Friday 2:21 p.m. Dec. 4, 2009
There is some very good news on the unemployment front in both the U.S and Canada in reports from the U.S.Bureau of Labour statistics and Stats Canada.In the U.S. the the jobless rate dropped in November to 10.0 % from 10.2 %.Job losses in November totalled only 11,000. This is clearly a very welcome statistic which probably indicates that the unemployment rate has now peaked and in the coming months will start dropping on a month to month basis.Of course, in order for this to happen more of the stimulus funds need to be spent and more employers have to start hiring workers as sales and confidence expands. In all of the previous recessions except for the mini recession in 2001-03 once the labour market turns in a given month at the end of the technical recession month to month employment improves and the unemployment rate drops and does not return to the previous peak.
This was true in 1973-76; 1981-84; 1990-1993. In each of these deep recessions the unemployment rate peaked and then fell consistently month to month in the months to follow. We shall see if this slump follows a similar pattern but there is every good reason except for the degree of globalization that now prevails to except a similar outcome. If you are betting it is a good but somewhat risky bet.
The details are as follows : Unemployment peaked in May 1975 at 9.0% then declined month to month to 7.4 % a year later.In two years it was 7.0%, 6.0% in three years and 5.6 % in four years.
Unemployment peaked in November 1982 at 10.8 %. It then fell to 8.3 % a year later, to 7.2 % two years later and to 7.0 % three years later.
In 1992 it peaked at 7.8% in June then fell to 7.0% a year later, to 6.1 % two years later and to 5.6 % three years later.
In Canada the unemployment rate dropped from 8.6 to 8.5 %.Full time employment rose by 39,000 in November the third consecutive month of employment gains. The labour market however still remains(-1.9%) 321,000 below its its October 2008 peak .
Wednesday, October 27, 2010
Dubai debt standstill market selloff
Nov.27, 2009
October and November 2009 are difficult months for skittish superstitious investors. After all the great crash of 1929 took place eighty years ago this fall and many investors have not forgotten. Nor have they forgotten the calamitous events of fall 2008 which are still very fresh in their memory. In recent months many analysts have been warning that the boomlet in stock prices that has dominated market sentiments since the market reached its nadir last spring was due for a major correction. Recent events in the Gulf city state of Dubai appear to be the trigger. Dubai and its real estate development corporation, Dubai World has been engaged in a much touted real estate development project, the Palm, which has involved land reclamation, luxury hotels and condos and construction of one of the world's tallest structures. The project has made a spectacular mark on the gulf landscape that has been widely admired. But this week some of the lustre has come off the jewel.The project depended upon the backing of the neighbouring Abu Dhabi government which is extremely rich in oil reserves.
But this week Dubai announced that it wanted a standstill on servicing the more than 80 billion dollars of debt associated with the project. This sent shock waves around the globe, particularly in the London financial markets which are much more exposed to the gulf than New York. Markets lost between 2 and 5 % in the day's trading.The bonds issued by Nakheel, Dubai's real estate development arm
fell substantially in price as risk aversion more than doubled.It is quite possible this will be a one time weekend wonder with the markets absorbing the shock and moving on. But we won't know this until Monday.
In the meantime the need for better oversight and regulation has never been clearer.Real estate speculation is a classic area that is vulnerable to bubbles and irrational exhuberance. Globalization that is unrestrained and unregulated is unsustainable.
October and November 2009 are difficult months for skittish superstitious investors. After all the great crash of 1929 took place eighty years ago this fall and many investors have not forgotten. Nor have they forgotten the calamitous events of fall 2008 which are still very fresh in their memory. In recent months many analysts have been warning that the boomlet in stock prices that has dominated market sentiments since the market reached its nadir last spring was due for a major correction. Recent events in the Gulf city state of Dubai appear to be the trigger. Dubai and its real estate development corporation, Dubai World has been engaged in a much touted real estate development project, the Palm, which has involved land reclamation, luxury hotels and condos and construction of one of the world's tallest structures. The project has made a spectacular mark on the gulf landscape that has been widely admired. But this week some of the lustre has come off the jewel.The project depended upon the backing of the neighbouring Abu Dhabi government which is extremely rich in oil reserves.
But this week Dubai announced that it wanted a standstill on servicing the more than 80 billion dollars of debt associated with the project. This sent shock waves around the globe, particularly in the London financial markets which are much more exposed to the gulf than New York. Markets lost between 2 and 5 % in the day's trading.The bonds issued by Nakheel, Dubai's real estate development arm
fell substantially in price as risk aversion more than doubled.It is quite possible this will be a one time weekend wonder with the markets absorbing the shock and moving on. But we won't know this until Monday.
In the meantime the need for better oversight and regulation has never been clearer.Real estate speculation is a classic area that is vulnerable to bubbles and irrational exhuberance. Globalization that is unrestrained and unregulated is unsustainable.
U.S.GDP grows by 3.5%
October 29, 2009
Third quarter results show that the U.S. economy grew by 3.5 % ahead of what most analysts were predicting and a reassuring sign that the stimulus is beginning to do its work(more of it needs to be actually spent as soon as possible to lower unemployment rates) and the economy is on the long road back to health. This result should but probably won't cause the doomsters and gloomsters to retreat for awhile . The pessimism in the financial and stock markets needs to be overcome and businesses need to be restocking inventories and hiring back workers for the coming months of expansion while the government goes about its business of reregulating the financial markets and ensuring that greater equity prevails. In the meantime the news about the return of positive growth is good and should be taken in as an optimistic sign.
Third quarter results show that the U.S. economy grew by 3.5 % ahead of what most analysts were predicting and a reassuring sign that the stimulus is beginning to do its work(more of it needs to be actually spent as soon as possible to lower unemployment rates) and the economy is on the long road back to health. This result should but probably won't cause the doomsters and gloomsters to retreat for awhile . The pessimism in the financial and stock markets needs to be overcome and businesses need to be restocking inventories and hiring back workers for the coming months of expansion while the government goes about its business of reregulating the financial markets and ensuring that greater equity prevails. In the meantime the news about the return of positive growth is good and should be taken in as an optimistic sign.
The danger of prematurely raising interest rates
October 12, 2009
Central bankers like Mark Carney of Canada are musing aloud about the possibility of raising rates despite very high unemployment, a highly valued Canadian dollar heading toward parity with the U.S. dollar and generally suppressed aggregate demand. The situation is even worse in the U.S. where unemployment now is 1.5 % points higher than in Canada, standing at 9.8 %. Whenever central banks raise rates to cut off a recovery or slow down a boom it usually takes over a year for the impact to be felt. If one examines the data from the 1990-92 recession in the U.S. we can see this quite clearly. I have examined the monthly change in the federal funds rate, the rate of change in the monthly Consumer Price Index and the monthly result for the unemployment rate from 1988 to 1995 for the U.S. The results clearly show that it takes a number of months for the interest rate rises to have an impact but once they do they raise the rate of unemployment for many months to come despite reductions in the interest rate once the bank has clearly unleashed a recession. There are very big risks then for the central bank to prematurely raise rates particularly when globally there is still deflation and high unemployment, even if there is a lag time of several quarters before the rate rises begin to bite.
Paul Krugman had a good piece on this in the New York Times today and he is right to worry that monetarist leaning central bankers will jump the gun on rate rises unless they are pressured not to do so. The problem is they base their decision far too much on a NAIRU mentality and take far too seriously expectations among bond dealers and traders rather than among the general public as to which direction prices will be heading.
Just to make the argument clearer look at the evidence from the time series I have identified above.(These series are all available for the U.S.Bureau of Labour Statistics and the Federal Reserve.) The federal funds rate was 6.58 % in February 1988. At that time unemployment was 5.7 % and month to month inflation 0.3 %. By March 1989 the federal funds rate had peaked at 9.85 % when unemployment was 5.0 % and inflation was running at 0.5 % month to month. The unemployment rate began to rise slowly at first, but then by December 1990 it hit 6.3 % rising to 7.3 % by December 1991. It peaked at 7.8 % in June of 1992. It stayed above 7% for the next 12 months even as the federal funds rate dropped to 2.96 %. It stayed above 6.0 % for the next 14 months after that despite federal funds rates below 4% for most of that period.
Overall unemployment was above 6 % for a total of 46 months imposing considerable unnecessary hardship on Americans. The only positive accomplishment was lowering the inflation rate from over 4.5 %-5.2 % down to 2.5 %. A better employment performance would have been possible by accepting a 3-4 % target for the inflation rate. Unemployment above 6 % for close to five years was a high price to pay for this extra 1.5 % point gain in the inflation reduction result.
Central bankers ought to think long and hard before they prematurely pull the trigger on interest rate rises.
Central bankers like Mark Carney of Canada are musing aloud about the possibility of raising rates despite very high unemployment, a highly valued Canadian dollar heading toward parity with the U.S. dollar and generally suppressed aggregate demand. The situation is even worse in the U.S. where unemployment now is 1.5 % points higher than in Canada, standing at 9.8 %. Whenever central banks raise rates to cut off a recovery or slow down a boom it usually takes over a year for the impact to be felt. If one examines the data from the 1990-92 recession in the U.S. we can see this quite clearly. I have examined the monthly change in the federal funds rate, the rate of change in the monthly Consumer Price Index and the monthly result for the unemployment rate from 1988 to 1995 for the U.S. The results clearly show that it takes a number of months for the interest rate rises to have an impact but once they do they raise the rate of unemployment for many months to come despite reductions in the interest rate once the bank has clearly unleashed a recession. There are very big risks then for the central bank to prematurely raise rates particularly when globally there is still deflation and high unemployment, even if there is a lag time of several quarters before the rate rises begin to bite.
Paul Krugman had a good piece on this in the New York Times today and he is right to worry that monetarist leaning central bankers will jump the gun on rate rises unless they are pressured not to do so. The problem is they base their decision far too much on a NAIRU mentality and take far too seriously expectations among bond dealers and traders rather than among the general public as to which direction prices will be heading.
Just to make the argument clearer look at the evidence from the time series I have identified above.(These series are all available for the U.S.Bureau of Labour Statistics and the Federal Reserve.) The federal funds rate was 6.58 % in February 1988. At that time unemployment was 5.7 % and month to month inflation 0.3 %. By March 1989 the federal funds rate had peaked at 9.85 % when unemployment was 5.0 % and inflation was running at 0.5 % month to month. The unemployment rate began to rise slowly at first, but then by December 1990 it hit 6.3 % rising to 7.3 % by December 1991. It peaked at 7.8 % in June of 1992. It stayed above 7% for the next 12 months even as the federal funds rate dropped to 2.96 %. It stayed above 6.0 % for the next 14 months after that despite federal funds rates below 4% for most of that period.
Overall unemployment was above 6 % for a total of 46 months imposing considerable unnecessary hardship on Americans. The only positive accomplishment was lowering the inflation rate from over 4.5 %-5.2 % down to 2.5 %. A better employment performance would have been possible by accepting a 3-4 % target for the inflation rate. Unemployment above 6 % for close to five years was a high price to pay for this extra 1.5 % point gain in the inflation reduction result.
Central bankers ought to think long and hard before they prematurely pull the trigger on interest rate rises.
Canada's unemployment rate falls to 8.4 %
October 10, 2009
Statistics Canada's labour force survey for last month shows that the unemployment rate fell to 8.4 %. This is partly because there were more discouraged workers last month than in the preceding month. But also there were a larger number of hirings than in the previous month. The result was a fall in the rate of unemployment. So the news is good up to a point. If this is the beginning of a trend then we should see the rate falling for the coming months without a further rise in the number of discouraged workers-those who have stopped looking for work because they believe there are no jobs and who thereby drop out of the labour force. The survey report is reproduced below courtesy of Statistics Canada.
Labour Force Survey
Related subjects
Labour
Employment and unemployment
September 2009 (Previous release)
Employment increased for the second consecutive month, up 31,000 in September, driven by large full-time gains. The unemployment rate fell by 0.3 percentage points to 8.4%, the first monthly decline since the beginning of the labour market downturn in the fall of 2008.
September's full-time increase of 92,000, the largest since May 2006, was partially offset by part-time losses of 61,000. The increase in full-time work was mainly among youths and women aged 25 and over and in Ontario.
Despite September's gains, full-time employment has fallen by 395,000 or 2.8% since the employment peak in October 2008.
Construction, manufacturing and educational services saw employment increases in September, while there were declines in transportation and warehousing.
British Columbia, New Brunswick and Prince Edward Island were the only provinces with notable employment gains in September. In Ontario, employment rose slightly as large full-time gains were dampened by losses in part time.
Since the peak in October 2008, employment has fallen by 2.1% (-357,000), with the bulk of the decline occurring between October 2008 and March 2009. Since then, the trend in employment has levelled, with the number employed almost the same in September as it was in March.
Note to readers
The Labour Force Survey (LFS) estimates are based on a sample, and are therefore subject to sampling variability. Estimates for smaller geographic areas or industries will have more variability. For an explanation of sampling variability of estimates, and how to use standard errors to assess this variability, consult the "Data quality" section of the publication Labour Force Information (71-001-X, free).
Changes in average hourly wages are affected by shifts in the composition of the Canadian labour force. For example, a drop in employment in low-wage occupations or industries will contribute to an increase in the national average hourly wage.
Canadians have been working more hours since April 2009. While the number of actual hours worked decreased 4.2% from October 2008 to April 2009, since then, there has been an increase in hours worked of 2.0%. In contrast, employment edged down 0.2% from April to September.
The increase in average hourly wages slowed to 2.5% compared with September 2008. This was the lowest year-over-year growth in two and a half years.
Manufacturing and construction up in September
Manufacturing employment increased by 26,000 in September, the first notable increase since February 2009. Employment in this industry had the sharpest rate of decline since the start of the labour market downturn in the fall of 2008, down 10.6% (-210,000).
Following an increase the previous month, employment in construction rose again in September (+25,000). Both housing starts and building permits have increased from April to August 2009. Despite these recent increases, employment in this industry has fallen by 6.7% (-84,000) since October 2008.
There was an employment gain of 18,000 in educational services in September. Since October 2008, employment in this industry has declined by 1.6% (-20,000).
Employment in transportation and warehousing decreased by 21,000 in September, continuing the downward trend since the fall of 2008. Employment has fallen by 8.4% or 73,000 since October, mostly in truck transportation in Ontario and Quebec.
In September, public sector employment increased by 36,000, leaving employment in this sector down 0.8% since October 2008. Employment among private sector employees edged down in September, while there was a small increase among the self employed. Most of the employment declines since October have been among private sector employees (-3.6%), while the number of self employed has increased by 2.9%.
Largest gain in British Columbia
By province, the most notable employment gain in September was in British Columbia, up 14,000. Although down 1.7% since October 2008, employment in this province has been increasing since March 2009 (+1.3% or +30,000). The unemployment rate, at 7.4%, declined by 0.4 percentage points in September.
In Ontario, a large full-time increase (+62,000) was dampened by a loss in part time (-49,000), leaving employment up only slightly in September. The unemployment rate declined by 0.2 percentage points to 9.2%.
September marks the third consecutive month of small employment increases in Ontario, totalling 39,000. Despite this increase, Ontario has suffered the fastest rate of employment losses since October (-2.9%), mostly in full time and in manufacturing, construction and a number of service industries.
Employment also increased in New Brunswick in September, up 2,900, bringing the unemployment rate down 1.2 percentage points, to 8.1%.
Quebec's employment level was little changed in September for the second consecutive month. The unemployment rate declined by 0.3 percentage points to 8.8%, as fewer people participated in the labour market. Since October, employment in this province has fallen by 1.6%, less than the national average of 2.1%.
More women working in September
September's overall employment gains were among women aged 25 and over (+41,000), while employment fell for men aged 25 to 54 (-17,000). Among youths, increases in full-time work (+58,000) were offset by part-time losses (-54,000).
Since October, the majority of employment losses were among men aged 25 to 54 (-211,000) and youths (-205,000). In recent months, employment declines have stabilized for core-age men, leaving employment down 0.2% since March. For youths, employment continued to decline throughout the summer months, with employment losses of 3.4% since March 2009.
Quarterly update on territories
The Labour Force Survey also collects labour market information about the territories. These data are not included in the national estimates, but are published separately and in the form of three-month moving averages. Information in this release is based on data that are not seasonally adjusted and therefore comparisons should only be made on a year-over-year basis.
Compared with the third quarter of 2008, employment was down in the Northwest Territories in the third quarter of 2009 (-2,200), pushing the unemployment rate up 2.6 percentage points to 7.6%. Over the same period, the employment rate (the proportion of the working-age population who are employed) fell by 7.0 percentage points to 65.1%, the lowest since the start of the series in 2001.
Employment in the Yukon edged down in the third quarter of 2009, bringing the employment rate to 70.2%, a decline of 3.3 percentage points from the same quarter of the previous year. The unemployment rate was 5.6%, the lowest of the three territories.
In Nunavut, over the same period, employment declines brought the employment rate down 1.3 percentage points to 53.1%. In the third quarter of 2009, the unemployment rate stood at 14.4%.
Available on CANSIM: tables 282-0001 to 282-0042, 282-0047 to 282-0064 and 282-0069 to 282-0100.
Definitions, data sources and methods: survey number 3701.
A more detailed summary, Labour Force Information (71-001-X, free) is now available online for the week ending September 19. From the Publications module of our website, under All subjects, choose Labour. LAN and bulk prices are available on request. The CD-ROM Labour Force Historical Review, 2008 (71F0004X, $209) is now available. See How to order products.
Data tables are also now available online. From the By subject module of our website, choose Labour.
The next release of the Labour Force Survey will be on November 6.
For general information or to order data, contact Client Services (toll-free 1-866-873-8788; 613-951-4090; labour@statcan.gc.ca). To enquire about the concepts, methods or data quality of this release, contact, Vincent Ferrao (613-951-4750; vincent.ferrao@statcan.gc.ca), or Judy Hosein (613-951-5704; judy.hosein@statcan.gc.ca), Labour Statistics Division.
Statistics Canada's labour force survey for last month shows that the unemployment rate fell to 8.4 %. This is partly because there were more discouraged workers last month than in the preceding month. But also there were a larger number of hirings than in the previous month. The result was a fall in the rate of unemployment. So the news is good up to a point. If this is the beginning of a trend then we should see the rate falling for the coming months without a further rise in the number of discouraged workers-those who have stopped looking for work because they believe there are no jobs and who thereby drop out of the labour force. The survey report is reproduced below courtesy of Statistics Canada.
Labour Force Survey
Related subjects
Labour
Employment and unemployment
September 2009 (Previous release)
Employment increased for the second consecutive month, up 31,000 in September, driven by large full-time gains. The unemployment rate fell by 0.3 percentage points to 8.4%, the first monthly decline since the beginning of the labour market downturn in the fall of 2008.
September's full-time increase of 92,000, the largest since May 2006, was partially offset by part-time losses of 61,000. The increase in full-time work was mainly among youths and women aged 25 and over and in Ontario.
Despite September's gains, full-time employment has fallen by 395,000 or 2.8% since the employment peak in October 2008.
Construction, manufacturing and educational services saw employment increases in September, while there were declines in transportation and warehousing.
British Columbia, New Brunswick and Prince Edward Island were the only provinces with notable employment gains in September. In Ontario, employment rose slightly as large full-time gains were dampened by losses in part time.
Since the peak in October 2008, employment has fallen by 2.1% (-357,000), with the bulk of the decline occurring between October 2008 and March 2009. Since then, the trend in employment has levelled, with the number employed almost the same in September as it was in March.
Note to readers
The Labour Force Survey (LFS) estimates are based on a sample, and are therefore subject to sampling variability. Estimates for smaller geographic areas or industries will have more variability. For an explanation of sampling variability of estimates, and how to use standard errors to assess this variability, consult the "Data quality" section of the publication Labour Force Information (71-001-X, free).
Changes in average hourly wages are affected by shifts in the composition of the Canadian labour force. For example, a drop in employment in low-wage occupations or industries will contribute to an increase in the national average hourly wage.
Canadians have been working more hours since April 2009. While the number of actual hours worked decreased 4.2% from October 2008 to April 2009, since then, there has been an increase in hours worked of 2.0%. In contrast, employment edged down 0.2% from April to September.
The increase in average hourly wages slowed to 2.5% compared with September 2008. This was the lowest year-over-year growth in two and a half years.
Manufacturing and construction up in September
Manufacturing employment increased by 26,000 in September, the first notable increase since February 2009. Employment in this industry had the sharpest rate of decline since the start of the labour market downturn in the fall of 2008, down 10.6% (-210,000).
Following an increase the previous month, employment in construction rose again in September (+25,000). Both housing starts and building permits have increased from April to August 2009. Despite these recent increases, employment in this industry has fallen by 6.7% (-84,000) since October 2008.
There was an employment gain of 18,000 in educational services in September. Since October 2008, employment in this industry has declined by 1.6% (-20,000).
Employment in transportation and warehousing decreased by 21,000 in September, continuing the downward trend since the fall of 2008. Employment has fallen by 8.4% or 73,000 since October, mostly in truck transportation in Ontario and Quebec.
In September, public sector employment increased by 36,000, leaving employment in this sector down 0.8% since October 2008. Employment among private sector employees edged down in September, while there was a small increase among the self employed. Most of the employment declines since October have been among private sector employees (-3.6%), while the number of self employed has increased by 2.9%.
Largest gain in British Columbia
By province, the most notable employment gain in September was in British Columbia, up 14,000. Although down 1.7% since October 2008, employment in this province has been increasing since March 2009 (+1.3% or +30,000). The unemployment rate, at 7.4%, declined by 0.4 percentage points in September.
In Ontario, a large full-time increase (+62,000) was dampened by a loss in part time (-49,000), leaving employment up only slightly in September. The unemployment rate declined by 0.2 percentage points to 9.2%.
September marks the third consecutive month of small employment increases in Ontario, totalling 39,000. Despite this increase, Ontario has suffered the fastest rate of employment losses since October (-2.9%), mostly in full time and in manufacturing, construction and a number of service industries.
Employment also increased in New Brunswick in September, up 2,900, bringing the unemployment rate down 1.2 percentage points, to 8.1%.
Quebec's employment level was little changed in September for the second consecutive month. The unemployment rate declined by 0.3 percentage points to 8.8%, as fewer people participated in the labour market. Since October, employment in this province has fallen by 1.6%, less than the national average of 2.1%.
More women working in September
September's overall employment gains were among women aged 25 and over (+41,000), while employment fell for men aged 25 to 54 (-17,000). Among youths, increases in full-time work (+58,000) were offset by part-time losses (-54,000).
Since October, the majority of employment losses were among men aged 25 to 54 (-211,000) and youths (-205,000). In recent months, employment declines have stabilized for core-age men, leaving employment down 0.2% since March. For youths, employment continued to decline throughout the summer months, with employment losses of 3.4% since March 2009.
Quarterly update on territories
The Labour Force Survey also collects labour market information about the territories. These data are not included in the national estimates, but are published separately and in the form of three-month moving averages. Information in this release is based on data that are not seasonally adjusted and therefore comparisons should only be made on a year-over-year basis.
Compared with the third quarter of 2008, employment was down in the Northwest Territories in the third quarter of 2009 (-2,200), pushing the unemployment rate up 2.6 percentage points to 7.6%. Over the same period, the employment rate (the proportion of the working-age population who are employed) fell by 7.0 percentage points to 65.1%, the lowest since the start of the series in 2001.
Employment in the Yukon edged down in the third quarter of 2009, bringing the employment rate to 70.2%, a decline of 3.3 percentage points from the same quarter of the previous year. The unemployment rate was 5.6%, the lowest of the three territories.
In Nunavut, over the same period, employment declines brought the employment rate down 1.3 percentage points to 53.1%. In the third quarter of 2009, the unemployment rate stood at 14.4%.
Available on CANSIM: tables 282-0001 to 282-0042, 282-0047 to 282-0064 and 282-0069 to 282-0100.
Definitions, data sources and methods: survey number 3701.
A more detailed summary, Labour Force Information (71-001-X, free) is now available online for the week ending September 19. From the Publications module of our website, under All subjects, choose Labour. LAN and bulk prices are available on request. The CD-ROM Labour Force Historical Review, 2008 (71F0004X, $209) is now available. See How to order products.
Data tables are also now available online. From the By subject module of our website, choose Labour.
The next release of the Labour Force Survey will be on November 6.
For general information or to order data, contact Client Services (toll-free 1-866-873-8788; 613-951-4090; labour@statcan.gc.ca). To enquire about the concepts, methods or data quality of this release, contact, Vincent Ferrao (613-951-4750; vincent.ferrao@statcan.gc.ca), or Judy Hosein (613-951-5704; judy.hosein@statcan.gc.ca), Labour Statistics Division.
U.S.National wealth 118.3 trillion
October 7, 2009 3;07 p.m.
There is a lot of loose talk about the size of the American debt and the supposed threat of bankruptcy. But whenever we examine the burden of the debt we have to compare it to the wealth of the debtor. The 2010 budget of the U.S. government on p.199 of the Analytical perspectives section of the budget has a very useful table that reveals precisely this information. As of 2008 total US wealth net of claims by foreigners on the U.S. stood at 118.3 trillion U.S.2008 dollars. The total outstanding debt of the U.S. however stands at about a tenth of that at 11.9 trillion dollars. Clearly solvency is not an issue.The burden of the debt is very manageable in relation to the national wealth.
Interestingly the total value of U.S. wealth is about twice what it was in 1995 when it stood at 54.1, trillion 1995 U.S. dollars according to the Bureau of the Budget in 1997.( See Frances X. Cavanaugh, The Truth about the National Debt:5 Myths and One Reality, Harvard Business School press, 1996 , p.24. Cavanaugh is a former U.S. Treasury Department and Federal retirement thrift investment board official. his book makes an excellent contribution to the debate.) National wealth data are very useful in fighting debt and deficit hysteria. the U.S. national wealth in 2008 consisted of 10.2 trillion of publicly owned assets, 54.2 trillion of privately owned assets, 57.2 trillion of education capital and 3.9 trillion of R&D capital, for a total of 125.5 trillion.
Foreign claims on the U.S. which are subtracted from the above total amounted to 7.2 trillion dollars.
There is a lot of loose talk about the size of the American debt and the supposed threat of bankruptcy. But whenever we examine the burden of the debt we have to compare it to the wealth of the debtor. The 2010 budget of the U.S. government on p.199 of the Analytical perspectives section of the budget has a very useful table that reveals precisely this information. As of 2008 total US wealth net of claims by foreigners on the U.S. stood at 118.3 trillion U.S.2008 dollars. The total outstanding debt of the U.S. however stands at about a tenth of that at 11.9 trillion dollars. Clearly solvency is not an issue.The burden of the debt is very manageable in relation to the national wealth.
Interestingly the total value of U.S. wealth is about twice what it was in 1995 when it stood at 54.1, trillion 1995 U.S. dollars according to the Bureau of the Budget in 1997.( See Frances X. Cavanaugh, The Truth about the National Debt:5 Myths and One Reality, Harvard Business School press, 1996 , p.24. Cavanaugh is a former U.S. Treasury Department and Federal retirement thrift investment board official. his book makes an excellent contribution to the debate.) National wealth data are very useful in fighting debt and deficit hysteria. the U.S. national wealth in 2008 consisted of 10.2 trillion of publicly owned assets, 54.2 trillion of privately owned assets, 57.2 trillion of education capital and 3.9 trillion of R&D capital, for a total of 125.5 trillion.
Foreign claims on the U.S. which are subtracted from the above total amounted to 7.2 trillion dollars.
Unemployment behaviour: a tale of two recessions
October 6, 2009 10:14 a.m.
There is understandable worry and anguish over the fact that unemployment rates in the U.S. have not yet begun to fall despite the fact that in a technical sense the recession appears to have ended in July. It may well take several quarters or perhaps longer before the unemployment rate begins to drop month to month.The previous large recessions of July 1981 to November 1982, 16 months long and July 1990 to to March 1991, 8 months long provide interesting contrasts.In the first of these unemployment began to fall immediately after the economy reached its trough or low point that marked the end of the recession. Within a year the unemployment rate was markedly lower then at the trough.
But in the second example July 1990 to March 1991 although the recession was only half as long 8 months, unemployment continued to stay elevated even after the recession ended for the next 29 months. There is clearly a reason for this having to do with a change in employer behaviour, the impact of globalization, outsourcing and so on. It is too early to tell for certain but the Obama administration needs to weigh these factors as it considers extending the stimulus or enhancing it. Given what we know at present I would lean in the direction of extending unemployment and health insurance benefits and implementing a direct hire program for the unemployed that involved a combination of skill retraining and service employment in health care, education and care of the elderly as well as urban reconstruction. A kind of domestic peace corps that could employ perhaps as many as a million people for a period of 8 to 24 months at a guaranteed modest but liveable income. These sort of jobs would restore hope, improve the quality of life in American society and inject much needed aggregate demand. Forty billion dollars allocated to this measure over two years would employ a large number of people and accomplish a great deal.
There is understandable worry and anguish over the fact that unemployment rates in the U.S. have not yet begun to fall despite the fact that in a technical sense the recession appears to have ended in July. It may well take several quarters or perhaps longer before the unemployment rate begins to drop month to month.The previous large recessions of July 1981 to November 1982, 16 months long and July 1990 to to March 1991, 8 months long provide interesting contrasts.In the first of these unemployment began to fall immediately after the economy reached its trough or low point that marked the end of the recession. Within a year the unemployment rate was markedly lower then at the trough.
But in the second example July 1990 to March 1991 although the recession was only half as long 8 months, unemployment continued to stay elevated even after the recession ended for the next 29 months. There is clearly a reason for this having to do with a change in employer behaviour, the impact of globalization, outsourcing and so on. It is too early to tell for certain but the Obama administration needs to weigh these factors as it considers extending the stimulus or enhancing it. Given what we know at present I would lean in the direction of extending unemployment and health insurance benefits and implementing a direct hire program for the unemployed that involved a combination of skill retraining and service employment in health care, education and care of the elderly as well as urban reconstruction. A kind of domestic peace corps that could employ perhaps as many as a million people for a period of 8 to 24 months at a guaranteed modest but liveable income. These sort of jobs would restore hope, improve the quality of life in American society and inject much needed aggregate demand. Forty billion dollars allocated to this measure over two years would employ a large number of people and accomplish a great deal.
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