Relevant and even prescient commentary on news, politics and the economy.

Angry Bear contributor now at Economonitor

Angry Bear contributor Rebecca Wilder has begun writing her own column, The Wilder View, at the internationally prestigious Economonitor (Nouriel Roubini).

The Wilder View at Economonitor

Europe: Why the One-Size-Fits-All Solution Won’t Work and

Linking sovereign risk to corporate credit spreads in Europe

…and is interviewed and quoted by Floyd Norris in the New York Times.

Government Debt Doesn’t Tell the Whole Story
New York Times by Floyd Norris

In Ireland, as in Spain, the government paid down debt while private sector grew,” said Rebecca Wilder, an economist and money manager whose blog at the …

You can follow her there in the sidebar feed for other blog contributions.

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In Other News, 90% of VeloNews Readers Consider Themselves Above-Average Cyclist

Floyd Norris discovers a mathematical impossibility:

Asked to rank, on a scale of one (excellent) to five (poor), the ability of their board’s compensation committee to “effectively manage C.E.O. compensation, 83 percent of the directors chose one or two, and only 4 percent picked four or five.

But asked, “In general, do you believe U.S. company board are having trouble controlling the size of C.E.O. compensation?” 58 percent thought the boards were having trouble, while 34 percent disagreed and the rest were unsure.

Since CompComs generally benchmark against the packages of CEOs in “similar” companies, you have to be really stupid or ignorant as a Director to believe you do it right while your competitors don’t.

But don’t think the Directors know they are incompetent:

Even if directors are not doing a good job, it is not a good idea to give others a say, at least to most directors. More than three-quarters are against giving shareholders a vote on C.E.O. compensation….

As for their own pay, the directors split almost down the middle: 45 percent thought pay should rise, and 53 percent thought it should not. The other 2 percent thought director pay should be reduced. If their identities leak, they are unlikely to be renominated.

Michael Jensen is rolling over in his grave, despite not being dead yet.

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Seasonal Posting: NYTFail, Part 2

First, David Leonhardt argued that this recession was good for workers.

Now, Floyd Norris apparently has decided to mix and match data. (I wonder if the fact many NYT employees who are looking at their 45-day severance offers is having an effect on its economic coverage.)

One of the standard “economist jokes” is about the one who died because he forgot to “seasonally adjust” his pool. In that tradition, Norris declares:

The adjustments are for seasonality. For some reason, October is the month with the largest seasonal adjustment down in jobs. So the increase in the unemployment rate does not reflect people actually losing jobs. It reflects the belief that seasonal factors should have added more jobs than they did.

All this may be very reasonable, and there is no way I can think of to test whether the seasonal adjustments are reliable. [emphases mine]

Gosh, I wonder why October would have a larger seasonal adjustment, and whether there is any BLS data to support that adjustment?

Apparently, employers traditionally hire a lot of people in October for “the Holiday Season.” And while it’s possible that they will be doing all that hiring in November this year, it hasn’t been the way to bet during this millennium.

Norris continues:

But I suspect seasonal factors are less important this year, when the economy may be changing directions, than they normally are.

It was with such optimism that Napoleon went to Russia, people bought VA Linux at $100 a share, and the Bush/Cheney/Rumsfeld axis decided to run a two-front war in Afghanistan and Iraq. With statements similar to Norris’s:

In reality, the government report says unemployment rates remained steady at 9.5 percent. And the number of jobs actually rose, by 80,000. And the number of jobs for college-educated Americans rose more than in any month in the last six years.

Well, the number of jobs rose (as one would expect, given the Holiday Sales push) but Table B-1 is closer to 40,000 than 80,000:

Where we do see an 80,000 job increase is in the private sector, which is more than 500,000 workers lower than it was in August. If you want to play a non-seasonally adjusted, private-sector only game with the data, you should at least be honest about it.

More vitriol and data below the break.

The details of that 80,000 look even worse: declines in all Goods-producing areas (except about 200 new jobs in primary metals, 300 in “miscellaneous manufacturing,” and 1,100 in motor vehicles and parts; cash for clunkers, anyone?) which are balanced by the Service sector, most notably the 63,500 new Retail jobs. Can you say “seasonal employment”? Floyd Norris apparently cannot.

The rest of the Non-Seasonally Adjusted figures are even less encouraging. Table A-8 of the report shows more than 100,000 people added to “not on temporary layoff”:

while Table A-9 is depressing: a larger number of unemployed at all durations, with the median duration of unemployment increased by more than one month (in a month):

And while the BLS has not updated their Job Openings data for October, the graphic through September isn’t exactly pointing to a decline in that median (or a robust recovery):

Is there a recovery in process? Maybe, though I’m not convinced, since most of the positive data seems, as Paul Krugman noted, “unrepresentative.”

But things are not so good as Floyd Norris wants to pretend, even (or especially) using the data he chooses to highlight.

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NBER generally gets it right

Brad DeLong suggested a bit before the U.S. election that there was virtually no non-political reason for NBER not to admit the United States was in a recession.*

A little late, but they generally got it right. As Floyd Norris notes:

The National Bureau of Economic Research said today that the current recession began a year ago, in December 2007.

I’ve been arguing for some time that the recession started around then (between October 2007 and January 2008), but for much of that time it was a lonely vigil, with few economists in agreement until things fell apart in September.

I would still argue for October 2007;the “peak” in December was related more to a Certain Holiday than anything real. (It’s not called “Black Friday” in honor of workers who get trampled.) But at least they called it, which will make it more difficult to argue that “the recession started on Obama’s watch.”

Sorry, New Economist.

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Floyd Norris points out another reason the bailout will not work

Take a page from Douglas North et al., I will simply note that if the institutions charged with managing the process are corrupt, the chance of success approaches zero.

Case in point, Christopher Cox (R-BoughtAndPaid) and the SEC:

The interesting thing here is that we have already heard that the S.E.C. staff almost immediately demanded such changes. Christopher Cox, the chairman, emphasized Tuesday that the commission imposed its new rules after conferring with the Fed and the Treasury. If he consulted with anyone, inside or outside the S.E.C., who actually understood how markets work, I have not heard about it. [emphases mine]

So the two institutions that are battling to be able to say fu with $700,000,000,000 in taxpayer money could not provide Cox with reasonable guidance.

I feel so much better.

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