Man Without Qualities

Tuesday, November 25, 2003

The Real News

Much of the financial media is a-twitter with this story:

Gross domestic product, a measure of all the goods and services produced in the U.S., was revised to an 8.2% annual rate for the third quarter, the Commerce Department reported Tuesday. That was a full percentage point higher than an earlier 7.2% estimate and even higher than the strong 8% growth economists had forecast for the latest reading, according to a survey by CNBC and Dow Jones.

Well, people have different ideas about what the real story in today's news is:

"Forget about GDP, the story is profits," said John Silvia, chief economist at Wachovia Securities. After-tax profits increased at a 10.6% annual rate in the third quarter, after falling 5% in the second quarter. Corporate profits with inventory valuation and depreciation -- the concept closest to company-reported profits -- rose 30% from a year earlier. Nonfinancial corporate profits surged an annualized 70%. That helped propel business spending to its strongest showing in three years.

Of course, to the Brad Delongs, Paul Krugmans and others of that fungible mass, a quarter of GDP growth is hardly a story at all. The real story is employment - and by that (with pining nostalgia) they mean payroll employment, not household employment.

For example, Brad Delong linked to this article, but his emphasis is not that the economy has finally been launched on a sustainable recovery that will help make this holiday season the best retailers have seen in years. No, no, no... Professor Delong cuts most of that out. His emphasis is on the article's report that the ... forecasting panel predicting the jobless rate will average 5.8 percent in 2004, down from 6 percent currently. The forecasting panel saw payroll employment rising by 1.1 percent, or about 1.3 million workers, not enough to replace the 2.3 million jobs that have been lost since Bush took office in January 2001. That the 2.3 million jobs were "lost" only in comparision to an employment bubble created at the end of the Clintonian era is not worth a mention by the Good Professor.

Consumer confidence and spending numbers are also in:

"Consumer confidence is now at its highest level since the fall of 2002," said Lynn Franco, director of the Conference Board's Consumer Research Center. "The improvement in the present-situation index, especially in the jobs component, suggests that consumers believe a slow but sure labor market turnaround is underway." ... Consumer spending rose at a 6.4% annual rate, driven by federal government tax cuts and low interest rates. It was the strongest quarterly spending since 1997. The figure was initially estimated at 6.6%.

Previous softness of such things had caused the Good Professor to quiver: That's a big enough piece of bad news to cause me to take a full percentage point off my personal estimate of the fourth quarter GDP growth rate...

But as of 10:45 am, the time of this posting, the Good Professor had not a word of revision or comment. But Perhaps he's in some kind of shock. [And, on a lighter note, the substanceless rantings at Eschaton again pay no heed to the new economic numbers. Herr Doktorprofessor Paul Von Krugman is busy with confabulatory word games concerning his political hate speech that amount to nothing more or less than an implication of bias in the New York Times coverage of him (including its patently obvious observation that the little mustache Herr Doktotprofessor's British publisher placed on Vice President Cheney with no objection from Herr Doktorprofessor was Hitleresque) and an infantile "mommy, the Republicans did it first" defense of his own excesses. The KCI Index was also revised strongly upwards. Poor kitty. Note: The [KCI] index is, in keeping with Krugman's methodology, measured in vague, fluid units that don't necessarily correspond with specific real-world methods of measurement. ]

The growth in profits is very important to employment expectations, and not just because employers are more willing to hire when profits turn up strongly. Strong profit growth tends to produce employment effects which are not squarely accounted for in many standard economic models, and that is especially true given the economy's current trend towards non-standard "employment" relationships (an obvious trend with a significance willfully ignored by bad economists such as Krugman and Delong, perhaps because of political bias and perhaps because they are intellectual dinosaurs). My guess is that near-term employment numbers will be much stronger than the published consensus - and that the economy is well on its way to an unemployment rate much lower than 5.8%.


A weird Boston Globe column by Alex Beam makes the additional patently obvious observations that Paul Krugman is completely crackers, that Herr Doktorprofessor's personal web site ( is a nutty, score-settling tote board where he fires his rhetorical blunderbuss, and that Herr Doktorprofessor considers his critics to be nonentities, including Taranto (Who bravely clings to his "entity" status. We are with you, James!) at Opinion Journal (hazily identified by the Globe as the Wall Street Journal Online), Andrew Sullivan, Mickey Kaus, and others.

Yes, yes. That's all completely true as far as it goes. And the Globe's ownership by the Times is yet more indication that somebody at the Times is getting impatient with Herr Doktorprofessor's rantings - although, as Don Luskin correctly points out, the tenor of the Globe's criticism seems more along the lines of trying to get Herr Doktorprofessor to stop all the extracurricular activities that make it so obvious that he's completely crackers.

And here, at least, the Globe is right to that extent. Imagine if Maureen Dowd had such a personal website? She wisely keeps her rantings confined to the Times' Op-Ed pages, where her trainers/handlers/editors can intervene if the need arises.

But Paul Krugman has increasingly put the Times in a position too much like that of Roy Horn - who is at this very moment left to ponder whether his nearly-fatal injuries were the results of his exotic pet's deliberate attack or mere confusion. And so it is with the Times and its exotic pet.

FURTHER UPDATE: Mr. Beam at the Globe thinks that a visit from Mr. P., as in Pulitzer, is only a matter of time for Herr Doktorprofessor. Mickey Kaus agrees! Of course, that doesn't matter, because he's a non-entity. But Mr. P isn't likely to call unless the Times management lobbies hard for the visit. Is Mr. Beam making that point, too, for Herr Doktorprofessor's benefit?

ANOTHER UPDATE: By 10:30 pm, various things - including the recently released Two Towers DVD and an Economist excerpt suggesting that investors sense a chill beneath the warm glow of the numbers - had warranted posts from Good Professor Delong. But not the revised 8.2% GDP growth rate - the number that's currently giving off the warmest glow.

Delong's desire to call attention to the chill beneath the warm glow of the numbers while seeking to avoid discussion or admission of some of the most important numbers looks rather like Prince Charles' spokesman's attempt to quash reports of "the incident" without actually saying what the alleged "incident" was supposed to be. But it may be deduced from Brad Delong's vigorous attempt to not mention those numbers giving off that misleading glow that the supposed numbers involved the economy and that they were not, say, boating race results.


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