Bloomberg: Surging Imports Mask Strength of China's Economic Revival [feedly]

Surging Imports Mask Strength of China's Economic Revival
https://www.bloomberg.com/news/newsletters/2020-10-19/supply-chains-latest-imports-dent-china-s-gdp-revival

Sometimes a trade rebound can be a double-edged sword when it comes to gauging economic strength.

Take Monday's data dump showing China to be the only major economy in the world on a growth trajectory this year.

But drilling into the data, the numbers show that a surge in imports has acted as a counterweight against bumper exports. Gross domestic product expanded 4.9% in the third quarter from a year ago, missing economists' forecast for a 5.5% expansion.

That's partly because inbound shipments surged 13.2% in September from a year ago, depressing the net contribution of trade to the calculation of GDP. Net exports contributed only 0.6 percentage point to GDP's expansion in the third quarter, according to the National Bureau of Statistics.

That dynamic may not fade in the near term given that China's consumers are showing firm signs of resurgence — retail sales expanded 3.3% in September from a year earlier — while exports also stay strong.

Data last week showed that global demand for everything from hazmat suits to work-from-home technology has allowed China's products to win record global market share. That's a striking reversal from the first two months of the year, when China's exports contracted by 17.1%.

Francoise Huang, a senior economist for Asia-Pacific at Euler Hermes, calculates that out of the top 20 exporters in the world, China's total market share now stands at around 25% compared to an average of around 20% over the 2017-19 period.

With the U.S. election just weeks away, it's also worth reflecting how China has managed to build such a position of trade strength in the face of stiff U.S.-led protectionism. Such tensions probably help propel imports as technology firms stockpiled key components ahead of the imposition of sanctions.

The big questions now revolve around the sustainability of China's trade performance:

• Will the resurgent virus in the U.S. and Europe slow demand for Chinese goods?
• Will China's factories lose their competitive advantage as manufacturers in trading rivals get back on their feet?
• Or, will China remain as the standout economic performer among major peers due to its early and aggressive control of the coronavirus?

While the yuan's strength could act as a headwind, for now, the balance of issues looks like the trade revival can continue, according to Huang. "We expect Chinese exports to remain resilient in the coming quarters," she said.

—Enda Curran in Hong Kong

Charted Territory

Global trade is staying on a winning streak. The Port of Los Angeles has kept especially busy over the past two months, and all 10 gauges on the Bloomberg Trade Tracker have sustained "normal" status since early September.

Today's Must Reads

• Brexit mess | British officials are ready to water down Boris Johnson's lawbreaking Brexit legislation in a move that could revive failing trade deal talks with the European Union. Johnson has told the EU the U.K. intends to exit the bloc with a deal similar to Canada's or its setup with Australia — code for World Trade Organization terms.
• Pollution solution | Nearly 200 countries are nearing a legally binding agreement to reduce pollution from the world's cargo ships, a step forward after two years of talks on how the industry should clean up its emissions.
• WTO pitch | Nigeria's Ngozi Okonjo-Iweala, one of two candidates to lead the WTO, said she wants the body to overcome its problems so that it can create a level playing field for international commerce and see a return to a multilateral system.
• Equal measures | China passed a new law to restrict sensitive exports to protect national security, helping Beijing gain reciprocity against U.S. as tech tensions mount.
• Millwork slows | Nordic forestry companies are shuttering paper mills at an unprecedented pace as the Covid-19 pandemic accelerates a long-running decline in demand.
• Going local | Small companies are filling the vacuum for consumer goods as Iranians struggle to buy foreign brands, and "Made in Iran" has become a rare glimmer of hope for a nation cut off from the oil market and global trade while Covid-19 rages. 

 -- via my feedly newsfeed

Tim Taylor: Interview with Gary Hoover: Economics and Discrimination [feedly]

Gary Hoover's powerful testimony as an African American economist at the U of Alabama.

Interview with Gary Hoover: Economics and Discrimination
https://conversableeconomist.blogspot.com/2020/10/interview-with-gary-hoover-economics.html

The Southwest Economy publication of the Federal Reserve Bank of Dallas has published "A Conversation with Gary Hoover" (Third Quarter 2020, pp. 7-9). Here are some of Hoover's comments: 

On  his own career path: 

Although I have been successful in economics, it has not come without some amount of psychological trauma. When I arrived at the University of Alabama in 1998, the economics department had never hired a Black faculty member. Sadly, that is still the case at more economics departments than not. I would not call those initial years hostile, but they were not inviting either.

I stuck to my plan, which was to publish articles to the best of my ability and teach good classes. The pressures were there to mentor Black students, serve on countless committees to "diversify" things and be a role model. I took on the extra tasks but never lost track of my goal. I saw so many of my Black counterparts fall into the trap. They had outsized service burdens compared to their peers, which they took on with the encouragement of the administration. However, when promotion and tenure evaluation time arrived, they were dismissed for not "meeting the high standards of the unit."

On labor market impediments for black workers: 

The impediments begin for Blacks seeking employment from the very outset. Some research has shown that non-Black job applicants of equal ability receive 50 percent more callbacks than Blacks. To further amplify on the issue, some research has shown that Black males without criminal records receive the same rate of callbacks for interviews as white males just released from prison when applying for employment in the low-wage job market.

With such handicaps existing from the start, it is no surprise that a wage gap exists. Some estimates show that gap to be as large as 28 percent on average and as large as 34 percent for those earning in the highest end (95th percentile) of the wage distribution. ,,, 

Employers want workers who are trainable and present. Black workers, who have been poorly trained or suffer inferior health outcomes, will suffer disproportionately. In addition, the impacts of the criminal justice system cannot be overlooked. Some recent research has shown that for the birth cohort born between 1980 and 1984, the likelihood of incarceration transition for Blacks was 2.4 times greater than for their white counterparts. Given this outsized risk of incarceration, the prospects of long-term unemployment are dramatically increased.

On whether "the economy will evolve quickly enough to ensure the success and prosperity of minority groups":

I think that I must be optimistic about the future. What employers are yet to realize, but will have to come to grips with, is that successful market outcomes for minority groups mean success for them also. By that I mean, this is not a zero-sum game where one group will only improve at the expense of the other. In fact, history has shown us the opposite. Once minorities are fully utilized and integrated in the labor force, the economy as a whole will enjoy a different type of prosperity than has ever been experienced in the U.S. Once again, we must remember the introductory idea we teach to our college freshmen about the circular flow of the economy in that those fully engaged minority employees become fully engaged consumers.

For more on Hoover's thoughts about racial and ethnic diversity in the economic profession, a useful starting point is his co-authored article in the Summer 2020 issue of JEP, written with Amanda Bayer and Ebonya Washington. "How You Can Work to Increase the Presence and Improve the Experience of Black, Latinx, and Native American People in the Economics Profession" (Journal of Economic Perspectives, 34: 3, pp. 193-219).

For an overview of how economists seek to understand discrimination in theoretical and empirical terms, and how the views of economists differ from sociologists, a useful starting point is the two-paper
symposium on "Perspcctives on Racial Discrimination" in the Spring 2020 issue of JEP: 

• "Sociological Perspectives on Racial Discrimination," by Mario L. Small and Devah Pager
• "Race Discrimination: An Economic Perspective," by Kevin Lang and Ariella Kahn-Lang Spitzer

 -- via my feedly newsfeed

PK: How the G.O.P. Can Still Wreck America [feedly]

How the G.O.P. Can Still Wreck America
https://www.nytimes.com/2020/10/15/opinion/election-trump-republicans.html

After 2016, nobody will or should take anything for granted, but at this point Joe Biden is strongly favored to beat Donald Trump, quite possibly by a landslide. However, Trump's party may still be in a position to inflict enormous damage on America and the world over the next few years.

For one thing, while Democrats are also favored to take control of the Senate, the odds aren't nearly as high as they are in the presidential race. Why? Because the Senate, which gives the average voter in Wyoming 70 times as much weight as the average voter in California, is a deeply unrepresentative body.

And it looks as if a president who is probably about to become a lame duck — and who lost the popular vote even in 2016 — together with a Senate that represents a minority of the American people are about to install a right-wing supermajority on the Supreme Court.

If you want a preview of how badly this can go, look at what's happening in Wisconsin.

In 2018, Wisconsin voters elected a Democratic governor. A strong majority — 53 percent — also voted for Democratic legislators. But given the way the state's districts are drawn, Democrats ended up with only 36 out of 99 seats in the State Assembly. And Wisconsin's elected judiciary is also dominated by Republicans.

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You probably won't be surprised to hear that the Wisconsin G.O.P. has tried to use its remaining power to undermine Gov. Tony Evers. What you may not know is that this power grab is now turning lethal.

You see, Wisconsin is experiencing a frightening coronavirus surge, which looks on track to match the wave that hit Arizona in the summer. Arizona eventually contained that surge with mask mandates, bar closures and limits on indoor gatherings. But Wisconsin's Republican legislature has obstructed Evers's attempts to get control of the pandemic. And on Wednesday a Republican judge blocked an order limiting the number of people who can gather in bars and other public places.

In Wisconsin, then, a party rejected by the voters is nonetheless managing to inflict immense damage, probably including hundreds of unnecessary deaths. And something similar but far worse could all too easily play out on a national level.

First of all, while Trump has very little chance of winning the popular vote, he might still eke out an Electoral College victory. If he does, it could be the end of American democracy.

A more likely outcome is that Trump loses but Republicans hold the Senate. In that case, we know exactly what will happen: fiscal sabotage on a grand scale. That is, the G.O.P., which has been completely indifferent to budget deficits under Trump, will suddenly rediscover the evils of government debt and block every effort by a Biden administration to sustain the economy and living standards in the face of a pandemic.

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And even if Democrats take both the Senate and the White House, they're now almost certain to face a 6-3 Supreme Court — that is, a court dominated by appointees of an increasingly extremist party that has only won the popular vote for president once in the past three decades.

In the hearings for Amy Coney Barrett, Democrats have, rightly and understandably, hammered on the possibility that such a court would use transparently spurious arguments to overturn the Affordable Care Act, causing tens of millions of Americans to lose health insurance coverage. Roe v. Wade is also in obvious danger.

But I'd argue that the biggest threat this court will pose is to environmental policy.

Put it this way: Charles Koch is reportedly investing millions trying to get Barrett confirmed. That's not because he's passionately opposed to abortion rights, or, probably, even because he wants the A.C.A. overturned. What he's looking for, surely, is a court that will block government regulation of business — and above all a court that will hamstring a Biden administration's efforts to take action against climate change.

Sure enough, during her hearing, Barrett, asked about climate change, uttered the dreaded words, "I'm certainly not a scientist." At this point everyone knows what that means. It's not an expression of humility; it's a signal that the speaker intends to ignore the science and to oppose any attempt to avert the biggest threat facing humanity.

It's hard to overstate just how dangerous it will be if the power of the Supreme Court ends up being used to undermine environmental protection. Biden has made it clear that climate action will be at the core of his economic agenda. And this action would come not a moment too soon. We're already starting to see the effects of global warming in the form of fires and floods, and if we waste the next few years it will probably be too late to avoid catastrophe.

In other words, if a G.O.P.-stacked Supreme Court blocks effective climate policy, it won't just be an outrage, it will be a disaster, for America and the world. So that can't be allowed to happen. Never mind all the talk about norms (which only seem to apply to Democrats, anyway.) What's at stake here could be the future of civilization.

 -- via my feedly newsfeed

Expert Focus: The consequences of economic inequality among Latinx groups in the United States [feedly]

Expert Focus: The consequences of economic inequality among Latinx groups in the United States
https://equitablegrowth.org/expert-focus-the-consequences-of-economic-inequality-among-latinx-groups-in-the-united-states/

Equitable Growth is committed to building a community of scholars working to understand whether and how inequality affects broadly shared growth and stability. To that end, we have created the monthly series, "Expert Focus." This series highlights scholars in the Equitable Growth network and beyond who are at the frontier of social science research. We encourage you to learn more about both the researchers featured below and our broader network of experts.

October 15 marks the end of Latinx Heritage Month. In this installment, we explore the work of five scholars whose research helps us understand the economic aspects of the diverse Latinx experience, including in the workplace, the broader U.S. labor market, and barriers to equitable access to opportunities in the U.S. economy and society. These experiences are often compared to the experiences of Black people in the United States, who tend to face similar barriers to economic equity—comparisons examined by several of the academics whose research we highlight here.

Carlos Fernando Avenancio-León 

Indiana University Bloomington 

Carlos Fernando Avenancio-León is an assistant professor of finance in the Kelley School of Business and an affiliate of the Center for Research on Race and Ethnicity in Society at Indiana University Bloomington. His work focuses on equitable finance, or the role of finance in economic redistribution, and its effects on disadvantaged communities and inequality. A 2018 Equitable Growth grantee, he and colleague Troup Howard from the University of California, Berkeley published a recent working paper showing that property taxes place an inequitable burden on Latinx and Black homeowners. Their work on systemic racism in taxes highlights the barriers that Latinx and Black homeowners face even after overcoming the U.S. homeownership divide. In other research, featured in this Econimate video, he and his colleague Abhay Aneja, also an Equitable Growth grantee, document how political empowerment through protecting the right to vote had a positive impact on U.S. labor market inequality for Black workers in the South following the passage of the Voting Rights Act of 1965.

Eduardo Bonilla-Silva

Duke University 

Eduardo Bonilla-Silva, the James B. Duke distinguished professor of sociology at Duke University, is a longstanding influential voice on understanding the personal, collective, and structural dimensions of racism. His work, from his first publication, titled "Rethinking Racism: Toward a Structural Interpretation" in the American Sociological Review in 1997, to his most recent book, Racism Without Racists: Color-Blind Racism and the Persistence of Racial Inequality in the United States, is critically relevant in the context of the coronavirus pandemic and recession, and the social unrest against systemic racism and police brutality. Furthermore, he recently engaged in conversations on how economics can better adopt a racial equity lens by drawing from outside the discipline. At this moment, he is writing on how the actions of White people are central to the maintenance of systemic racism, lecturing across the nation on the subject "What Makes Systemic Racism Systemic?" and finishing the sixth edition of Racism Without Racists. 

Adriana Kugler

Georgetown University 

Adriana Kugler is a full professor at the McCourt School of Public Policy at Georgetown University and was the chief economist at the U.S. Department of Labor during the Obama administration. She currently serves on the Science, Technology and Economic Policy committee of the National Academies of Science and Engineering and is the Chair of the Business and Economics Statistics Section of the American Statistical Association. A 2016 Equitable Growth grantee, her current research is on the impact of Unemployment Insurance on the labor market during recessions. During the coronavirus pandemic and subsequent recession, the effect of Unemployment Insurance benefits, partly as a lesson learned from the Great Recession, has remained a vital topic for economic growth and the well-being of families and individuals who may have lost their jobs. Kugler and her co-authors Ammar Farooq and Umberto Muratori, the latter of whom is a former dissertation scholar at Equitable Growth, released a recent working paper showing the benefits of UI extensions to improve the quality of job matches for women, non-White workers, and less-educated workers—an understudied but important subject. Beyond Unemployment Insurance, Kugler's research looks at labor markets and policy evaluation in developed and developing countries, as well as the role of public policies such as payroll taxes, employment protections, occupational licensing, and immigration.

Juliana Londoño-Vélez 

University of California, Los Angeles 

Juliana Londoño-Vélez is an assistant professor of economics at the University of California, Los Angeles, a faculty research fellow at the National Bureau of Economic Research, and a 2018 Equitable Growth grantee. Londoño-Vélez's research focuses on inequality and redistributive tax and transfer policies, including research on developing countries such as Colombia. In her Equitable Growth-funded research, Londoño-Vélez investigates the feasibility of wealth taxation in developing countries. 

Marie Mora

University of Missouri-St. Louis 

Marie Mora is the provost & executive vice chancellor for academic affairs and professor of economics at the University of Missouri-St. Louis. As a labor economist for 25 years, Mora is a leading voice on education and employment outcomes within/among the Latinx population in the United States. As briefly presented by the Institute for New Economic Thinking, poverty and migration can drive lower outcomes in education and labor opportunities among Latinx groups, including U.S. born individuals. She has also given talks on the lack of access to capital Latinx groups face, which is increasingly evident in today's recession. In August 2020, Mora obtained the national Presidential Award from the White House Office of Science & Technology Policy and administered by the National Science Foundation for her excellence in mentoring. She continues to play a major role in supporting graduate students and faculty from diverse backgrounds—as evidenced by her leadership of the American Economic Association Mentoring program, as well as long-standing commitment to the Diversity Initiative for Tenure in Economics Program and the NSF ADVANCE Program.

Equitable Growth is building a network of experts across disciplines and at various stages in their career who can exchange ideas and ensure that research on inequality and broadly shared growth is relevant, accessible, and informative to both the policymaking process and future research agendas. Explore the ways you can connect with our network or take advantage of the support we offer here. 

 -- via my feedly newsfeed

How much would it cost consumers to give farmworkers a significant raise?: A 40% increase in pay would cost just $25 per household [feedly]

How much would it cost consumers to give farmworkers a significant raise?: A 40% increase in pay would cost just $25 per household
https://www.epi.org/blog/how-much-would-it-cost-consumers-to-give-farmworkers-a-significant-raise-a-40-increase-in-pay-would-cost-just-25-per-household/

The increased media coverage of the plight of the more than 2 million farmworkers who pick and help produce our food—and whom the Trump administration has deemed to be "essential" workers for the U.S. economy and infrastructure during the coronavirus pandemic—has highlighted the difficult and often dangerous conditions farmworkers face on the job, as well as their central importance to U.S. food supply chains. For example, photographs and videos of farmworkers picking crops under the smoke- and fire-filled skies of California have been widely shared across the internet, and some data suggest that the number of farmworkers who have tested positive for COVID-19 is rivaled only by meat-processing workers. In addition, around half of farmworkers are unauthorized immigrants and 10% are temporary migrant workers with "nonimmigrant" H-2A visas; those farmworkers have limited labor rights in practice and are vulnerable to wage theft and other abuses due to their immigration status.

Despite the key role they play and the challenges they face, farmworkers are some of the lowest-paid workers in the entire U.S. labor market. The United States Department of Agriculture (USDA) recently announced that it would not collect the data on farmworker earnings that are used to determine minimum wages for H-2A workers, which could further reduce farmworker earnings.

This raises the question: How much would it cost to give farmworkers a significant raise in pay, even if it was paid for entirely by consumers? The answer is, not that much. About the price of a couple of 12-packs of beer, a large pizza, or a nice bottle of wine.

The latest data on consumer expenditures from the Bureau of Labor Statistics (BLS) provides useful information about consumer spending on fresh fruits and vegetables, which, in conjunction with other data, allow us to calculate roughly how much it would cost to raise wages for farmworkers. (For a detailed analysis of these data, see this blog post at Rural Migration News.) But to calculate this, first we have to see how much a typical household spends on fruits and vegetables every year and the share that goes to farm owners and their farmworker employees.

The BLS data show that expenditures by households (referred to in the data as "consumer units") in 2019 was $320 on fresh fruits and $295 on fresh vegetables, amounting to $615 a year or $11.80 per week. In addition, households spent an additional $110 on processed fruits and $145 on processed vegetables. Interestingly enough, on average, households spent almost as much on alcoholic beverages ($580) as they did on fresh fruits and vegetables ($615).

Data from the U.S. Department of Agriculture's Economic Research Service show that, on average, farmers receive less than 20% of every retail dollar spent on food, but a slightly higher share of what consumers spend for fresh fruits and vegetables. Figure A shows this share over time for fresh fruits and vegetables: Between 2000 and 2015, farmers received an average 30% of the average retail price of fresh fruits and 26% of the average retail price of fresh vegetables (2015 is the most recent year for which data are available). This means that average consumer expenditures on these items include $173 a year for farmers (0.30 x 320 = $96 + 0.26 x 295 = $77).

Figure A

According to studies published by the University of California, Davis, farm labor costs are about a third of farm revenue for fresh fruits and vegetables, meaning that farmworker wages and benefits for fresh fruits and vegetables cost the average household $57 per year (0.33 x $173 = $57). (However, in reality, farm labor costs are less than $57 per year per household because over half of the fresh fruits and one-third of fresh vegetables purchased in the United States are imported.)

To illustrate, that means that farm owners and farmworkers together receive only about one-third of retail spending on fruits and vegetables even though most, and in some cases all, of the work it takes to prepare fresh fruits and vegetables for retail sale takes place on farms (the exact share of the price farmers receive varies slightly by crop). For example, strawberries are picked directly into the containers in which they are sold, and iceberg lettuce is wrapped in the field. Consumers who pay $3 for a pound of strawberries are paying about $1 to the farmer, who pays one-third of that amount to farmworkers, 33 cents. For one pound of iceberg lettuce, which costs about $1.20 on average, farmers receive 40 cents and farmworkers get 13 of those 40 cents.

So, what would it cost to raise the wages of farmworkers? One of the few big wage increases for farmworkers occurred after the Bracero guestworker program ended in 1964. Under the rules of the program, Mexican Braceros were guaranteed a minimum wage of $1.40 an hour at a time when U.S. farmworkers were not covered by the minimum wage. Some farmworkers who picked table grapes were paid $1.40 an hour while working alongside Braceros in 1964, and then were offered $1.25 in 1965, prompting a strike. César Chávez became the leader of the strike and won a 40% wage increase in the first United Farm Workers table grape contract in 1966, raising grape workers' wages to $1.75 an hour.

What would happen if there were a similar 40% wage increase today and the entire wage increase were passed on to consumers? The average hourly earnings of U.S. field and livestock workers were $14 an hour in 2019; a 40% increase would raise their wages to $19.60 an hour.

For a typical household or consumer unit, a 40% increase in farm labor costs translates into a 4% increase in the retail price of fresh fruits and vegetables (0.30 farm share of retail prices x 0.33 farm labor share of farm revenue = 10%; if farm labor costs rise 40%, retail spending rises 4%). If average farmworker earnings rose by 40%, and the increase were passed on entirely to consumers, average spending on fresh fruits and vegetables for a typical household would rise by $25 per year (4% of $615 = $24.60).

Many farm labor analysts consider a typical year of work for seasonal farmworkers to be about 1,000 hours. A 40% wage increase for seasonal farmworkers would raise their average earnings from $14,000 for 1,000 hours of work to $19,600. Many farmworkers have children at home, so for them, going from earning $14,000 to $19,600 per year would mean going from earning about half of the federal poverty line for a family of four ($25,750 in 2019) to earning about three-fourths of the poverty line. For a farmworker employed year-round for 2,000 hours, earnings would increase from $28,000 per year to $39,200, allowing them to earn far above the poverty line.

Raising wages for farmworkers by 40% could improve the quality of life for farmworkers without significantly increasing household spending on fruits and vegetables. If there were productivity improvements as farmers responded to higher labor costs, households could pay even less than the additional $25 per year for fresh fruits and vegetables.

If average farmworker earnings were doubled (rose by 100%) through increased spending on fresh fruits and vegetables, a typical household would see costs rise by $61.50 per year (10% of $615). That extra $61.50 per year would increase the wages of seasonal farmworkers to $28,000 for 1,000 hours of work, taking them above the poverty line for a family of four.

 -- via my feedly newsfeed