Friday, January 13, 2012

Consolidating the Bureaucracy

President Obama announced today that he is seeking some special powers from Congress in order to streamline several federal agencies with overlapping areas of responsibility by consolidating them into one agency.  The savings, at the federal level, would amount to an estimated $3 billion over ten years.  $3 billion seems pretty good to most of us (for which even a small fraction would set us up for life), but how does that stack up to government spending?

First, we'll note that last year's projected federal deficit was $1.65 trillion dollars.  Note that this is not the total amount the government spent in 2011, but only the amount it spent over what it took in (i.e. the amount it needed to borrow).  Also note that the $3 billion in savings is over a ten year period, so the average yearly savings is "only" $300 million.  A simple division of the two will tell us how much these savings can be expected to offset our borrowing this year:

300 million / 1,650,000 million = 0.000181, or 0.0181%.

Almost two hundredths of a percent of deficit reduction is not exactly inspiring on the face of it.  Still, these figures only take into account what we can see (the alleged savings by the government), but if Bastiat teaches us anything, we must also take into account what is unseen.  To the extent that businesses will be able to breathe easier because they don't have six different (and often contradictory) bureaucracies to deal with, the business climate will improve in ways that are not easy to measure in dollars.

It's a start, anyway.

Friday, January 6, 2012

December Unemployment Data Is In

The BLS reports that unemployment dropped to 8.5%, from 8.7% (November's unemployment numbers were "revised" upwards to 8.7%).  Based on the issues raised in the last post, what can we make of the numbers reported?

Not Seasonally Adjusted

Population: +143,000
Employed: -389,000
Unemployed: +79,000
Labor Force: -310,000

So, we had a net loss of 389,000 jobs in December (not unexpected, due to temporary holiday employment ending), of which 79,000 are still looking for work, and 310,000 are no longer looking for work.  Meanwhile, we tacked on 143,000 new people.  According to the "unadjusted" numbers, unemployment actually went up by 0.1%.

Note that the above numbers represent the real statistics as collected by the BLS.  As we noted previously, however, employment throughout the year is cyclical.  For example, people are hired for temporary jobs during the holidays and are then let go after.  That is, unemployment naturally decreases during the holidays and then increases afterwards.  Some people find this cycle to be unsatisfactory for reporting purposes, and so the BLS "seasonally adjusts" the data by comparing it to historical trends.  Here are this month's "adjusted" numbers:

Seasonally Adjusted

Population: +143,000
Employed: +176,000
Unemployed: -226,000

Labor Force: -50,000

Quite the swing!  You might say that these adjusted numbers tell us that we lost 176,000 fewer jobs than we expected to lose at this time of year.  While that's valuable to know, I would argue against the headlines that we will no doubt read saying "Unemployment has gone down!".  Instead, they should say "Unemployment has gone up, but less than would be expected based on historical trends!".

I guess that isn't as easy to fit on a page, though.

Following Trends

Even in the seasonally adjusted data, the trend is still towards a declining labor force.  If the economy is going to truly pick up, this number has turn around dramatically. The numbers show us that since December of 2010, the labor force has only increased by 217,000 people.  If January follows the trend of the last two months, we could actually have less people in the labor force now than a year ago, even though we have since added 1.695 million people to our population!

Also, last month it was noted that well over 99% of those dropping out of the labor force were women.  This month, the numbers are -61,000 for men (19.7%), and -249,000 for women (80.3%), so the trend continues, albeit not as strongly.