Dallas Fed Respondent Sums It Up: “Anyone Saying We’re Not In Recession Is Peddling Fiction”

a reply to: ScepticScot

Can you please explain in what way the above poster is wrong so I can better understand where your coming from?

More in depth?

originally posted by: onequestion
a reply to: jkm1864

Don't even try to say that they are inaccurately measuring inflation using an outdated model.

I look at inflation in terms of actual purchasing power.

How many hours does it take to work for item A B and C.

Then we get a clearer picture of the real impact of inflation especially on wages.

They must not teach that in school. Not really worth the 120k if you ask me.

Yes and no.

You are right that purchasing power is an important measure of the effect of inflation however that is not inflation itself.

For example if salaries and inflation increase in exact alignment there may be no affect on purchasing power of your hours labour, however the inflation will still have an economic affect on investment, savings, debtors and creditors, deferred purchasing etc.

originally posted by: onequestion
a reply to: ScepticScot

Can you please explain in what way the above poster is wrong so I can better understand where your coming from?

More in depth?

Sure, GDP figures are adjusted for inflation (if someone quotes non adjusted figures there is probably an agenda).

So if you have $100 worth of goods created in an economy and inflation makes that $100 worth $110 there is no GDP growth. If you then double the number of goods in the economy (now worth $220) then the GDP growth is 100% not 120%.

This of course depends on the right measure of inflation being used.

a reply to: ScepticScot

What do you think about how they calculate inflation and is it correct and why?

originally posted by: BeefNoMeat
a reply to: ScepticScot
Yes, it varies, but with revisions it's the rule of thumb that 4 quarters qualify as a legit recession. My first job was with Kansas City Federal reserve. Seasonally adjusted estimates of agriculture returns are a big data set they study regularly and those numbers lag; 4 quarters of negative growth qualifies in the mind of policy makers.

Pretty sure two is the more common definition (at least here in the UK). Using the 4 quarter rule then we wouldn't have had any recessions at all in the 70's and the 2008 recession would just have been a standard length. That said it doesn't change the main (on which we agree) point that the US is not in a recession at the moment.

a reply to: ScepticScot

a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two succes

From googling the word recession.

originally posted by: onequestion
a reply to: ScepticScot

What do you think about how they calculate inflation and is it correct and why?

All measures of inflation (and there are many) are at the end of the day an estimate. As indeed are almost all economic measures.

The main measures ate probably not highly accurate for an individual, company or even local government. At aggregate economic level it is probably accurate enough most of the time, or at least more accurate than than not measuring it. (damning with faint praise I know)

a reply to: ScepticScot

So it doesn't represent the local economies.

It's also more accurately a placeholder estimate.

Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

So how does this differ from macro economics?

What the difference in cost in goods and does 2.4% accurately represent the recent cost of living increase seen around the country?

a reply to: onequestion
As most inflation measures are based round a basket of goods to represent the general economy they won't accurately represent the cost of living for any individual. For example increase in transportation costs will have greater affect on cost of living on local communities that are further from main distribution centres.
It is also important to separate out an increase in cost of living from inflation in economic terms. Inflation is a sustained increase over time not a one off adjustment. So for example an increase in petrol duty (or whatever the US equivalent) would increase the cost of living but not necessarily be seen as real inflation.

a reply to: ScepticScot

So it's safe to say Americans experienced something totally different than what the numbers say?

So what's the truth?

originally posted by: onequestion
a reply to: ScepticScot

So it's safe to say Americans experienced something totally different than what the numbers say?

So what's the truth?

Not necessarily totally different. If you have a inflation rate of 2% then you can say that most people will find most things costing a little more over time. Some people will have different experiences depending on their own consumption but it gives a general idea of what's happening.
Unemployment is a even more stark example, unemployment figures don't affect most people directly up to the point when they or immediate family are unemployed. However unemployment is still an important measure of how the economy is doing.

a reply to: ScepticScot

Thanks for correcting me. I was shooting from the hip. Glad we agree on the main point. Good discussion.

a reply to: ScepticScot

But how can th unemployement number accurately reflect the state of the economy when it's done using a survey?

Have you ever been surveyed?

Because unemployment insurance records relate only to people who have applied for such benefits, and since it is impractical to count every unemployed person each month, the government conducts a monthly survey called the Current Population Survey (CPS) to measure the extent of unemployment in the country. The CPS has been conducted in the United States every month since 1940, when it began as a Work Projects Administration program. In 1942, the U.S. Census Bureau took over responsibility for the CPS. The survey has been expanded and modified several times since then. In 1994, for instance, the CPS underwent a major redesign in order to computerize the interview process as well as to obtain more comprehensive and relevant information.

www.bls.gov...

How can that accurately reflect the state of employment and how does this compare to the labor force participation rate and why do they tell two different stories?

originally posted by: BeefNoMeat
a reply to: ScepticScot

Thanks for correcting me. I was shooting from the hip. Glad we agree on the main point. Good discussion.

You haven't participate in a discussion you've simply state that you are the end all be all to everything economy and that you are now God.

a reply to: onequestion
Well I don't live in US and measures we use are slightly different, however as I stated above pretty much every economic measure is an estimate. Not every transaction can measured to work out GDP, not every price change can be checked for inflation.

In a way it is more important that they are consistent than accurate. For example there is a lot of belief that unemployment figures under repored (which I would agree with). To be a useful measure it is better that they under report by a consistent amount than are accurate sometimes and not others. The purpose should be to gauge if unemployment is going up or down. Not to give a 100% accurate total of unemployment.

This is why when calculation methods are revised it is important to adjust for historical differences.

a reply to: ScepticScot

I totally understand what your saying about being consistent.

But how do we get the truth when the consistency is a lie?

If the number is portrayed as true and everyone is told to believe it without really looking into it then the enteral public believes it to be true and it's totally a lie and inaccurate and they know it.

a reply to: onequestion

It's not a lie however, it is an estimated figure based on sound statistical principles. If you think of the answer to almost any question in politics, economics, social sciences and even a fair amount of 'hard' science you will generally find that it is one way or another an estimated figure.

You can will relative ease find out how pretty much any official government economic figure is put together. The fact that the majority people will not (and frankly why should they) does not in anyway invalidate the figures.

Politicians and journalists will often misrepresent or spin the figures I agree, that is why if you care about economics it is important (as with any subject that is often politicised) to look at the real figures and sources, not news sites pushing an agenda.

a reply to: ScepticScot

So, quite clearly, UI information cannot be used as a source for complete information on the number of unemployed.

BLS

RIGHT OFF THEIR WEBSITE!

They don't have a fricken clue the unemployement number is.

I just... Can't.

originally posted by: onequestion
a reply to: ScepticScot

So, quite clearly, UI information cannot be used as a source for complete information on the number of unemployed.

BLS

RIGHT OFF THEIR WEBSITE!

They don't have a fricken clue the unemployement number is.

I just... Can't.

So they tell you on their own web site that it is an estimated figure and you think this means that they are lying about unemployment?

Saying something is not a full measure of unemployment is not the same as saying they have no 'frigging clue what the unemployment number is'

a reply to: ScepticScot

There are about 60,000 eligible households in the sample for this survey. This translates into approximately 110,000 individuals each month, a large sample compared to public opinion surveys, which usually cover fewer than 2,000 people. The CPS sample is selected so as to be representative of the entire population of the United States. In order to select the sample, all of the counties and independent cities in the country first are grouped into approximately 2,000 geographic areas (sampling units). The Census Bureau then designs and selects a sample of about 800 of these geographic areas to represent each state and the District of Columbia. The sample is a state-based design and reflects urban and rural areas, different types of industrial and farming areas, and the major geographic divisions of each state.

They randomly pick 60,000 households.

Seems more like a guess than an estimate.