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February 4, 2013

Latest Posts from Economist's View


Latest Posts from Economist's View


Posted: 08 Dec 2012 12:06 AM PST
Posted: 07 Dec 2012 11:27 AM PST
Today, Duncan Black/Atrios/Eschaton observed:
We're All Keynesians Now: All the "fiscal cliff" nonsense is just acknowledging that contractionary policy is contractionary. That all the serious people have been advocating contractionary policy for years seems to have been lost. Maybe we take the next step and learn that expansionary policy is expansionary.
That's a pretty good introduction to this post from John Cassidy:
It's Official: Austerity Economics Doesn't Work, by John Cassidy: With all the theatrics going on in Washington, you might well have missed the most important political and economic news of the week: an official confirmation from the United Kingdom that austerity policies don't work. ...
One of the frustrations of economics is that it is hard to carry out scientific experiments and prove things beyond reasonable doubt. But  ... what has been happening in Britain amounts to a "natural experiment" to test the efficacy of austerity economics. ...
That austerity has led to recession is undeniable. ... If all the pain he has inflicted had transformed Britain's fiscal position, his policies could perhaps be defended. But that hasn't happened. ...
For the purposes of the natural experiment, the U.S. can be thought of as the control. In adopting a fiscal stimulus of gradually declining magnitude over the past four years, the Obama Administration has administered what was, until recently, the standard medicine for a sick economy. As one would have expected on the basis of the textbooks, the American economy, while hardly racing ahead, has fared considerably better than its British counterpart. ...
Let's go over that one more time. Having adopted the policies of Keynes in response to a calamitous recession, the United States has grown more than twice as fast during the past three years as Britain, which adopted the economics of Hoover (and Paul Ryan). Meanwhile, the gaping hole in the two countries' budgets has declined at roughly the same rate, and next year the U.S. will be in better fiscal shape than its old ally.
Q.E.D.
Posted: 07 Dec 2012 10:46 AM PST
Tim Duy:
No News is Good News?, by Tim Duy: The employment report offered me no reason to change my baseline opinion that the US economy continues to grow at a slow, steady pace regardless of the quarterly fluctuations we see in GDP growth. Indeed, there seems to be little news in November's numbers. This is good news in the sense that fears that the economy is slipping toward stall speed in the final quarter of the year is not yet translating into weaker job growth. The same is true for fears of the fiscal cliff, debt cliff, austerity bomb, etc. The bad news is that we are not seeing the 200k+ numbers that the Fed is leaning towards as evidence of stronger and sustainable improvement in the labor market. That means the Fed will continue to add to its stock of assets, converting most if not all of Operation Twist into an outright purchase program next week.
Headline payrolls rose 146k in November, well-ahead of Sandy-impacted expectations. The BLS says that Sandy did not impact return rate of the establishment survey. But did it impact the actual numbers of reported employees? Unknown at this point. There were downward revisions to the two previous months, including a downward revision of government employees. This picture as it now stands:
Emp1
On average, a remarkably steady pace of job creation since last fall. The details weren't great, but weren't terrible either. Retail trade gained 52.6k jobs, indicating solid holiday hiring. Professional and business services gained 43k jobs, including 18.0k in the cyclically-sensitive temporary help sector. Construction, however, lost 20k jobs despite mounting evidence of improved residential housing activity. And nondurable goods manufacturing lost 18k. Aggregate hours continue to climb, consistent with expanding GDP:
Emp3
But wage growth remains abysmal:
Emp5
On the household side, the details were a little more spotty. Notably, the number of employed fell along with the labor force. Note that the last two months, however, saw out-sized gains in employed relative to nonfarm payrolls:
Emp2
Lot's of noise there. But under that noise is a consistent trend - job growth at these rates has been sufficient to push the unemployment rate lower:
Emp4
This suggests that growth, as historically anemic as it is, exceeds potential growth. I would not, however, take much comfort in this yet, as low wage growth suggests that the labor market is nowhere near what can be described as healthy or recovered. I would be wary of adopting Felix Salmon's position that the employment emergency is over.
Bottom Line: Progress, but mediocre progress. Much as we have seen, on average, for the past year. No reason to dramatically shift from a slow and steady outlook in either direction.
Posted: 07 Dec 2012 09:17 AM PST
Dean Baker:
Unemployment Rate Edges Down to 7.7 Percent as Job Growth Slows: The unemployment rate fell to 7.7 percent in November, its lowest level since December of 2008. However, the immediate cause was a drop of 350,000 in the size of the labor market as reported employment actually fell by 122,000. The establishment survey reported job growth of 146,000. With the prior two months growth revised downward by 49,000, this brings the average over the last three months to 139,000. This is somewhat worse than the 158,000 average rate of job growth over the last year. ...
The household data indicated little change from prior months. While the drop in unemployment is good news, the employment rate actually slipped down to 58.7 percent, just 0.5 percentage points above the 58.2 percent low last reached in the summer of 2011. ...
On the whole, the data in the November report show pretty much the same picture as what we have been seeing over the last six months. The economy is creating jobs at a rate that is a bit faster than what is needed to keep pace with the growth of the labor market. At the current pace, we would not see the economy returning to full employment for another decade. Furthermore, there are more downside risks than upside -- for example, if there were to be severe deficit reduction as a result of the current negotiations between President Obama and Congress.
We need to do better than this. Deficit reduction, however, is the opposite of the right answer to the problem of slow job growth.

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