• Everyday Economics and Debating the accuracy of seasonally adjusted jobs numbers.

    The Reason Jobs Numbers Don’t Have to be Real

    Mar 11 • Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Economic Thinkers, Government, Labor, Macroeconomic Measurement • 98 Views

    Last Friday we found out that the unemployment rate was 5.5 percent and 295,000 jobs were added to our labor force.

    But they were not.

    Actually the unemployment rate was 5.8 percent and we added 903,000 jobs. The difference is because of seasonal adjustment.

    Where are we going? To how we can better grasp statistical headlines.

    What is Seasonal Adjustment?

    It is easiest to tell the story through department stores. During December 2014, there were 1.5 million department store jobs; in January, the number dropped to 1.36 million . But, was the economy contracting? No. It was all about holiday shopping. So, to avoid a misrepresentation of the state of the jobs market, government statisticians seasonally adjusted the numbers and wound up with almost identical totals. For December and January, department store jobs were close to 1.3428 million.

    In addition to holiday employment pops, we also have the ups and downs of weather and summer lawns, school openings and school closings. As the BLS (Bureau of Labor Statistics) notes, by eliminating those types of blips, we can better see what really is happening to jobs and the economy.

    The Debate

    Not every one agrees that statistics should be seasonally adjusted.

    In a recent WSJ column, a Harvard business professor suggested that the media convey both sets, the adjusted and non-adjusted numbers. Concerned that the economy depends less, for example, on malls because of online shopping, he says adjusted numbers that compensate for bad weather distort reality and policy decisions. For that reason, the unadjusted numbers should be more accessible and the adjusted formulas need to be up-dated.

    Responding, a fivethirtyeight writer said that it is a mistake to focus on the weather. Rather it is recurring patterns that include the need for more tax preparers in March, landscapers during the summer, and fewer autoworkers during the new model prep shut down. Without numbers that recognize those patterns, the data would be misleading and obscure important trends. On the other hand, he concurs that the formulas could be tweaked.

    Our Bottom Line: Do Statistics Lie?

    When they are in spread sheets, employment reports and the GDP, numbers appear very believable. Perhaps we should be asking some questions about the jobs numbers in the headlines.

    No Comments

    Read More
  • everyday economics and mail truck productivity

    Surprising Messages From a Mail Truck

    Mar 10 • Businesses, Demand, Supply, and Markets, Economic Debates, Economic History, Government, Households, Innovation, Labor, Regulation, Thinking Economically • 118 Views

    I just called the post office and was told that mail trucks do not have cup holders.

    Because people care a lot about their car’s cup holder, my postman will be especially happy that they will be required in the mail trucks that the U.S. Postal Service will soon order. Crevice elimination is also on the list since letters are getting lost in “hard to access” cracks.

    Where are we going? To how mail trucks provide insight about USPS problems.

    Mail Truck Problems

    The current mail truck fleet lacks air bags, air conditioning, shoulder seat belts, back-up cameras and anti-lock brakes. For gas, trucks average nine miles a gallon. Although some of its pricier vehicles can run on alternative fuels, most do not because of the expense and lack of alternative fuel availability where the trucks are located. Purchased approximately 25 years ago for carrying letters, today’s mail trucks are not set up for the packages that increasingly dominate their business. With inappropriate (if any) shelving and inadequate headroom for postal workers who need to stand as they organize packages, the rear of the truck constrains productivity.

    So, unable to postpone the inevitable and what it cannot afford, the USPS has said it will buy 180,000 vehicles. First though, they have to determine who is qualified to bid. Then those firms will submit design alternatives, prototype contracts will be awarded, and one will be selected. 2018 is the target date for deliveries.

    The new truck could look like this:

    Productivity and new USPS mail trucks

    From: PostalReporter.com

    With these specifications:

    Productivity and new mail truck specs

    From: PostalReporter.com

     

    I wonder whether the truck is our metaphor for the problems that plague the postal service.

    Our Bottom Line: Productivity

    Outdated, old and tired, the mail truck is inappropriate for its current cargo. It reflects a lack of innovation, of money, and the productive techniques employed by firms in the private sector that optimize the number of packages drivers deliver daily. And yet, it will take at least three years to replace it.

    The problems faced by the entire USPS are rather similar.

    No Comments

    Read More
  • everyday economics and apple and the Dow

    Why Apple Deserves the AT&T Slot in the Dow

    Mar 9 • Businesses, Economic Growth, Economic History, Economic Thinkers, Government, Innovation, Lifestyle, Macroeconomic Measurement, Regulation, Tech • 138 Views

    Usually when one firm replaces another in the Dow Industrial Average, they have no connection to each other.  But with Apple taking the AT&T slot, there is a bit more to contemplate.

    Where are we going? What AT&T long ago represented is reminiscent of today’s Apple.

    AT&T’s Innovations

    The AT&T story starts in 1876 when Alexander Graham Bell got his patent for the telephone. Claiming that his device would transmit a voice as far as twenty miles, he decided to rent rather than sell equipment. With households paying $20 a year and businesses $40, the Bell System provided two telephones, the line that connected them, and free maintenance.

    It is easy to forget that someone somewhere had to create all we associate with the telephone. Someone at AT&T decided that a phone had to ring. As for phone numbers, a measles outbreak in Lowell, Massachusetts was the beginning. The AT&T Lowell telephone system depended on switchboard operators who knew the names of their 200 customers. Worried that the system would collapse if their four operators got the measles, they changed from names to numbers.

    If we want to see AT&T’s mind-boggling innovations, though, the place was Bell Labs. Between 1925 and 1983, Bell Labs developed the first fax machine, the original laser, the solar battery cell, light emitting diodes, the UNIX operating system, digital cell phone technology and the transistor which led to computer microchips, touchtone phones and hi-def TVs. You get the picture. Their scientists were paid to think.

    Doesn’t the AT&T spirit make you think of Apple?

    Some AT&T telephone history:

    Innovation from AT&T

    From: The American Experience

    Apple’s Innovations

    As you know, in Apple’s long list of innovations, we have the Gui (graphic user interface) and all of the invisible details that compose the iMac, iPod, iPhone, iPad, and (soon-to-be introduced) iWatch.

    Perhaps like the phone ringer was someone’s idea, so too was Apple’s start-up chime. Jim Reekes, an Apple engineer, believed that the start-up sound should be “meditative” because it shaped the experience we had with our computer. Winding up with a C-chord that “fades back and forth,” he felt everyone could connect with C major.

    And here is Steve Jobs introducing the first iPhone in 2007:

     

    The Dow

    On March 19, Apple will enter AT&T’s Dow slot.

    But the story is not quite that simple.

    The AT&T that is leaving the Dow is different from the firm that first was listed in the Dow in 1916. In 1984, the old AT&T was told to split up. With seven Baby Bells operating independently as local providers and a shrunk Ma Bell, the unraveling had begun. Soon a Baby Bell joined the Dow and then that Baby Bell acquired the AT&T name. Not the AT&T we had known for more than a century, the Baby Bell we call AT&T is the firm now exiting the Dow.

    Our Bottom Line: AT&T and Apple

    A spiritual descendant of AT&T, Apple’s Dow entry reminds us of our innovative history. It also suggests the never ending march of creative destruction.

    1 Comment

    Read More
  • everyday economics and daylight saving time

    What Most of Us Don’t Know About Daylight Saving Time

    Mar 8 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Government, Households, Innovation, Labor, Lifestyle, Macroeconomic Measurement, Regulation, Thinking Economically • 145 Views

    Here’s an oldie but goodie from two years ago that seemed just right for today.

    Railroad Time

    Changing to daylight saving, have you ever thought about who should control time?

    During the 1880s, the railroads said that they should. With railroad companies observing 52 different times and even more variation among cities and towns, a group of railroad managers proclaimed that the US shall have four standard time zones.

    As a result, on Sunday, November 18, 1883, clocks, watches and schedules across the U.S. adjusted as they implemented standard time. How much? It all depended on their time zone. On the Baltimore and Ohio Railroad Line, all conductors  were told to move their watches back 28 minutes.

    Not everyone, though, was pleased.

    Many people believed affluent industrialists had no right to change what nature created. Time was a local issue. If the sun was directly overhead, it was noon. Disagreeing, others wanted the consistency that would help economic activity.

    Congress’s Time

    In 1918, passing legislation that confirmed the four time zones, Congress added a controversial section. Called daylight saving, it would move the clocks forward every May 31. Farmers objected saying their cows could not be milked and their work could not begin in dark wet fields. On the other hand, baseball team owners rejoiced. With games starting at 4:30 instead of 3:30, attendance would soar. Similarly, the founder of Filene’s department store chain looked forward to more women shopping after work because they could walk home before dark.

    Summarized in Keeping Watch: A History of American Time, the debate was between tradition and modernity. Farmers said no while industry supported the idea. Some condescendingly said it would make early risers out of later sleepers. Others felt it encouraged more leisure and consumerism instead of the Protestant work ethic.

    Only a year later, in 1919, Congress voted to end daylight saving and did not reinstate it until WW II.

    I guess that daylight savings, in more ways than one, was about changing times.

    Our Bottom Line: Economic Growth

    Control over time relates to economic growth. But I guess that time always relates to money (as Ben Franklin and others before him have said).

    No Comments

    Read More
  • The econlife.com Weekly Roundup

    Weekly Roundup: From Fed Humor to the Wisdom of Warren Buffett

    Mar 7 • Behavioral Economics, Developing Economies, Economic Humor, Economic Thinkers, Financial Markets, Innovation, Money and Monetary Policy, Tech, Thinking Economically • 109 Views

    Our Posts Roundup

    Everyday Economic and Warren Buffett's ideas Sunday 3.01.15

    Handy notes from Warren Buffett…more

    Everyday economics and Tax evasion in the shadow economy is a fiscal policy problem. Monday 3.02.15

    The basics of Greek tax evasion…more

    everyday economics and airline boarding Tuesday 3.03.15

    Insight about airline queues...more

    everyday economics and federal farm subsidies Wednesday 3.04.15

    Why we subsidize Brazilian farmers…more

    everyday economics and the significance of an ATM Thursday 3.05.15

    What an ATM can teach us…more

     

    everyday economics and Fed humor

    Friday 3.06.15

    Why a Fed joke is about more than humor…more

     

    Ideas Roundup

    • stock markets
    • probability neglect
    • developing nations
    • taxation, eurozone
    • negative externalities
    • shadow economy
    • productivity
    • marginal analysis
    • profits
    • competitive strategies
    • subsidies
    • crop insurance
    • financial intermediaries
    • creative destruction
    • automation
    • monetary policy
    • bubbles
    • recession

     

     

    No Comments

    Read More