Somebody's Story Is Wrong
What we see in the United States and some other economies is a statistical recovery and a human recession
—Larry Summers, Davos, Jan 30, 2010 (via CNBC)
A statistical recovery but a human recession. So true. Perhaps I will have to reevaluate my view of Satan's Earthly Agent for Economic Affairs. But not yet. The greatest trick the Devil ever pulled was convincing the world he didn't exist.
Calculated Risk is an assiduous updater of official government statistics and other economic indicators. He's very good at what he does, and provides well-informed comment, especially on the housing market, with every story he posts. But let's investigate the statistical recovery that CR has been reporting. If the recovery is only in the data, but we still have a human recession, surely that implies that the data does not reflect reality. Surely it implies that the data is measuring the wrong thing.
Here's CR's latest report on the personal consumption expenditures (PCE) component of GDP. PCE is 71% of the total.
Real (inflation-adjusted) PCE. Here's the relevant BEA table in billions of chained (2005) dollars seasonally adjusted at annual rates.
This graph is not zero-scaled on the X-axis. In fact, it shows a relatively minor dip in PCE during the greatest economic downturn since the Great Depression. And as you can see, PCE is roaring back, now climbing toward levels last seen in 2007. That is suspicious in itself, but let's see what it looks like at the next level down.
What's wrong with this graph? Do you see it? It's annual data, so dips in the PCE components during the "Great" recession are hard to see. But they're really hard to see if they're not there!
Services never declined during the worst recession since World War II. Your bullshit detector should be red-lining at this point. This is the Measurement That Can Not Go Down. This happened despite—
- "official" unemployment at 10%, and total joblessness and underemployment (the U6) at 17.3%, with a shrinking Labor Force, which pushes the BLS numbers down. (See my Not In The Labor Force.)
- rising foreclosures and now, short sales, as underwater home owners bail to get out from under their onerous mortgages
- a huge loss of wealth following from the crash in home prices since mid-2006
Etc. See my 2009—A Year We Will Live To Regret for a more complete list of the human disasters besetting the Empire.
One wonders what it would take for Services to show an actual decline—
The Imperial Daily
Only news that's fit to print
July 29, 2012
Clean-up continued in the Midwest, where a large asteroid wiped out Eastern Kansas and much of Missouri in April... Great progress is being made in filling up the gaping hole where St. Louis and Kansas City once stood, and the Mississippi River once flowed...
In other news, the economy continued to grow, as GDP grew 4.1% in the 2nd quarter. In another sign that the rebound continues, personal consumption grew 3.1% in June. This was the 24th consecutive positive month since the "Great" recession ended...
Of course, when you collect unemployment benefits, GDP goes up. When you get sick & die, GDP goes up. Health Care Services showed robust increases every step of the way. (See the BEA data cited above.)
I will be posting again about this. I want to get to the bottom of this
one, but my initial attempts to analyze the data were thwarted when I
ran into the Great Wall of Obfuscation the BEA has erected around the
numbers they print. iTulip's Eric Janszen has an interesting take on this at The Fog of Economic Crisis. It was Eric's story that alerted me to the Ever-Growing Measurement of economic activity.
Perhaps there was a good man out there who lost his good-paying job, ran out of benefits, lost his house, got sick, faced impossible medical bills. A man who left his family from the shame of it all, whose next "residence" was going to be under a bridge. A man who killed himself when he saw the hopelessness of his situation.
His family retrieved him, and gave him a dignified funeral & burial. Here is his tombstone.
Somebody's story is wrong. And it's not yours.