On Wednesday, January 20, 2010, the New York Association for Business Economists held its annual forecasting meeting. The speakers were Jan Hatzius, Chief U.S. Economist at Goldman Sachs and Stephen Gallagher, Chief U.S. Economist at Societe Generale on their forecasts for the U.S. economy, and Joyce Chang, Global Head of Emerging Markets and Credit Research at JP Morgan.

As I used to do what Hatzius and Gallagher are doing, I can critique their presentations. For those who are unfamiliar with how the macroeconomic forecasting community works, I’ll put it in context toward the end. I have little experience with emerging markets, but Chang made a very interesting point that I’ll convey.

I focus on Hatzius’s presentation because he approached the forecast as I would. He also had a nice set of charts and tables. I no longer have access to the databases and other tools that are necessary to make good judgments so I appreciate his work.

Hatzius is forecasting U.S. real GDP growth in 2010 of 2.6%, lower than the consensus of 2.9%; little or no growth in employment, meaning the unemployment rate peaks around 11% late in the year. The Federal Reserve leaves the policy interest rate near zero, i.e., no Fed tightening.

The economy rebounded to 2.2% growth in the third quarter, and an estimated fourth quarter of nearly 6% (first official estimate for the fourth quarter will be Friday, January 29; but much partial data is available, so it is an accounting estimate, not a forecast). The entire explanation for the upturn involves the contribution of fiscal stimulus and the accompanying reversal of the inventory drawdown. Fiscal stimulus added two percentage points in the second quarter of last year, three in the third, down to 2 in the fourth through second quarter of this year. The end of fiscal stimulus (assuming no new packages) turns the federal government sector into a drag on the economy in the fourth quarter of this year.

The inventory cycle, which subtracted from growth in the first half of last year, added about a percentage point in the third quarter and a large 4 percentage points in the fourth quarter, down to about a percentage point in the first half of 2010, after which the inventory cycle is neutral.

The combined contribution to growth was 4 percentage points to the third quarter’s 2.2% (meaning the economy would have declined in their absence), and all of the 6% expected for the fourth quarter.

Technical note: The inventory cycle would not have reversed were it not for fiscal and monetary stimulus, but presenting the figures this way allows for clear accounting of how the economy turned around.

The reasons for sluggish growth have been well discussed at FDL and acknowledged by Hatzius.

1. Little or no growth in employment, as in the first years of the two prior recoveries, and the inability of consumers to borrow in light of underwater mortgages, foreclosures, etc., a reluctance of financial institutions to lend.
2. A weaker-than-normal rebound in homebuilding owing to the continuing mess in that sector.
3. State and local government budget pressures.
4. Constraints on lending to small business; problems in commercial real estate which are in their infancy.

My question, which I didn’t get a chance to ask, is why any growth at all? Why not a double dip after the stimulus, and its indirect influence on the inventory cycle, wears off?

The answer involves some fine calculations about household income which I no longer have the tools to do. In an after-meeting conversation with a friend who does do those calculations, she told me that you can get some growth in aggregate income by noting that weekly hours of those at work start to rise in advance of employment. That is accurate. It hasn’t happened yet, but it’s probably around the corner.

I remarked that the economy is poised on a knife edge, and she agreed. The modest growth in income that is projected could easily be counterbalanced by a rise in the household savings rate. If that happened, consumer spending, the economy’s engine, would decline, taking the whole economy with it.

Gallagher has a forecast that is slightly more optimistic than consensus, growth a bit above 3% this year. His arguments were unpersuasive, some of them circular. For example, employment growth was only stagnant in the first years of the past two recoveries because the economy was sluggish he noted. But the economy was sluggish because of the lack of employment growth. He also asserted that to have a really sluggish recovery means that you’re saying “this time it’s different,” a frequent mistake that economists make. But even his forecast is well below what would be a “normal” first year, over 5% in the recoveries before 1991. And it was “different” in the past two cases: 2.6% in 1991, and 2.2% in 2002. (Factors like the degree of monetary and fiscal stimulus, larger now than in the prior two cases, and the effect of 9/11 in the last case, should also be considered.) The “optimistic” case is weak and not very optimistic anyhow.

Chang’s presentation on emerging markets made a big deal out of the fact that emerging markets in aggregate weathered the global financial storm much better than G3 (apologies to Iceland and a few others). My words, not hers, but it seems she thinks they’ve learned about disaster capitalism. Resource producers have set up funds when resource prices are high to tide them over when prices drop. Accumulation of a gigantic amount of reserves (think China, India, but apparently it’s more widespread) insulates them from financial market gyrations and allows them to thumb their noses at IMF and World Bank dictates. It is certainly a sad state of affairs when the poor have to double-save to protect themselves against predation from the rich, while the rich squander. But a better state of affairs than if they didn’t do that.

Some context for economic forecasts coming from financial institutions. Anticipating questions about the honesty and self-serving nature of these forecasts, economists’ forecasts are a different animal from those made by analysts who cover stocks. I experienced no pressure to forecast one thing or another. It’s been nine years since I did that job, and Wall St. has changed dramatically for the worse since then. But economists’ forecasts have no direct bearing on the business of the corporation, so no reason to pressure them. And Hatzius approached the exercise much as I would have; he passes my smell test.

Some final notes. There was a lot of talk about how amazed they were at the speed of recovery in financial markets, but did not dwell on that. One questioner asked about the next bubble and Chang noted some real estate possibilities in Asia. There was NO talk about the U.S. political implications of the forecast.

The Secular Coalition for America (SCA) is an organization whose mission is lobbying the U.S. government on issues involving separation of church and state and for the inclusion of nonbelievers into the public discourse. Its member organizations can be found on its website.

I am newly acquainted with this organization, and with New York City Atheists so this diary, as the title says, is an introduction, not an endorsement.

On Sunday, December 13, 2009, its Executive Director, Sean Faircloth, spoke in Manhattan at a meeting sponsored by New York City Atheists, Inc., not one of SCA’s member organizations.

Rather than railing against the inclusion of the work “God” in pledges, on currencies and buildings, the bulk of Mr. Faircloth’s speech concerned the pitfalls of exempting religious organizations not only from taxes, but broad sets of other laws. For example, several children have died in religious day care centers that are exempt from local regulatory laws for secular day care centers. A much higher percentage of infants of faith healing believers die than in the general population because they are exempt from all the rules about child endangerment and neglect. Mr. Faircloth told a particularly gruesome story of a 15-year-old daughter of believers in faith healing who suffered months of excruciating pain owing to the growth of a tumor on her shoulder, eventually to the size of a basketball, at which point she died. Mr. Faircloth refers to such behavior as faith torture and faith killing. It would never be allowed outside the “religious” context.

Mr. Faircloth is young and enthused about his work. He spent 10 years as a state representative in Maine. He was frequently lobbied by religious interests, but not once in a decade by secularists, humanists, atheists. He points out that legislators respond to the voices they hear.

He also had priceless quotes from Thomas Jefferson and James Madison. These Enlightenment era men of learning and vision could never be elected in the 21st Century United States of America.

The U.S. government has become entirely too religious for my tastes. I’m looking for some force on the other side that might start to turn back the religious wave.

I’m hoping the SCA might become that organization. Its budget is tiny, so great things cannot be expected soon, but Mr. Faircloth might be the right person to spearhead the effort.

Check out the website. Click the “sign up” button in the upper right—it’s how Mr. Faircloth’s speaking engagements get rated. Note some of its successes, like having language removed from the health care reform legislation that would have covered the spiritual care of individuals with religious objections to medical care, which had previously been included.

Two loosely related developments. First, NYC Atheists report that their advertising campaign on city buses has brought many new members and is being used as a model in other cities.

Second, NYC Atheists is joining with a Roman Catholic priest to sue a bishop in Brooklyn over his robocalls in support of a political candidate. At issue is the parish’s tax exempt status. The lawsuit will be announced on Thursday, December 17.

Sibel Edmonds was an FBI translator in Turkish and Farsi for about seven months from mid-September 2001 until April 2002. She was translating audio recordings of phone calls (owing to lack of FBI expertise in these languages, some of the material had been archived and went back to 1996) relating to suspected spy operations conducted by Turkish and Israeli agents, mainly it seems their U.S. lobbies. They were, according to the material Edmonds translated, paying off U.S. members of congress, through campaign contributions and/or promises of lucrative positions post government service. Or through attempted blackmail. High ranking officials in the State Dept. (Mark Grossman allegedly started when he was ambassador to Turkey and continued when he was number 3 in the State Dept.) participated. So did high ranking members of the Defense Dept. Edmonds names Air Force Major Douglas Dickerson, Richard Perle and Douglas Feith.

I am no expert in this case but the extent of the corruption, if these allegations are true, is astounding. The purpose of this diary is to encourage wider distribution of Edmonds’ story.

She was fired for complaining that a member of a Turkish organization had infiltrated into the translation section of the FBI. Edmonds has subsequently been the most muzzled person in contemporary U.S. history. However, she was recently able to give a four hour deposition in a defamation lawsuit by U.S. Representative Jean Schmidt (yes that one) against her political opponent, David Krikorian, who accused her of taking $30,000 in bribes from Turkish interests.

That seems to have unmuzzled her, as a result of which Philip Giraldi, a reporter and former CIA agent, has now published an in-depth interview here. It is a must read. A few excerpts below. In addition, there is a long interview of Giraldi and Joe Lauria here, the latter having published earlier articles on the Edmonds’ story in the Sunday Times of London. The interview has a long discussion of how to think about Edmonds’ credibility, the conclusion being that she is certainly credible enough for her allegations to be investigated further.

Since the alleged corruption is at very high levels of the U.S. government, the story demands additional exposure. Not only read it yourself and pass it along, but also if you have any connections in MSM, try to get them to pick it up. Apparently the FBI investigation has been scotched, but it could be reopened if there is enough publicity.

Here are three illustrative excerpts.

1. Marc Grossman’s role and other actors

EDMONDS: Grossman became a person of interest early on in the investigative file while he was the U.S. ambassador to Turkey [1994-97], when he became personally involved with operatives both from the Turkish government and from suspected criminal groups. He also had suspicious contact with a number of official and non-official Israelis. Grossman was removed from Turkey short of tour during a scandal referred to as “Susurluk” by the media. It involved a number of high-level criminals as well as senior army and intelligence officers with whom he had been in contact.

Another individual who was working for Grossman, Air Force Major Douglas Dickerson, was also removed from Turkey and sent to Germany. After he and his Turkish wife Can returned to the U.S., he went to work for Douglas Feith and she was hired as an FBI Turkish translator. My complaints about her connection to Turkish lobbying groups led to my eventual firing.

Grossman and Dickerson had to leave the country because a big investigation had started in Turkey. Special prosecutors were appointed, and the case was headlined in England, Germany, Italy, and in some of the Balkan countries because the criminal groups were found to be active in all those places. A leading figure in the scandal, Mehmet Eymür, led a major paramilitary group for the Turkish intelligence service. To keep him from testifying, Eymür was sent by the Turkish government to the United States, where he worked for eight months as head of intelligence at the Turkish Embassy in Washington. He later became a U.S. citizen and now lives in McLean, Virginia. The central figure in this scandal was Abdullah Catli. In 1989, while “most wanted” by Interpol, he came to the U.S., was granted residency, and settled in Chicago, where he continued to conduct his operations until 1996.

GIRALDI: So Grossman at this point comes back to the United States. He’s rewarded with the third-highest position at the State Department, and he allegedly uses this position to do favors for “Turkish interests”—both for the Turkish government and for possible criminal interests. Sometimes, the two converge. The FBI is aware of his activities and is listening to his phone calls. When someone who is Turkish calls Grossman, the FBI monitors that individual’s phone calls, and when the Turk calls a friend who is a Pakistani or an Egyptian or a Saudi, they monitor all those contacts, widening the net.

EDMONDS: Correct.

2. Perle’s & Feith’s roles

EDMONDS: Absolutely. And we also had Pentagon officials doing the same thing. We were looking at Richard Perle and Douglas Feith. They had a list of individuals in the Pentagon broken down by access to certain types of information. Some of them would be policy related, some of them would be weapons-technology related, some of them would be nuclear-related. Perle and Feith would provide the names of those Americans, officials in the Pentagon, to Grossman, together with highly sensitive personal information: this person is a closet gay; this person has a chronic gambling issue; this person is an alcoholic. The files on the American targets would contain things like the size of their mortgages or whether they were going through divorces. One Air Force major I remember was going through a really nasty divorce and a child custody fight. They detailed all different kinds of vulnerabilities.

GIRALDI: So they had access to their personnel files and also their security files and were illegally accessing this kind of information to give to foreign agents who exploited the vulnerabilities of these people to recruit them as sources of information?

3. And the inevitable role that sex plays

EDMONDS: Yes, and in 2000, another representative was added to the list, Jan Schakowsky, the Democratic congresswoman from Illinois. Turkish agents started gathering information on her, and they found out that she was bisexual. So a Turkish agent struck up a relationship with her. When Jan Schakowsky’s mother died, the Turkish woman went to the funeral, hoping to exploit her vulnerability. They later were intimate in Schakowsky’s townhouse, which had been set up with recording devices and hidden cameras. They needed Schakowsky and her husband Robert Creamer to perform certain illegal operational facilitations for them in Illinois. They already had Hastert, the mayor, and several other Illinois state senators involved. I don’t know if Congresswoman Schakowsky ever was actually blackmailed or did anything for the Turkish woman.

The banality of it all. For example, in another part of the scheme, they were able to place recent PhDs at think tanks like Rand and Sandia, who would sell U.S. secrets (including nuclear) for a few thousand dollars (an unintended consequence of education inflation, no doubt), which were later resold for hundreds of thousands of dollars.

Spread the word.

This report represents an update of the employment/unemployment data that the government releases at 8:30amET, usually on the first Friday of the following month, depending on holidays. The original diary, explaining the data, can be found here.

The February employment data continued the labor market disaster. The headline unemployment rate jumped to 8.1%, from 7.6% the month before and the highest rate since December 1983, over 25 years ago. Payrolls plunged 651,000, and the prior two months were revised downward. Job losses during 2008 were 3.0 million, the largest for any year in the post-WWII period. But by shifting the period by just two months, to February 2009 versus February 2008, employment plummeted 4.4 million.

Employment declines of more than half a million per month obviously worsen the outlook for the economy. Cutting interest rates to zero has not stimulated the economy, though the Federal Reserve would point out that the situation would be much worse if it hadn’t eased aggressively. The fiscal stimulus already enacted is far from sufficient to stem the decline in the economy and jobs.

The most comprehensive rate for labor underutilization is called U-6 (see original diary for the definition). It leaped to 14.8% in February from 13.9%

This report represents an update of the employment/unemployment data that the government releases at 8:30aET, unusually on the first Friday of the following month, depending on holidays. The original diary, explaining the data, can be found here.

The January employment data continued the labor market disaster. The headline unemployment rate jumped to 7.6%, from 7.2% the month before, the highest rate since mid-1992, and higher than when Clinton took office (7.3%). Payrolls plunged 598,000, and the prior two months were revised downward. Job losses during 2008 are now reported at 3.0 million, worse than the 2.6 million reported just a month ago, already the largest for any year since World War II.

Employment declines of more than half a million per month obviously worsen the outlook for the economy. Cutting interest rates to zero has not stimulated the economy, though the Federal Reserve would point out that the situation would be much worse if they hadn’t eased aggressively. A large fiscal stimulus is needed, yesterday.

The most comprehensive rate for labor underutilization, U-6, is defined as total unemployed, plus all marginally attached workers, plus total employed part-time for economic reasons, as a percent of the civilian labor force plus all marginally

This report represents an update of the employment/unemployment data that the government releases at 8:30aET, unusually on the first Friday of the following month, depending on holidays. The original diary, explaining the data, can be found here.

The December employment data continued the labor market disaster. The headline unemployment rate jumped to 7.2%, from 6.8% the month before and the highest rate since early 1993. Payrolls plunged 524,000, and the prior two months were revised downward, with November now showing a loss of 423,000 jobs and October down 403,000. 2008′s 2.6 million job loss was the largest for any year since World War II.

The most comprehensive rate for labor underutilization, U-6, is defined as total unemployed, plus all marginally attached workers, plus total employed part-time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers. It leaped to 13.5% in December, up from 12.6% the month before, and 8.7% a year ago. That compares to the headline unemployment rate at 7.2%, up from 4.9% the year before. The December U-6 is the highest on record. (The Bureau of Labor Statistics started reporting this measure in January 1994, when it was 11.8%, whereas most

A Primer on Employment Data

This is an introduction to government employment data and the unemployment rate, intended as a reference document. It is policy and forecasting free. Each month I’ll try to replace the second paragraph with quick highlights of the data after they are reported.

The November employment data were a disaster. The headline unemployment rate jumped to 6.7%, from 6.5% the month before and the highest rate since late 1993. Worse still, payrolls plunged 533,000, much more than the 320,000 drop that was expected and the prior two months were revised down from declines of around 240,000 to -403,000 in September and -320,000 in October.

The unemployment rate that hits the headlines is from a survey of households. The respondent is asked if s/he is currently employed, or looking for work. The sum of the two is called the workforce. The unemployment rate is therefore the ratio of those who are looking for work but can’t find a job, divided by the workforce. The official press release is here. The end of the press release includes links to all the detailed data.

The data are usually released the first Friday of the following month (8:30a ET) and are