble for piecemeal employment than ever before. And of course, there are still plenty of blue-collar workers who do the same.

Stunning statistic

But in 2005 almost forty percent of working-age African American men in Philadelphia were unemployed or outside the labor force

It wasn't clear to me (from a cursory look at the source) whether that number includes those who are incarcerated - but even if it does, it's a stunning statistic.

Sort of

Their population numbers come from the Census' American Community Survey. The census counts people as residents of where they are incarcerated, not where their residence is. This is a really controversial topic, especially when it comes to drawing Congressional boundaries. For example, a concentration of NY prisoners are from NYC, but the prisons are generally upstate... So, it artificially makes small towns have more people and more representatives, even though those prisoners are not from there, and cannot vote.

So, for prisoners actually within the City limits- I bet it counts them. But, if someone is at Graterford or anywhere else, then definitely not.

But yeah, whatever the exact answer is, that is an absolutely crazy statistic to think about.

Macro Economics is such a

Macro Economics is such a kludgy subject. There are differing arguments about inflation and unemployment, to the point where pretty much every Macro Economist, from the armchair to the Nobel Prize winner has been massively wrong in their predictions from one time or another.

I wonder if food and gas prices are factored into the inflation rate transitively (i.e. higher prices for gas means higher prices for all goods and services and increased wage pressure, etc.) Inflation also doesn't take into account how in some cases, buying power in much greater over time, as new things become commoditized. Like I read a statistic that if you take inflation into account, over half of Americans would be considered to be living below the poverty line in the 1950's, even though we were in an economic boom. The difference is that a lot of people didn't have indoor toilets back in those days, and even many poor people these days have cable.

Thus, pretty much every Economic prediction that's done by an Economist will always end with, "we think". Except, of course, if every Economist with half a brain agrees on something, like, I don't know, the Gas Tax Holiday.

All I can say is thank goodness

that all those economic experts said it was a great idea for Philly to invest so much money in the Convention Center project. As we well know, the convention business does just peachy when the economy does a downturn. Just imagine what a disaster it would have been had they focused on projects in our City's neighborhoods instead.

Which economic experts

are you talking about?

Exactly. The expansion of

Exactly. The expansion of Convention Center was basically something no one talked badly about in Philly because the State was paying. But, it is basically impossible to justify.


The economists' studies I remember said the CC project was a bad idea.

Nice post Jennifer

Interesting post and links. If I can steal some time I will comment further. But in leu of further pontification let me repeat a quote from one of the great economists of the 20th century.

"The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to avoid being deceived by economists."
--Joan Robinson

--Mark Price


pretty awesome.

PS I owe Dan for the last two links.

PPS seriously someone please read that Wendell Berry article. (I sent it to like my entire family when I first read it and only my grandma in Maine wrote back and I think it sort of disturbed her.)

So crazy

I've been really nursing the idea of going back to school for economics and that Harper's Article really got me going. I used to be way into that stuff in college and I knew that some of our numbers were pretty warped. I often think that a lot of our problems go back to the question of a money supply (I think credit counts) that's much, much too large.

I didn't realize that inflation was so intensely fiddled with, though. That's depressing and scary. There does seem to be this sense that things are converging in a way that is just not going to be good down the road. That Harper's piece really nailed that.

This Too Will Pass, for the guts in your cerebrum.

Yo Brady and Ray

Ahh this blog moves to fast for me or maybe I’m just slow. I never answered Ray’s question above. Sorry Ray. I suck.

Brady the Kevin Phillips piece from Harpers has been popping up in various places on the web. Mark Thoma makes some good points about the data problems that Phillips weaves a tale around.

And let me hoist Dean Baker from his own comments section on the inflation measure and Phillips:

“I think there are problems with the CPI. but there are nowhere near the magnitude that Phillips suggests and they certainly are not all on the high side.
On the biggest issue, not including home sales prices (instead they use rental values) the Bureau of Labor Statistics is right. Furthermore, since house sale prices are now falling, including sale prices would lead to a lower CPI, not a higher one.”

My two cents, data is never perfect. And data itself never wins the day.

--Mark Price

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