Unemployment
The Bureau of Labor Statistics has released their November Jobs numbers . . . Yikes! There are some interesting data in this release.
In November, the average workweek for production and non-supervisory workers on private nonfarm payrolls fell by 0.1 hour to 33.5 hours, seasonally adjusted–the lowest in the history of the series, which began in 1964. Both the manufacturing workweek and factory overtime fell by 0.2 hour over the month, to 40.3 and 3.3 hours, respectively. There are also questions about how new firms are calculated into the data.
Since new firms are not included in the sample data, that number is imputed. Unfortunately this data is from a historical perspective; thus on a downturn in employment, as we have had, the number of NEW jobs is usually over estimated. In other words, the employment situation was most likely worse than expected!
Does the establishment survey account for employment from new businesses? Yes; monthly establishment survey estimates include an adjustment to account for the net employment change generated by business births and deaths. The adjustment comes from an econometric model that forecasts the monthly net jobs impact of business births and deaths based on the actual past values of the net impact that can be observed with a lag from the Quarterly Census of Employment and Wages. The establishment survey uses modeling rather than sampling for this purpose because the survey is not immediately able to bring new businesses into the sample. There is an unavoidable lag between the birth of a new firm and itsappearance on the sampling frame and availability for selection. BLS adds new businesses to the survey twice a year.
The CES Birth/Death link describes this establishment survey process along with the detailed methodology. If you review the B/D document, you will see that, by using the 2007 model, in most months construction increases, a fact that we know was not the case in 2008 – thus an over estimation of employment. The method gives a little more detail, just in case you are bored today!
Recession Dating
National Bureau of Economic Analysis NBER announced 12.01.2008 that the economy “officially” went into a recession in November of 2007. It is interesting that there was really no mention in the papers. This piece of data is, in fact, very important especially given the history of recessions. A quick evaluation of the past few recessions notes that the troughs were only 8 months from the peak. This recession is turning out to be quite a bit different. I believe we are nowhere near the bottom and may be in for a long period before recovery happens. This recession is already 13 months long with no significant signal of an end. There has been a lot of talk about the credit crisis, but the reality is that people are not credit worthy, thus not allowing them to spend (that is 2/3′s of our economy). The result thus plays havoc on the economy. In the past it appeas that consumers were using home equity as a source of borrowed income. With that source eliminated, as a result of the housing bubble, we find ourselves, as with the rest of the world, in a recession.
Cost of Coal
The Post and Courier would have you believe that that it is inevitable that the cost of electricity is going to rise, hence the need for higher electricity bills. A review of the cost of coal from the Energy Information Administration outlines exactly what has been happening to coal prices. EIA
Like most commodities, coal also experienced a price bubble (remember oil prices of $145/barrel – now $50/barrel!). The same is true of coal primarily because of transportation costs. However, within the last few weeks, coal has dropped significantly and will most likely return to its long term trend forecast, slightly DECREASING in cost. The reason for a decrease is due in part to the phasing out of more expensive sources of production and an increase in production efficiency.
