Calculated Risk has obviously posted several updated graphs, which give a good, if very general, sense of just what’s been happening in terms of employment in America.

From Bill McBride’s post at CR this morning:

The Labor Force Participation Rate was increased to 63.5% in June (blue line) from 63.4% in May. This is the percentage of the working age population in the labor force.

The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although a significant portion of the recent decline is due to demographics.

The Employment-Population ratio increased in June to 58.7% (black line).

Here’s that graph:

You can see the dip in the participation rate during the 2007-2009 recession, but note that the rate had already been declining for over a decade before that. There are a variety of reasons for this, primarily the increased number of elderly Americans. The slow employment recovery from the 2001 recession almost certainly contributed to the decline in the rate for a few years as well. Also, more adult Americans are going to college, and I suspect there might even have been an uptick in single-income households by choice.

The key reason for the rising participation rate from 1960 to 1990 was the entry of women in large numbers into the workforce.

The employment-population ratio obviously nosedived as unemployment spiked and millions of jobs were lost beginning in 2008, but it looks like that number has stabilized and is slowly creeping upward. If the unemployment rate continues falling and if the economy keeps adding jobs at the current clip, we should see that number back up around 61 percent in a couple of years.

This next graph from Calculated Risk shows the devastating decline in jobs during the 2007-2009 recession compared to other post-WW II recessions, which typically saw steep losses and strong recoveries.

Note, however, that the jobs recovery form the relatively shallow 2001 recession was painfully slow. We’re recovering at about the same rate this time around. The slower recoveries in these two most recent recessions suggest that newer forces might have come into play.

It’s worth noting, however, that part of the jobs recovery a decade ago was due to the continued growth of government payrolls. This time, public employment has been declining.

He posted some typically concise and on-the-mark commentary on Sunday: A few comments on dumb policy

McBride cites a number of counter-productive policies embraced or proposed in recent years that have had the effect of deepening or simply extending the conditions that led to the financial crisis and the Fed’s stimulative measures. He appropriately notes the seller-financed Downpayment Assistant Programs for FHA backed loans, the Homebuyer Tax Credit that dragged out the housing bust by at least 18 months, and other measures.

In this post he takes aim at the indiscriminate sequestration cuts that are undoubtedly hurting the economy more than they are helping control spending — while they are having real, adverse impacts on the lives of Americans, especially those who live or work on military bases. From the post, with emphasis added:

This is frustrating and embarrassing for the U.S. – and this also impacts the Fed. If we ended the sequestration budget cuts, then there would be a better chance that the Fed could taper and end QE3 sooner rather than later. Dumb policy is hurting the country right now … and if I was a reporter, I’d ask these three Congressmen [Boehner, Cantor, and Ryan] about ending the cuts at every opportunity.

For more on how sequestration is impacting residents in the Savannah area, check out this recent AP article.

I’ve corresponded very occasionally with McBride via email. Despite the fact that his blog gets huge amounts of traffic, he always responds promptly and politely. (I was a little late in joining the game, but I’m currently tied for 4th place for the year in Calculated Risk’s economic predictions contest.)

Joe Weisenthal has a great interview with McBride today at Business Insider: The Genius Who Invented Economics Blogging Reveals How He Got Everything Right And What’s Coming Next

From that lengthy piece:

I hate to say it, but this is the most optimistic Iâ€ve been since the 90s. Iâ€m not a roaring bull, but looking forward, this is the best shape weâ€ve been in since â€97 or something.
In 97, I started worrying about what was going to happen when the stock bubble burst. By the time you got to the decent part of the Bush economy 2004-2005, I was so worried about housing I didnâ€t think much about the economy. Looking forward, this is the best weâ€ve been since then. We have plenty of problems to work through, but gosh, housing is going to be a tailwind for some time.

As McBride notes — calmly, patiently, and apolitically — there are all sorts of potential headwinds, especially from the situation in Europe. He’s less worried, btw, about the fiscal “slope”, which isn’t a single firm deadline and which is entirely solvable.

Years ago, a few friends — and I suspect a lot of readers — called me Mr. Doom and Gloom, a phrase that also appears a few times in the BI piece today. But I was just going where the data was leading me. When I first started writing in earnest about the Savannah housing market, things were bad and about to get much, much worse. Now things are weak, but steadily getting better. Ditto for local, state, and national employment, which is still in bad shape but clearly improving.

Paul Krugman has also chimed in today on his blog about McBride’s contributions to sober, fact-based discourse.

A personal note: I’d like to thank Governor Romney for his personal sacrifice. I believe he is a decent man, and I think everyone should appreciate the sacrifice all candidates made in running for office (I’d never do it, even at the local level). I also think President Obama is a decent man, and I remain optimistic about the future.

And about the fiscal “cliff”, which is not really cliff and which does not have a hard deadline of January 1:

1) The top marginal tax rate will increase from 35% to 39.6%. The details still need to be worked out (at what income the highest bracket will start, and what happens with dividends and capital gains). The it is pretty clear the top tax rate will increase.

2) The payroll tax cut is probably going away. This was the 2% payroll tax reduction that workers received in 2010 and 2011. For a family with a $50,000 per year income, this is a tax increase of about $20 per week.

3) The Alternative Minimum Tax (AMT) relief will probably be extended (it is every year).

4) Given that the top marginal tax rate will increase – and that certain politicians can’t vote for any bill with a tax increase – the agreement will probably be voted on in January after the Bush tax cuts expire.

Here’s CR’s graph of the history of the top marginal tax rate:

An increase in the top tax rate is just one small move that could help address the deficit and debt. There’s essentially no historical correlation that suggests that a slight increase in that rate will damage the economy.

The Fed has already taken other actions over the last 4 years to try to bolster the economy.

Here’s how my Armstrong colleague Nicholas Mangee explained it in a recent Savannah Morning News column:

From 2008 through 2011, the Federal Reserve embarked on a series of financial market operations to try to rejuvenate an economy grasping for air. Massive amounts of reserves were injected into the commercial banking system. These policies, known as Quantitative Easing (QE) I, and II, and Operation Twist (a term from a similar policy enacted in 1961) consisted of purchasing hundreds of billions of dollars worth of mortgage-backed securities and treasuries from major federal agencies like Fannie Mae and Freddie Mac and other financial intermediaries.

Unlike QE I and II, Operation Twist involved re-shuffling the Fedâ€s balance sheet by which short-term treasuries were sold in exchange for assets with greater maturities, such as mortgage-backed securities. These assets were bought in order to lower medium to longer-run interest rates, the only existing yields not near zero.

By purchasing the toxic assets that so many financial firms were caught holding when the music stopped on the great credit expansion of 2003 through 2007, the Fedâ€s balance sheet and bank reserves expanded to historically unprecedented levels.

From 1984 through 2008, the average amount of commercial bank reserves held with the Fed was approximately $20 billion. By the end of 2011, that amount skyrocketed to $1.53 trillion. Even though commercial banks are required to keep a portion of reserves on site with the Fed, almost all of these new injections of liquidity were excess reserves allowed to be loaned out at will.

Calculated Risk has a succinct QE Timeline in this post. He also puts those dates into this graph of the S&P 500. It speaks for itself.

And contrary to what you might be reading or hearing, the Fed’s actions over the last few years have not damaged the economy. We have not seen runaway inflation: in fact, we still need higher inflation. We have not seen investors run away from U.S. debt: the dollar is still — even increasingly — regarded as one of the world’s few safe havens.

And by not using all the tools in its toolbox, the Fed is virtually assuring that the American economy will remain weak for years, probably until the end of this decade.

For a broader but still concise summary of the Fed’s actions over the last few years, check out an April column by my Armstrong colleague Nicholas Mangee: What the Federal Reserve has (has not) done

Today’s economic projections after the latest round of Fed meetings are, in a word, dismal. They show continued growth and continued declines in unemployment — i.e., no recession — but with a growth so slow that millions of Americans will remain un- or underemployed. Many Americans already have a tenuous hold on their standing in the middle class; millions more will fall out of it if the Fed doesn’t do more.

Here are the projections in graph form that the Fed released today. There’s obviously a considerable range of uncertainty in these forecasts, in part because of the potential catastrophe in Europe and other external events, but note that the best case scenarios are weak. To a large extent, these weak forecasts are still rooted in the housing crisis, which I last discussed at length here.

From the Fed:

And those projections in table form:

So absent Fed action, the best estimates right now are for GDP growth to remain below 3% into 2014 and for the unemployment rate to stay above 7% into 2015.

The Federal Reserve has a dual mandate: to control inflation and to maximize employment. Both those goals are currently significantly below the Fed’s targets.

Check out Calculated Risk for a broader discussion and additional links. He expects QE3 to be announced on August 1.

Excluding distressed sales, the increase was 2.6%.

Those are healthy gains even after the reminder that these numbers are not adjusted for seasonality and that home prices month-to-month are generally more robust through the late spring and summer, and much less robust in the fall and winter.

More importantly, in year-over-year comparisons, CoreLogic saw an increase of 1.1% in home prices in April 2012 compared to April 2011. That includes distressed sales.

And that’s just another indication that we have finally hit bottom in terms of home prices nationally.

But some states and cities are obviously in better shape than in others.

From the press release:

Including distressed sales, the five states with the greatest depreciation were: Delaware (-11.9 percent), Illinois (-6.8 percent), Alabama (-6.6 percent), Rhode Island (-6.2 percent), and Georgia (-5.6 percent).

Here’s CoreLogic’s map showing the widespread positive turn year-over-year:

And here’s the year-over-year change in percentage terms — the brief positive turn in the CoreLogic HPI two years ago was because of the homebuyer tax credits.

Some analysts have been predicting the bottom for house prices for years now, but it really might be here, finally.

In an era of breathless, impulsive media, his calm patient style has proven a winning approach. From Professor James Hamilton writing in Time magazine in March 2011, when Calculated Risk was selected one of the most important economics blogs in the country:

“If you only follow one economics blog, it has to be Calculated Risk, run by Bill McBride. The site provides concise and very accessible summaries of all the key economic data and developments. One of the reasons McBride is able to do this so well is that he has an almost uncanny knack of recognizing which facts really matter. He began the blog in 2005 because he saw a disaster brewing in the form of the housing bubble, and tried his best to warn the rest of us of what was coming. I’ve followed him closely ever since, and I don’t know if he’s ever been wrong. My advice is, if you’ve come up with a different conclusion from McBride on how economic developments are going to unfold, you’d be wise to think it over again!”

A few months ago, Calculated Risk began a monthly contest using Facebook logins for readers to pick the under or over or on-the-money for a wide range of predictions for upcoming releases of economic data.

The leaderboard for Calculated Risk's May Facebook contest

And I shouldn’t have missed one question that I did miss. I correctly assumed that new home sales in April would be stronger than the consensus (all the data pointed higher), but for some reason I still thought that housing starts would be below consensus.

I also missed the call on the monthly trade deficit — not an area I have any particular expertise in.

And I also thought that the unemployment rate would stay at 8.2% despite decent job growth. I keep expecting to see enough of an increase in the labor force participation rate to push unemployment a little higher despite steady job creation. But I might need to let go of that notion soon if it’s not supported by the data.

Most of the other predictions seemed like pretty easy ones, given trends in various sectors of the economy. Of course, it’s possible that my reasoning on some or all of those picks was completely flawed, even though I managed to get the right answer.

So where does this “consensus” come from? Well, it comes from experts in various fields. So if the experts are the smartest people in the room as one would hope, then guessing the over or under on their projections should be pretty much a coin toss. But things aren’t that straightforward. In some cases, the consensus projections are calculated days or maybe even weeks in advance of the data release, so more current data might give clues about whether the prediction is too high, too low, or right on. And sometimes it seems pretty clear that the experts arriving at the consensus simply aren’t looking closely enough at what’s actually happening. I began discovering this back in the middle of the last decade in writing my columns in the Savannah Morning News.

I’ll certainly be curious to see how the contest goes in the coming months.