Relevant and even prescient commentary on news, politics and the economy.

1970s stagnation

I keep seeing references to the 1970’s stagnation that reflect a consensus belief that real GDP growth in the 1970s was significantly lower in the 1970s than in the 1980s.


But this is contrary to the data:


















Yes, the 1970s had a serious problem with inflation, but that does not negate the fact that real GDP growth was actually higher in the 1970s than in the 1980s. We need  a different term to  correctly  describe the  1970s rather than stagnation.

So why do knowledgeable economist like Krugman not recognize that applying the stagnation term to the 1970s creates a false impression about our economic history.

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Greg Mankiw thinks the VA is having problems.

I can not believe the nerve of  Greg Mankiw posting a blog about the Veterans Administration having problems.

He suggests giving Vets a voucher.

I suggest that he should apologize to all the Vets  for the War and Tax cuts policies that were implemented while he was at the White House that created the problem he is referring to.

But I guess Republicans do not believe they ever have to take the blame for the problems they create.






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Real State Per capita Income

The Bureau of Economic Analysis has been working on creating state and metro cost of living indices for several years and they have just published a new set of them that can be used to create real per capita income comparisons between states.

In their press release they show a map comparing real growth in 2012 that ranged from plus 12.7% in North Dakota and minus -2.3% in South Dakota.

But I found the ranking of the states real per capita income much more interesting.

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Capacity Utilization Telling a Strange Story

Capacity utilization is telling a very unusual story. Information technology –computers & peripherals, communication equipment and semiconductors — is operating at recession levels. Part of the story is import tablets and smart phones displacing personal computers. But there has to be more to the story.


Meanwhile, the rest of industry appears to be operating at near full operating rates. Manufacturing excluding info tech capacity is only a few percentage points below its 2007 peak. Given the long run downward slope of capacity utilization this is probably effectively full utilization


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Greg Mankiw on Bond Returns

Greg Mankiw had an interesting post today pointing out that bond returns calculated by the economist were incorrect.

Mankiw wrote:

Here is a question for students who are learning about compounding.  What is wrong with the following passage from The Economist magazine?

Investors who bought Treasury bonds in 1946, when yields were around current levels, did not suffer a formal default. But over the following 35 years they lost money in real terms at a rate of 2% a year. The cumulative real loss was 91%. By that standard, Greek creditors, who recently suffered a 50% loss via default, were lucky.

Answer: The second number is inconsistent with the first.  Note that .98^35=.49, so we get only a 51 percent cumulative loss.

In fact, the price level from 1946 to 1981 rose by a factor of about 5, so holding currency with a zero nominal return led to a real loss of only about 80 percent.

But Mankiw forgot one important element of calculating bond market returns.  Much of the total return for bonds is the interest on the annual interest payments and in a period of rising rates the returns will rise  as the interest payments  are reinvested at higher yields.  It is a bond market convention to assume that all the interest payments will be reinvested at the current yield.  They do that so they can actually calculate a valid price for the bond. But that is just a convention, and in a period of rising rates the returns will be higher than Mankiw calculates.

By omitting this point Mankiw is making just as serious an error as he is accusing the Economist of making.



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Obama-care and part time employment –Part 2

I’m seeing all types of comments on the 2013 rise in part time employment that blame it on Obama-care and that is just plain wrong.

Based on unpublished BLS data so far this year federal employes forced to work part time because of the sequester account for over 100% of the increase in part time employment.

So far this year private part time employment is actually some one million jobs lower than in the same 8 months of last year.  Because the data is not seasonally adjusted ( NSA ) the correct comparison to make is the year over year change because frequently the month-to-month changes can be misleading.

Time after time I’m seeing people observe the jump in part time workers and just jumping to the conclusion that it is Obama-care.  That is what they want to believe, so they do not bother to check  if their is another explanation. Economist generally call this  the omitted variable problem.  But I suspect it is just more Republican disinformation.  All it takes to get the data showing that the jump in part time  employment is all federal employes is just one simple phone call or email to the BLS . But it appears that people do not want to be confused by the facts.

(See table after the read more)

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Disinformation was the old Cold War practice of both the CIA and KGB of planting false information in the press for propaganda purposes or to fool each other.The KGB actually had an entire Disinformation Division.Now it just seems to be the conservatives-liberaterians trying to fool themselves.


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OBAMACARE,THE SEQUESTER and part time employment

It is time to get serious.

There are widespread claims that firms are cutting  hours worked and converting full time jobs into part time jobs because of Obama-care.

So what does the data say.  Below is a table of unpublished data from the Bureau of Labor Statistics (BLS) of part time employment by private and government employers.  The government data includes state, local and federal part time workers but I have also broken out federal part time workers in a separate column. The data  also is not seasonally adjusted, so generally month to month comparisons are meaningless and one should make comparisons between a month in 2013 and the same month in 2012.

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The data shows that private part time employment in 2013 is lower in every month but one than it was in the same month of 2012. Moreover, federal part time employment was just the opposite, rising in every month but January. In particular, in June and July, 2013, when firms were supposedly cutting hours worked to avoid having to pay for employee health insurance over 100% of the increase in part time employment stemmed from federal government employment.  This in turn was generated by employee furloughs brought about by the sequestration.

So over the last few months when Obama-care was supposedly causing a surge in part time employment the data shows that private part time employment actually fell, just the opposite of what is being claimed.

Overall, the data massively contradicts claims that Obama-care is responsible for the recent surge in part time employment. Moreover, it strongly supports the case that the recent increase in part time employment stemmed from the Sequester.

I can understand why papers like the Wall Street Journal will buy into such Republican misinformation, but I am really surprised that the New York Times  appeared to accept the misinformation even though they were publishing good data on the sequester. But as far as anyone else is concerned, I see no reason to take you seriously unless you can show good, hard data demonstrating that the BLS data is wrong.

PS. The Pentagon announced that it is reducing the number of furlough days DOD civilians must take from 11 to 6.



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Part Time Employment and the Sequester

Part of the reason employment and hours worked, in particular, have been so weak in early 2013 is the rapid growth of part-time employment. Part time employment is volatile and subject to many influences.  From December to June part time employment rose 589,000.  That is a 2.2% — almost 5% annualized – growth rate. Part time employment jumped from 18.4 % of total employment in December  to 19.0% in July.

The unusually large increase in part time employment is due  almost exclusively to the sequester.  For example, at the Department of Defense (DOD) some 650,000 civilians must take 11 days off in the second and third quarters. They have 26 weeks, but after adjusting for federal holidays, vacations, sick leave, etc., the effective  time is 22 weeks. This works out that DOD employees must take an involuntary, unpaid day-off every other week. Consequently, on any given week about half of the DOD civilian workers (325,000) became part time employees.  That is 55% of the 589,000 jump in part time employment in the first half of 2013..

But the sequester is impacting all federal employees and is spreading to federal contractors.  Total federal civilian employment is 2,760,000.  If half are now part time workers that would be 1,380,000, or 134% of the 589,000 jump in part time employment. Even if only 25% of non-DOD federal civilian workers are now part time, it would still mean that the sequester is converting over a million jobs into part-time work.





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The Employment Situation


Although the July employment report was weaker than expected, it was still in line with recent experiences. The household survey reported employment gains of 204,000 while the payroll report showed a gain of 162,000 jobs.

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Average hourly earnings for all employees on private nonfarm payrolls edged down by 2 cents to $23.98, following a 10-cent increase in June.

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