Friday, February 5, 2010

Unemployment Drops Yet Romer is Still Wrong

The DoL announce that unemployment for January 2010 dropped to 9.7%. Specifically they state:

The unemployment rate fell from 10.0 to 9.7 percent in January, and nonfarm payroll employment was essentially unchanged (-20,000), the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.

The charts below depict the three factors we have been monitoring.

First the track to the Romer Data of January 11, 2009. Her projects now appear as pure guess work.

Second we depict the difference in absolute percent for the two cases:

Third we depict the relative error between what she predicted and actual.

It is clear that the Romer error is decreasing on a relative scale. However it is also clear that the Stimulus did not function. The attempt to define an unmeasurable called "jobs saved" is truly shameful. The answer is what we suggested in a earlier posting, just eliminate corporate income tax. That will have a twofold effect; increase demand by lower costs and in turn increase employment due to increased demand.

The Government is the last entity ever to create jobs. In fact their money is targeted at local and state jobs, the very jobs that should be reduced! These jobs have the excess pay, excess pensions, excess health care, and yet are dominated by unions.

In the same BLS page as the unemployment data we have a report on union employment. They state there:

In 2009, the union membership rate—the percent of wage and salary workers who were members of a union—was 12.3 percent, essentially unchanged from 12.4 percent a year earlier, the U.S. Bureau of Labor Statistics reported today. The number of wage and salary workers belonging to unions declined by 771,000 to 15.3 million, largely reflecting the overall drop in employment due to the recession. In 1983, the first year for which comparable union data are available, the union membership rate was 20.1 percent, and there were 17.7 million union workers.

The data on union membership were collected as part of the Current Population Survey (CPS). The CPS is a monthly sample survey of about 60,000 households that obtains information on employment and unemployment among the nation's civilian noninstitutional population age 16 and over.

Some highlights from the 2009 data are:

1. More public sector employees (7.9 million) belonged to a union than did private sector employees (7.4 million), despite there being 5 times more wage and salary workers in the private sector.

2. Workers in education, training, and library occupations had the highest unionization rate at 38.1 percent.

3. Black workers were more likely to be union members than were white, Asian, or Hispanic workers.

4. Among states, New York had the highest union membership rate (25.2 percent) and North Carolina had the lowest rate (3.1 percent).

The observations on the above are pointed:

1. We now have more union members in the public sector than anywhere else. This drives up costs and lowers productivity. Just look at the New York City School System of the State of New Jersey.

2. Education is a disaster in the United States. There are lower scores, less students going into the hard sciences, and higher drop out rates and frankly less is learned by teachers who frequently are at best marginally competent. A PhD in Math from MIT or Stanford is prohibited by law, a law created by unions, from teaching in a High School unless they are dumbed down by the education courses. If Einstein had teachers like these just think!

3. Highest union membership and New York and its financial collapse, is there a connection? Yes there is, and the current Administration just wants to institutionalize this! Shameful acts.