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Thursday, May 13, 2021

Dean Baker endorses Powell Reappointment to Fed Chair

 





Dean Baker: President Biden Should Reappoint Powell as Fed Chair, Now


Jerome Powell’s term as chair of the Federal Reserve Board does not end until next January, but the debate on his reappointment has already begun. It would be good for the economy if Powell were reappointed, and if Biden announced this decision as soon as possible.

In making the case for Powell it is important to understand how much he has moved the Fed from where it has been in prior decades. I have long been in battles with the Fed over its willingness to raise interest rates, slowing growth and killing jobs, in order to head off the risk of higher inflation. It viewed its legal mandate for high employment as an afterthought, at best.

Powell has turned this around. He has quite explicitly said that he wants to have the economy run hot, pushing it as far he can without kicking off inflation. He has embraced the idea that many of us on the left had long maintained; low levels of unemployment disproportionately benefit those most disadvantaged in the labor market.

When the unemployment rate is low, Blacks, Latinos, people with disabilities, and people with criminal records are more able to find jobs. Employers don’t have the option to discriminate, these are the workers who are available.

Low rates of unemployment also give workers at the middle and bottom of the income distribution the bargaining power to obtain wage gains. We have seen this pattern repeatedly in the last four decades.

When the unemployment rate has been relatively high, for example in most of the 1980s, the early 1990s, the Great Recession and the slow recovery that followed, real wages for most workers were stagnant. However, when the labor market tightened, in the late 1990s or in the four years before the pandemic, workers were able to secure wage gains in line with productivity growth. (This was the main focus of two booksI wrote with Jared Bernstein.)

While this view may seem like common sense – why not run the economy in a way that as many people as possible can have jobs – it is a world away from where the Fed has been in the not distant past, where the view was that the Fed had to focus on inflation. I recall being in a meeting in early 1994, with Alan Blinder and Janet Yellen (yes, that Janet Yellen), who were both recently appointed members of the Fed’s Board of Governors.

The immediate issue was that the unemployment rate was falling to the 6.0 percent level that was generally viewed as the point where inflation would begin to spiral upward. I and my colleagues were trying to convince Blinder and Yellen to hold off on raising rates and slowing the economy, since we thought the risks of inflation were small relative to the benefit from millions of people being able to get jobs.

We weren’t able to move them. I will always recall arguing with Blinder that, since we didn’t know for sure the impact of lower unemployment on inflation, it was worth taking the risk. Blinder responded that the Fed was legally mandated to pursue price stability. I pointed out that the Humphrey-Hawkins legislation, which was then still in effect, required the Fed to target 4.0 percent unemployment.

Blinder, who was one of most liberal and decent people to ever sit on Fed’s board, responded by saying that no one takes that mandate seriously. I then said that he doesn’t have to take the mandate for price stability seriously either, to which he said “yes, I do.”

Later that year, Blinder actually got caught up in a mini-scandal for suggesting that the Fed could act to boost employment when the economy was facing a recession. A major New York Times article, implied that this was a major break with Fed policy, since Blinder’s comments indicated that the Fed would not just be focused on inflation.

Anyhow, having a chair who sees the Fed’s priority as running the labor market as hot as possible without triggering inflation, is a very different world. The change in views reflects a lot of work over the decades trying to impress on the Fed the importance of getting to full employment. Most notably, the Fed Up Coalition, consisting of labor and community groups, of which Ady Barkan was a lead organizer, played a major role in swaying the Fed. Janet Yellen, who was then chair of the Fed, met with the group several times, as did other board members and district bank presidents. They seemed to take our arguments seriously.

Yellen, and even her predecessor Ben Bernanke, had certainly moved the Fed from its inflation obsession, but Powell still took a qualitative leap forward. In saying that it is the Fed’s responsibility to have a tight labor market and get the unemployment rate as low as possible, he has totally reversed the Fed’s priorities. Having won a huge battle on economic policy, progressives should be anxious to defend our victory.

Powell and Regulation

Many people have pointed out that Powell has not been good in regulating the financial sector, which in another important responsibility of the Fed. This criticism is valid, but it really needs to be put in some context.

First, there is a seriously wrong myth about the Great Recession, which sees it as the result of failed regulation, that needs to be corrected. There were indeed many failures in regulation in the years before the Great Recession, but the problem was the collapse of a housing bubble that was driving the economy.

The distinction is important, because the regulation story implies that we needed super-sleuths to uncover the fraudulent loans in the sub-prime market or the flood of credit default swaps being issued on mortgage backed securities by AIG and others. These abuses surely fed the bubble, but the bubble was sitting there in plain sight for anyone paying attention, and most importantly, it was easy to see that it was driving the economy.

We had an unprecedented run-up in house sale prices, with no remotely corresponding increase in rents. And, this was occurring while vacancy rates were hitting record levels, which is hard to reconcile with claims that prices were being driven by the fundamentals of the market.

It was also easy to see that the bubble was driving the economy, as residential construction was hitting record shares of GDP. In addition, the wealth created by the bubble also led to a consumption boom, as homeowners were spending based on the ephemeral housing wealth created by the bubble. This could easily be seen in the GDP data published by the Commerce Department every quarter.

When the bubble burst, it was inevitable that we would face a serious recession, as there was no obvious source of demand that was going to replace the construction and consumption demand generated by the bubble.

To prevent the disaster of the Great Recession, we didn’t need the Fed to get into weeds of regulation. We needed a Fed that recognized the risk of a bubble that was driving the economy, instead of cheering it on, as Greenspan largely did until he stepped down in 2006.

Bubbles are not dependent on bad finance.  The stock bubble in the late 1990s, whose collapse gave us the recession in 2001, did not depend to any substantial extent on credit. People put up their own money to buy ridiculously priced shares of stock.

The collapse of bubbles also doesn’t necessarily lead to a recession. This is only the case if the bubble was actually driving the economy, as was the case with the stock bubble in the 1990s and the housing bubble in the 2000s. If the $1 trillion market for Bitcoin collapsed completely tomorrow, we probably would not even be able to find its impact in the GDP data. (I discuss this issue in more detail here.)

Anyhow, even if bad regulation wasn’t responsible for the Great Recession, we still should want a well-regulated financial system. There are three important reasons why regulation matters.

First, much of finance, for example subprime house and car loans, or fees for financial services, is predatory. Contracts and loans are often designed deceptively so customers don’t realize the full costs and risks. Banks and other financial companies usually target low and moderate income people, and people of color, with these products.

Second, the financial sector is a major source of inequality. Many of the country’s biggest fortunes were made in the financial sector. We can debate how much money a person should get when they are responsible for a genuinely useful innovation, like an important drug or new software, but it’s hard to see a way to justify someone getting very rich off subprime mortgages.

The third reason regulation is important is that bloated financial sector is inefficient. The financial sector provides an important service, it allocates capital and facilitates payments. But we should want this to be done with as few resources as possible. We should think of finance like we think of the trucking industry – we need to get goods from point A to point B – but we want as few people and trucks employed in this process as possible.

The same applies to the financial sector. The sector has quintupled relative to the size of the economy over the last five decades, with little obvious benefit. If we can limit the bloat with regulation, that makes the sector and the economy more efficient.

For these reasons, we should want a well-regulated financial sector and there are certainly grounds for criticism of Powell on this front. However, the more obvious target here would be finding a good vice-chair for regulation. The term of the current vice-chair, Randal Quarles, ends in October. It will be important to replace him with someone who takes regulation more seriously.

Other Issues: Climate and Cities

Some have complained that Powell has not made climate a factor in Fed policy. There also have been complaints that the municipal lending facility he created in the recession was barely used.

These complaints are not really fair to Powell or the Fed. It would be great to have a central bank that actively promoted clean energy and sought to penalize fossil fuel companies, but this is not a power that has been given to the Fed by Congress. While it can arguably do this with the power it has, it would be virtually certain to lose this power very quickly if it went this route.

We can be quite certain that every Republican in Congress would be up in arms if the Fed were to pursue this path, as would likely be the case with many Democrats. If this had happened with Donald Trump in the White House, we would also have the executive branch out for Powell’s head. It is hard to see the value in pursuing a policy that is virtually certain to be cut off before it can have any real impact, and likely to lead to a Fed with much less autonomy.

The same applies with lending to cities. In fact, the Fed’s policies led to a sharp reduction in the interest rates on municipal bonds between February and April of last year. The ability to borrow at lower interest rates helped many cities get through the pandemic. However, there were cities with bad credit ratings that benefitted less from the drop in interest rates.

It would have been great if Powell could have tossed these cities a lifeline by lending at well below market rates, but here too we have to look to the reaction from Congress. The Republicans in Congress, along with Donald Trump, were quite explicit in their efforts to keep “Democrat” cities from getting money. Had Powell tried to use the Fed as a backdoor, they would not have sat by and twiddled their thumbs helplessly. Again, they would have gone gunning for Powell and the Fed, and likely succeeded in reining in the lending and weakening the Fed.

In both of these cases, we can argue whether the Fed had the legal authority to do more, but as a practical matter, it almost certainly would have been blocked in these efforts. The Fed’s main responsibility is the state of the macroeconomy and I find it hard to argue that Powell should have put the Fed’s ability to be an effective here at risk to pursue initiatives that were virtually certain to be shut down quickly.

Why Powell and Why Now

While Powell had brought about a remarkable shift in Fed policy, it could be argued that others, most notably Fed Governor Lael Brainard, could carry this shift forward as good or better. There are several reasons why ditching Powell would be a risky strategy.

Most importantly, Powell would have the best chance of getting confirmed by the Senate. The Republicans have made it fairly explicit that their agenda for the Biden presidency is sabotage. If Biden wants to appoint a Fed chair committed to full employment, they will look to block them. We can assume that all 50 Republican senators will vote no, on almost anyone that Biden puts forward. That means that if any of the centrist Democrats decide to get cute, Biden doesn’t have a Fed chair.

Powell has a huge advantage in this area in that he already secured the vote of almost every Republican in the Senate when Trump nominated him in 2017. (There were only four no votes from Republicans.) There are few limits to Republican shamelessness. Many may decide that if Biden wants Powell, then they don’t, but clearly the person Trump picked to be Fed chair has a better chance of winning their support than anyone else Biden might put forward.

There is also the question of the Fed chair’s authority at the Fed. Decisions on monetary policy are not made by the chair alone, but rather by the Fed Open Market Committee (FOMC), which includes the other six governors, and the twelve district bank presidents, five of whom vote at any given meeting. The chair usually gets their way, but they typically negotiate and work out compromises with the other members of the FOMC.

Powell, as the incumbent chair, would have much more authority in this situation than a new person just stepping into the position. There are still many inflation hawks among the district bank presidents. Powell will be much better situated to keep the priority on full employment than any possible replacement.

In terms of announcing his reappointment soon, Biden should want to do what he can to remove uncertainty and shore up Powell’s position in coming months. We know that the Republicans will do everything in their power to stir up fears of runaway inflation and to undermine the Fed’s authority. If Biden can give him a clear endorsement now, it would help Powell’s effort to keep the focus on full employment.

We know that there will be areas with jumps in prices due to a bounce back from pandemic drops or temporary shortages, as we saw in the April CPI report. We need the Fed to be able to look at the data clearly and respond accordingly. Powell will be most able to do this if there is no doubt about his reappointment.

This should be an easy one for Biden. He will be reappointing a chair with a proven track record. And, he can show his willingness to be bipartisan by handing over one of the most powerful positions in government to a Republican.

Wednesday, May 12, 2021

Dani Rodrik: Beware Economists Bearing Policy Paradigms [feedly]

Dani goes URPE -- I know there was a secret socialist luking in Rodrik.


Beware Economists Bearing Policy Paradigms
https://www.project-syndicate.org/commentary/economic-policy-must-abandon-universal-paradigms-by-dani-rodrik-2021-05

 US President Joe Biden's administration has embarked on a bold and long-overdue departure from the economic policy orthodoxy that has prevailed in the US and much of the West since the 1980s. But those who are seeking a new economic paradigm should be careful what they wish for.

CAMBRIDGE – Neoliberalism is dead. Or perhaps it remains very much alive. Pundits have been calling it both ways these days. But either way, it is hard to deny that something new is afoot in the world of economic policy.


Beware Economists Bearing Policy Paradigms

DANI RODRIK

US President Joe Biden's administration has embarked on a bold and long-overdue departure from the economic policy orthodoxy that has prevailed in the US and much of the West since the 1980s. But those who are seeking a new economic paradigm should be careful what they wish for.



US President Joe Biden has called for a vast expansion of government spending on social programs, infrastructure, and the transition to a green economy. He wants to use government procurement to rebuild domestic supply chains and bring manufacturing jobs back to the United States. His Treasury Secretary, Janet Yellen, is pushing for a globally coordinated increase in corporate taxes. Jerome Powell, Chair of the Federal Reserve, traditionally the most hawkish arm of government on price stability, is playing down inflation fears and lending his support to fiscal expansion.

All of these policy changes represent a sharp departure from the conventional wisdom in Washington. Do they also augur a new economic policy paradigm?

Economic policies in the US, and the West more broadly, have long been in need of overhaul. The ideas dominant since the 1980s – variously called the Washington Consensus, market fundamentalism, or neoliberalism – originally gained traction because of the perceived failures of Keynesianism and excessive government regulation. But they took on a life of their own and produced highly financialized, unequal, and unstable economies that were unequipped to cope with today's most significant challenges: climate change, social inclusion, and disruptive new technologies.

The needed paradigm change might usefully start with how we teach economics. Economists tend to be enamored of the power of markets to promote overall economic prosperity. Adam Smith's invisible hand – the idea that self-interested individuals seeking only their personal enrichment might produce collective prosperity instead of social chaos – is one of the crown jewels of the economics profession. It also remains deeply counterintuitive, which is perhaps why economists devote an inordinate amount of time proselytizing about the magic of markets.

But economics is not a paean to free markets. In fact, much of economics instruction focuses on how markets may produce too much inequality, and how they fail on their own terms of allocating resources efficiently. Perfectly competitive markets that harmoniously produce stable equilibria are only one possibility among many. The Smithian model is not the only one. Still, the knee-jerk reaction of many economists is to treat well-functioning, competitive markets as the relevant benchmark for any proposed departure from laissez-faire.




Fortunately, a new paradigm for teaching economics does exist. The CORE Project is an online teaching tool and free, open-access textbook. Two leading economists, Samuel Bowles of the Santa Fe Institute and Wendy Carlin of University College London, are the visionaries behind it. But a large group of economists worldwide has collaborated in its development. Already, it is in use in a majority of university economics departments in the United Kingdom.

A key advantage of the CORE approach is that it tackles issues like inequality and climate change head-on. But the pedagogically more interesting move is that it replaces the standard benchmarks of economics with alternative benchmarks that are more realistic and useful. For example, in contrast to conventional economics, CORE assumes that individuals are pro-social and myopic, rather than selfish and far-sighted. Competition is imperfect, with winner-take-all characteristics, rather than perfect. Power is ever-present in the form of principal-agent relationships in labor and credit markets, instead of being treated as either diffuse or exogenous. Economic rents are ubiquitous and often required for well-functioning economies, not rare or the result of policy error.

Such a new paradigm for teaching and doing economics will produce better understanding of social outcomes. But we should recognize that it will not produce a new paradigm for economic policy. And that is as it should be.

All of our previous policy paradigms – whether mercantilist, classical liberal, Keynesian, social-democratic, ordoliberal, or neoliberal – had important blind spots because they were conceived as universal programs that could be applied everywhere and at all times. Inevitably, each paradigm's blind spots overshadowed the innovations it brought to how we think about economic governance. The result was overreach and pendular swings between excessive optimism and pessimism about government's role in the economy.



The right answer to any policy question in economics is, "It depends." We need economic analysis and evidence to fill out the details of what the desired outcome depends upon. The keywords of a truly useful economics are contingency, contextuality, and non-universality. Economics teaches us that there is a time for fiscal expansion and a time for fiscal retrenchment. There is a time when government should intervene in supply chains, and a time when it should leave markets to their own devices. Sometimes, taxes should be high; sometimes, they should be low. Trade should be freer in some areas, and regulated in others. Mapping the links between real-world circumstances and the desirability of different types of interventions is what good economics is about.

Our societies are confronted with vital challenges that require new economic approaches and significant policy experimentation. The Biden administration has launched a bold and long-overdue economic transformation. But those who are seeking a new economic paradigm should be careful what they wish for. Our goal should be not to create the next ossified orthodoxy, but to learn how to adapt our policies and institutions to changing exigencies.



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Job openings surged in March as the economy continues to recover from the pandemic [feedly]

Job openings surged in March as the economy continues to recover from the pandemic
https://www.epi.org/blog/job-openings-surged-in-march-as-the-economy-continues-to-recover-from-the-pandemic/

Today's Job Openings and Labor Turnover Survey (JOLTS) reports an all-time high number of job openings, surging to 8.1 million for the end of March. This is a positive sign that the economy is moving forward. While hires were little changed, I'm optimistic that in coming months those job openings will translate into filled jobs.

One important indicator from today's report is the job seekers ratio—the ratio of unemployed workers (averaged for mid-March and mid-April) to job openings (at the end of March). On average, there were 9.8 million unemployed workers compared with 8.1 million job openings. This translates into a job seekers ratio of 1.2 unemployed workers to every job opening. Put another way, for every 12 workers who were officially counted as unemployed, there were only available jobs for 10 of them. That means, no matter what they did, there were no jobs for 1.6 million unemployed workers.

As with job losses, workers in certain industries are facing a steeper uphill battle. In the construction industry as well as arts, entertainment, and recreation, there were more than two unemployed workers per job opening. In educational services, accommodation and food services, other services, and transportation and utilities, there were more than three unemployed workers for every two job openings.

JOLTS

There has been much bemoaning of labor shortages, particularly within accommodations and food services, even though there are no available jobs for one-third of the job seekers in that sector. Any potential shortage from the recent surge in job openings is likely to be quite short-lived, as before long many more workers will come back into job-search as it becomes increasingly safe to pursue these public facing jobs with improving public health metrics, as childcare and schooling becomes more reliable, and as wages rise to compensate for the extra risk of working in face-to-face places during the lingering pandemic. And, as we saw in the April employment data last Friday, the labor market added 241,400 more jobs in accommodation and food services, so the trend is already moving in the right direction.

It's also important to remember that all potential workers don't show up in the official count of unemployed, particularly in this recession as workers sheltered at home to avoid the pandemic or to care for family members. The economic pain remains widespread with 22.1 million workers hurt by the coronavirus downturn. I hope hiring picks up in coming months since the labor market continued to face a significant jobs shortfall likely in the range of 9.0 to 11.0 million jobs.


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Monday, May 10, 2021

While a disappointing jobs report, job gains in leisure and hospitality respond to increased demand in April [feedly]

While a disappointing jobs report, job gains in leisure and hospitality respond to increased demand in April
https://www.epi.org/blog/while-a-disappointing-jobs-report-job-gains-in-leisure-and-hospitality-respond-to-increased-demand-in-april/

A disappointing 266,000 jobs were added in April, and March's employment number was revised down by 78,000. While the overall growth was far below expectations, leisure and hospitality gained 331,000 jobs, a sign that increased demand has led to significant gains in employment in that sector.

The unemployment rate ticked up in April to 6.1%, in large part due to workers beginning to return to the labor force in search of jobs. The labor force increased by 430,000 workers in April, the largest gain in six months. Likely in response to improving public health metrics and increased expectations of job opportunities, more and more workers are actively returning to the labor force in search of work. While wage growth will be the leading indicator of employers having to bid up wages to attract workers, the significant rise in the labor force runs counter to anecdotal claims of labor shortages.

As of the latest data, employment is still down 8.2 million jobs from its pre-pandemic level in February 2020. But, if we include the likelihood that thousands of jobs would have been added each month over the last year without the pandemic recession, the jobs shortfall is more likely in the range of 9.0 and 11.0 million. Now is not the time to turn off vital relief—including expanded unemployment benefits—to workers and their families.

Additional key points in today's report:

  • The Black unemployment rate rose slightly to 9.7%, making Black workers the only racial and ethnic group (as a whole) to experience worsening metrics. Meanwhile, the white unemployment rate fell to 5.3%. Clearly, these two groups are experiencing a very different labor market.
  • Long-term unemployment—those unemployed 27 weeks and over—fell slightly in April, while the increase in the unemployment rate was due to increases in those unemployed less than five weeks. Among those long-term unemployed, improvements in those unemployed 27-51 weeks were largely offset by increases among those unemployed 52 weeks or longer.
  • Only 18.3% of the workforce teleworked in April. As the economy absorbs more leisure and hospitality workers, I expect this number to keep falling. This also means that over 80% of the workforce is going to work in-person, risking their health and the health of their family members as the pandemic continues to spread.
  • In addition to the 9.8 million officially unemployed in April 2021, we must add three more groups of economically hurt workers: those unemployed but misclassified as employed or not in the labor force (3.3 million), those who dropped out of the labor force (4.4 million), and those employed but experiencing a cut in pay and hours (4.6 million). Taken together, 22.1 million people are economically hurt in the COVID downturn.


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Saturday, May 8, 2021

Enlighten Radio:Talking Socialism: A Manufacturing Renaissance -- Dan Swinney

The Red Caboose has sent you a link to a blog:



Blog: Enlighten Radio
Post: Talking Socialism: A Manufacturing Renaissance -- Dan Swinney
Link: https://www.enlightenradio.org/2021/05/talking-socialism-manufacturing.html

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Friday, May 7, 2021

Tim Taylor: The Great Texas Power Failure of February 2021 [feedly]

Count on Tim Taylor to take you to the 12-step if you fell off the wagon trusting "spinned" stories about a major tech/weather event


The Great Texas Power Failure of February 2021

https://conversableeconomist.blogspot.com/2021/05/the-great-texas-power-failure-of.html

In the aftermath of the Texas power failures in February, a number commenters found confirmation that, amazingly, they had been right about everything all along. Thus, those who were against wind power and renewable energy mandated in general blamed the wind farms. Those who are suspicious of competition in markets for generating electrical power blamed deregulation, although blaming "the market" for what happens in a heavily regulated industry seems peculiar to me. Some critics even blamed Enron, a company that has not existed for years. What actually happened seems simpler, if less reinforcing for various preconceptions: It got really cold. 

Michael Giberson provides an overview in "Texas Power Failures: What happened in February 2021 and What Can be Done" (Reason Foundation, April 2021). He describes the weather: 
The temperature in Dallas dipped to -2° F, the coldest it had been in Dallas for 70 years. Snow fell on the beaches on the Gulf Coast at Galveston, south of Houston. Temperatures in Austin remained below freezing for six days at a time of when temperatures usually average in the mid-50s. At Brownsville, near the most southern tip of Texas, February weather typically averages 65° F. High temperatures in Brownsville were in the mid-80s just days before the cold. The temperature in the city did not rise above freezing for nearly 48 hours once the cold settled in. For the first time in history all 254 counties in Texas were under a winter storm warning at the same time. The cold was not unprecedented at any particular location, but it was extreme, widespread, and long lasting in February 2021. ...
The cold affected more than the ERCOT power system. Some power systems in Texas not within the ERCOT system also resorted to rolling outages. Natural gas production and distribution froze up. Municipal water mains froze in cities across the South. Ranchers in the Panhandle lost cattle to the cold. Citrus growers in South Texas saw damage to trees that may last for years. Roads were closed due to ice and storms. Failures were not solely an electric power industry concern or a natural gas failure. The cold was simply worse than almost anyone in Texas was prepared for. ... Clearly, it was not negligent on ERCOT's part—and maybe anyone's part—to fail to anticipate such anomalous temperatures.

The  Texas power emergency lasted about four days: at its worst, about 4.5 million people were without power.

Of course, the obvious question is why ERCOT--the ironically named Electric Reliability Council of Texas which has responsibility for regulating Texas electricity---had not already required larger investments against cold weather. After all, there had been a cold snap back in 2011 that also caused power outages, although it was not as extreme as the February 2011 version. The short answer is that the weather turned out to be colder than ERCOT's worst-case scenario. Here's a figure that takes a bit of explaining, but tells much of the story: 
The black line shows the actual electricity load. The thin gray line shows the forecasted demand, if ERCOT had been able to deliver it. In general, electricity demand is typically  higher in Texas in the summer (air-conditioning) rather than the winter. But electricity demand during the cold snap would have broken the all-time summer records, as well as the winter ones. 

But the real problem was on the supply side. The ERCOT "extreme" scenario was that 14 GW of electricity would go off-line; actually, 30 GW went off-line.  The blue dashed horizontal line bottom line shows the 2 GW that ERCOT projected for wind and solar power in its "extreme" scenario. There were a couple of small dips below this level, but a drop in wind power was not the main culprit here. 

In retrospect, some of the problem was poor coordination across the energy system. For example, some natural gas pipeline operators failed to submit the information to their electricity providers so that they could be treated as "critical load" functions, which meant that they couldn't deliver natural gas to generate electricity:" "At its worst, as much as 9,000 MW of generation was sidelined by the lack of gas supplies, in part due to power cut offs at gas pipelines." The drop in electricity produced from natural gas was by far the biggest source of the overall drop in supply. 

Other than better coordination of electricity supplies, what else might be done to avoid similar power failures in the future. The key point here to remember is that we are talking about preparation for a very rare event. 

One option is to invest more in weatherization. Another is to pay some firms for being ready to provide a certain amount of electricity in an emergency, even if most of the time they are not actually doing so--that is, pay for some extra unused capacity. Another option is to build more connections from ERCOT to electricity grids outside of Texas, which could be very valuable in emergencies even if they aren't used much of the time. Yet another option would be to encourage Texas electricity users to maintain some of their own battery storage or generating capacity for emergencies. 

Hindsight is 20:20, but now that Texas has been warned by experience, the case for some mixture of these actions is strong. Garrett Golding, Anil Kumar and Karel Mertens at the Dallas Federal Reserve offer some estimates in "Cost of Texas' 2021 Deep Freeze Justifies Weatherization" (Dallas Fed Economics blog, April 15, 2021). In measuring economic losses from the power outage, they write: 
The power outages led to widespread damage to homes and businesses, foregone economic activity, contaminated water supplies and the loss of at least 111 lives. Early estimates indicate that the freeze and outage may cost the Texas economy $80 billion–$130 billion in direct and indirect economic loss. These initial calculations come with significant uncertainty. Estimates of insured losses, which are easier to quantify, range from $10 billion to $20 billion.
In terms of what steps might be taken, they note: 
Winterizing standards on new oil and gas wells may offer a targeted and effective approach in the long run. Due to the high initial productivity of shale wells, new wells will eventually make up a large share of overall production. Many companies already implement winterizing measures. With winterizing equipment costing between $20,000 and $50,000 per well, we estimate these measures statewide would total $85 million–$200 million annually. A large and perhaps inexpensive fix would be prioritizing electricity delivery to gas infrastructure. If power plant and pipeline operators improve coordination to identify and constantly monitor the gas infrastructure requiring such prioritization, some of the problems experienced during the freeze could be prevented.

It's also possible to winterize the wind farms that received so much attention. They write about the possibilities of "upgraded blade coatings, cold-weather lubricants and de-icing drones." 

Overall, the lesson here seems to be to move past the blame game, to accept that the cold weather snap was unprecedented, and now to have Texans pay a little more for electricity to fund these kinds of steps. 


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Equitable Growth’s Jobs Day Graphs: April 2021 Report Edition [feedly]

Equitable Growth's Jobs Day Graphs: April 2021 Report Edition
https://equitablegrowth.org/equitable-growths-jobs-day-graphs-april-2021-report-edition-2/

On May 7, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of April. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data.

With fewer jobs added than expected in April, prime-age employment increased only slightly to 76.9 percent from 76.8 percent in March.

Unemployment rates were little changed among most racial and ethnic groups and remain persistently high for Black and Latinx workers.

After stark declines in employment rates for both women and men amid the pandemic, men made small gains in April with no change to women's employment rate.

The unemployment rate for workers with less than a high school degree increased to 9.3 percent in April from 8.2 percent in March, while labor force participation also declined for this group of workers.

The proportion of unemployed workers who were out of work for fewer than 5 weeks increased in April, offsetting the recent trend of increasing long-term unemployment.

As the unemployment rate was little changed in April, an increasing proportion of those out of work were on temporary layoff, left their job, or were new entrants to the labor force.

The post Equitable Growth's Jobs Day Graphs: April 2021 Report Edition appeared first on Equitable Growth.


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