The Economics and Politics of Revoking NAFTA

From a new NBER working paper by Raphael Auer, Barthélémy Bonadio, and Andrei A. Levchenko 

Abstract:

We provide a quantitative assessment of both the aggregate and the distributional effects of revoking NAFTA using a multi-country, multi-sector, multi-factor model of world production and trade with global input-output linkages. Revoking NAFTA would reduce US welfare by about 0.2%, and Canadian and Mexican welfare by about 2%. The distributional impacts of revoking NAFTA across workers in different sectors are an order of magnitude larger in all three countries, ranging from -2.7 to 2.26% in the United States. We combine the quantitative results with information on the geographic distribution of sectoral employment, and compute average real wage changes in each US congressional district, Mexican state, and Canadian province. We then examine the political correlates of the economic effects. Congressional district-level real wage changes are negatively correlated with the Trump vote share in 2016: districts that voted more for Trump would on average experience greater real wage reductions if NAFTA is revoked.

Gated version here. 

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The November 2018 Employment Situation in Massachusetts

U-Rate: 3.4%; +4,600; +60,500 YoY

OVERVIEW

• According to the Executive Office of Labor and Workforce Development, the state’s total unemployment rate dropped one-tenth of a percentage point to 3.4 percent in November.
• According to the federal Bureau of Labor Statistics, the state added 4,600 jobs in November. 
• he state’s unemployment rate was three-tenths of a percentage point lower than the national average of 3.7 percent. 
• The state’s Labor Force Participation Rate (LFP) remained at 68.0 percent. Since November 2017, the LFP rate by 2.7 percentage points.
• Trade, Transportation and Utilities added 3,100 over the month and Professional, Scientific and Business Services added 1,700 with Education and Health Services adding 1,200.
• Financial Activities lost 700 jobs over the month with Construction (-500), Other Services (-300) and Manufacturing (-100) also losing jobs in November. 
• Two sectors remained unchanged over the month: Government and Leisure and Hospitality.

ANALYSIS
Since January the Massachusetts monthly unemployment rate averaged 3.5 percent. The state continues to enjoy an unemployment rate less than the national rate. 

The jobs economy is driven mostly by the state’s Professional, Scientific and Business Services sector, which created 27,600 jobs since last November. However, the Leisure and Hospitality sector shed 800 jobs since that time. Financial Activities only added 700 jobs. Government has lost jobs. 

Education and Health Services comprise the largest sector in Massachusetts. (See table above) Over the past 12 months it has added 14,400 jobs. 

Assuming the BLS figure of 60,500 new jobs, the state created a monthly average of approximately 5,000 jobs since last November.  Northern New England is benefiting from low unemployment rates. 

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Notes on the U.S. Employment Situation for November 2018: U-Rate: 3.7%; Jobs: +155,000

OVERVIEW

• The unemployment rate remained at 3.7 percent in November with payrolls expanding by 155,000 jobs, according to the Bureau of Labor Statistics.  
• The Labor Force Participation (LFP) rate remained at 62.9 percent. The Employment-Population ratio also remained at 60.6 percent. The number of unemployed dropped from October to November by 100,000 from 6.075 million to 5.975 million.
• Job gains took place in Health care (+32,000) and Manufacturing (+27,000) and Transportation and Warehousing (+25,000).
• In addition, Professional and Business Services added 32,000 jobs while Retail Trade added 18,000 jobs.  
• According to the BLS, the following sectors saw little or no change in employment: Mining, Wholesale Trade, Information, Financial Activities, Leisure and Hospitality, and Government. 
• Over the year, average hourly earnings have increased by 81 cents or 3.1 percent. In November the average hourly private nonfarm wage rang in at $27.35, an increase of six cents. The average workweek for all employees decreased by 0.1 hour to 34.4 hours in November. 

ANALYSIS

Total nonfarm payroll employment only rose by 155,000 in November and the unemployment rate remained at 3.7 percent for the third consecutive month.

Earlier this week, Wall Street expected a payroll increase by 197,000 jobs. 

The BLS reported 161,000 new private sector jobs were created compared with the estimate from the ADP payrolls report released earlier this week of 179,000 private payrolls.  

The number of persons employed part-time for economic reasons remained at 4.8 million. The number of long-term unemployed was dropped by 120,000 to 1.25 million. This group represents 20.8 of all unemployed persons. 

Revisions to the previous two months showed there were 12,000 less new jobs. October was revised down to 237,000 from 250,000 and September was revised up to 119,000 from 118,000. November’s payrolls number was below the 2018 monthly average of 208,000 jobs per month. 

Still, there’s only a smaller number of jobs slated to come online.  “The economy only needs to create 60,000 to 70,000 jobs to keep pace with the growth of the working-age population, so job growth is still strong,” Julia Pollak, labor economist at ZipRecruiter told MarketWatch.com. 

Despite the turmoil in the stock market, workers are enjoying wage gains. Wages rose 3.1% over the prior year, the fastest pace of annual wage growth since April 2009 according to Yahoo Finance. Even with lower payroll growth, the economy faces a shortage of workers.  

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