Tag: President Obama

Where is the Automobile Industry Really Headed?

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American voters should be required to read the 1954 best seller by Darrell Huff, How to Lie with Statistics. The book illustrates how data used by political leaders, economists, and business leaders represent their viewpoints. At times, a single set of data may tell different, but accurate stories about the subject matter.

This was the case in President Obama’s State of the Union speech on February 12 when he stated “We buy more American cars than we have in five years”.  A review of the data tells at least three different  stories (you may find additional interpretations of the data).

1. In February 2008, light truck and auto sales were 15,459,000 and interest rates were 7.27%. Total sales for December 2012 were 15,325,000 and January was slightly lower 15,200,000.  After plummeting, light truck and auto sales have returned to levels of five years ago.

2. In February 2009, sales had plummeted to 9,021,000 with interest rates of 6.92%.  For the period 1980 to 2012, this is the lowest level of sales since December 1981. That month sales were 8,849,000 and interest rates were 17.36%. Since late 2001, there has been heavy stimulation in the market causing sales to be “stolen from the future.” This includes zero percent and other creative financing programs as well as Cash for Clunkers. Given the level of past stimulation, a case can be made that the recent increased growth in auto sales is partly a function of altered consumption patterns and may not be sustainable.

3. Current light truck and auto sales are comparable to December of 1985, when 15,387,000 vehicles were sold and interest rates were 12.39%. Interest rates have dropped steadily since the high in December 1981 to 4.82% at the end of 2012. Given the current level of interest rates and the likelihood  they will increase, a case can be made that additional stimulation is unlikely to occur from low interest rates.

The President was correct in his statement (#1 above). While his positive interpretation of the data was appropriate for the occasion, it is possible that the growth of the auto industry will not be the topic of future State of the Union speeches.

Note: monthly light truck and auto sales are seasonally adjusted and annualized.


Copyright 2011 by CBER.

“Our Businesses Have Created Over Six Million Jobs” – True, But…

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In his State of the Union speech, President Obama stated, “After years of grueling recession, our businesses have created over six million new jobs.”

The jobs data produced by BLS tells at least four accurate, but different stories about the state of U.S. private sector employment.

1. The trough of the recession occurred in February 2010. About 6,111,000 private sector jobs were added between February 2010 and January 2013.

2. When President Obama took office in January 2009, private sector employment was 111,048,000. In January 2013, it was only 113,111,000. During the first four years of President Obama’s presidency, private sector employment increased by about 2 million workers.

3.  In December of 2000 private sector employment peaked at 111,776,000. The recovery from the 2001 recession took 54 months, or until June 2005, to return to its 2000 peak. The rebound continued until January 2008 when private sector employment peaked at 115,668,000. Just over 8.8 million jobs were lost between then and February 2010 when private sector employment bottomed out at 106,850,000, well below the peak in 2000. Specifically, in January 2009, employment dropped below the 2000 peak. Forty three months later, mid-2012, the number of jobs again exceeded the 2000 peak. At the time President Obama gave his 2013 State of the Union speech private sector employment was only about 1.2 million jobs greater than the peak in 2000.

4.  Private sector employment will not reach 2008 peak employment until mid-2014. In other words it will take about 72 months, or 6 six years for full recovery of the private sector from the 2008 recession.

The wisdom of Darrell Huff, author of How to Lie with Statistics, should be heeded when reviewing data produced by political leaders, economists, and business leaders.  Statistics can tell many stories.

©Copyright 2011 by CBER.

The Colorado Economy is Outperforming the U.S.*

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Earlier this year, President Obama sparked a debate about the health of the economy when he said, “The private sector is doing fine.”

At the national level, the private sector began adding jobs in February 2010 and has consistently added jobs since. The private sector has regained about 48% of the jobs lost in the recession, as compared to the peak in 2008. That part of the debate is clear.

On the other hand, the number of total government jobs has been on the decline since January 2008 (temporary employment associated with the 2010 Census is excluded). Shrinking budgets have caused federal, state, and local agencies to tighten their belts.

Closer to home, Colorado leaders are proudly proclaiming that the state is recovering faster than the U.S. Unfortunately, the sense of optimism displayed in this statement requires an asterisk.

The state’s private sector began adding jobs in January 2010. It has regained about 49% of the jobs lost in the recession, as compared to the peak in 2008. By this measure of improvement, Colorado’s private sector is recovering from the recession at a similar rate as the U.S. Whether that level of growth is “fine” is a debate for a different time. (It should also be noted that current private sector employment is below the peak prior to the 2001 recession.)

Government employment is the difference maker. In contrast to the national level where there is a decline, the number of government jobs in Colorado has increased slightly since 2009. As a result, total Colorado employment has regained jobs lost in the recession at a faster rate than the U.S.*

 

©Copyright 2011 by CBER.