Their Own Facts

At Bloomberg Barry Ritholtz makes some very good points:

Consider the following data points. In a typical full employment economy, this is what you would expect to see:

— Robust wage growth;
— Rising consumer confidence;
— Record employment-to-population;
— Longer workweeks and more overtime;
— The chief executive officer survey showing confidence about the future;
— Rising quit rates as employees aggressively change jobs;
— Low and falling levels of people marginally attached to labor force;
— High and rising consumer spending;
— More household formations;
— Housing sales (for new and existing homes) are strong;

In many case, these measures are not where you might expect them to be in the 10th year of what is now the longest economic expansion in postwar history.

Why aren’t we seeing those things? Let’s consider some possibilities.

1. We are. We just don’t know how to measure them.
2. There are countervailing forces which even in an economy nearing full employment prevent them from emerging.
3. Unemployment rate doesn’t tell enough of the story. The labor force participation rate is still too low for those other things to start happening.
4. The statistics that are being used are carefully constructed to make the economists compiling them and the politicians who commission them look good.

I think that the answer is probably “all of the above” but I find the last one particularly appealing. Nobody wants to be the bearer of bad news. Or out of step with the smartest people in the field.

Another possibility is that neither Obama’s rather flat affect nor Trump’s highly mercurial approach has conveyed the confidence to managers or workers alike to take risks.

My general rule of thumb is that regardless of what the weatherman says it’s not raining until you see rain and people start behaving as though it were raining.