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Catching up: November JOLTS report

Catching up: November JOLTS report

Let me catch up on some data I didn’t examine last week: the November JOLTS report.

It decomposes the jobs numbers into a number of metrics, but is less than 20 years old, so only covers one full business cycle, so is of limited forecasting use.

To reiterate, here is the order in which the JOLTS series peaked during the 2000s expansion:

  • Hires peaked first, from December 2004 through September 2005
  • Quits peaked next, in September 2005
  • Layoffs and Discharges peaked next, from October 2005 through September 2006
  • Openings peaked last, in April 2007

So to start, here are YoY hires and quits for the entirety of the series, measured YoY

Hires has turned negative for some months in the past year, while quits remain positive YoY.

 

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The Democratic Debate in Des Moines: progressive candidates on means testing versus universality

The Democratic Debate in Des Moines: progressive candidates on means testing versus universality

Dana Chasin at 2020 Vision does a good job of encapsulating key issuesthat surface in the Democratic debates.

Let’s get this out first:  most listeners will admit that the debates seem both too long and too short, as mentioned on Stephen Henderson’s Detroit Today program this Wednesday 1/15 morning.  They are too short, because candidates are interrupted at the 30-second time limit and not allowed to develop nuanced, considered answers to questions.  They are too long, because they go on for 2 hours.  I’d add that they are problematic, because the media pundits have their own views of what creates energetic dialogue that makes good ‘copy’ for programming, versus the kinds of in-depth discussions about issues like climate change, health care, education, the Supreme Court, congressional oversight/checks and balances, tax policy, wealth inequality and income inequality, plutocracy and oligarchy, etc. that people want to hear.

One important distinction that Chasin notes for thinking about socio-economic programs is the distinction between means testing and universality.  A means-tested program is generally available to lower-income people and often phases out and is capped at some income level beyond which it is no available.  A universally offered program is one that is available to all, rich and poor alike.  So the Earned Income Tax Credit is a means-tested program that is capped (too low, in my view), and Social Security is a universally available program (though there is a graduated payout scale and the funding formula caps pay-ins to the program at a ridiculously low level that means the rich pay only a pittance into the program)

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What Is Up With Empirical Economics?

Tyler Cowen today flags a paper by Currie, Kleven, and Zwiers on changing practices in economics, and highlights the following:

Panel A illustrates a virtually linear rise in the fraction of papers, in both the NBER and top-five series, which make explicit reference to identification. This fraction has risen from around 4 percent to 50 percent of papers.

This caught my eye, because Matt Yglesias at Vox recently highlighted a study claiming to show large educational benefits from air filtering in schools:

This paper identifies the achievement impact of installing air filters in classrooms for the first time. To do so, I leverage a unique setting arising from the largest gas leak in United States history, whereby the offending gas company installed air filters in every classroom, office and common area for all schools within five miles of the leak (but not beyond). This variation allows me to compare student achievement in schools receiving air filters relative to those that did not using a spatial regression discontinuity design. I find substantial improvements in student achievement: air filter exposure led to a 0.20 standard deviation increase in mathematics and English scores, with test score improvements persisting into the following year. Air testing conducted inside schools during the leak (but before air filters were installed) showed no presence of natural gas pollutants, implying that the effectiveness of air filters came from removing common air pollutants and so these results should extend to other settings. The results indicate that air filter installation is a highly cost-effective policy to raise student achievement and, given that underprivileged students attend schools in highly polluted areas, one that can reduce the pervasive test score gaps that plague public education.

Kevin Drumm was quick to spot the problem in the paper (click through to see the data).

Then Andrew Gelman weighed in:

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For MLK Day: unemployment by race

For MLK Day: unemployment by race

In observance of Martin Luther King’s birthday, almost all US markets are closed and there is no economic data.

So on this day let’s see the extent to which economic opportunity in several neutral metrics has improved since the passage of the Civil Rights Acts in the 1960s.

Here in unemployment for African Americans (blue) vs. whites (red) since the former began to be measured in 1972 (white unemployment had been measured since the 1950s – interesting that black unemployment wasn’t even deemed worthy of being separately measured before the 1970s!):

Unemployment for whites made a 50 year low at 3.1% earlier in 2019. It was only lower, at 3.0%, in 1969 (not shown). African American unemployment made its all time low, at 5.4%, in August of last year.

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“What is the Most Useful Idea in Economics?”

NPR’s Planet Money went to the 2020 American Economic Association conference in San Diego where they asked economists, “what is the most useful idea in economics?” David Autor appears near the end of the episode (minute 16:00) to talk about the lump-of-labor fallacy. Almost exactly 87 years earlier, on January 18, 1933, Arthur Dahlberg appeared before a Senate subcommittee to give testimony on the thirty-hour work week bill. The lump-of-labor fallacy would be a useful idea indeed if it would show economists how little they have learned and how much they have forgotten in the intervening 87 years.

In his Planet Money interview, Autor rehearses the standard refrain about there not being a “finite” amount of work to be done so we are not in danger of running out of jobs. Then he introduces the caveat that although we will not run out of jobs, that doesn’t mean that there is nothing to worry about — some people will end up in worse jobs than they previously had or would have had. Autor’s remedy for this is to develop policy that will improve people’s skills so they qualify for better jobs or raise the productivity in personal service jobs so they pay more.

Eighty-seven years earlier, Dahlberg also disagreed with the idea that machines create technological unemployment. He also saw that the new jobs created by technological change would be different than the old ones. But Dahlberg carried his analysis several steps further than Autor. In Dahlberg’s view many of the new jobs would differ from those they replaced in that the demand for their products or services would not be spontaneous but would need to be artificially induced by, for example, advertising.

Autor acknowledges something similar when he mentions that a hundred years ago 70 percent of consumer spending was on necessities compared to only around 40 percent now. But Dahlberg raised the issue that wages are determined by bargaining and the shift away from spontaneously-demanded goods and services undermines labor’s relative bargaining power, resulting in a smaller labor share of income. Recipients of capital income may spend their larger share either on personal consumption or investment but eventually they will want to “cash in” on that investment. Spending on new investment will decline faster than spending on consumption rises. Dahlberg thus invoked the business cycle as the “slow-moving effect” of the introduction of labor-saving technology.

Here is a link to the transcript of the Planet Money interview with David Autor. Below is the transcript of Arthur Dahlberg’s testimony to the Senate subcommittee on the thirty-hour work week:

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Housing BOOM! 2

Housing BOOM! 2

Housing is a very important long leading indicator, and it reflects both the consumer and producer sides of the economy. And this morning, at least in terms of starts, it hit a grand slam.

Total housing starts were 1.608 million units annualized, the highest number since the end of 2006. The less volatile and slightly more leading permits declined slightly to 1.416 million units annualized, but the three month average of each made new expansion highs:

The story is the same with the less volatile single family starts and permits:

 

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News and Words that Caught My Eye this Week

Teacher of the Year‘ kneels during college football championship attended by Trump,”ABC News, January 16, 2020

During a ceremony honoring the 2019 “Teachers of the Year,” one in particular stood out.

The honoree from Minnesota, Kelly Holstine, chose to kneel during the national anthem at the NCAA football championship game on Monday, where the ceremony took place, “to stand up for marginalized and oppressed people,” according to a tweet she wrote, which included a photograph of her kneeling.

“Like many before, I respectfully kneeled during Nat’l Anthem because, ‘No one is free until we are all free,'” she wrote, referencing former San Francisco 49ers quarterback Colin Kaepernick and citing a quote from Dr. Martin Luther King, Jr.

Virginia school board refuses to ban Confederate flag” from the dress code, Today, Alyssa Newcomb, January 16, 2020

A Virginia school board is refusing a dress code ban on clothing showing the Confederate flag, despite the appeals of the board’s only black member.

The Franklin County School Board in Rocky Mount, Virginia, voted 7-1 on Monday against formally writing a ban on the Confederate flag into the dress code. The board cited Tinker vs. Des Moines, a 1969 case that ruled students were allowed to wear black armbands to protest the Vietnam War and did not lose their right to free expression, even while attending school.

“In Franklin County, we do not have any documented cases of a substantial disruption caused by the Confederate flag

The Miseducation of the American Boy,” The Atlantic, Peggy Orenstein, January 15, 2020

I knew nothing about Cole before meeting him; he was just a name on a list of boys at a private school outside Boston who had volunteered to talk with me (or perhaps had had their arm twisted a bit by a counselor). The afternoon of our first interview, I was running late. As I rushed down a hallway at the school, I noticed a boy sitting outside the library, waiting—it had to be him. He was staring impassively ahead, both feet planted on the floor, hands resting loosely on his thighs.

My first reaction was Oh no.

It was totally unfair, a scarlet letter of personal bias. Cole would later describe himself to me as a “typical tall white athlete” guy, and that is exactly what I saw. At 18, he stood more than 6 feet tall, with broad shoulders and short-clipped hair.

Additional after the Leap

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Dan Shaviro (NYU) and Tim Smeeding (WISC) on NPR’s Detroit Today Show

Dan Shaviro (NYU) and Tim Smeeding (WISC) on NPR’s Detroit Today Show

For those of you who may not have the opportunity to tune into Stephen Henderson’s radio program Detroit Today on NPR, it might be useful to have a short summary of the January 9 discussion of the “wealth gap” from that program.

Background

Tax lawyers have traditionally talked of the “tax gap”1  and frequently mentioned the growing “income gap” between the top 1% of the income distribution and the remaining 99%, but the “wealth gap”2 discussion among tax lawyers, tax policy thinkers, economic analysts and indeed progressive legislators about the relative net assets of different segments of the population has become increasingly important as people have recognized the trend of increasing wealth for the top 0.1% in the US and stagnating wealth for most of the US population.  The wealth gap is even more significant when race/ethnicity is taken into account: the 400 wealthiest families in 2015 owned as much as the country’s entire African-American population plus 1/3 of the Latino population.4  The median white household in 2011 had about $111 thousand in wealth, while the median black household had $7 thousand and the median Latino household had $8 thousand, with the impact of slavery and post-WWII homeownership policies being the underlying source of most of the disparities.3 See also How Ameria’s Vast Racial Wealth Gap Grew: By Plunder, New York Times, Aug. 14, 2019.  The generational wealth gap is also worrisome: older Americans’ wealth grew between 1989 and 2013 but all other age groups had their wealth decline. The gender wealth gap underlies the power distinction that lies at the bottom of the MeToo movement: women earn less than men for the same work at the same level, and they save less and are more likely to live in poverty in old age.

That means that children in this country born to families in the top 10% of the wealth distribution have enormous advantages from birth:  they are essentially guaranteed the best medical, educational, and institutional support imaginable, with every opportunity for learning and advancement laid before them.  Their parents can afford to ensure they are able to get into top colleges (e.g., Harvard alumni preferences for their children), meet the “right” people for success in their preferred field (the “connections” that wealthy families build), take a preferred non-paying internship in another city with family funds supporting living expenses and more, all the way up the ladders of success.  Children born into families in the bottom half of the wealth distribution face a struggle at every point along that ladder:  schools that are inadequately funded after decades of Republican concentration on assessment and hurdles rather than support and educational opportunities; lack of exposure to different possibilities and the people who can open doors into those possibilities; lack of funding to make it possible to accept an opportunity when it presents itself.

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The US-China Nothing Burger Trade Deal

The US-China Nothing Burger Trade Deal

There has been much hype about the signing of Phase One (and probably only) US-China trade deal.  However based on a front page story in today’s Washington Post, there is not much there.  The US did not raise tariffs as planned, but tarifsf still remain on two thirds of the sectors that had them, although some were halved.  But numerous US sectors see no change at all and are now viewing the  situation as not likely to improve, with them suffering losses of business likely to return.  Among those are chemicals, apparel retailers, and auto parts. In these and other sectors there is not much reduction of uncertainty regarding US-China trade, so not likely much increase in investment.

The main items in it besides no worsening of tariffs, China has made promises not to pressure US firms to turn over technology and also to increase imports from the US by $200 billion over the next two years, especially in energy and agriculture. So maybe US soybean farmers will no longer need the bailouts of billions of $ Trump has been providing to them.  However, such promises have been made in the past.

As it is, I am watching commentators on Bloomberg, and about the most any of them are willing to say is that this “puts a floor” on the “deterioration” of US-China trade relations.  That is far from some dramatic breakthrough, and most of the tariffs put on as part of the US-China trade war remain in place.

Barkley Rosser

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Real wages declined slightly in Q4 2019; nearly flat since last January

Real wages declined slightly in Q4 2019; nearly flat since last January

In December consumer inflation was +0.2%. Since in last Friday’s jobs report average hourly earnings also increased +0.1%, real average hourly earnings declined slightly:

In a longer term perspective, this means that real wages also declined from 97.8% to 97.5% of their all time high in January 1973:

 

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