Double Dip Recession? What there ever a recovery?

[Surlethe]

And yet U3 won't count them. U3 can actually go down after a protracted economic crunch, even if no new full-time jobs are being created, if people are ceasing to try and find work because they've given up. Or if jobs are split into part-time employment for two people who don't make enough to support themselves separately- two people working 20 hour weeks instead of one person working a 40 hour week is counted as higher employment under U3.

The U* all move together very tightly. For example, in this situation you describe, where the labor force participation rate shrinks, U6 would go up as well because the workers who were previously marginally unattached become simply unattached, moving further away from workforce participation.

*****

For those interested, here's a good way to think about the different measures of unemployment. Imagine taking everybody in the US and grouping them in loose order from "completely unemployable" and "completely unemployed and not even thinking about looking for work" to "working full-time and very satisfied with the job." It might look something like this:

Code: Select all

[not looking for work] -------------- [looking for work] ------------- [have job, will take better] ----------------- [have stable job]

The job of an economist studying the labor market is to try to get a rough profile of the number of people at each point of the line.

This isn't easy. At any given moment, vast numbers of people are moving around in this line. If someone who wasn't working decides to get a job, he moves from the left toward the right. If someone finds a better job and quits his current job, he drops from stable job to looking for work then back up to stable job. If someone rips his arm off in a factory and retires with SS disability insurance, he goes from have stable job all the way down to not looking for work. And so on. Remember, we have about 300 million people lined up here, and there are hundreds of thousands of jobs created and destroyed every day.

So what can we do? We're interested in unemployment. What's the unemployment rate? It's the proportion of workers who don't have jobs. But what are "workers"? Obviously people who don't want to work or can't work count -- people who are happy being stay-at-home parents, or volunteering their time, or are too old or are permanently disabled. But what if you're not looking for a job? What if you want a job, but you don't think there are any to be had near you? What if you're between jobs? And what does it mean to "not have a job" -- does mowing your neighbors' lawns count? Does temp work count? What if you're looking to find a better job? And so on.

Like I said, this is an incredibly complicated phenomenon. We're talking about quantifying the hopes and dreams of three hundred million people. It's going to be hard to do this in one number. What's better than one number? Several! We can come up with several different ways of slicing and dicing the population to measure unemployment, and each one gives us a different perspective of the labor force.

But each number is measured in the same basic way. We make two cuts in the line above: first, we distinguish between those participating in the labor force and those not participating in the labor force. Then, we focus on the labor force and we distinguish between people who have jobs and people who don't have jobs. Finally, we figure out what proportion of the labor force has a job, and what proportion doesn't.

There are six measures of unemployment gathered by the BLS, aptly named U1 through U6. They're described here (Wikipedia). They each draw the two lines in different places, so they each give a slightly different picture of what's happening in the labor force. For instance, the commonly-cited U3 draws the "labor force" line at "those who have jobs or have looked for a job within the past month." However, U4 draws the "labor force" line at "those who have jobs, or have looked for a job within the past year." Slightly more expansive definition of the labor force, slightly different picture.

So each definition of unemployment gives a slightly different perspective on what's happening in the labor force -- think of it like the parable of the blind men and the elephant.

So there you go. That's where the different measures come in: trying to quantify patterns in an enormous, incredibly dynamic labor market.

[Starglider]

For example, in this situation you describe, where the labor force participation rate shrinks,

Incidentally the US LFPR is at the lowest level seen since 1984;



Of course in 1984 the economy was doing pretty well. Why is sub-64% participation so bad now? Much higher inflation in prices than in wages, such that two incomes are now a necessity for most families, and this;



...now at an all-time record.

[Surlethe]

One thing to keep in mind when you look at the second graph is that the duration of unemployment is probably distributed something like a log-normal, with a quick peak and then a rapid decay. So the people who are really getting hit hard by the unemployment have been unemployed for much, much longer than 9 or 10 months.

The US economy has some pretty severe structural issues.

[KrauserKrauser]

One thing to keep in mind when you look at the second graph is that the duration of unemployment is probably distributed something like a log-normal, with a quick peak and then a rapid decay. So the people who are really getting hit hard by the unemployment have been unemployed for much, much longer than 9 or 10 months.

The US economy has some pretty severe structural issues.

Wait till later in the month in Jackson Hole where Bernanke and Co. will announce QE3 in some form or another. The market will soar. People will clap hands. Dogs and cats, living in harmony.

Then, in 3 months time $4+ per gallon gas, that's like rocket fuel for job creation, right?

If the Fed goes for additional easing in an, already failed twice so let's try it a third time, effort to get more money into the economy you will just see additional inflation. It's bad times ahead for the bottom 99% if the Fed starts up the presses again.

[Thanas]

Then, in 3 months time $4+ per gallon gas, that's like rocket fuel for job creation, right?

Man, $4+ per gallon sounds awesome. I wish I could get gas that cheap over here.

[Broomstick]

No you don't - if Germany lowered the taxes enough to give you $4 a gallon gas (expressed, of course, in euros and liters over there, whatever that converts to) Germany would no longer have enough money to prop up the Eurozone!

Well, actually, I don't know that of course, but while the American public prefers its relatively low taxes, and WILL scream when gas goes up again, which it will, a little more revenue to our governments (both state and Federal level tax gas here) might not be a bad thing at this point. Except of course we become far too dependent on relatively cheap transportation.

Also a desperate and probably failed attempted at levity. I am trying to find something positive to do or think about all this and not succeeding these day. It's not in me to simply give up in despair, though it's getting harder to be an optimist.

[Thanas]

No you don't - if Germany lowered the taxes enough to give you $4 a gallon gas (expressed, of course, in euros and liters over there, whatever that converts to) Germany would no longer have enough money to prop up the Eurozone!

Well played.

[Simon_Jester]

Then, in 3 months time $4+ per gallon gas, that's like rocket fuel for job creation, right?

Man, $4+ per gallon sounds awesome. I wish I could get gas that cheap over here.

Besides, if you had gasoline at around 0.60 €/L, what would you do with it when you'd got it?

You live in a country with an average population density of around, three hundred per square kilometer versus thirty in the US?

If the US started taxing commodities with the same intensity as Germany taxes gas, and I'm not saying that would be a bad idea, gas would be the wrong commodity to tax. Too much of the internal transportation network depends on it, and too many people have a routine need to make trips long enough to consume a respectable fraction of a tank of gas in one day.

[Thanas]

Then, in 3 months time $4+ per gallon gas, that's like rocket fuel for job creation, right?

Man, $4+ per gallon sounds awesome. I wish I could get gas that cheap over here.

Besides, if you had gasoline at around 0.60 €/L, what would you do with it when you'd got it?

You live in a country with an average population density of around, three hundred per square kilometer versus thirty in the US?

220ish iirc and we are not that densely populated by itself - about the level of Maryland iirc.

[Simon_Jester]

Yes, and Maryland is one of the parts of the US that could best handle a gasoline tax; I try not to let regional bias determine my thinking on issues like this. Maryland has a number of metropolitan areas with (broadly) functional mass transit, at least in the form of buses if not an actual subway system. Maryland has a fairly dense network of highways that have or could be adapted to have HOV lanes (which is a great way to improve fuel economy per passenger-mile).

But when we move away from the Atlantic corridor- and not very far from it at that- we encounter sparser population, sparser rail and mass transit networks- indeed, passenger rail in the US is damn near dead, or at least not very lively. Freight rail is more functional, but there's still a lot more long-distance trucking of goods over the interstates. And the average distances between cities are... well, off the top of my head the only analogy I can think of is Russia. Russia has a much lower population density than the US, of course, but it also has larger tracts of practically uninhabitable land than the US, and the vast majority of the population is 'crowded' into the arable regions (mostly European Russia).

As far as I can tell, Russia also taxes gasoline much less heavily than the US, and I rather suspect they do so with the same reasons.

I'm not saying high gas taxes don't make sense for Germany, or for comparably dense populations elsewhere, but that doesn't mean they're a good idea for everyone.
_________

*Yes, you're right, it's 220 not 300. However, the US is still down at 32/km2, with Russia at 8.3.

[Thanas]

Yes, and Maryland is one of the parts of the US that could best handle a gasoline tax; I try not to let regional bias determine my thinking on issues like this. Maryland has a number of metropolitan areas with (broadly) functional mass transit, at least in the form of buses if not an actual subway system. Maryland has a fairly dense network of highways that have or could be adapted to have HOV lanes (which is a great way to improve fuel economy per passenger-mile).

So why not put up a gas tax in high-density areas? One can always have exceptions for farmers or people with special needs with regards to long range transport - the German law does as well. The US needs to get revenue from somewhere, might just as well stop the CO2 output that much.

As far as I can tell, Russia also taxes gasoline much less heavily than the US, and I rather suspect they do so with the same reasons.

Did you factor in the lower median wage?

[Surlethe]

General remark: While we're on the subject of Pigovian taxes, there are several externalities to gasoline which, arguably, indicate that gasoline should be taxed --- for example, carbon emissions and an incorrect evaluation of the present cost of reliance on fossil fuels. The negative shock to the economy and infrastructure to the US of a hypothetical higher gas tax should be interpreted as a recalculation of value given the new information about gasoline's costs which was previously not included in the price: we are not currently as wealthy or productive as we think we are because (a) we're producing carbon and not bearing many of the costs of that production; and (b) we're pulling part of the peak oil recalculation forward in time.

[The Kernel]

So why not put up a gas tax in high-density areas? One can always have exceptions for farmers or people with special needs with regards to long range transport - the German law does as well. The US needs to get revenue from somewhere, might just as well stop the CO2 output that much.

The US still has too much urban sprawl for this to work. Take a look at the average American's commute (over an hour a day) and that's without taking into consideration errands at key retail and services locations which tend to be very spread out.

Take the location I live in: the San Francisco Bay Area. It's got very high population density but I still have a 40 mile round trip commute and most of the key places I need to get to are anywhere between 3 and 10 miles away from my home one-way. A tripling of gas taxes under these sorts of circumstances would do nothing but squeeze strapped families even more.

A more effective means of dealing with this problem is what we are already doing: draconian increases to CAFE standards and heavy subsidies for electric cars.

[Thanas]

According to this PDF, the average daily commute in Germany is 42 minutes a day. The average US commute is 48 minutes according to the same source (page 2 of the PDF). So not that different alltogether.

[Surlethe]

So why not put up a gas tax in high-density areas? One can always have exceptions for farmers or people with special needs with regards to long range transport - the German law does as well. The US needs to get revenue from somewhere, might just as well stop the CO2 output that much.

The US still has too much urban sprawl for this to work. Take a look at the average American's commute (over an hour a day) and that's without taking into consideration errands at key retail and services locations which tend to be very spread out.

Take the location I live in: the San Francisco Bay Area. It's got very high population density but I still have a 40 mile round trip commute and most of the key places I need to get to are anywhere between 3 and 10 miles away from my home one-way. A tripling of gas taxes under these sorts of circumstances would do nothing but squeeze strapped families even more.

You know what will fix urban sprawl? Higher gas prices. Raise the price of gasoline and people will move together. Squeezed, strapped families will maneuver themselves to become less squeezed and less strapped, and in the process will reconfigure society to be more efficient.

A more effective means of dealing with this problem is what we are already doing: draconian increases to CAFE standards and heavy subsidies for electric cars.

Except that this is costly to the government, costly to the auto industry, and the effect of the standard is partially mitigated by people driving further. Raise the price of gasoline by taxing it, however, and - as if by magic - you get cars with better fuel mileage, hybrids, electric cars, fewer miles driven, and a more dense population. Oh, yes, and the government doesn't have to spend money forcing the auto companies to obey the CAFE standards; instead, it gets extra money from the higher gasoline tax. Win, win, win, and win.

[White Haven]

You know what will fix urban sprawl? Higher gas prices. Raise the price of gasoline and people will move together. Squeezed, strapped families will maneuver themselves to become less squeezed and less strapped, and in the process will reconfigure society to be more efficient.

Ah yes, families with very little money will magically find jobs closer to home in a horrible jobs market! Or maybe, wait, maybe they'll magically be able to afford the expenses of moving to a location closer to a job that, in an unstable economy, they could then subsequently lose in short order! Maybe the cheapest places to get groceries will just nicely shuffle closer to where they live. Or should they move closer to their groceries somehow?

Please. 'Fuck those at the bottom of the totem pole even more, maybe it'll help fix things!' Great plan.

[cosmicalstorm]

You know what will fix urban sprawl? Higher gas prices. Raise the price of gasoline and people will move together. Squeezed, strapped families will maneuver themselves to become less squeezed and less strapped, and in the process will reconfigure society to be more efficient.

Ah yes, families with very little money will magically find jobs closer to home in a horrible jobs market! Or maybe, wait, maybe they'll magically be able to afford the expenses of moving to a location closer to a job that, in an unstable economy, they could then subsequently lose in short order! Maybe the cheapest places to get groceries will just nicely shuffle closer to where they live. Or should they move closer to their groceries somehow?

Please. 'Fuck those at the bottom of the totem pole even more, maybe it'll help fix things!' Great plan.

Should we just wave a magic wand and conjure a trillion barrels of oil from thin air so we can continue business as usual?

[Surlethe]

You know what will fix urban sprawl? Higher gas prices. Raise the price of gasoline and people will move together. Squeezed, strapped families will maneuver themselves to become less squeezed and less strapped, and in the process will reconfigure society to be more efficient.

Ah yes, families with very little money will magically find jobs closer to home in a horrible jobs market! Or maybe, wait, maybe they'll magically be able to afford the expenses of moving to a location closer to a job that, in an unstable economy, they could then subsequently lose in short order! Maybe the cheapest places to get groceries will just nicely shuffle closer to where they live. Or should they move closer to their groceries somehow?

Please. 'Fuck those at the bottom of the totem pole even more, maybe it'll help fix things!' Great plan.

Yes, because families with "very little money" are currently living in suburbs and exurbs with extravagant commutes to work and grocery shopping, spending several thousand of their scarce and precious dollars every year on gasoline. And of course the marginal families will adjust. The cheapest places to get groceries will indeed just nicely shuffle closer, they'll move closer to their groceries, they'll move closer to their jobs (if they even have any), cities will get denser, suburbs will get sparser. (Remember the second law of demand?)

[Simon_Jester]

Yes, and Maryland is one of the parts of the US that could best handle a gasoline tax; I try not to let regional bias determine my thinking on issues like this. Maryland has a number of metropolitan areas with (broadly) functional mass transit, at least in the form of buses if not an actual subway system. Maryland has a fairly dense network of highways that have or could be adapted to have HOV lanes (which is a great way to improve fuel economy per passenger-mile).

So why not put up a gas tax in high-density areas? One can always have exceptions for farmers or people with special needs with regards to long range transport - the German law does as well. The US needs to get revenue from somewhere, might just as well stop the CO2 output that much.

Off the top of my head...

The first reason why I don't think that would work well is that the chunk of the population which relies (directly or indirectly) on "special needs with regards to long range transport" is large; by the time you subtract out the gasoline users that can make a case for being 'vital,' how much consumption do you have left?

The second is that because of the way the US government and constitution work, it is very questionable whether it would be legal for the federal government to enact a tax on gasoline that would impact some states or municipalities but not others. States might enact such gasoline taxes, I suppose.

As far as I can tell, Russia also taxes gasoline much less heavily than the US, and I rather suspect they do so with the same reasons.

Did you factor in the lower median wage?

No, good point. Do you think this is the entirety of the explanation, and that distance plays little or no factor?

[Thanas]

Yes, and Maryland is one of the parts of the US that could best handle a gasoline tax; I try not to let regional bias determine my thinking on issues like this. Maryland has a number of metropolitan areas with (broadly) functional mass transit, at least in the form of buses if not an actual subway system. Maryland has a fairly dense network of highways that have or could be adapted to have HOV lanes (which is a great way to improve fuel economy per passenger-mile).

So why not put up a gas tax in high-density areas? One can always have exceptions for farmers or people with special needs with regards to long range transport - the German law does as well. The US needs to get revenue from somewhere, might just as well stop the CO2 output that much.

Off the top of my head...

The first reason why I don't think that would work well is that the chunk of the population which relies (directly or indirectly) on "special needs with regards to long range transport" is large; by the time you subtract out the gasoline users that can make a case for being 'vital,' how much consumption do you have left?

What are the special needs, though? Commuter time in the USA is only 6 minutes more.

No, good point. Do you think this is the entirety of the explanation, and that distance plays little or no factor?

I do not know, you were the one who brought up Russia...which after all, has about a third of the median income of the USA.

[Zaune]

Ah yes, families with very little money will magically find jobs closer to home in a horrible jobs market! Or maybe, wait, maybe they'll magically be able to afford the expenses of moving to a location closer to a job that, in an unstable economy, they could then subsequently lose in short order! Maybe the cheapest places to get groceries will just nicely shuffle closer to where they live. Or should they move closer to their groceries somehow?

Please. 'Fuck those at the bottom of the totem pole even more, maybe it'll help fix things!' Great plan.

So put the petrol tax into providing alternatives. Improve passenger rail provision to the point where there are no longer entire states without a single station, funnel some money to county or city councils for light rail projects, maybe provide grants for anyone seeking to start a bus company.

[Broomstick]

If the US started taxing commodities with the same intensity as Germany taxes gas, and I'm not saying that would be a bad idea, gas would be the wrong commodity to tax. Too much of the internal transportation network depends on it, and too many people have a routine need to make trips long enough to consume a respectable fraction of a tank of gas in one day.

No, Simon, that is not the problem with taxing fuel in the US the way Germany does - in theory we could do more telecommuting, use buses for public transportation, and so forth if we really, really, had to.

No, the big problem is food transportation. More and more the US has consolidated food production - to the point that 40% of all the fruits and vegetables consumed in American households some from one valley - in California. Granted, the California Central Valley is a big valley, but its produce is shipped thousands of kilometers, all the way out to the east coast of North America. If that supply chain ever breaks well, you won't see actual starvation but it will not be pretty.

Rinse and repeat for every other agricultural commodity in the US.

Fuel is a major driver of food prices in the US.

[Simon_Jester]

If the US started taxing commodities with the same intensity as Germany taxes gas, and I'm not saying that would be a bad idea, gas would be the wrong commodity to tax. Too much of the internal transportation network depends on it, and too many people have a routine need to make trips long enough to consume a respectable fraction of a tank of gas in one day.

No, Simon, that is not the problem with taxing fuel in the US the way Germany does - in theory we could do more telecommuting, use buses for public transportation, and so forth if we really, really, had to.

No, the big problem is food transportation. More and more the US has consolidated food production - to the point that 40% of all the fruits and vegetables consumed in American households some from one valley - in California. Granted, the California Central Valley is a big valley, but its produce is shipped thousands of kilometers, all the way out to the east coast of North America. If that supply chain ever breaks well, you won't see actual starvation but it will not be pretty.

Rinse and repeat for every other agricultural commodity in the US.

Fuel is a major driver of food prices in the US.

That was folded into the underlined passage- note that I also mentioned freight rail.

This is one of the reasons why once we exempt all the 'vital' types of fuel usage (including refrigerated trucks for produce), there's not as much left as there might be in Germany.

Now, we could fix that- decentralize food production somewhat, upgrade rail infrastructure, and so on. But it wouldn't be a fast process, and taxing fuel consumption in certain places before that fix was in place wouldn't have the desired effect. Especially not when you're taxing gas in Maryland... but not in Kansas or Ohio, where large amounts of gas are being burned to move goods by truck cross-country to Maryland.

[Broomstick]

Yes, and Maryland is one of the parts of the US that could best handle a gasoline tax; I try not to let regional bias determine my thinking on issues like this. Maryland has a number of metropolitan areas with (broadly) functional mass transit, at least in the form of buses if not an actual subway system. Maryland has a fairly dense network of highways that have or could be adapted to have HOV lanes (which is a great way to improve fuel economy per passenger-mile).

So why not put up a gas tax in high-density areas? One can always have exceptions for farmers or people with special needs with regards to long range transport - the German law does as well. The US needs to get revenue from somewhere, might just as well stop the CO2 output that much.

To some extent the US already does that. While the Federal taxes on gas are the same everywhere each state taxes it at a different rate, and more heavily populated (and thus more densely populated) states tend to have higher gas taxes. On top of that even smaller subdivisions of government may also impose taxes on gas. This is why gas in Chicago, Illinois can cost up to a dollar more a gallon than the same gas in Gary, Indiana where I live (usually it's more of a 50-75 cent difference).

Farmers purchasing fuel for use on their farms can purchase it in quantity without the "road tax" added on, which is a significant price difference - but are prohibited from using it in vehicles on public roads. So it's useful for the farm equipment, but they're not supposed to use it when trucking goods to market over the public highway system.

A certain amount of agricultural goods travel by rail road, and always have, but the more perishable an item to more likely it is to travel by truck or airplane due to time factors.

[Surlethe]

Now, we could fix that- decentralize food production somewhat, upgrade rail infrastructure, and so on. But it wouldn't be a fast process, and taxing fuel consumption in certain places before that fix was in place wouldn't have the desired effect. Especially not when you're taxing gas in Maryland... but not in Kansas or Ohio, where large amounts of gas are being burned to move goods by truck cross-country to Maryland.

Why would taxing fuel uniformly not spur that decentralization? If food production is as centralized as Broomstick says, then food production could decentralize relatively rapidly (on the scale of years, rather than decades), with low marginal cost.