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Did anyone see Greenspan's talk in Germany yesterday? One of the answers to a question concerning American employment figures was most interesting. He reckons that the number of people leaving employment is about normal, but the number of people entering employment is low, despite many businesses having full order books.

He attributes this to a major gain in productivity as companies finally understand how to use all the hardware and software they purchased over the last 5 years. For some time to come - he doesn't know how long - companies will be able to grow without employing more staff.

In the UK employment figures reported this morning (issued yesterday) show rising levels of employment and falling unemployment, which would indicate that we're not getting the productivity gains seen in the US.

Any comments from the US as to whether Greenspan's comments reflect reality?

David Roper
Wednesday, January 14, 2004

To some extent it's probably true, but that answer is overly simplistic and really only seems to cover one aspect of the whole economy. One has to wonder what Greenspan's agenda was.
Wednesday, January 14, 2004

I think you're oversimplifying Greenspan's comments.  I read that he made the broader statement that worker productivity was up, and that had kept businesses from hiring.  Not just office staff that figured out how to use their computers, but all workers.

“This cannot go on’s just a matter of time before we begin to see employment start to pick up quite significantly, as it always has in the past,”

Wednesday, January 14, 2004

I think the significance of his views on economic matters is bloated. Frankly my financial advisor knows heck of a lot more than this fella.

cosmo kramer
Wednesday, January 14, 2004

They why is he your financial advisor and not the head of the Fed?
Wednesday, January 14, 2004

Perhaps the money and benefits are better?

Wednesday, January 14, 2004

I thought this was already common knowledge: first of all, that employment is a lagging indicator anyways, and secondly, that much of the growth numbers from last Q3 were due to productivity gains, not higher employment.

Wednesday, January 14, 2004

I wouldn't believe what you hear about the UK. How they measure unemployment changes depending on the answer they want. And as it happens the government would like everyone to believe it's going down.

Not sure I've ever seen them officially release the number of employed, usually because it would expose the dodgy calculations they use for unemployed.

"Out of work? Only for 2 months? Well, we won't call you unemployed, we'll call you in transition. You can't claim benefit because you haven't been out of work for 3 months therefore you can't be unemployed. And when you come back after 3 months, we'll probably have changed the figure to 6 months. Clear? Well on a positive note you should be reassured that unemployment is declining, therefore you're sure to get a job real soon"

Wednesday, January 14, 2004

It's a common misconception that unemployment statistics only count those who are taking unemployment insurance benefits.  The key tool in computing these statistics is a survey called the CPS, which has detailed guidelines as to who is counted as unemployed.

Wednesday, January 14, 2004

Remember when hearing a statistic that without the context its almost worthless.

UK unemployment is falling, though its still over 1 million, and that 1 million is generally assumed to be largely transient unemployment, people in transition from job to job.

However, the available workforce is dropping, there is a shrinking population of those in the employable age group, and there is a growing proportion of older people.

Per capita the UK is more productive than the USA, but that's largely a result of demographics and trying to compare a population of around 58 million with a population of around 297 million. 

In estimating the size of the US economy I've not seen so far any study which actually takes account of the US dollar being used as a de facto currency around the world and the impact that has on money supply.  The rate at which new money is produced feels to me to be out of proportion with the rate at which old money returns to the exchequer, so much sticks outside of the country.

It looks like it will be a $2 pound by Easter at the rate the dollar is plunging, if the Euro follows it down the UK will begin to feel the squeeze at both ends.  Then the UK economy might just burn with inflation and a huge defecit in the balance of payments.

Simon Lucy
Wednesday, January 14, 2004

I did not hear Chairman Greenspan's talk, but I did hear some commentary on current employment indicators.  Robert Reich, who was President Clinton's Treasury Secretary, pointed out yesterday that two factors which are likely to keep unemployment of American citizens high and wages low are:

1) President Bush wishes to deregulate overtime pay.  But high overtime pay encourages companies to hire more workers rather than give existing workers more hours.  Smart companies will hold off hiring staff because they know that they will soon be able to get more work out of people for fewer dollars.

2) President Bush also wishes to open up the American labour market to guest workers from Mexico.  Again, this will drive wages down, and the notion that only jobs which could not be filled by American workers will be filled by guest workers seems implausible.  Smart companies which provide low-wage jobs will hold off hiring staff because they know that a legal pool of guest workers will drive wages down.

Eric Lippert
Thursday, January 15, 2004

Dear Eric,
              I think you are way off on the second one. The regularization of illegal immigrants drives wages up, not down, since the boss can no longer go round threatening them with deportation at the first complaint.

            Also it does seem a little unfair to criticize Bush on one of the few humanitarian measures he has promulgated. Now if he could be persuaded to raise the miniimum wage :)

Stephen Jones
Thursday, January 15, 2004

"I think you are way off on the second one. The regularization of illegal immigrants drives wages up, not down, since the boss can no longer go round threatening them with deportation at the first complaint."

If the visa system is set up so their legal status is tied to their employer, the bosses will still be able to use deportation as a threat.  It only drives wages up if they were making below mininum wage before.

Thursday, January 15, 2004

> Dear Eric, I think you are way off on the second one.

No you don't.  I haven't expressed MY opinion.  You think that former Treasury Secretary Robert Reich is way off on the second one.

I, being a programming language designer and not an economist, have no informed opinion on the matter.

Eric Lippert
Thursday, January 15, 2004

Note that I misspoke --  Reich was Labor Secretary, not Treasury Secretary.  My bad.

> also it does seem a little unfair to criticize Bush
>  on one of the few humanitarian measures he
>  has promulgated.

How fascinating that you took those comments as criticism.  What was it in particular that led you to assume that I was being critical?  I don't think that anywhere I said either that lower wages for Americans or legal jobs for Mexicans are bad things.

I suspect that former Labor Secretary Robert Reich was intending to be critical, as he was pointing out that President Bush's policies are inconsistent. 

I was not intending to be critical -- I was intending to do what the original poster asked, ie, pass along opinions of Americans.

Obviously, any policy produces winners and losers.  Whether the humanitarian benefit outweighs the economic cost in this particular is a moral question which I have no informed opinion on.

Eric Lippert
Thursday, January 15, 2004

One other thing -- I'm also curious as to under what circumstances it is "unfair" to criticise the policies of the President of the United States. Any general guidelines would be appreciated.

Eric Lippert
Thursday, January 15, 2004

Yes, Erich, you're right. You did make it clear these comments were Reich's, not yours.

I would suggest that it is unfair to criticize anyone if you are Robert Reich. He rode the wave of the economic expansion during the early Clinton years. His website gives as an achievment:

# Protecting workers' pensions by ensuring that companies fully funded their pension plans.

I'm glad Enron pensioners know they are fully protected.

Stephen Jones
Thursday, January 15, 2004

Stephen: Reich is refering to defined-benefit contribution plans which are protected under the 1974 ERISA legislation.  A defined-contribution plan, such as a 401k, has no guarantee whatsoever of protection.  Stock market could tank tomorrow and you could be left holding the bag.

In Enron's case, it was much worse because the company encouraged its employees to invest in Enron stock - which as any financial advisor will tell you is a dumb "put your eggs all in one basket" idea.  The company match was exclusively in Enron stock as well.  And when the stock started tanking, people couldn't transfer their allocations.

Eric: I think Stephen is saying that, given the poor track record of the Bush Administration policies, that we should be happy that he does ANYTHING right ...

Friday, January 16, 2004

> as any financial advisor will tell you is a
>  dumb "put your eggs all in one basket" idea

Not any financial advisor.  Take Andrew Carnegie, for example.  Carnegie said that the way to get successful was "Concentrate all your thought and energy upon the performance of your duties. Put all your eggs into one basket and then watch that basket, do not scatter your shot."

The full text is here:

Eric Lippert
Tuesday, January 20, 2004

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