Posted by: Michael Mandel on May 14
I'm travelling today to the "2008 World Congress on National Accounts and Economic Performance Measure for Nations." (on the train down to Washington DC as I write this). Basically a full week conference on how to make sure that the economic statistics are measuring exactly what we want them to be measuring, given the changes in the world economy.
I hadn't planned on going, but the program looked so appetizing that I changed my schedule. If you want to see the program, you can find it here
Frankly, I consider this stuff to be incredibly significant. When it comes to the economy, we depend on the statistics to tell us what is happening. If the statistics aren't right, we run the risk of making bad decisions, both personally and in terms of policy.
Update: I was strong-armed into giving a short talk at lunchtime about the importance of economic statistics from the perspective of a journalist. Fun.
Posted by: Michael Mandel on May 07
I just got this press release from the American Physical Society. This is the sort of thing which depresses me. If we can't find the money to spend on science and innovation, then my optimism index goes way down.
America’s Physics Nobel Laureates Send Letter to President Bush Requesting Emergency Science Funding to Reverse Damage to Science
WASHINGTON, D.C.- America’s Physics Nobel Laureates sent a letter to President Bush today requesting that $510 million be included in the Fiscal Year 2008 Emergency Supplemental Bill in an effort to reverse the damage done to basic science research in the FY ’08 Omnibus Appropriations Bill.
After the Omnibus Appropriations Bill passed last year, scientists lost their jobs; grants and fellowships were cut; and facilities operations were scaled back at national laboratories. In addition, the nation’s $160 million contribution to the construction of the International Thermonuclear Experimental Reactor (ITER), was cut from the budget, damaging our reputation as a reliable partner for international projects.
The FY ’08 budget sent the wrong message to aspiring scientists who are considering entering the science field. Instead of doubling funding as outlined in the bipartisan American COMPETES Act, which passed Congress by an overwhelming margin last year, it even fails to provide for inflation-adjusted costs.
Posted by: Michael Mandel on May 07
I've had this post sitting here for a while, and I've decided to just put it up. It's not earth-shaking, but it's kind of interesting.
Last Wednesday the BLS announced strong productivity growth in the nonfarm business sector--2.2% in the first quarter. This number was a surprise to most economists, who expected a much lower number, closer to 1.5%.
The miss is because virtually all the private employment growth has been in nonprofits, which are not counted in productivity...and that suggests private business employment is dropping at a rapid rate.
Let's step through this real slow. The headline number is "nonfarm business productivity." The nonfarm business sector does not include nonprofit hospitals, nonprofit schools (like Harvard!), or nonprofit membership organizations, which would include political parties. Here's what the BLS says on its site:
The business sector excludes many activities where it is difficult to draw inferences on productivity from GDP. These excluded activities are: General government, nonprofit institutions, paid employees of private households, and the rental value of owner-occupied dwellings.
So neither nonprofit output nor nonprofit employment are counted in the productivity stats. The BEA removes nonprofit output from the GDP, as part of its process of contructing the nonfarm business sector. (see NIPA tables 1.3.6 and 1.3.5) In the first quarter, for example, the output of "nonprofit institutions serving individuals" grew at a 3.3% annual rate, compared to 0.6% for GDP as a whole.
To calculate productivity, the BLS removes nonprofit employment from the employment stats. What's in the nonprofit sector? You can construct a reasonable approximation to the BLS nonprofit employment series using 80% of private educational services (NAICS 61), 53% of healthcare and social assistance (62), 100% of museums, historical parks, zoos, and parks (712) and 100% of membership associations and organizations (813). The last one is a category which includes foundations, civic organization, religious organizations and the like.
So roughly about 60% of nonprofit employment is in health care. Another 20% or so is in membership organizations, and most of the rest is in education. All told, the BLS has about 13.6 million jobs in the nonprofit sector in 08Q1, about 12% of the total number of private jobs.
Under normal circumstances, nobody worries much about the removal of nonprofits. But it turns out in recent months, virtually all of the employment growth has been in nonprofits. Take a look at the chart below.
In the first quarter of 08, private sector jobs fell at an 0.6% annual rate. After taking out nonprofits, the rate of decline almost doubled, to 1.1%. That pretty much accounts for the entire miss in the productivity figures.
What's the implication of this? If we are measuring the size of the nonprofit sector correctly, the implication is that private sector businesses are cutting much faster than the raw numbers show. That is to say, a -1.1% growth rate in private sector business employment in the first quarter.
Posted by: Michael Mandel on May 01
I had promised a week of optimistic posts, but only delivered 3. That means I owe you folks two more.
Posted by: Michael Mandel on May 01
According to the BEA's latest report, real personal consumption grew at a 1% rate in the first quarter. But once I take out the parts of PCE which don't actually come directly from consumer pockets, the rest of real PCE actually shrunk at an 0.1% rate. The chart is here:
You can see the down bar on the far right.
This calculation updates the one I did for the "Consumer Spending Mirage" (which Brad DeLong was kind enough to highlight here). See also the BEA's defense of imputations, which I assume was a response to my story.
To get these figures, I remove owner-occupied housing, unpaid financial services, and 85% of medical care from consumer spending. Owner-occupied housing and unpaid financial services are imputations, which means they don't directly correspond to cash expenditures. And roughly 85% of medical care spending flows through Medicare, Medicaid, and health insurance companies, so once again not out of pocket.
