Amazon defeated in New York UPDATED

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Who Is Really A Socialist?

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Amazon defeated in New York; more to come

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Electrolux closing Memphis plant; Economic development malpractice leaves Tennesse holding the bag

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by New Deal democrat

What does a “Recession Watch” mean?

Yesterday I explained what that means in detail over at Seeking Alpha.

So, what happens after this?

As always, I will be relentlessly data-driven.

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December JOLTS report: mixed but with strong positive revisions

The JOLTS report on labor is noteworthy and helpful because it breaks down the jobs market into a more granular look at hiring, firing, and voluntary quits. Its drawback is that the data only goes back less than 20 years, so from the point of view of looking at the economic cycle, it has to be taken with a large dose of salt.

With that disclaimer out of the way, Tuesday’s JOLTS report for December was mixed, and for the second month in a row was soft relative to the strength of the overall jobs gain for that month. With the exception of one new high, the other series are off their best levels, and two continued to decline, with the good news being that there were generally positive revisions in the previous month’s data:

• Quits declined for the 4th month in a row, and are about 5% off peak.
• Hires rose and are only 0.3% off their peak set two months ago.
• Total separations declined and are off 4% from August.
• Job openings made a new all time high.
• Layoffs and Discharges declined (a good thing), but remain up about 10% from their recent low last March.

Let’s update where the report might tell us we are in the cycle.

First, below is a graph, averaged quarterly through the fourth quarter, of the *rates* of hiring, quits, layoffs, and openings as a percentage of the labor force since the inception of the series (layoffs and discharges are inverted at the 3% level, so that higher readings show fewer layoffs than normal, and lower readings show more):

During the 2000s expansion:

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This is an exiting day. I disagree with something Paul Krugman wrote.

In 2017, private insurance paid about a third of America’s medical bills — $1.2 trillion, or 6 percent of GDP. Having the government pay those bills directly, without a revenue offset, would therefore be a spending increase — a fiscal stimulus — of 6 percent of GDP.

Suppose — as MMTers tend to assume — that interest rates nonetheless didn’t rise. Then this stimulus would have a multiplier effect, probably raising GDP, other things equal, by 9 percent.

I have 2 objections. First the replacement of private insurance with debt financed single payer is effectively a tax cut not a spending increase (as indicated by the phrase “those bills”) as such, the direct effect on demand is less than 6% of GDP. Krugman likes to do two kinds of analysis IS-LM and New Keynesian.

In a standard new Keynesian model, the shift would have no effect on demand — ultra rational consumers would assume that they would have to pay the public debt eventually, so they would save the money that isn’t being paid as insurance premiums (which would presumably be paid as salaries instead).

In an IS-LM model, the incrase would be 6% times the marginal propensity to consumer. Going full Hicks (the orignal IS-LM model) that is 1-1/(the multiplier) = 1/3. To consistently apply the original IS-lm model, Krugman should calculate (multiplier -1)(the tax cut) = 3% of GDP.

Second Krugman writes “a multiplier effect” when he means “a multiplier greater than one”. I hate that. It does not follow from the definition of “to multiply” If I have to multiply a by something to get b, that doesn’t mean b is greater than a. Mutiplying by 0.9 is multiplying.

I insist on this, because anti Keynesians often play the 1=0 trick. When fiscal stimulus is proposed, they claim to prove that the multiplier is zero. When data is analyzed they claim to have been proven right, because there isn’t proof that the multiplier is greater than 1.

But the important point is that the correct calculation implies a 3% increase in GDP. Okun’s law (click the link) implies a 1.5% reduction in unemployment to 2.5% which would probably scare the Fed into raising interest rates, but which is a lot more possible than -0.5% as calculated by Krugman.

Now I don’t think that the marginal propensity to consume is 1/3, but that means that Krugman and I have to explain why estimate multipliers are only 1.5 and not much higher. I suspect this explanation would imply that MMTers predict a negative unemployment rate, so I suspect thaat, in the end, I would agree with Krugman’s conclusion.

But I find his calculation suspect.

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A decelerating Staffing Index suggests that weakening temporary jobs in the monthly employment report is not just noise

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(There’s a movie at the end!)

For decades we have been hearing about the loss of industrial production through out what is called the “Rust Belt”.  It’s presented, even as recent as the prior presidential election as a relative regional problem that only began post Reagan.  What gets me though is that the reporting and ultimately the politics are as if the rust belt is/was unique in their experience with the west and east coast experiencing nothing of the sort.  The presentation is of the west coast Hollywood economy and now the “tech” economy, the east coast (namely New York/Boston) being the money economy.  The south east is not considered other than Disney and orange production.  The north west?  Microsoft and Starbucks.  Well I think it used to be lumber.

Wiki notes that the rust belt is not geographic but is a term that “pertains to a set of economic and social conditions“.     It includes the northeast which is proper in that industry started there but I have had the feeling for a few decades now that such history is forgotten and thus no longer considered when we look to understand what the hell happened to the middle class.

Let me start with this fun fact.  Rhode Island was the most industrialized state per capita in the nation at one point.  Wiki notes that:

…Aldrich, as US Senator, became known as the “General Manager of the United States,” for his ability to set high tariffs to protect Rhode Island — and American — goods from foreign competition.

We were where the super rich came to escape the heat and play.  And then it started to die.  Not just here though.  Neighboring Massachusetts was hit as was Connecticut.  If you ever get a chance, come visit the New Bedford  Whaling museum and read about the massive industry that was there.  Example, the worlds largest mill of weaving looms.  Some 4000+!  Whaling from that city in the later 1800’s generated some $71 million per year!  Not impressed? Well, using the GDP deflator it’s $1.480 billion per year!

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“I’m not sure I follow the arithmetic here.”

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