Friday, February 27, 2009

Bad News That Isn’t “New”

The revised rate of real GDP growth for the 4th quarter of 2008 was released this morning.

This is the second of 3 releases of this number. Every quarter gets 3 announcements, coming 1, 2, and 3 months after it ends.

This revision to –6.2% is much worse than the first estimate of –3.8%. That’s bad. The –3.8% was the worst in 26 years, and the –6.2% is still the worst in 26 years (although it is a lot closer to the –6.4% we registered in 1982 I).

Keep in mind that the media likes to push this as new news. It is new, but not really that new. We tend to hear about these later revisions more when they change the estimate up or down substantially (like this time around). And, the news business being what it is, we hear more about this when the revision is downward.

For example, this news item was at the top right of the headlines on Drudge Report when I got up this morning, and it was listed in red instead of black. In other quarters, where there is less change, I sometimes forget about the announcement date (which I know by heart) because the news sites don’t put it up front like this.

Wednesday, February 25, 2009

Pessimism Porn

Pessimism porn is the meme of the new year, eh?

Paul Kedrosky, in an op-ed in the Globe and Mail has the best description:

People are revelling [sic] in sending one another scary stories about the awfulness of the current awfulness.

Even better:

The Greater Depression!

Kedrosky has a very good finance/macro blog and has even used pessimism porn to title some posts (here and here).

The original source was an article in The New York Times Magazine, entitled, what else, “Pessimism Porn: A Soft Spot for Hard Times”.

There are lots of players in this mini-industry, but the biggest is probably Nouriel Roubini – a very bright NYU professor whose been preaching financial doom and gloom for … well … since before the last recession. Who knows – maybe he’s right.

So, why the porn metaphor?

I searched for a site that would list the warning signs of porn addiction. I don’t know if they’re good, but they seem reasonable. Here they are:

1. Time - looking at porn is taking up more time and more time. It is no longer just a means to an end.

2. Cost -  looking at porn is beginning to cost you because you are neglecting other areas of life (for example, you're not doing your job properly or your relationships are deteriorating.)

3. Objectification - after a porn session you're looking at everyone in a sexual, porn-filtered way. (In the Friends episode The One With The Free Porn, Chandler realises [sic] he and Joey have to turn off their free porn channel when he goes to the bank and is surprised the teller doesn't ask him to 'do it with her in the vault.' Funny but it reflects the truth.)

4. Desensitisation - in some cases, people find themselves looking at harder and harder porn, even at material which conflcits [sic] with their personal values.

5. Acceptance of the message - wanting to take what you have seen in the fantasy of porn into the reality of your life. (For example, wanting to suggest it to your partner or wanting to join a club or chat room could well be warning signs.)

Now, to turn this around, the signs that someone has a problem with pessimism porn are:

  1. Spending a lot of time reading and talking about the bad economic news.
  2. Focusing on bad economic news is interfering with other parts of life.
  3. Surprise that others aren’t quite as obsessed with the bad economic situation as they “should be”.
  4. Worse economic news is rush.
  5. Acting on the bad economic news when there isn’t need to.

Does this sound like anyone you know? It sounds like quite a lot that I know.


Most people go to TV news for information on macroeconomic issues.

So, you’d think it would be really important to have macroeconomists on those shows.


Media Matters did a study of this and found that only 6% of the pundits on TV discussing the current economic situation and the stimulus package were economists.

Media Matters purposefully used a broad definition of "economist" to be inclusive, coding as an economist any guest who has a master's degree or doctorate in economics or who has served as an economics professor at a university or college, as best as we could determine.

Note that this is economists; macroeconomists is a subset that is no doubt smaller still.

I don’t think you can get those kind of numbers by accident. I think it is useful to ask why it is so important for the legacy media to misrepresent their talking heads as economists.

N.B. If you don’t know the meaning of the word in the title, this is a good time to plug in the keywords “define” and “poseur” into Google.

Monday, February 23, 2009

Policy and the Ongoing Financial Crisis

The problem with a lot of policy is that it is like holding a water balloon: if you see a problem and respond to it, another problem is created somewhere else (just like pinching a water balloon in the spots where it is bulging).

I bring this up for two reasons, and bear with me while I explain.

First, about a month ago I remarked casually that everyone is supposed to know that primary residential real estate (a home you own and live in) is a lousy investment. Many people – including some of you – don’t know that.

Second, Peter has brought up a book he is reading for Harrop’s class called The Wealthy Barber. Peter noted that the book confirms part of what I said (and adds other arguments that I didn’t make, but don’t disagree with).

People get fooled into thinking that primary residential real estate is a good investment by not recognizing or understanding the leverage involved. For example, if you buy a $100K with 20% down, and the value of the house goes up by 10%, you now owe $80K on something worth $110K. That gain is yours, not the lenders, so you’ve made a 50% profit on a 10% appreciation. What leverage does is amplify gains and losses - you get higher returns because you’re taking on extra risk.

So what does all this have to do with policy and water balloons?

After the Great Depression, our government set in place laws and regulations to strongly discourage the use of leverage in the purchase of stocks. This was felt to be a big contributing factor – through margin calls – to the huge stock market (and wealth) declines that started in 1929.

In its place, they created an industry out of thin air – the now defunct savings and loan industry – whose role it was to facilitate the leveraged purchase of primary residential real estate.

So … the economy is the water balloon, and government sanctioned leverage investing is the hand squeezing it. Moving the hand doesn’t change the problem. You’d think they learn.

Michelle Muccio’s Policy Suggestion

A video about a policy suggestion by Michelle Muccio has been getting a lot of airplay on the internet (and she got interviewed on the legacy media the other day).

In short, her idea is a tax holiday for FICA taxes.

The pros are that it is simple, transparent, and cheap to implement.

The cons are … well … um … you can’t make people spend the money they get to keep, and you can’t control what they spend it on. Cafe Hayek has a good quote about this:

If ordinary Americans truly are struggling to pinch pennies these days, there should be little worry, even for a Keynesian, that the extra money workers get from a suspension of their payroll taxes won't be spent.  However, if you're a politician, the ways private citizens will spend these monies are not under your control -- a fact that renders the political class terribly allergic to Michelle's plan.

I mentioned this in class on Friday: the real conflict with the stimulus package is not between Democrats and Republicans, it is between centralizers and decentralizers. The Republicans voted against the stimulus package because they are out of power. When they were in power, what they did was pretty much constantly centralize and stimulate the economy (and the Democrats were against their policies).

More broadly, I think you should recognize how problematic this is: Ms. Muccio is connected in the D.C. political scene, and yet to get anyone to talk about this as an alternative she has to promote it as a viral video. That’s twisted.

Urban Myths

After most of you left on Friday, I grabbed Mike Terry and said we should look his e-mail right then and there.

So, we put a few keywords that roughly fit the e-mail he mentioned into and quickly found information that supported the points I’d made in class. I’d like to repeat this experiment in class today.

In the future, if you hear something about the macroeconomy that seems odd, there are other sites that collect and check urban legends like this: urban legends page, the AFU archive, and scambusters.

In macroeconomics, urban legends come up in two contexts.

First is innumeracy (just like illiteracy, but with numbers). If people can’t or won’t do the math for the sort of numbers we talk about in macroeconomics, then they are more open to manipulation by the unscrupulous.

The second context is related to critical thinking. Research on critical thinking shows that the problem when this doesn’t occur is not usually that people can’t think critically about an issue, but that they have certain issues for which they “turn off” their critical thinking ability. A broad term for that is “faith”. A lot of political issues boil down to faith, and when they do, there is a lot of room for urban myths: politically faithful Republicans will believe all sorts of nonsense about Democrats, and vice versa.


I recommended that you look up “hyperbole”, and its adjective form “hyperbolic”. I can’t remember the context for using those words, but there’s cause to use them a lot when talking about policy.

I also recommended you look up “ossified”. That’s a medical term, but one often borrowed to describe how bureaucracy works in practice.

Wednesday, February 18, 2009

The U.S. Saving Rate (tee hee)

We always hear that the personal saving rate is low and that this is bad.

This is a data artifact: we really ought to know better than to talk about this without knowing more, but the fact is that most reporters and pundits don’t.

It shouldn’t take a rocket scientist to figure out that there’s no way we can have the wealth we do (and until last summer the growth in wealth we’ve had) without a lot of saving supporting it.

What we really have here is a number called the “personal saving rate” which ought to be renamed: it misleads people because it misses most saving. No wonder it’s low.

This piece from the Federal Reserve Bank of San Francisco goes over some of the details, and shows that the low personal saving rate can be predicted fairly tightly as a response to increase in real and financial wealth, and declines in the rate of return on saving. Here’s another one from the Federal Reserve Bank of Chicago indicating we should worry less.

There’s more irreverent coverage of this at Seeking Alpha, and InvestmentU.

Most of these are technical. They’re light on the big picture. People save because:

  • They lack insurance
  • They lack social security
  • They lack a pension
  • They lack material possessions
  • They’re more worried about the future than the present.

The top 4 operate in the U.S. at all times, and the 5th one generally. So, we probably shouldn’t be too surprised that savings is low.

An additional factor is our target wealth. If we have a target in mind for wealth, and we exceed it, then we lose interest in saving. This is why we should see lower saving in financial and real estate booms.

An additional problem with thinking about this is that our current rate is often compared to a reference point that was higher. The problem is cherry picking those reference points. One commonly used is the U.S. in World War II. Another is the current saving rate in China. A third is the current saving rate in other developed countries. The problem with these is that consumption is like “anti-saving”: if we’re not savings we must be consuming. But what we forget is that consumption requires two things: 1) available and worthwhile stuff to consumer, and 2) a place to put it. Going back to these three examples, it shouldn’t be surprising that saving was higher in the U.S. during World War II (when there was nothing to buy), is higher in China currently (where there isn’t much worthwhile to buy away from the ports), or is higher in Japan and Europe (where smaller homes mean bigger consumption of intangibles like vacations).

A last factor is purchases of new homes. In all countries national income and product accounts this is counted as investment. But, since there is a lot more of this in the U.S. than most other countries, it means that what many families regard as their big wealth vehicle – their home – isn’t counted as saving. Try telling them that sometime …

The bottom line is that you should roll your eyes and harumph when you hear someone complain about the low saving rate in the U.S. Saving is the part of income we don’t consume (after allowing taxes and government spending to go through the circular flow). If we’re only consuming 70% or so of GDP, we’ve got to be saving 30%.

I have in mind pieces like this one from MSNBC: the level of discussion here could have come out of the mouth of a 17th century Puritan.

Fixed Assets

We spent some time in class looking for a number that we could use to represent aggregate capital in the U.S.

We started out with some keywords and got to capital formation first. This is akin to net investment in (new) capital, when we really want existing capital.

Fixed assets was mentioned and seemed more like what we need. Data on fixed assets is collected by the Department of Commerce.

Calibrate a Solow Growth Model

You’ll get several thousand hits if you put that phrase into Google – not Paris Hilton numbers certainly, but definitely showing that a lot of people besides you are thinking about this.

A lot of these aren’t very accessible for students, but this one should appear near the top of the list Google gives you, and isn’t too unreadable. Around page 10 it talks about reasonable values for parameters.

The author is Stephen Parente – a fairly well-known young-ish macroeconomist known for his work with Edward Prescott (who won a Nobel Prize in 2004 in part for applying the Solow growth model to understanding business cycles).

GDP Around the World

The developed world revolves around 3 economic axes: the U.S., Japan, and Europe. U.S. real GDP growth was –3.8% in the last quarter of 2008.

Japan is off by a ton more : see “Japan's Slump Is Broadening to Service Sector” in the February 18 issue of The Wall Street Journal.

The news isn’t quite as bad for Europe, but it’s still worse than the U.S.: see “Euro-Zone Economy Registers a Grim Performance” in the February 16 issue of The Wall Street Journal.

Did We Just Hit the Trough?

Note: in no way am I claiming definitively that the economy just troughed, or even that there is a high probability of last month being the trough.

Having said that though, there is better data coming in.

Recessions are always a mix of bad and good data with the former predominating (just as expansions are mostly good numbers with a few bad ones thrown in).

What is going to happen when the economy troughs though, is that the data is going to start getting better at a certain point, and after several months of improving data the NBER will declare that the trough occurred at that point in the past when things started getting brighter.

So, take a look at “Data Hints At Slowing of Decline” from the February 17 issue of The New York Times. (Also note that the title indicates a slowing of decline rather than a turning point, although the reporter is putting in an opinion there that a macroeconomist wouldn’t dare to.)

Manufacturing shrank at a slower rate in January from December, and new orders rose slightly …

… Retail sales crept up 1 percent in January …

Sales of existing homes jumped an unexpected 6.5 percent in December …

A Little Macro Humor

The largest number has been discovered. (Beware of mild insensitivity – site is usually office safe.)

Monday, February 9, 2009

Lucas On the Unimportance of Business Cycles

Robert E. Lucas Jr. won his Nobel Prize in 1995 for work he’d done in the the 1970’s on business cycles.

By the late 1980’s his tune had changed subtly. He didn’t think that his earlier work was unimportant (no one does) but that it allowed him to quantify how important business cycles were to the average Joe, and the answer is “not very”.

He made this point most forcefully in a 1988 book entitled Models of Business Cycles.

Models are the key for how we think about the world. Lucas’ big contribution in macroeconomics was in developing models that were more difficult to find faulty with:

… Participants in the discussion [about policy and business cycles] must have, explicitly or implicitly, some way of making a quantitative connection between policies and their consequences. [pg. 6]

This points to a big problem in our current situation. No one seems to be able to figure out what model the Bush people had in mind when thinking about the recession, and while everyone agrees that Obama won because voters believed he could bring change, with respect to macroeconomics this seems to be a change back to a discredited model of the economy.

Lucas’ particular sort of model is capable of showing two things about growth and business cycles that no one was able to quantify before.

  • The welfare gains from small changes in growth rates are huge: that Americans would be willing to give up something like half of their current level of income in exchange for the growth rates they have in China. This is broadly in line with what the Chinese actually have forsaken to get those growth rates – although Lucas wrote this before there was any awareness that China was undergoing a growth miracle. [pp.20-25]
  • The welfare gains from reducing the variability of our growth rates to zero (i.e., eliminating business cycles) are almost non-existent: we appear willing to give up between 0.1% and 1% of our average annual growth rate to live in a perfectly stable world. [pp. 25-31]

Note the elephant in the room of the first point: many people around the world have given up that amount of current income to not get growth anywhere near what the Chinese are getting. Something must be really goofed up with their economies.

And, putting some numbers on the second one might help a bit. Our business cycles have growth rates that are broadly like 3% plus or minus 5% each year. Lucas is saying that to get the second number down to zero, we’d only be willing to go down to between 2.0 and 2.9%. That isn’t much.

All of this is a hugely strong argument for spending a lot more time looking at growth rather than business cycles, and it is one that the profession of economics has not been able to seriously weaken in 20 years of trying.

Fogel On Well-Being

Robert Fogel won his Nobel Prize about 15 years ago for applying economics to history. His paper “Catching Up with the Economy” shares a lot of content with his book The Escape from Hunger and Premature Death … that I put on reserve in the library.

His main assertion is that we are far better off than our GDP statistics are capable of measuring, mostly because we:

  • Count input costs instead of output benefits for big chunks of the economy, and
  • We don’t value leisure at all in GDP, even though it is already the major component of what we “consume”, and growing faster than other components.

The first part is mainly a measurement problem: it is a lot easier to count the budget of SUU than the value to Utah of SUU graduates. The bigger problem is that education, health care, government and leisure services all have this problem, and they’ve gone from a fraction of the economy 150 years ago to the vast majority of it today.

The second part is because GDP was developed at a time when just about everyone toiled almost constantly. A lot of the world is still like this, but the U.S. and other developed countries aren’t any more. Many countries are currently like the U.S. of 100 years ago. The U.S. of today is not: we work between a third and half less than we did the in exchange for better goods and services and 4 times as much lifetime leisure.

This means that we miss a huge amount of what makes us rich. This isn’t stuff – goods and services – but rather what Fogel calls spiritual assets. This isn’t spiritual in a religious sense (although it can be), but rather spiritual in the sense of virtues that make our spirits rich:

  • A vision of opportunity
  • A work ethic
  • Self-esteem
  • Family solidarity
  • Sense of discipline
  • Impulse control
  • Sense of community
  • Benevolence
  • Thirst for knowledge

The fundamental problem in developed society is not a maldistribution of goods and services that might be rectified through government transfer programs, but the rather the uneven investment of leisure time in the nurturing of spiritual assets.

It isn’t possible for the government to tax a sense of community from, say, Utahns, and transfer it to south central LA, but we also shouldn’t be under any illusions that this is the sort of thing we should be worrying about instead of the usual class warfare nonsense that comes out of D.C. 

Taylor on Policy as a Cause of the Financial Crisis

John Taylor is another macroeconomist on everyone’s short list for a Nobel Prize. He as also an undersecretary of Treasury in the Bush administration, which means that a lot of politicians and pundits in D.C. are currently more inclined to dismiss him than they ought to be.

His piece entitled “How Government Created the Financial Crisis” in the February 9 issue of The Wall Street Journal makes the point that – like all recessions – this one was caused by a number of things we’ve seen before, just not in this combination.

One mistake was that most past financial crises have been about liquidity, while this one was about solvency.

Early on, policy makers misdiagnosed the crisis as one of liquidity, and prescribed the wrong treatment.

The Bush Treasury and the Bernanke Federal Reserve didn’t “do nothing”, rather they did several things that weren’t right. Then they made it worse:

After a year of such mistaken prescriptions, the crisis suddenly worsened in September and October 2008.

Many have argued that the reason for this bad turn was the government's decision not to prevent the bankruptcy of Lehman Brothers over the weekend of Sept. 13 and 14. A study of this event suggests that the answer is more complicated and lay elsewhere.

While interest rate spreads increased slightly on Monday, Sept. 15, they stayed in the range observed during the previous year, and remained in that range through the rest of the week. On Friday, Sept. 19, the Treasury announced a rescue package, though not its size or the details. Over the weekend the package was put together, and on Tuesday, Sept. 23, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson testified before the Senate Banking Committee. They introduced the Troubled Asset Relief Program (TARP) …

The two men were questioned intensely and the reaction was quite negative … It was following this testimony that one really begins to see the crisis deepening and interest rate spreads widening.

The realization by the public that the government's intervention plan had not been fully thought through, and the official story that the economy was tanking, likely led to the panic seen in the next few weeks. And this was likely amplified by the ad hoc decisions to support some financial institutions and not others …

It’s worth remembering that Taylor is probably on a first name basis with all the principals in the story. He isn’t blaming anyone, but he is trying to do some forensics to figure out what they did wrong.

Sunday, February 8, 2009

Rogoff on Financial Crises

Ken Rogoff is another guy on everyone’s medium-list for a Nobel Prize in economics.

In the February 3 issue of The Wall Street Journal he had an op-ed piece entitled “What Other Financial Crises Tell Us”.

His basic point is that so far our crisis looks like a whole bunch of other countries’ crises – and so we have a ways to go (9 months to a a couple of years) before things start brightening up.

Chinese Unemployment

While America is being all self-centered about its economic problems, there’s news out of China (see “China’s Migrants See Jobless Ranks Soar” in the February 3 issue of The Wall Street Journal) that they have 20 million newly unemployed people – and that’s just migrants from rural areas.

The article does not put this in perspective well. China has – maybe – 4 times the population of the U.S. Yet, U.S. unemployment is up by about 3 million in this recession.

What China is seeing is quite a bit more than 4 times what we have in the U.S., so things are worse there.

Further, the Chinese labor force is a smaller share of the population – it’s a lot easier to be a two-earner couple with the services and amenities we have in the U.S., so again, things are worse there.

Lastly, this is just out of China’s internal migrant labor force – at 150 million people, that’s probably about a third of their total labor force.

In sum, they have a proportionally higher number taken out of a fraction of their labor force.

And yet … we will continue to see published estimates of how quickly the Chinese economy is growing (I saw that they were down to about 6% last month). That number and the unemployment number can’t both be right.

The Great Leap Forward and the Cultural Revolution

A few weeks ago we talked about the big downward movement in Chinese real GDP in the late 1950s and 1960s.

While it is correct to de-emphasize the importance of business cycles because they are of secondary importance relative to growth, it is important to keep in mind that we are talking about real people who are hurt in real ways, not just dips on a graph.

In this case, these look like a depression-scale event in China.

Unfortunately, depressions aren’t caused by people and policies, while the downturn in China was in fact a policy that had effects that look like a depression.

To make matters worse, Chinese policies created a depression-scale event in a country full of people living at subsistence level. The result was starvation on a scale never seen before or since.

The Great Leap Forward was an agricultural reorganization policy of Mao Zedong that ended horribly. In part, it also led to a loss of some of Mao’s political power, who responded with the Cultural Revolution – a policy that amounted to getting rid of everyone who knew what they were doing. The bottom line is that depression-scale blip in Chinese real GDP corresponds to the deaths of millions under each policy – so we’re talking Hitler-scale.

Stockholm Syndrome

This was an obscure reference for a macroeconomics class that you can read up on here.

That post details a number of uses, to which I’d add that I’ve heard of it used as a reason for why employees sympathize with bad managers, or even why children often retain attachments to their parents favorite sports team or even religious faith, in spite of evidence that it isn’t working for them.

In our case it was mentioned that people in poorer countries often claim that they don’t need the wide array of products frequently purchased in developed countries. This is in spite of the fact that many people in developed countries aren’t particularly free to leave the influence of governments that aren’t acting in their best interest. Their typical response after emmigration to a richer country is to maintain this sympathy for old ways for a time (just as victims continue to sympathize with their kidnappers) before adjusting.

This was an interesting idea to bring to the debate about macroeconomics and well-being, because proponents of growth limitation in developed countries often use this perception of people in developing countries to discourage growth there. The fact that it changes with the local macroeconomy suggests this is a very problematic view.

Friday, February 6, 2009

Thorough Source on Historical GDP

Google Books has a scan of one of the definitive sources: Angus Maddison’s The World Economy: Historical Statistics.

It shows the oldest reasonable estimate of GDP: in England and Wales, in 1688, nominal GDP was about 54 million pounds.

To grow to the current nominal GDP of the U.K. (a modestly bigger country) of around 3 Trillion pounds would require an average growth rate for nominal GDP of 3.5% to be sustained for 321 years.

Good. Fast. Expensive. Pick two.

This is an old joke about what is possible on engineering projects.

Megan McArdle uses the concept to think through the planned stimulus package.

Good: It is very obvious, now that we have the stimulus plans, that the Democrats are using stimulus as an excuse to spend money on things they want to spend money on.

Fast: The problem is, that contra the Republicans, Democrats do care that money spent on these important projects is spent well.  And spending a lot of money well takes time.

Expensive: What we've got ... is basically one fact: America entered World War II in a depression, and emerged from World War II without one.  Hopefully, the relevant variable was the massive, massive amount of spending, rather than any of the other explanations one can plausibly build ...

Thursday, February 5, 2009

New Productivity Data

Data on labor productivity came out Thursday morning: up by 3.2% in the 4th quarter.

Increased productivity is desirable, but by itself, this piece of data isn’t good or bad. It can reflect 3 things:

  • Technological improvements
  • The worst workers were fired first in the recession, making it easier for the remaining workers to post better productivity gains.
  • The retained workers are covering their butts by working harder.

One way to interpret this is to compare it with compensation. Managers are inclined to retain workers whose productivity gains exceed the growth of their compensation. The difference is unit labor costs. Last quarter compensation was up by 4.7%, so unit labor costs were up by 1.5%. This isn’t good. (FWIW: FoxNews gets this backward by asserting that unit labor costs being less than productivity gains is good).

Another way to interpet it is to compare productivity gains to real GDP or some other measure of output. Again, productivity is outstripping our ability to buy it and consume it. This isn’t good.

So what we have here is a good thing – the productivity gain – that is bad at this time because the economy doesn’t seem to be able to “digest” it.

Wednesday’s New Data ??

Aaron brought this up in class, and we talked about it a bit.

In retrospect, I can’t dig out what Aaron was talking about; this is not to say Aaron was wrong, just that I couldn’t pick out what he was talking about from the ton of new data available (one possibility is initial unemployment insurance claims for last week, while another is change in unemployment for December). The numbers are similar.

I did make the mistake of asserting that perhaps the unemployment rate had gone up to 7.5% as expected. This data won’t be released until Friday morning, so that couldn’t be it either.

Monday, February 2, 2009

More GDP Growth Details

"Economy Dives as Goods Pile Up" from the February 1 issue of The Wall Street Journal goes over some finer details of 4th quarter performance.

In all quarters, some things get better and some get worse. In this one, the worst performers were business investment, consumer spending, and exports (basically, everyone else's business investment and consumer spending).

Interestingly, commercial and residential real estate were not off that much - perhaps they've fallen so far there isn't much place to go.

The only bright spot was imports - we're buying less of stuff produced by employees in other countries (although that is more than canceled by them not buying our stuff, and us not buying our stuff either).

The real problem area is inventories. These are goods that were produced but not sold. When they go up - as they did in the 4th quarter - it suggests that jobs will be cut more in the near future so that we don't make even more stuff that people aren't willing to buy.