Sunday, August 6, 2017
In Case You Missed It…
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In Case You Missed It… // Center on Budget: Comprehensive News Feed
https://www.cbpp.org/blog/in-case-you-missed-it-365
This week at CBPP, we focused on the federal budget and taxes, health, Social Security, housing, state budgets and taxes, and the economy.
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Jobs day! More solid jobs gains…but wage growth still not responding
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Jobs day! More solid jobs gains…but wage growth still not responding // Jared Bernstein | On the Economy
http://jaredbernsteinblog.com/jobs-day-more-solid-jobs-gains-but-wage-growth-still-not-responding/
The nation's employment rolls went up 209,000 last month, and the unemployment rate ticked down slightly to 4.3%. The underlying pace of job gains, shown below, suggests a solid, healthy labor market characterized by strong employer demand for workers. That said, wage growth remains remarkably subdued. Taken together, these two facts imply that while we're closing in on full employment, we're not there yet.
To get at the underlying trend just mentioned, our jobs-day smoother takes some of the noise out of the jumpy monthly data by averaging job gains over 3-, 6-, and 12-month periods. There's been a slight acceleration of job growth over the past three months, but broadly speaking, net payrolls are rising at a rate of between 180-190 thousand over the past year. That's strong enough job growth to continue placing downward pressure on the unemployment rate.
Typically, downward pressure on unemployment means some degree of upward pressure on wage growth. But as the next two figures reveal (average hourly wage growth, yr/yr, for all and non-supervisory—blue collar and non-managerial—workers), while nominal wage growth initially caught a buzz, rising from about 2 to around 2.5%, it's gotten stuck at 2.5 (a bit lower for the mid-level workers) and hasn't accelerated further even as the job market has continued to tighten.
One explanation for this lack of correlation is that the job market still has some slack, and that's suppressing the extent of worker bargaining clout that we'd historically associate with the low unemployment rate and steady, sizable monthly gains we see in these data.
In that spirit, this is a good time to evaluate a spate of slack measures. Here's a list of "where they were at their trough and where they are today" for some key labor market indicators:
–Monthly job losses/gains have swung from an average monthly loss of 773,000 in the first quarter of 2009 (i.e., your worst nightmare) to an average gain of 195,000 over the last three months.
–Unemployment fell from a high of 10% in Oct of 2009 to 4.3% last month.
–Underemployment fell from a high of 17.1% in April of 2010 to 8.6% last month.
–Involuntary part-time work has fallen from 9.2 million in September of 2010 (6.6% of employment) to 5.3 million in July (3.4% of employment), slightly down from where it was in June.
–The closely watched labor force participation rate is up from a low of 62.4% in September of 2015, but only moderately, ticking from 62.8% in June to 62.9% last month, which is back to where it was at the beginning of 2017. Some of this represents aging boomers leaving the labor force, but some represents ongoing slack.
–That "slack" point re labor supply is underscored by looking at the prime-age (25-54, so few retirees in there) employment rate, which climbed from a low of 74.8% in November of 2010 to a post-recession high of 78.7% this month (up from 78.5% last month); it is now over 70% of the way back to its January 2007 level, 80.3%.
So, clear evidence of labor market tightening, but, at least as far as the prime-age workers go, still some potential labor supply to be tapped.
Sticking with the wage theme for one more moment, clearly the so-called wage Phillips Curve—the correlation between wage growth and the level of unemployment—must be very flat. The next figure takes a little work to absorb but it's really worth it, IMHO (h/t to its creator, Ben S!). The figure plots unemployment against the annual change in average hourly earnings for blue-collar and non-managerial workers, basically mid-level earners (each data point represents a different month). During the 1990s recovery, a period of chock full employment when real wages grew solidly across the pay scale, you clearly see the expected negative slope. But in this recovery, it's flat as a pancake.
As I said, that's partly remaining slack, but there are other factors in play. One hypothesis is that the combination of high inequality and low productivity is part of the problem. Productivity growth is much slower now than in the latter 1990s, when wages were more responsive to labor market tautness. That meant employers could provide wage gains and still maintain their profit margins. With output per hour growing more slowly, in tandem with worker bargaining power that's still too weak, employers are keeping profit margins up and holding down the growth of pay packets.
I'll have more to say about the sectoral job changes in July later—running off to play some chin music on MSNBC around 10:30. Manufacturing employment is up a touch in recent months—28K jobs over the past two months—possibly reflecting the benefits to the sector of the falling dollar, though it's too soon to tell if this is a new, improved trend.
Finally, need I say, I strongly recommend you assiduously ignore any president who argues that his awesomeness is behind these job gains (though he'd be far from the first to claim such credit). This momentum was fully in place before Trump got here, and the best I can say for him is that he hasn't screwed it up…yet.
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Gaining Currency: The Rise of the Renminbi
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Gaining Currency: The Rise of the Renminbi // IMF Blog
https://blogs.imf.org/2017/08/04/gaining-currency-the-rise-of-the-renminbi/amp/
By IMFBlog
August 4, 2017
Eswar Prasad at an IMF conference (photo: Staff/IMF)
As China's economy catches up in size with that of the United States, some economists predict that the renminbi will soon challenge the dollar's dominance in international finance.
But in this podcast, Cornell University's Eswar Prasad says there are limits to how far China's currency can go without undertaking significant domestic reforms.
Prasad, a former IMF economist himself, was invited to IMF headquarters in Washington, DC to talk about his new book, Gaining Currency: The Rise of the Renminbi, on the relevance of the Chinese renminbi in today's global economy.
The renminbi—created in 1949 when the People's Republic of China was formed—didn't really play much of a big role in international finance until a few years ago, Prasad says. And in this podcast, he describes the renminbi's addition last year to the IMF's Special Drawing Right basket of major currencies as remarkable, given China's capital account remains relatively closed and its financial markets underdeveloped.
"One could argue—and some have," Prasad says, "that the renminbi does not meet the traditional prerequisites of a reserve currency, but it has become a reserve currency, and one that is playing a big role in international financial markets," Prasad says.
Prasad says China's desire to have the renminbi take its place on the international stage would require a lot of heavy lifting including developing domestic financial markets and institutions, an independent central bank, and the rule of law.
"For many pro-reform-minded policymakers in China, the notion of the renminbi becoming a major global currency is not an end in itself, but it serves a very useful purpose in providing a framework for getting around opposition to domestic reforms."
On whether the renminbi could challenge the US dollar on international currency dominance, Prasad says, "If China plays its cards right, it could become a significant international payments currency—perhaps even a significant reserve currency—but it's highly unlikely to be a safe haven currency that challenges the dollar's dominance."
Listen to the full podcast, and read more on the renminbi in the SDR basket, a review of Prasad's book in IMF Finance & Development magazine, and another IMF podcast on the renminbi's potential in the international arena.
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Links for 07-06-17
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Links for 07-06-17 // Economist's View
http://economistsview.typepad.com/economistsview/2017/07/links-for-07-06-17.html
Voter Data Request Is Illegal, not Just Controversial - Regulatory Review Someday Congress Won't Raise the Debt Ceiling - Narayana Kocherlakota The Case for Housing Finance Reform - Jerome Powell Austerity Confusion, or why the Tories are trapped by austerity - mainly macro A review of labor market conditions - FRED Blog Who fears losing their job to AI and robots: Japanese survey data - VoxEU Foreign banks and the international transmission of monetary policy - VoxEUNever mind the flatness of the observed Phillips Curve - Nick Rowe A New Deal for the 21st Century - Yanis Varoufakis Money tree economics - Stumbling and Mumbling Fed Officials Are Divided Over When to Reduce Its Debt Holdings - NYTimes Freedom of Information Request - Jayson Lusk Transition to clean technology - VoxEU Growing, shrinking, and long-run economic performance - VoxEU
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The Montgomery County minimum wage impact study is absurd junk science
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The Montgomery County minimum wage impact study is absurd junk science // Economic Policy Institute Blog
http://www.epi.org/blog/the-montgomery-county-minimum-wage-impact-study-is-absurd-junk-science/
In January, Montgomery County, Maryland County Executive Isiah Leggett vetoed an ordinance passed by the county council that would match the minimum wage in the District of Columbia, raising the county minimum to $15 by 2020. Leggett then commissioned the consulting firm PFM to analyze the likely economic effects. The firm just released their study and their findings are so implausible that they border on the absurd. The study essentially concludes that raising the minimum wage in Montgomery County—even a small amount—would be the most devastating economic shock the county has experienced in a generation, more damaging than the Great Recession. To say that the study has methodological problems would be a gross understatement. No county official, business owner, worker, or resident in Montgomery County—and certainly not editorial boards of local newspapers—should give any credence to this report.
The report posits that the proposed $3.50 minimum wage hike over 5 years will lead to massive losses in jobs, income, and county revenues. Ostensibly wanting to present both the costs and benefits, the authors do also note that "increased wages are associated with improved mental health, reduced hunger, and decreased stress for workers and their families." Admittedly, I have only skimmed the full 145 page report, but one only needs to read the initial section on job impacts to see how flawed this "study" is. The alleged large negative outcomes for incomes and county revenues all stem from the jobs findings, so there really isn't need to read much further.
The report's methodology for how they calculate expected impacts on employment is completely divorced from any actual research. First, the authors go through a long discussion of other localities that have enacted higher minimum wages—such as the District of Columbia, Los Angeles, and San Jose, among others— which they refer to as "comparison jurisdictions," implying that the impacts of minimum wage hikes in these locations might provide guidance for how a higher minimum wages might affect Montgomery County. Ironically, they note that in virtually all these "comparison jurisdictions," studies that analyzed the resulting or likely employment effects of the local minimum wage showed that any impact on jobs was negligible. Nevertheless, the authors assert that Montgomery County is not a "twin" of any of these places, thus none of these chosen comparisons should serve as a guide.
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Reflections on a Xenophobic Speech
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Reflections on a Xenophobic Speech // Dollars & Sense Blog
http://dollarsandsense.org/blog/2017/03/reflections-on-a-xenophobic-speech.html
By Bill Fletcher, Jr.
Anticipating and sitting through President Trump's address to Congress last night was arduous, to say the least. There are so many things that can be said about the speech, not the least being how many inaccuracies were mouthed by Trump. I wish that I could say that was the most disturbing part, but it was not.
Trump's speech was the most xenophobic speech by a US President that I can remember. If you took him seriously, barbarians are approaching the gates and it is everyone for themselves. I actually wish that we could afford to make fun of him and his rhetoric, but there was a deadly seriousness to what was offered.
It was not just that Trump went after immigrants from the global South as the alleged sources of crime. Nor was it that he reiterated the misinformation that terrorism in the USA is mainly perpetrated by people coming from outside of the USA. It was the cynical manipulation of the relationship of African Americans and immigrants from the global South that really caught my attention.
First things first. At no point did Trump mention the Russian mafia. This is remarkable because they constitute the most feared criminal organization in the USA, an organization that has carried out multiple killings in the USA. In listening to Trump one would have the impression that crime originates south of the Rio Grande. It is also remarkable because crime carried out by immigrants, whether documented or undocumented, does not constitute the major source of crime and violence in the USA.
A second point is that President Trump is a bit fast and loose when it comes to discussing terrorism. The major source of terrorism in the USA since 11 September 2001 has been right-wing, white supremacist individuals and organization rather than Muslim terrorists. To this we must add that most acts of terror carried out by Muslim terrorists have been the acts of individuals legally in the USA.
Now, however, let's get to the cynicism. Trump nuanced the xenophobia through playing up the alleged threat that immigrants from the global South constitute for African Americans. It was no accident that Trump used examples of alleged criminal activities by immigrants against African Americans.
Just as the Trump administration is working overtime to split up organized labor, last night evidence was displayed of an effort to create a wedge between African Americans and immigrants from the global South, suggesting that such immigrants are our competitors as well as being a threat to our very existence. This was smooth and well-choreographed, but clearly something that flies in the face of facts and, as such, was quite demagogic.
Immigrants are not closing down factories and other workplaces. They are not the major sources of crime and violence in African American communities. The immigrants that Trump wishes us to focus upon are those from the global South, many of who are coming to these shores as a direct result of the economic, political and military policies (and actions) of the USA. This contrasts with why East Europeans, for instance, would come here. And the fact that Trump never seems to get around to mentioning European immigrants is not representative of a memory lapse, but rather a calculated effort to focus the attention of non-immigrants on immigrants from the global South as our alleged enemies rather than focusing on the multi-national corporations and the capitalists who run them.
Hopefully we are not foolish enough to be played.
Bill Fletcher, Jr. is the former President of TransAfrica Forum. Follow him on Twitter, Facebook and at www.billfletcherjr.com.
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