Posts Tagged ‘menzie chinn’

If we make it through December

3 December 2010

The BLS unemployment report for November is out, and it ain’t pretty.  Less than a third as much job creation (+39,000) as expected, not nearly enough to absorb new entrants into the labor force, so the official unemployment rate edged up to 9.8%.  (The comprehensive U-6 unemployment rate was unchanged at 17.0%.)

The private sector added 50,000 more jobs, and the government shed 11,000 jobs.  It is a bit hard to disentangle private sector jobs from the government, in view of the fact that the $787 billion stimulus went mostly to the private sector as opposed to new government jobs, but it is rather remarkable how little the government is doing in terms of direct job creation.  At the federal level this comes down to politics — in this conservative age, creating 3.5 million temporary government jobs, as the New Deal did each year, is considered a bad thing.  Indirectly creating or saving 3.5 million jobs, as the Obama Administration credits the stimulus with having done, is politically viable (or was in early 2009) but hard to prove, which is probably why the stimulus is unpopular with most of the public.  At the state and local level, of course, it comes down to balanced-budget requirements — with tax revenues down for the count, everyone’s cutting government payrolls to try to close the budget gap.  (Without emergency federal aid to make up the difference, the recession gets magnified at the state and local government level.)   If I eyeballed the numbers correctly, employment is down for the year at all three levels of government.

The only good news I noticed in the report was that the number of temp workers, a leading economic indicator of employment, increased for the fourth straight month.  (And even then, the increase is smaller than in several months earlier this year.)  Another leading indicator, weekly hours worked, did not improve, instead holding steady at 34.3 hours.

Now, the unemployment rate is a lagging indicator, and there are positive signs of recovery elsewhere, but that’s cold comfort to the nation’s 15 million unemployed. Seems like we’re back to where Merle Haggard  was in 1973, especially with Republicans in Congress so far refusing to extend unemployment benefits for the long-term jobless:


Jobs, jobs, jobs, stimulus, Depression

28 January 2010

It’s been noted that President Obama used the word “jobs” more times (29) than other word in last night’s State of the Union address.  Much of that was in connection with a jobs bill that he plans to introduce, and about which he mentioned a few reasonable-sounding specifics.  But indications are that he and his party will try to do this one on the cheap, rather than open themselves to the “big spenders” charge or the predictable cries of deficit scolds who think there’s nothing wrong with the economy that a good bloodletting won’t cure.

And, according to polls, last winter’s American Recovery and Reinvestment Act (a.k.a. the stimulus bill) is unpopular.  It was too small to make much of a dent in the massive unemployment crisis, and the continued high and rising unemployment has led many to conclude, by that famous fallacy post hoc ergo propter hoc and with the encouragement of countless politicians and talking heads, that the stimulus actually caused the rise in unemployment.  Brad DeLong has an excellent column on “America’s Employment Dilemma” right here.

Some on the right have likened the Obama stimulus bill and the still-high unemployment to the New Deal jobs programs and the Great Depression:  the argument is, if they didn’t end it, then they must have caused it.  (Which is kind of like blaming Doctors Without Borders for an earthquake.)  Others make the less extreme but still ridiculous argument that because unemployment is still high, the fiscal stimulus must not have created a single job.  (Which is hogwash — Prof. Menzie Chinn of Econbrowser shows that private studies by IHS/Global Insight, Macroeconomic Advisers, and Moody’s estimate that the stimulus has created 1.1 to 1.6 million jobs to date, and Chinn himself estimates that the number may be more like 2.9 million.  It’s wonkish stuff, but worth a look.)

Anyway, here’s an unpublished letter I wrote a few weeks ago to USA Today in response to a letter that made that bogus argument about how those New Deal programs that employed millions somehow didn’t employ anybody:


What the #$*! do we know!?

6 July 2009

WhatTheBleep2Didn’t see the movie, but the title is one that any student of economics must ponder on a regular basis. Case in point: our attempts to understand the current crisis, which is the reason I set up this blog in the first place. While there does seem to be a general consensus that the crisis involved the bursting of a bubble of some kind, there seems to be strong disagreement on the specifics, even among economists who are smart, fair, and thorough.

A few weeks ago I noted that there were two basic explanations of the crisis that were both plausible and consistent with each other:  (1) overindebted Americans whose luck finally ran out and (2) a global savings glut. Money inflows from abroad helped fuel the housing and stock-market bubbles, and also made U.S. interest rates cheaper, thus making it easier for spendthrift Americans to keep on borrowing. Americans have been living beyond their means since 1981 (we know this because the trade balance has been negative during that time, meaning that imports have made up the gap between what we purchase and what we produce), and foreigners have been our eager enablers by purchasing U.S. stocks, bonds, property, and other assets. Aggregate statistics show that American indebtedness increased greatly in the past decade — to the highest levels since 1929! — and of course the housing market (and to a lesser extent the stock market) became a historic bubble in this decade. The usual story is that the runups in stock and housing prices encouraged Americans to spend more and more, even to the point of going further into debt, as their equity was rising and in many cases, like home equity loans, they could even borrow against it. Then the housing bubble burst, and the stock bubble followed suit, and suddenly Americans were a lot less wealthy and therefore cut back their spending, causing GDP to fall.

Still sounds plausible, but is it true? Some recent empirical studies cast a lot of doubt on both of those explanations.