Links and Quick Takes 6/9/08

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Natural lab shows sea’s acid path BBC. See here and here for more on the danger of rising ocean acidity.

Audit pans Iraq and U.S. efforts to account for oil, fuel and revenue flow… Iraq Oil Report

Ben Stein Watch: June 8, 2008 Felix Salmon

Ken Rogoff is also confused by the US policy towards dollar pegs Brad Setser

Another 1% hike in minimum reserves Michael Pettis. China’s monetary policy goes from “extremely loose” to marginally less so.

Asian Crisis Redux? Hot Money Leaving Philippines International Political Economy Zone

Unemployment and the credit cycle Steve Waldman. Nice concise post (so do read it) with a key takeaway:

Some argue that the US economy is structurally immune from the wrenching spikes in unemployment that used to accompany recessions, because employment has transitioned from volatile manufacturing to more mellow services. See, for example. this excellent analysis from Calculated Risk. CR chooses 8% unemployment as his threshold for a “severe” recession. But the US economy need not lose a single job more to bring unemployment to that level. If participation rose back to the levels of the late 90s without a commensurate increase in new jobs, we’d be there already.

Crisis shifts to regional lenders Financial Times. Not only was this development foretold at the RGE Monitor sponsored panel I attended in New York, but they had the timing perfect. I recall it was Chris Whalen of Institutional Risk Analytics who predicted the wheels would start coming off regional and local banks in the June-July timeframe.

Antidote du jour (and for those in the US Northeast, to our heatwave):

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  1. Tom Lindmark

    Sorry, I can’t buy the Waldman post. It’s just a bit shallow. He needs to look into why they left the labor market. Then as now there were people who sold at the top of a market and made tons of money. For every loser there’s a winner. We’ve had a lot of winners that don’t need to work anymore. At the bottom the earned income credit is also a deterrant to employment.

    The assumption that there are participants that want or may want to get back into the market is unsupported.

  2. Yves Smith

    I agree his speculation on why the labor force participation is down isn’t convincing, but my take is different than yours. While this is admittedly anecdotal, of the people I know in their 40s and 50s who are effectively retired, the vast majority of them would rather be working, even if they put enough away to live comfortably. These are former professionals and high level managers. There simply aren’t enough perches for all of them.

    I know a smaller cohort (late 50-early 60s) who are quitting due to burnout or the work not being fun anymore who a generation ago would have worked till 65. And even though this is technically by choice, I attribute it to the high pressure now in many companies and firms. Most people I know who are still on the big company/big firm meal ticket are doing 1.5 to 2 jobs, and for no more pay in real terms than before.

    Similarly, among the people who have gone the consulting route, only a minority are a busy as they’d like to be. And the “not as busy as they’d like to be” includes people I know who are doing everything right: great network, excellent reputation, focused offering. Again, too many people, not enough opportunities to go around (and in this expense-conscious market, it’s far harder to create opportunities than it once was).

    And if you have narrow, high level skills, the drop is far indeed. Remember, in the dot-com bust, a lot of people in Silicon Valley were looking for any job they could find, including Home Depot.

  3. Tom Lindmark

    I hear you but… Don’t we have to use some discipline in defining employed, unemployed, those actively looking, etc. If the numbers are to mean anything and we use them to draw conclusions and make policy then there have to be some bright lines. Otherwise we just keep redefining the problem and get nowhere.

  4. Yves Smith

    Agreed, The problem is that people have been conditioned to focus on simple numbers (unemployment) that are far less meaningful than they once were because (compared to 40 years ago) far fewer people have full time work in stable jobs. We have had a lot of undertows that have changed the job market, but we still keep focusing on the same, less revealing figure.

    The difficulty is the best way to approach complicated, evolving situations is to look at multiple metrics and supplement it with qualitative work. But a lot of people don’t want to hear a complicated story. They want yes/no, good/bad characterizations. Grr.

  5. Yves Smith

    Dunno why, that horse looks alive in the photo on my computer when I open it but pretty far into rigor mortis in the web browser. For one thing, the eye isn’t goofy in my local version.

  6. ScottB

    Yves, thanks again for your great blog. See my comments on Waldman’s site. If you correct for the aging of the population, most of the decline in the labor force participation rate goes away. The participation rate for 55 to 59 year olds is 8 to 10 points lower than for 50 to 54 year olds.


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