Jobs

Bad news in the jobs market. More evidence that this economy is slow to recover with more questions of if this is the new way of things.

Here is a scarry stat:

a stalled job market with a scant 54,000 jobs created in May

Now consider this, it takes about 130,000 to 150,000 jobs per month to replace the retirees.

Matt Ridley's Talk

A good discussion about economic progress over the years in an interesting way.

Our Stagnate Economy

Technically speaking we are not in a recession. That does not mean our economy is doing well. Far from it as this article details. What they do not even mention is that we need about 100 to 150 thousand jobs just to keep up with the retiring baby boomers. Not only are we not getting these jobs in our economy but we actually lost about 100 thousand jobs this past month. The charts in the article tell the story of just how many jobs we need to recoup to get to where we were. The bottom line is that just because we stopped digging ourselves in a deeper hole doesn’t mean we are near climbing out of it yet.

The State of our Economy

Some past posts to give us an idea of the state of the economy.

From our Federal government

From Google

From Slate

Structural Unemployment

Unemployment as a result of opening up international trade, or technological advances are called structural unemployment (as you all know). This is a healthy type of unemployment. This link are some interesting types over the years.

Crowding Out Before Our Eyes

The cautionary tale of our current fiscal spending is called the "crowding out effect". The Federal Government demands more bonds to finance their deficit and in turn the interest rates climb. This decreases private investment. (page 122 of our text) Greece has spend far more in terms of their deficit (and debt) as a percentage of GDP. This is the outcome.

In the United States we are also seeing this take place before our eyes. This is the latest evidence suggesting we are spending too much.

The State of Macro

Macroeconomics is in a state of soul searching. Serious questions have to be answered for our discipline to remain relevant. Questions like "What happened a year ago?" and "Why did the Macroeconomists not see this coming?" are valid questions.

Here is David Brooks' take from the New York Times. Here is Greg Mankiw's take. Both sources I respect a great deal, and they are interesting perspectives but I am not sure I buy either of them personally.

More on Trade

The fact that free trade is even debated is very frustrating to economists. We can all prosper by free trade, but politics often get in the way. This article is more evidence of this. (More of this has been talked about in the past, for more info look to the "trade" label at the end of the article).

Keynes-Hayek Rap

F.A. Hayek is best known for his libertarian views (smaller government intervention) that are spelled out in his book “The Road to Serfdom”. John Maynard Keynes is best known for advocating government spending to temporarily stimulate the economy which is spelled out in his book “The General Theory of Employment, Interest, and Money” (“The General Theory” for short). Both well known economists but their views could not be further apart. So what is the natural thing that happens when two well known economists get together? A rap breaks out naturally. I like the lyrics and scenes. Think of the party as the recent stimulus. (I could not figure out how to get you tube embedded so I had to link to Marginal Revolution)

Crowding Out?

This may be taken as evidence of crowding-out. Remember that the crowding-out is when the government deficit begins to increase interest rates eventually decreasing investment.

This accompanying piece gives some interesting looks at the debt. (Keep in mind the White House projections may be politically biased... unless prepared by the CBO)

Economic Prosperity

Why do some nations find economic prosperity while others fall short? That is the heart of a very good book titled “A Farwell to Alms”. The first chapter goes a long way in describing this problem and can be found here.

Looking for a graph that tracks these nations? Look here (click on the link below the map to get the bigger version of the map).

HT: Mankiw

Recent Unemployment Rate

So we finally hit the double digit unemployment rate. The unemployment rate is what economists call a lagging indicator. This means that as we climb out of a recession (which we technically have done) there are certain things that happen at different times. For example, worker productivity increases relatively quickly. Once employers recognize that workers are bringing in more revenue they begin hiring temporary workers, then full time workers. The end result is a ‘lag’ between production increases and job increases.

Aside from the discouraged worker effect altering these number, another interesting paragraph in the article that centers on our classroom discussion of underemployment is quoted:

Counting those who have settled for part-time jobs or stopped looking for
work, the unemployment rate would be 17.5 percent, the highest on records dating
from 1994.

Unions and Politics... an Unholy Alliance?

At one point California had to give out IOU’s instead of money. Pennsylvania just completed our state budget despite new sources of revenue by renting out land for natural resource drilling and new casino tax revenue. One of the smallest states in the nation (New Jersey) has an awful mess dealing with their insane property taxes despite annual enormous revenue from Atlantic City casino taxes. Ever wonder how the trail to state insolvency is ploughed? This article from today’s ‘Currents’ section in the Inquirer written by Fred Siegel and Dan DiSalvo has many of the answers. Their argument is that powerful state unions are draining funds from the states, and it is the politicians who give out those contracts that should be to blame. Is this article fair to unions? Some money quotes:

The governmor of a state is supposed to keep the spending in check. What does Gov. Corzine do it 2006?

"...when [Corzine] shouted at a Trenton
rally of about 10,000 public workers: "We will fight for a fair contract."
Corzine was, of course, management in that situation, not labor."

The situation in NY looks dismal… maybe this has something to do with it.

"Nearly 800 Gotham "rubber room" teachers who have problems on the job are
being paid not to work. Salary increases have been running at better than twice
the rate of inflation."

When did this begin?

A significant boost was President John F. Kennedy's decision to mobilize public-sector workers as a new source of political support.

Some additional stats:

"In New York City, where public-sector union benefits have grown twice as
fast since 2000 as those in the private sector, firefighters may retire after 20
years at half pay. Pension benefits for a new retiree averaged just under
$73,000 (all exempt from state and local taxes). To top it off, retirees receive
a health insurance policy that is worth about $10,000 annually."

The punch line:

"In the absence of tough-minded
leaders who will take on the public-sector unions, the fiscal future of states
and localities is bleak."

Politics and the Media

Politicians often feed off of people not understanding the difference between deficit and debt (and the media seems unwilling to take on the task). This article outlines how we reached a record deficit in 2009. The print inquirer article puts it best (I don’t understand why the article changed once it hit online).

This deficit represents “… more than $4,700 for every man, woman, and child in the United States.”

It is as if everyone in America just increased the balance on their credit card by 5k (including my two year old daughter!). The scary thing is that next year will probably be just as bad. Another quote:

“President Barack Obama has pledged to reduce the deficit once the Great Recession ends and the unemployment rate starts falling. But economists worry the government lacks the will to make the hard political choices to cut spending and raise taxes to get control of the imbalances.”

This completely ignores the fact that the powers that be must cut the DEBT, not the deficit. Even if Obama cuts the deficit in half every year for the next seven years the debt will continue to grow (and it will be your generation that will pick up the tab). Politicians get votes by ignoring this issue (so at least I can understand why they do it) but I can not figure out what the media gets

Drop in Minimum Wage

An historic drop in Nominal Minimum Wage. Very interesting.

Are we in a recovery?

If you hold a conversation with someone very ill you probably pick up on the fact that they are sick. Medical doctors specialize in telling us why they are sick. Similarly anyone living in America over the past year knows the economy is sick. Macroeconomists try to tell us why this is the case.

This leads to the latest batch of economic numbers. Looks like the unemployment rate went up to 9.8%. To the casual observer this is not much of a jump, but it is actually worst than it appears. Lets dive deeper into the numbers: Many economists and politicians are sold on the fact that we are in a recovery. They cite a small uptick in housing prices and a small decline in 2009 second quarter GDP (with the implication that we are now in the upswing). To quote the article: “The latest data "sets the stage for an improved economic outlook for the rest of 2009 and throughout 2010," said Aaron Smith at Moody's Economy.com.” (Sounds optimistic… right... like any news coming after that date will be positive). Now this info: We lost a net total of 263,000 jobs last month (more than expected). In addition this takes into consideration that previously unemployed workers have begun part time work to make ends meet. They are counted as employed. Take this into account and the number of 9.8% unemployed actually underestimates the problem. In addition to this, these numbers do not take into consideration the discouraged workers effect. We will discuss these things in greater detail in the class soon (oh joy!).

Deficits and Debt into Historical Perspective

If I told you someone tallied up $10,000 in credit card debt and asked how bad that was you would probably tell me you do not have enough information to answer that question. One vital piece of info would be how affluent that person was. For example, if that person were a college student your answer may be different then if it were Bill Gates.

With this general idea in mind we explore the complex world of public finance. If I tell you that a government deficit was $100 billion, you should similarly ask which government, and how affluent they are. The gauge of affluence is measured by economists as Gross Domestic Product (GDP). Thus to put our current spending into perspective we examine how much the government outspend tax revenue this year (the deficit) as a percentage of GDP, and how much money we owe out as a result of past deficits (debt) as a percentage of GDP:

In case you are wondering, the debt was very large in the early 1900’s due to the World Wars.

(Charts were generated by usgovernmentspending.com)

Google Unemployment

Google and economic data working hand in hand. Pretty cool.

(HT: Marginal Revolution)

Shifting Jobs in America

How (and where) are the jobs shifting in America? This will give you an idea. (Be sure you push play)

Employment (or the lack thereof)

Gloomy chart for you all to ponder (I feel for my seniors). The shaded areas are the periods of recessions. When will the discouraged workers effect kick in?

(H/T: Bureau of Labor Statistics)