Sunday, October 9, 2016

Dean Baker: Slower Pace of Job Growth Continues Into the Fall

Slower Pace of Job Growth Continues Into the Fall

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October 7, 2016 (Jobs Byte)

By Dean Baker

Average weekly earnings for production workers are up just 2.0 percent over the last year.

The Labor Department reported that the economy added 156,000 jobs in September, somewhat less than most economists had projected. The job growth figures were also on net revised down slightly for the prior two months, so that the average for the last three months stands at 192,000. The unemployment rate edged up to 5.0 percent, but this was due to a large number of people entering the workforce, as the employment-to-population ratio (EPOP) also rose by 0.1 percentage point to 59.8 percent, just below the 59.9 percent peak the recovery hit in March. The EPOP for prime age workers reversed its decline last month and stood at 78.0 percent. However this is still more than two full percentage points below its pre-recession peak.

Other news in the household survey was mostly positive. The number of people involuntarily working part-time hit a new low for the recovery. It is now down by more than 3.3 million from the recession peak, although it is still more than 40 percent higher than pre-recession levels. The duration measures of unemployment all fell, with the share of long-term unemployed dropping by 1.2 percentage points, a new low for the recovery.

One negative in the household survey was a modest decline in the share of unemployment due to voluntary job leavers, which remains more than a full percentage point below its pre-recession peak and is four percentage points below the peak hit in 2000.

Most demographic groups saw little change in their unemployment rates, with the major exception of Hispanics. The unemployment rate for Hispanics rose by 0.8 percentage points to 6.4 percent. This was due to a rise of 0.6 percentage points for both adult men and adult women (age 20 and older) and an increase of 3.5 percentage points for teens. These numbers are erratic, so this could just be a statistical fluke, but this sort of single month increase in an otherwise healthy labor market is cause for concern.

On the establishment side, the big job gainers were health care, with 32,700 new jobs; professional technical services, which added 29,900; restaurants with 29,700; construction with 23,000 jobs; temporary help with 23,200; and retail, which added 22,000. Manufacturing lost 13,000 jobs, and government lost 11,000.

The growth in health care jobs is the second consecutive month of relatively slow growth. The sector added 22,300 jobs in August after adding an average of almost 38,000 over the prior 12 months (August to August). There has been little trend in temporary employment, with total growth of just 54,400 over the last year.

The manufacturing sector has been shedding jobs for most of the year and is now down 76,000 jobs since January. The loss of government jobs was almost all due to local education. This reversed gains reported the prior two months that largely reflected earlier starts to the school year.

Employment in the mining sector finally stabilized in September. This sector has lost 220,000 jobs since its peak in September of 2014, or 25.8 percent of total employment. This is the result of massive over supply, which has led to a crash in the world price of oil and other sources of energy.

There was a modest increase in average weekly hours, reversing the decline reported for August. The average hourly wage grew at a 2.6 percent annual rate over the last three months, compared with the average for the prior three months, the same as the pace in August. Because there has been a modest decline in average hours, the average weekly wage has risen by just 2.3 percent over the last year. For production workers, who have seen a larger drop in hours, the average weekly wage has risen by just 2.0 percent.

On the whole this is a moderately positive report. The labor market is continuing to tighten, but at a relatively slow pace. The modest wage growth and the relatively short average workweek suggest that employers are still not facing serious difficulties in finding workers. In addition, the low percentage of unemployment due to voluntary job leavers indicates workers are still not very confident about their labor market prospects.


--
John Case
Harpers Ferry, WV

The Winners and Losers Radio Show
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Friday, October 7, 2016

15 Years of the BRICS: Which Countries have fulfilled Expectations? [feedly]

15 Years of the BRICS: Which Countries have fulfilled Expectations?
http://www.globalpolicyjournal.com/blog/07/10/2016/15-years-brics-which-countries-have-fulfilled-expectations

15 Years of the BRICS: Which Countries have fulfilled Expectations?

Jim O'Neill - 7th October 2016
15 Years of the BRICS: Which Countries have fulfilled Expectations?

15 years after he coined the term, Jim O'Neill explores the progress of the BRICS.

This year marks the 15th anniversary of the "BRICs," the term Icoined to refer to the major emerging economies: Brazil, Russia, India, and China (South Africa was added in 2010). Recently, my brief tenure in the British government came to an end, following the completion of an independent review on antimicrobial resistance (AMR) that I had been chairing. As I ponder what to do next, I can't help but return to the subject of the anniversary. Have those large and promising emerging economies fulfilled expectations?

Perhaps the simplest way to answer this question relates to my work on the AMR review, which was launched by former British Prime Minister David Cameron in 2014. On September 21, we achieved a major victory: a high-level agreement by the United Nations on the topic.


China's GDP growth rate

Image: BBC


After the agreement was reached, a German television crew that had occasionally followed my team and me as we worked to spread awareness of AMR asked me, on air, whether the outcome was more important than the BRIC concept. Without even waiting for me to answer, they declared that it obviously was. And they were right: no economy, emerging or otherwise, can hope to be successful if it is plagued by a health threat as serious and uncontrollable as AMR.

But there is more to the story: the BRICS are just as important to tackling AMR as tackling AMR is to the BRICS. South Africa, for one, was a key supporter of the United Kingdom in discussions about AMR at the recent G20 summit in Hangzhou, China, and the issue might not have ended up in the meeting's communiqué without its support.

And that is the point. The BRICS today, like in 2001, have a vital role to play in tackling the most pressing international challenges. In fact, I came up with the acronym not just because the letters fit together, but also because of the word's actual meaning: these emerging economies, I argued in my 2001 paper, should be the building blocks of freshly overhauled global financial and governance systems.

Yet, as we approach this year's autumn meetings of the International Monetary Fund and the World Bank, the BRICS remain severely underrepresented by these critical institutions. If this does not change, with reforms going much further than they have so far, we will soon find that "global governance" is no longer global at all.

To be sure, the BRICS have lately been going through a rough time. The economic performance of Brazil and Russia, in particular, has been very disappointing so far this decade, to the point that many now perceive those countries as unworthy of the status the acronym afforded them.

But the suggestion that the BRICS' importance was overstated is simply naïve. The size of the original four BRICs economies, taken together, is roughly consistent with the projections I made all those years ago.

Both Russia and Brazil now account for a similar share of global GDP as they did in 2001, though Russia, according to my simple calculation, might currently be outside the world's ten largest economies. Brazil, for all of its considerable problems, is higher in the world ranking today than even I had envisaged back then.

India continues along roughly the same path it was on 15 years ago. With the right structural reforms, it may even be able to achieve a sustained period of Chinese-style double-digit economic growth.

But the biggest BRICS success story remains China, which, despite its recent slowdown, has far exceeded expectations. If the economy grows at an annual rate of around 6% for the remainder of the decade, it will fulfill my 20-year projection.

This is not to diminish the challenges confronting China. But if it manages to address the most urgent among them – downside deflationary risks – its much-discussed debt challenge will become far more manageable.

Fortunately for China, other countries want – or should want – it to succeed. After all, a dynamic Chinese economy is in the interest of many other countries, especially those that can export the goods and services that a more modern, consumer-driven China needs. In fact, therise of the Chinese consumermay well be the most important single global economic variable today – even more important than, say, the economic problems afflicting Europe and Japan or questions about India's enduring global relevance.

The potential barriers to the BRICS' growth and development are many, including health threats like AMR, educational challenges, inadequate representation in global governance bodies, and a number of short-term cyclical problems. Policymakers worldwide must commit themselves to dismantling these barriers, and enabling the BRICS to fulfill, finally, their true potential.


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Robert Rubin on long run growth



By Robert E. Rubin October 5 at 7:41 PM
Robert E. Rubin, co-chair of the Council on Foreign Relations, was U.S. treasury secretary from 1995 to 1999.
The progress our economy has made since the financial crisis is real. So, too, is the sense that our country is adrift. Faith in institutions is eroding. Income inequality, job insecurity and sluggish wage growth — even with 2015’s improved performance — are fraying our social fabric. Technological development and, to a lesser extent, globalization contribute to productivity and growth but also put pressure on wages and jobs. The poverty rate is unconscionably high. Many feel that the American promise of hard work leading to a better life is out of reach.
The United States, however, still holds the world’s best long-run hand. The question is how we play our cards. We need a policy regime that effectively promotes growth, widespread income gains and greater economic security in the context of an economy undergoing transformation. These three objectives are interdependent and mutually reinforcing and, taken together, constitute one overarching goal: inclusive growth, which could, in turn, restore a sense of common purpose, confidence in our future and much-needed social cohesion.
An inclusive growth agenda would address three broad categories of challenges: first, public investment; second, structural reform and innovation; and, finally, our intermediate and longer-term fiscal outlook.
Public investment should begin with overdue action on infrastructure, including addressing deferred maintenance estimated at more than a trillion dollars. Repairing and expanding bridges, railways, airports and ports would create jobs immediately, tighten labor markets to improve wages and increase the productivity and capacity of our economy for years to come. Economic success also requires increased funding for basic and applied research, broadened access to high-speed Internet and other targeted investments in our future.
Next, we need structural reform in many critical areas, often in conjunction with public investment. Twenty percent of our children live in poverty — that’s a moral disgrace and highly counterproductive economically. Breaking the intergenerational cycle of poverty through early family intervention, transitional public employment to provide jobs and workforce readiness, and other policy interventions could significantly reduce social costs and increase long-run productivity.
Likewise, our nation’s criminal-justice policies fail us morally and harm us economically. Alternatives to incarceration for many nonviolent crimes, shorter sentences, better rehabilitation in prison and vastly improved re-entry programs could produce great direct cost savings, including from reduced recidivism, and substantial productivity gains from better equipping released prisoners for the workforce.
Reform should also include immigration measures that provide a fair path to citizenship and recognize the immense contribution of both high- and low-skilled immigrants. We also need to level the playing field for workers to opt for collective bargaining; apply a sensible balance of costs and benefits to regulation; address climate change; improve K-12 education; and develop innovative measures to address ongoing wage and job pressure from transformative technological development. Those measures might include public employment, free or low-cost lifelong learning, effective retraining and a substantially expanded earned-income tax credit.
Finally, to achieve inclusive growth, we must address our unsound and economically harmful intermediate and longer-term projected fiscal conditions. Our current trajectory is likely to increasingly undermine business confidence, both by creating uncertainty about future policy and by exacerbating concerns about Washington’s ability to govern. And it diminishes our resilience in the face of another economic or geopolitical crisis; reduces our capacity to fund public investment and national security; crowds out private investment when it recovers; and, at some future point, could trigger financial market or economic destabilization. To a certain extent, some of these risks are already materializing.
A constructive fiscal regime would pair immediate public investment to boost current demand and future productivity with measures to effectively address our longer-term trajectory. That would require increased revenue, which should be raised progressively, and putting our social insurance and federal health-care programs on sustainable financial footing. We should also rigorously scrutinize both the defense and nondefense sides of the budget to improve programmatic efficiency and relevance. The longer we wait to address these challenges, the greater the effects and the harsher the measures that will be required.
But the fundamental challenge, upon which all else depends, is reestablishing a willingness among members of Congress to engage in principled compromise across policy and political divides, to make difficult decisions and to focus on facts and analysis, while recognizing that politics will always be involved. If they do this, we can achieve broadly shared economic success. If they do not, we languish.
For too long, we have been caught in a vicious cycle: Failure to achieve inclusive growth has undermined the public trust and Congress’s commitment to governing that, in turn, is necessary to achieve inclusive growth. If we act on the policies that promote inclusive growth, we could restore support for governance and initiate a virtuous cycle, spurring further constructive policy. All of us can contribute to this positive outcome, even when we have very different policy views, by using all means available, from emails and social media to campaign contributions, to insist that our elected officials engage in making our system work.
Inclusive growth offers an economic vision that reflects and reinforces our country’s broad values. The policies exist to achieve it. Now it’s up to us to make it happen.
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What to Watch on Jobs Day: The teacher gap, and how today’s unemployment masks continued weakness in the economy [feedly]

What to Watch on Jobs Day: The teacher gap, and how today's unemployment masks continued weakness in the economy
http://www.epi.org/blog/what-to-watch-on-jobs-day-the-teacher-gap-and-how-low-unemployment-masks-continued-weakness-in-the-economy/

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Thursday, October 6, 2016

President Obama Inadvertently Gives High Praise to China in UN Speech [feedly]

President Obama Inadvertently Gives High Praise to China in UN Speech
http://cepr.net/publications/op-eds-columns/president-obama-inadvertently-gives-high-praise-to-china-in-un-speech

Mark Weisbrot
The Hill, September 29, 2016

See article on original site

President Obama's speech at the UN last week was mostly a defense of the world's economic and political status quo, especially that part of it that is led or held in place by the US government and the global institutions that Washington controls or dominates. In doing so, he said some things that were exaggerated or wrong, or somewhat misleading. It is worth looking at some of the things that media reports on this speech missed.

"Over the last 25 years, the number of people living in extreme poverty has been cut from nearly 40 percent of humanity to under 10 percent." This is roughly true, according to World Bank data, but the story of how it happened goes against his whole speech — which argues that this progress is a result of the "globalization" that Washington leads and supports wherever it has influence in the developing world. In fact, the majority of the reduction in extreme poverty during this period (more than 1.1 billion people worldwide) took place in China. But during this period China was really the counterexample to the "principles of open markets" with which Obama insists "we must go forward, not backward." 

China's historically unprecedented economic growth in the past 25 years (or 35 years, or even more) was accomplished with state-owned enterprises and banks dominating the economy. State control over investment, technology transfer, and foreign exchange was vastly greater than in other developing countries. China rejected the neoliberal policies of an "independent central bank," indiscriminate opening to international trade and investment, and rapid privatization of state companies. Instead, it chose a gradual transition, over 35 years, from an overwhelmingly planned economy to a mixed economy in which the state still plays a leading role. Even today, China expanded the investment of state-owned enterprises by 23.5 percent in the first six months of 2016 (as compared to the same period in 2015), to help boost the economy. 

If we go back a bit more and look at 1981–2012, China accounted for even more of the reduction of the world population in extreme poverty, about 70 percent. This would indicate that other parts of the developing world increased their economic and social progress during the 21st century, relative to China, and indeed many developing countries did (as compared to the last two decades of the 20th century). But China played an increasingly large role in reducing poverty in other countries during this period. It was so successful in its economic growth and development — by far the fastest in world history — that it became the largest economy in the world, and pulled up many developing countries through its imports. Chinese imports went from a negligible 0.1 percent of other developing countries' exports to 3 percent, from 1980–2010. China also provided hundreds of billions of dollars in investment, loans, and aid to low- and middle-income countries in the 21st century. (In the last few years, Chinese growth has slowed, along with that of most countries, and that has contributed — although perhaps not as much as Europe has — to the global slowdown since 2011.) 

Of course, the "principles of open markets" that Obama refers to is really code for "policies that Washington supports." Some of them are the exact opposite of "open markets," such as the lengthening and strengthening of patent and copyright protection included in the Trans-Pacific Partnership (TPP) agreement. President Obama also made a plug for the TPP in his speech, asserting that "we've worked to reach trade agreements that raise labor standards and raise environmental standards, as we've done with the Trans-Pacific Partnership, so that the benefits [of globalization] are more broadly shared." But the labor and environmental standards in the TPP, as with those in previous US-led commercial agreements, are not enforceable; whereas if a government approves laws or regulations that infringe on the future profit potential of a multinational corporation — even if such laws or regulations are to protect public health or safety — that government can be hit with billions of dollars in fines. And they must pay these fines, or be subject to trade sanctions. 

In his defense of a world economic order ruled by Washington and its rich country allies, President Obama also asserted that "we have made international institutions like the World Bank and the International Monetary Fund more representative." But that is a gross exaggeration: the most recent reform of IMF voting shares left the US with an unchanged 16.7 percent share, enough to veto many important decisions (that require an 85 percent majority) by itself; and it left Washington and its traditional rich country allies with a solid majority of more than 60 percent of votes. Of course, it is the developing countries, especially poorer ones, that are most subject to IMF decisions. But the IMF is — by a gentleman's agreement among the rich country governments — headed by a European, and the World Bank by an American. It should not be surprising if these institutions do not look out for the interests of the developing world.

"We can choose to press forward with a better model of cooperation and integration," President Obama told the world at the UN General Assembly. "Or we can retreat into a world sharply divided, and ultimately in conflict, along age-old lines of nation and tribe and race and religion."

But the rich country governments led by Washington are not offering the rest of the world any better model of cooperation and integration than the failed model they have been offering for the past 35 years. And that is a big part of the problem. But fortunately, their influence is diminishing.

Mark Weisbrot is Co-Director of the Center for Economic and Policy Research in Washington, D.C., and the president of Just Foreign Policy. He is also the author of the new book "Failed: What the 'Experts' Got Wrong About the Global Economy" (2015, Oxford University Press). You can subscribe to his columns here.


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Secrets in Plain View: Obamacare Is Working [feedly]

Secrets in Plain View: Obamacare Is Working
http://cepr.net/publications/op-eds-columns/secrets-in-plain-view-obamacare-is-working

Dean Baker
Truthout, October 3, 2016

See article on original site

Most people would consider it pretty bad luck if they had three inches of rain dumped on their city in a 24-hour period. That is, unless they had just missed being hit by a hurricane. That analogy captures how we should feel about Obamacare.

There are still tens of millions of people without health insurance. An even larger number of people have great difficulty covering the deductibles and co-pays required by their insurers. In many cases, even people with insurance go without necessary care because they can't afford these expenses. And we still have jokers like Martin Shkreli and the Mylan EpiPen crew jacking up prices on life-saving medicines. There are plenty of reasons to be angry about the current state of our health care system, but like the city that just missed being nailed by the hurricane, we have to realize that it could be much worse.

This isn't idle speculation. In 2009, President Obama's first year in office, the Center for Medicare and Medicaid Services projected that health care spending would take up 19.3 percent of GDP in 2016. The most recent projections show health care costing 18.1 percent of GDP this year.

That sounds really nerdy, but the difference between these two projections amounts to more than $220 billion in savings this year. That comes to $690 per person in savings or $2,750 for an average family of four. This is real money to most people.

One reason that the slowing in health care costs is not widely recognized is that most people are not studying the projections. While just about everyone living in a coastal city will know about the forecast of a hurricane strike, few people spend their time studying health care cost projections. This means that when spending slows sharply, as it has in the last seven years, most people don't recognize the slowdown. They just know that health care costs more than it used to. This is the case of people getting hit by three inches of rain and not recognizing that they just missed a hurricane.

The other reason most people may not see the slower cost growth is that they don't pay for most health care directly. The overwhelming majority of people in the country have most of their health care paid for by their insurer or the government. When the insurance companies and the government see savings, the typical family does not directly feel the benefit in their pocketbook.

However that doesn't mean they don't benefit from these savings. For most of the last four decades workers were seeing an ever larger share of their compensation going to cover the cost of their health care insurance. Money that might have otherwise gone to wage increases went instead to pay for their health care plan. The opposite has been the case over the last seven years with the cost of health care and other benefits declining from 13.8 percent of total labor compensation in 2009 to 13.1 percent in 2015.

If spending had continued on its prior path, health care and other benefits would now account for more than 15 percent of compensation. While not all employers passed on these savings, on average workers' paychecks are almost 3 percent higher because of the slowing of health care cost growth.

The other big saver is the government. The federal budget deficit would be almost $200 billion higher in 2016, if health care costs had followed the path projected before the passage of the Affordable Care Act (ACA).

This is the good news from Obamacare. Of course the even better news is that the number of uninsured has fallen to a record low. And, we now have clear evidence that this is leading to improvements in health outcomes. States that expanded their Medicaid program, as provided for in the ACA, have seen improvements in health outcomes for low and moderate income people compared to states that did not.

All of this is important background, because the public has to recognize the enormous progress that has been made with the ACA so that the huge problems that remain in our health care system can be fixed. At the moment, most Democrats are scared to talk about the ACA because their focus groups tell them it is unpopular. That means the only people talking about the ACA are Republicans talking about it are death panels and comparing it to slavery.

We have to reduce the amount that people pay out of pocket, end charges for many times of preventative screening and introduce a Medicare-style public option in the health care exchanges. But these and other steps can only take place if politicians who support the ACA feel comfortable talking it. That will only be the case when people recognize the benefits it has brought.

No one should be satisfied with the health care system as "reformed" by the ACA. But it is important that they recognize the progress it has brought and that we can make much more progress by building on its success.


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