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I pour some cold water on 2018 midterm overoptimism

 I pour some cold water on 2018 midterm overoptimism

In the wake of Conor Lamb’s election victory in Pennsylvania last Tuesday night, some Democratic partisans are suggesting that every GOP-held seat from a district that is less than trump +20% is in play.
Hold your horses. The results of last June’s special election in Georgia, in which GOPer Karen Handel defeated Democrat Jon Ossoff show that there is a roadmap to the GOP minimizing their losses in this November’s midterms.
Because while all of the legislative elections in 2017 and so far in 2018 have featured huge gains in Democratic turnout, the difference in Georgia was that there was a *similar* spike in GOP turnout.  And this playbook is going to be easier for the GOP to run in nationwide contests than in local special elections.
Let’s start with turnout in Pennsylvania last week. Here’s the graph on point:

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JOLTS revisions paint brighter labor market picture

JOLTS revisions paint brighter labor market picture

Last Friday’s JOLTS report for January included some important revisions, particularly with regard to hiring.  So let’s take a closer look.As a refresher, unlike the jobs report, which tabulates the net gain or loss of hiring over firing, the JOLTS report breaks the labor market down into openings, hirings, firings, quits, and total separations.

I pay little attention to “job openings,” which can simply reflect that companies trolling for resumes, or looking for the perfect, cheap candidate, and concentrate on the hard data of hiring, firing, quits and layoffs.

The first important relationship in the data is that historically, hiring leads firing.  While the one big shortcoming of this report is that it has only covered one full business cycle, during that time hires have peaked and troughed before separations.

And here, there has been an important revision.  Here is the historical relationship on a quarterly basis between hiring (red) and total separations (blue) as it existed through the end of the third quarter of 2017:


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Facebook, Cambridge Analytica, and the Economics of Privacy

By Jeff Soplop

Facebook, Cambridge Analytica, and the Economics of Privacy

Cambridge Analytica – the data firm that provided consulting services for the Trump Campaign – has come under intense scrutiny for the firm’s capture and exploitation of vast quantities of user data from Facebook. These practices have added new urgency to questions about how information is collected online and how to protect users’ privacy rights.

From The New York Times:

“The firm had secured a $15 million investment from Robert Mercer, the wealthy Republican donor, and wooed his political adviser, Stephen K. Bannon, with the promise of tools that could identify the personalities of American voters and influence their behavior. But it did not have the data to make its new products work.

So the firm harvested private information from the Facebook profiles of more than 50 million users without their permission, according to former Cambridge employees, associates and documents, making it one of the largest data leaks in the social network’s history. The breach allowed the company to exploit the private social media activity of a huge swath of the American electorate, developing techniques that underpinned its work on President Trump’s campaign in 2016.”

In response, Facebook suspended Cambridge Analytica and several other involved parties. But an online statement from Facebook’s Deputy General Counsel Paul Grewal denied what happened constitutes a breach: “People knowingly provided their information, no systems were infiltrated, and no passwords or sensitive pieces of information were stolen or hacked.”

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Import and export growth and an expanding trade deficit do not need a strong dollar.

Import and export growth and an expanding trade deficit do not need a strong dollar.

We have had some discussions about dollar weakness and questions for those of us who expected the federal deficit to lead to a larger current account deficit through a strong dollar.

I’ve looked at the data in a different way and now wonder if we really need a change in the dollar to achieve a larger current account deficit.   If you look at real imports and exports you see that real imports are now 155% of real exports and the basic trend is for imports to grow much faster than exports.  Since 2013, real import growth has averaged some 3.4% annually while real exports only grew at about a 1.5% annual rate. If you project these trends out it implies that the real trade deficit would expand about 6% annually, or about a half a percentage point per month.

Interestingly, over the past year or so non-petroleum import prices have grown some 1% to 2% annually, or about the same  rate as domestic prices. So  there has been no significant changes in import prices relative to domestic prices.

So at least from this perspective I would expect  imports market penetration to continue expanding.   After all, in the overall trade balance, steel and aluminum tariffs — especially with major exceptions, like Canada — are not large enough to make much difference.

Figure 1

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Prime age labor force participation: disability and homemaking decline

Prime age labor force participation: disability and homemaking decline

About a year ago I wrote a series of posts on various reasons for the relatively low labor force participation by prime age individuals, and its effect on wages; In my post summing up that study I wrote:

A major element of the participation rate is comparison with other alternatives to being in the labor force.

Two alternatives to labor participation appear to have had a significant effect on the rate.

First, the cost of child care, which has soared over the last 15 years, compared with subdued (or paltry) wage growth has caused many women and some men as well in the prime age demographic to leave the labor force completely and instead raise their children as homemakers.

A second alternative, which appears to be a major determinant of the decline in male participation at least over the last 60 years is the expansion of disability insurance. This increase in disability has been mainly due to neck and back conditions, and together with improved longevity, has increased the incidence of long-term disability dramatically.

It has also been suggested that the huge increase in the incarceration rate from roughly 1980 through 2000 has also played an important role in depressing participation.

I bring this up again because a few days ago the NY Times published a very interesting graph depicting the trends in the percentage of prime age individuals who report that they are not in the labor force due to homemaking, disability, discouragement, being in school, and “other,” which presumably includes incarceration:

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Blue State Red State, Blue State Dead State

Back when he was a conservative (and didn’t just play one on TV) David Brooks specialized in the ecological inference fallacy. He tried to argue that the Democratic party was the elite party, because Democratic “blue” states are wealthier than red states. He wrote as if all people in blue states were upper middle class as he and all the people he knows are.

This is passé. Current conservatives just replace data with prejudice. For example, someone tweeted “Still doesn’t answer why these red states don’t have higher mass shootings and murders.” (picking on a random tweet is called the “nut picking fallacy”). This is hard to answer, since those red states do have higher murder rates.. Some people are sure this must not be true as soft on crime liberalism leads to lots of crime. However, there are tens of thousands of dead people who won’t argue back (being dead).

So I decided to look at maps of murder and church attendence. By Brooksian logic we can conclude that christ

There are two big exceptions — devout but not homicidal Utah and my native, blue, secular, and homicidal Maryland.

Still a pretty impressive state by state correlation of church going and killing no ?

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The dollar has devalued since Trump became President

Lifted from comments by PGL:

The dollar has devalued since Trump became President:

Barry Eichengreen has some interesting thoughts here:

“One of the big ones in the circles I frequent is dollar weakness. Between January 2017 and January 2018, the broad effective exchange rate of the dollar fell by 8%, wrong-footing many of the pundits. I include myself among the wrong-footed (others can decide whether I qualify as a pundit). Tax cuts and interest-rate normalization, I expected, would shift the mix toward looser fiscal and tighter monetary policies, the combination that drove up the dollar in the Reagan-Volcker years. Tax changes encouraging US corporations to repatriate their profits would unleash a wave of capital inflows, pushing up the dollar still further. New tariffs that made imports more costly and that shifted demand toward domestic goods would require offsetting effects in a near-full-employment economy in order to shift demand back to foreign sources. The most plausible such offset was, of course, appreciation of the real exchange rate, which could occur only through inflation or, more plausibly, a stronger dollar. The markets, in their wisdom, rejected this logic for more than a year.”

With this market rejection, he revisits:

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February update: real wages and real spending

by New Deal democrat

February update: real wages and real spending

Now that we have February inflation, let’s take an updated look at real wages and real spending.
First of all, real average hourly wages increased slightly in February, but are still -0.6% under their July peak:
But, because the total hours worked surged so much in February, real aggregate wage earnings, which had stalled since July, rose to a new record:
If it’s not revised away, this means that the middle and working classes have more income to spend, without dipping more into savings.

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