Explaining Southern California's economy

Unemployment preview: Ahead of Friday's official data, the outlook is grim

The official August employment numbers will be released by the BLS tomorrow. But a few other notable sources have already provided data:

Meanwhile, the economic consensus is expecting something in the neighborhood of 100,000 jobs added to non-farm payrolls. 

The economist Peter Morici, who's been hammering away at the jobs problem for over a year now, summed up an unpleasant situation rather nicely at CNBC:

The economy must add 130,000 jobs each month to accommodate a growing adult population seeking work.

The key factor stifling jobs creation is sluggish GDP growth, which only advanced 1.3 percent in the second quarter and 0.3 percent in the first. Businesses can’t hire and pay new workers without more customers.

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What's hard to get? The numbers on the porn business, that's what

When I recently blogged about the struggles of the California porn industry, I cited a figure of $12.6 billion in yearly sales. I'd seen figures in this general ballpark before. But there's also a…let's call it a feeling out there that the porn business' numbers are unreliable. 

So is it really a $12 billion-plus game? Ten years ago, a somewhat smaller number — $10 billion — was being questioned by Forbes:

The idea that pornography is a $10 billion business is often credited to a study by Forrester Research. This figure gets repeated over and over. The only problem is that there is no such study. In 1998, Forrester did publish a report on the online "adult content" industry, which it pegged at $750 million to $1 billion in annual revenue. The $10 billion aggregate figure was unsourced and mentioned in passing....For the $10 billion figure to be accurate, you have to add in adult video networks and pay-per-view movies on cable and satellite, Web sites, in-room hotel movies, phone sex, sex toys and magazines--and still you can't get there. 

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Remind me again: Why are we fighting over transportation?

At this point, it's looking like the economy won't fall back into a recession — but it is going to continue its anemic growth pattern. Against the backdrop of this malaise, we have a long-term unemployment problem: uninspiring jobs data is scheduled to be released tomorrow, with our national rate expected to stay around 9 percent and the California rate to remain at or above 12 percent. Can you say "stagnation?"

In Washington, President Obama and Republicans in Congress are playing chicken with legislation that would extend federal transportation funding. Obama says 4,000 jobs are at stake. And this is just an extension of funding that's due to expire on Sept. 30. Another fight looms over the cost of a long-term bill. Democratic Congresswoman Lois Capps of Santa Barbara argues that the parsimonious GOP plan would cost the state 51,000 jobs.

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Econ 474: Whatever happened to the 'Great Moderation?'

I'm introducing a recurrent weekly feature to the blog. It's called "Econ 474," and I'll leave it to the commenters to figure out why. For my part, I'll say that I want to blog about some key economics and business topics that bear on Southern California, but I'd like it to be a bit more involved that good-old Econ 101. 

Today, let's take a look at what, prior to the financial crisis. economists were calling the "Great Moderation." The current Federal Reserve Chairman, Ben Bernanke, summarized it pretty well in a 2004 speech -- before he succeeded Alan Greenspan, and obviously four years prior to the financial crisis:

One of the most striking features of the economic landscape over the past twenty years or so has been a substantial decline in macroeconomic volatility. In a recent article, Olivier Blanchard and John Simon (2001) documented that the variability of quarterly growth in real output (as measured by its standard deviation) has declined by half since the mid-1980s, while the variability of quarterly inflation has declined by about two thirds.1 Several writers on the topic have dubbed this remarkable decline in the variability of both output and inflation "the Great Moderation." Similar declines in the volatility of output and inflation occurred at about the same time in other major industrial countries, with the recent exception of Japan, a country that has faced a distinctive set of economic problems in the past decade....Reduced macroeconomic volatility has numerous benefits. Lower volatility of inflation improves market functioning, makes economic planning easier, and reduces the resources devoted to hedging inflation risks. Lower volatility of output tends to imply more stable employment and a reduction in the extent of economic uncertainty confronting households and firms. The reduction in the volatility of output is also closely associated with the fact that recessions have become less frequent and less severe.

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Even if we can reduce unemployment, we'll still struggle with African-American joblessness

Brian Watt and Madeleine Brand reported today on the final stop of the Congressional Black Caucus' jobs tour, which took place in Los Angeles. As they point out, the unemployment rate among African-Americans is around 16 percent, far higher than the national rate of 9.1 percent. In California, the rate for African-Americans is over 20 percent, while the overall rate is 12 percent.

If you think about this, we really have two problems rolled up into one: in California, we urgently need to reduce high general unemployment; but we also need to address the the problem of black unemployment, which is always higher than the general level. This is from the Economic Policy Institute -- in January of 2008, almost a year before the financial crisis hit:

In the best of times, many African American communities are forced to tolerate levels of unemployment unseen in most white communities. The 2001 recession pushed the white annual unemployment rate up from a low of 3.5% in 2000 to a high of 5.2% in 2003. During the same period, the black unemployment rate shot up from 7.6% to 10.8%. National recessions take African Americans from a bad situation to a worse one....In 2007, the black unemployment rate was 8.3%. This figure is still above the pre-recession low and more than twice the white unemployment rate. Goldman Sachs estimates that a new recession would increase the national unemployment rate to 6.4% by 2009. For African Americans, the unemployment rate would be expected to rise to 11.0%.

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