Foreign-born communities in the European Union

You will find more infographics at Statista

US News Best States from McKinsey

Iowa is number 1



PDF version here.

Are Americans losing interest in economic issues?

You will find more infographics at Statista

Retiring at age 62, if you are a man, is bad for your health

Pretty much required reading for anyone contemplating retirement at the age of 62.

WSJ: What’s going on at age 62?

DR. FITZPATRICK: A lot happens in our early 60s. Some change jobs, scale back working hours or retire. Our health-care coverage may shift. We may have fewer financial resources, or we may begin collecting Social Security. About one-third of Americans immediately claim Social Security at 62. Ten percent of men retire in the month they turn 62.

WSJ: What do the numbers show? 

DR. FITZPATRICK: There’s a sizable, 2% increase in male mortality at age 62 in the U.S. Over the 34 years we studied, there were an additional 400 to 800 deaths per year beyond what we expected, or an additional 13,000 to 27,000 excess male deaths within 12 months of turning 62. That 2% is 2 of every 100 men in the whole male population who turn 62. We really think these deaths are concentrated among the 10% of men who retire at 62, so instead of 2 in 100, it’d be 2 in 10. So, the increase in the probability of death for men who retire could be as high as 20%. I actually think that’s a pretty big deal.

Read more at the WSJ: Why So Many Men Die at 62

In terms of revenue, Apple is king of the smartphone

You will find more infographics at Statista

How you feel about government may determine how you avoid taxes

A new NBER working paper, "Political Alignment, Attitudes Toward Government and Tax Evasion," by Julie Berry Cullen, Nicholas Turner, Ebonya L. Washington rests on a very interesting model. 

Abstract:

We ask whether attitudes toward government play a causal role in the evasion of U.S. personal income taxes.  We first use individual-level survey data to demonstrate a link between sharing the party of the president and trust in the administration generally and opinions on taxation and spending policy, more specifically.  Next, we move to the county level, and measure tax behavior as elections, decided by the voting behavior in swing-states, push voters in partisan counties into and out of alignment with the party of the president.  Using IRS data, we find that reported taxable income increases as a county moves into alignment, with the increases concentrated in income sources that are easily evaded, due to lack of third-party reporting.  Corroborating the view that evasion falls, potentially suspect EITC claims and audit rates also fall.  Our results provide real-world evidence that a positive outlook on government lowers tax evasion.

Under the guise of free trade

"What do trade agreements really do?" a new NBER working paper by Dani Rodrik.

Abstract:

As trade agreements have evolved and gone beyond import tariffs and quotas into regulatory rules and harmonization, they have become more difficult to fit into received economic theory. Nevertheless, most economists continue to regard trade agreements such as the Trans Pacific Partnership (TPP) favorably.The default view seems to be that these arrangements get us closer to free trade by reducing transaction costs associated with regulatory differences or explicit protectionism.  An alternative perspective is that trade agreements are the result of rent-seeking, self-interested behavior on the part of politically well-connected firms - international banks, pharmaceutical companies, multinational firms.  They may result in freer, mutually beneficial trade, through exchange of market access.  But they are as likely to produce purely redistributive outcomes under the guise of "freer trade."

My commentary will follow at a later date.

"Benefit expenditures to labor are less rigid"

From a new NBER working paper by Grace Weishi Gu and Eswar Prasad.  

Abstract:

Employer-provided nonwage benefit expenditures now account for one-third of U.S. firms' labor costs.  We show that a broad measure of real labor costs including such benefit expenditures has become countercyclical during 1982-2014, contrary to the conventional view that labor costs are procyclical.  Using BLS establishment-job data, we find that even real wages, the main focus of prior literature, have become countercyclical.  Benefit expenditures are less rigid than nominal wages, although both components of labor costs have become more rigid.  These rigidities, along with the rising relative importance of aggregate demand shocks (including the financial crisis), help explain countercyclical labor costs. 

Read the paper,  New Evidence on Cyclical Variation in Labor Costs in the U.S. at NBER.

Women are catching up in the high skills jobs market

The "End of Men" and Rise of Women in the High-Skilled Labor Market
by Guido Matias Cortes, Nir Jaimovich, Henry E. Siu 

Abstract:

We document a new finding regarding changes in labor market outcomes for men and women in the US.  Since 1980, conditional on being a college-educated man, the probability of working in a cognitive/high-wage occupation has fallen.  This contrasts starkly with the experience for college-educated women:  their probability of working in these occupations rose, despite a much larger increase in the supply of educated women relative to men. We consider these facts in light of a general neoclassical model of the labor market.  One key channel capable of rationalizing these findings is a greater increase in the demand for female-oriented skills in cognitive/high-wage occupations relative to other occupations. Using occupation-level data, we find evidence that this relative increase in the demand for female skills is due to an increasing importance of social skills within such occupations.  Evidence from both male and female wages is also indicative of an increase in the demand for social skills.

More at NBER.

Measuring economic freedom, what does government size have to do with it?

A recent paper by Jan Ott from the journal Social Indicators Research. 

Abstract: 

The Heritage Foundation and the Fraser Institute measure economic freedom in nations using indices with ten and five indicators respectively. Eight of the Heritage indicators and four of the Fraser-indicators are about specific types of institutional quality, like rule of law, the protection of property, and the provision of sound money. More of these is considered to denote more economic freedom. Both indices also involve indicators of ‘big government’, or levels of government activities. More of that is seen to denote less economic freedom. Yet, levels of government spending, consumption, and transfers and subsidies appear to correlate positively with the other indicators related to institutional quality, while this correlation is close to zero for the level of taxation as a percentage of GDP. Using government spending, consumption transfers and subsidies as positive indicators is no alternative, because these levels stand for very different government activities, liberal or less liberal. This means that levels of government activities can better be left out as negative or positive indicators. Thus shortened variants of the indices create a better convergent validity in the measurement of economic freedom, and create higher correlations between economic freedom and alternative types of freedom, and between economic freedom and happiness. The higher correlations indicate a better predictive validity, since they are predictable in view of the findings of previous research and theoretical considerations about the relations between types of freedom and between freedom and happiness.

Notes on today's U.S. payrolls number and unemployment rate: +200,000 jobs; 4.1 percent

OVERVIEW

• The unemployment rate remained at 4.1 percent for the fourth consecutive month in December while payrolls expanded by 200,000, according to the Bureau of Labor Statistics.
• The Labor Force Participation (LFP) remained at also remained at 62.7 percent for the fourth straight month. The employment-population ratio was unchanged at 60.1 percent for the third straight month. 
• Construction added 36,000 jobs in January. 
• Employment in food services and drinking places added 31,000 jobs while employment in health care added 21,000 with 13,000 of those jobs in hospitals. 
• The manufacturing sector added 15,000 jobs continuing a trend.  In the past 12 months, the sector has added 186,000 jobs.
• Employment in the other major sectors— mining, wholesale trade, retail trade, transportation and warehousing, information, financial activities, professional services and government —changed little over the month. 
• The November 2017 number was revised downward from 252, 000 to 216,000 and the December 2017 payrolls number was revised up from 148,000 to 160,000.

ANALYSIS

After a disappointing December print, the labor market picked up in January. After revisions to earlier reports, job gains averaged 192,000 months for the past three months. A survey of Wall Street Journal economists expected an increase of 177,000 jobs. According to an ADP report earlier this week, private sector employment increased by 234,000 jobs in January.  Also, this past week saw a Labor Department report showing that initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 230,000 for the last week of the month. According to Reuters this represents the 152nd week of claims settling below the 300,000 threshold associated with a strong economy.  Wage growth underscores the tight labor markets.  This wage growth is the fastest since the Great Recession.  However, the labor force participation rate remains low by historical standards; the rate only declined by one-tenth of a percentage point since last January.  In addition, the broader measure which includes discouraged workers, the U-6 rate increased to 8.2 percent. The decline in African-American workers proved to be a bump. After falling to 6.8 percent in December, the rate for black workers rose to 7.7 percent last month. Despite the recent wage increases overall, the lower-wage food services and drinking places sector grew faster than higher wages sectors such as professional and technical services over the past 10 years. (See chart below.)  

New NBER Working Paper: "Stock Market Returns and Consumption"

by Marco Di Maggio, Amir Kermani, Kaveh Majlesi  

Abstract:

This paper employs Swedish data containing security level information on households' stock holdings to investigate how consumption responds to changes in stock market returns.  We exploit households' portfolio weights in previous years as an instrument for actual capital gains and dividends payments.  We find that unrealized capital gains lead to a marginal propensity to consume (MPC) of 13 percent for the bottom 50% of the wealth distribution but a flat 5 percent for the rest of the distribution.  We also find that households' consumption is significantly more responsive to dividend payouts across all parts of the wealth distribution.  Our findings are broadly consistent with near-rational behavior in which households optimize their consumption with respect to capital gains and dividends income as if they were separate sources of income. 

More at NBER.

Whither General Electric on the Dow? The decline of a giant now headquartered in Boston, MA

General Electric, the once-huge conglomerate lured by Massachusetts development officials is a shell of its former self. 

David Wilson of Bloomberg has the chart and the story. 

Here's another Bloomberg piece on General Electric.