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The Black Unemployment Rate

The Black Unemployment Rate

 Josh Marshall listens to Donald Trump so we do not have to:

President Trump has been out bragging that “because of my policies” the African-American unemployment rate has dropped to its lowest level ever. This appears to be technically true. But I thought it made sense to give some context for the nonsensical nature of this claim. As you can see, the idea that this is “because of my policies” is a bit hard to square with the actual data.

Josh provides the data on the black unemployment rate from January 1972 to December 2017. This rate spiked during the Great Recession but fell dramatically during the Obama term and continued its decline. Far enough but this is a very misleading metric. While the black unemployment rate is lower than it was even in 2000, let’s note why. The black labor force participation rate was only 62.1% as of December 2017 as opposed to 66.0 percent in April 2000. A better metric would be to compare the black employment to population rate which reached 61.4% but was only 57.9% as of December 2017. One has to wonder if Trump just thinks we are stupid or if he has just incredibly low expectations.

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Is Treasury Secretary Mnuchin Right About The Impact Of The Dollar On US Trade?

Is Treasury Secretary Mnuchin Right About The Impact Of The Dollar On US Trade?

Maybe yes.

In Davos some days ago Treasury Secretary Mnuchin declared that a lower valued dollar would lead to a lower US trade deficit. The dollar promptly fell several percents and various persons and many observers reacted in horror, most prominently former TreasSec Larry Summers. He did no actually dispute Mnuchin’s claim factually, rather he asserted that people holding that position as he did should follow a strong dollar policy and talk it up, that a lower dollar raises prices of imports (true) and that advocating it is just plain irresponsible, even though his predecessor, Lloyd Bentsen, in the Clinton administration also talked down the dollar at one point as a job-increasing policy.

Dean Baker at Beat the Press responded to all this with two days worth of posts defending the factual basis of Mnuchin’s claim against his critics (some of whom did not dispute his facts but rather argued the policy was unwise for other reasons). He argued that indeed lower values of the currency leads to lower trade deficits, noting experience in the 1980s especially when a strong dollar led to a soaring o the US trade deficit that fed into a sharp decline in manufacturing employment in the US Rust Belt, with the deficit declining as the dollar fell after the 1985 Plaza Accord. He pointed out that a lower dollar lowers the price of US exports abroad, which tends to increase the quantity of exports, and raise the price of imports in the US (as Summers noted), which tends to decrease the quantity of imports. All of this is indeed true, even if the size of those changes may vary a lot.

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Perfect worker on the cheap

Via Bloomberg Obsession for the Perfect Worker Fading in Tight U.S. Job Market points to an issue in hiring that has been discussed here at AB:

This is a problem because, at 4.1 percent last month, U.S. unemployment is at the lowest level since 2000 and companies from Dallas to Denver are struggling to find the right workers. In some cases this is constraining growth, the Federal Reserve reported last week.

Corporate America’s search for an exact match is “the number-one problem with hiring in our country,” said Daniel Morgan, a recruiter in Birmingham, Alabama, who owns an Express Employment Professionals franchise. “Most companies get caught up on precise experience to a specific job,” he said, adding: “Companies fail to see a person for their abilities and transferable skills.”

U.S. employers got used to abundant and cheap labor following the 2007-2009 recession. Unemployment peaked at 10 percent in October 2009, and didn’t return to the lows of the previous business cycle until last year. Firms still remain reluctant to boost pay or train employees with less-than-perfect credentials, though recruiters say that may have to change amid a jobless rate that’s set to dip further.

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“Naskh”

by Mike Kimel

“Naskh”

I think it was sometime in the late 90s when I first heard someone say that Reagan could never be elected to anything at the time as a Republican. This was because the Republican Party had tacked so far to the right in a decade that many who worshipped Reagan would have found his actual policies to be hopelessly leftist. I doubt Mr. Reagan would have a place in his own Party today either.

I believe a similar effect exists for the Democrats. For example, this video shows a few clips of Diane Feinstein discussing immigration in the early 1990s. While Feinstein stated in one of the clips that her views were moderate, the reality is that California Democrats have generally been left of center at every point in my lifetime.

A decade later, the stance of Senate Democrats had not changed. In 2003 senator Hilary Clinton declared herself “adamantly against illegal immigrants.” In 2006, senator Barack Obama told us that “better fences and better security along our borders” would “help stem some of the tide of illegal immigration in this country.” Senator Bernie Sanders was viewed by labor unions as a reliable ally. He railed against any sort of “immigration bill… that will lower wages and is designed to increase corporate profits” and questioned the patriotism of companies that used foreign workers instead of hiring qualified Americans.

Academics weighed in on the topic too. In 2006, Paul Krugman wrote about the issue. He started off by noting that he wished that low wage migrants’ needs didn’t conflict with those of Americans, but that he had to admit they did. (He specifically discussed low wage migrants and not illegal immigrants, but there is a fair amount of overlap.). He noted that whatever benefits there are from low wage immigration, they accrue entirely to the immigrants themselves. As he noted, there is no marginal product generated by low wage immigrants left over to benefit the non immigrants. He also wrote that such immigrants depress wages, and cited figures from the National Research Council showing that low wage immigrants impose a fiscal burden on the country equal to about a quarter of a percent of the GDP. (Note: the miracle of compound growth works both ways.) He finished by stating that “you’d be hard pressed to find any set of assumptions under which Mexican immigrants are a net fiscal plus….”

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Republicans Are Killing Social Security One Tiny Service Cut at a Time

Nancy Altman reminds us that Social Security is NOT off the table for Republicans via this post Republicans Are Killing Social Security One Tiny Service Cut at a Time at Slate:

Republicans have made no secret of their long-standing desire to destroy Social Security as we know it. Indeed, Sen. Marco Rubio revealed just before Christmas that congressional Republicans plan to go after Social Security yet again.

Their strategy includes both direct and stealthier efforts—death by a thousand cuts to services. And Republicans are poised to plunge the knife in again soon.

Republican politicians are making it increasingly difficult, time-consuming, and aggravating to access our earned Social Security benefits, in the hope of undermining support for the extremely popular program, and eventually ending it as we know it.

Since 2010, when Republicans took back control of the House of Representatives, SSA’s operating budget has been cut by 11 percent. For 2018, the Republican-controlled Senate Appropriations Committee has proposed limiting Social Security’s administrative budget even more, this time, by another $492 million—4 percent of SSA’s operating budget, on top of an already enacted 16 percent cut, after inflation, since 2010.

Republicans like to say that government should be run like a business. Any private business as successful and popular as Social Security would be opening branches, not closing them. If congressional Republicans simply allow SSA to spend just another one- or two-tenths of a percent of Social Security’s large and growing surplus, the agency can provide the exemplary, first-class service for which it has always been known.

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Trade in the GDP accounts

Trade was a significant factor in the weak GDP report today and as usual when this happens you see many comments that do not understand why imports are a negative in calculating GDP.

We do not directly calculate GDP.  Rather, we calculate consumption and adjust that for trade and inventories to obtain GDP indirectly.  To go from consumption to production in the US we have to subtract imports because they were not produced in the US.  However, imports show up twice in the GDP accounts.  They show up once in final demand –consumer spending, government spending or investments.  So for example if you buy a Volvo, which are not yet built in the US,  it will  be recorded in both personal consumption expenditures as a positive and in trade as an import.  So when you subtract imports all it does is offset the positive contribution recorded  in final demand.   So your buying a Volvo will have a zero impact on GDP, which is the way it should be because GDP is a measure of what is made in the US.  Most people, like Larry Kudlow on CNBC do not seem to understand this and  keep saying this it is a mistake to subtract imports.

 

Their is another big difference in how trade is treated in the GDP accounts.  Final demand –personal consumption expenditure, government spending and investments –is calculated as the average of the three months data that is reported monthly.  But trade is calculated as the difference between what it was in the final month of the previous quarter and the final month of the current quarter– data that is not yet reported when the first estimate of GDP is released.  In the GDP accounts trade and inventories are reported as the change over the quarter rather than the average during the quarter.  This is an adjustment that is necessary to go from the estimate of final demand or consumption to a measure of  production which is what GDP measures.  It is also normally the major reason why the first and second revisions to GDP or so significant.

 

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Parsing the Poland Problem Paradox: Local Versus National Outcomes

Parsing the Poland Problem Paradox: Local Versus National Outcomes

As argued in numerous posts here, we have seen an apparently emerging disconnect between economic conditions and political outcomes in a variety of nations, with anti-immigrant or more generally nationalist or populist parties with authoritarian tendencies gaining strength in many nations despite apparently improving or even largely pretty good economic conditions.  A list of those showing this includes Poland, the US, Germany, UK with the Brexit vote, Austria, Sweden, the Netherlands, and some others (I had Iran on the list, but it seems to a more complicated case).  I labeled this phenomenon to be the “Poland problem,” with the Law and Justice Party coming to power in 2015, despite Poland having been probably the best economically performing of all the European transition economies, as well as being the only European nation not to having gone into recession in 2009.

Now a study by Yann Algan, Sergei Guriev, Elias Papaionnou, and Eugenia Passari at Pro Market (and linked to today by Mark Thoma at Economistsview) finds that if one looks closely at local economic conditions in parts of European nations over recent years, specifically changes in unemployment rates, one finds that there seems to be a relationship between such increases and increased support for “populist” parties, a “specter hanging over Europe.”  I find the study reasonably persuasive.  So this would mean that a possible explanation for the Poland problem is that unhappiness in suffering and poorer regions overwhelms broader good economic performance in nations, leading in some cases to actual takeovers by these parties.

I note that for at least some nations where I know the geographic details better, this fits with the odd situation where those regions voting most vigorously for strongly anti-immigrant parties are also th regions with fewest immigrants.  This reminds me of the old wisecrack about Poland from 1968 when there was a major outbreak of anti-Semitism that Poland was showing how to have anti-Semitism while having few Jews.

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