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Suggested reading: Munger on Alesina, etl on Austerity

Over at EconLib.org, Michael Munger reviews Alesina et.al. Here's an excerpt:

"So, austerity is a second best policy, contingent on a particular kind of government failure. Alesina et al note that the effectiveness of austerity is controversial, with the discussion in the press “often taking a very ideological, harsh, and unproductive tone.” (page 3) The reasons given for why austerity should be selected by a government, or should be imposed as a condition of extension of loans by creditors, are obvious: (a) the ratio of debt to GDP has grown perilously large, raising questions about whether even the existing debt can be repaid, and (b) crises, fiscal needs arising from wars or major economic downturns in the business cycle or in currency exchange markets.

The critics claim that austerity is a moralistic, punitive policy designed to cause pain for excess deficits, one that fails even on its own logic because it actually pushes debt to GDP ratios higher rather than lower. The argument is that GDP shrinks sharply as government spending is cut, and even if debt falls, GDP falls by more which worsens the problem and causes an economic storm. 

In a way, that’s the end of the story. Because Alesina, et al. are able to give a decisive resolution to the controversy: not all austerities are the same. In fact, there are two very different types: a focus on raising taxes, and a focus on cutting spending. When it comes to imposing an austerity of “sharply increased taxes” variety, the anti-austerity activists probably have the best of it. But when the austerity takes the form of large-scale cuts, not just in budgets but in entire programs, the larger weight of evidence by far falls on the “austerity works” side of the scale."

Read the whole review here.  

Massachusetts Unemployment and Job Estimates for January 2020; URate 2.8%; YoY payrolls 33,400

This just in from the Executive Office of Labor and Workforce Development:

BOSTON, MA (March 13, 2020)– The state’s January total unemployment remained unchanged at 2.8 percent for the sixth consecutive month following on the Bureau of Labor Statistics’ annual revisions, the Executive Office of Labor and Workforce Development announced Friday.

The Bureau of Labor Statistics’ preliminary job estimates indicate Massachusetts added 11,800 jobs in January. Over the month, the private sector added 11,100 jobs as gains occurred in Trade, Transportation, and Utilities; Education and Health Services; Professional, Scientific, and Business Services; Financial Activities; Leisure and Hospitality; Other Services; Information; Construction; and Manufacturing.

From January 2019 to January 2020, BLS estimates Massachusetts added 33,400 jobs. 

The January unemployment rate was eight-tenths of a percentage point lower than the national rate of 3.6 percent reported by the Bureau of Labor Statistics.

"Following year-end revisions, BLS now estimates Massachusetts added 33,400 jobs over the year. In addition to those job gains, the labor force increased by 27,000 from last year’s level, with 39,400 more residents employed and 12,300 fewer residents unemployed," Labor and Workforce Development Secretary Rosalin Acosta said.

The labor force increased by 1,900 from 3,834,300 in December, as 2,300 more residents were employed and 400 fewer residents were unemployed over the month.

Over the year, the state’s seasonally adjusted unemployment rate dropped three-tenths of a percentage point.

The state’s labor force participation rate – the total number of residents 16 or older who worked or were unemployed and actively sought work in the last four weeks – remained unchanged at 67.9 percent. Compared to January 2019, the labor force participation rate is up two-tenths of a percentage point. 

The largest private sector percentage job gains over the year were in Information; Education and Health Services; Professional, Scientific, and Business Services; and Construction.

Annual revisions to the job estimates show growth was greater than previously published for 2018 and less in 2019.  In 2018, 42,700 jobs were added over the year.   In 2019, estimates indicate 26,100 jobs were added over the year.  BLS annually updates job estimates for each state with the most up-to-date information supplied by employers.

Annual year-end revisions show the unemployment rates were slightly lower than the previously published estimates for August 2019 through November 2019. The labor force estimates were lower than previously published estimates for 2015 to 2019.

January 2020 Employment Overview

Trade, Transportation and Utilities added 3,400 (+0.6%) jobs over the month. Over the year, Trade, Transportation and Utilities gained 2,900 (+0.5%) jobs.

Education and Health Services added 2,000 (+0.2%) jobs over the month. Over the year, Education and Health Services gained 11,700 (+1.4%) jobs. 

Professional, Scientific and Business Services added 1,600 (+0.3%) jobs over the month. Over the year, Professional, Scientific and Business Services gained 7,000 (+1.2%) jobs.

Financial Activities added 1,100 (+0.5%) jobs over the month. Over the year, Financial Activities gained 1,300 (+0.6%) jobs.

Leisure and Hospitality added 800 (+0.2%) jobs over the month. Over the year, Leisure and Hospitality gained 2,100 (+0.6%).

Other Services added 800 (+0.6%) jobs over the month. Over the year, Other Services are up 100 (+0.1%) jobs.

Information added 600 (+0.6%) jobs over the month. Over the year, Information gained 3,600 (+3.9%) jobs.

Construction added 500 (+0.3%) jobs over the month. Over the year, Construction has added 1,000 (+0.6%) jobs.

Manufacturing added 300 (+0.1%) jobs over the month. Over the year, Manufacturing lost 1,500 (-0.6%) jobs.

Government added 700 (+0.2%) jobs over the month. Over the year, Government gained 5,200 (+1.1%) jobs.

Labor Force Overview

The January estimates show 3,729,900 Massachusetts residents were employed and 106,200 were unemployed, for a total labor force of 3,836,100. The unemployment rate remained steady at 2.8 percent. The January labor force increased by 1,900 from 3,834,300 in December, as 2,300 more residents were employed and 400 fewer residents were unemployed over the month. The labor force participation rate, the share of working age population employed and unemployed, remained unchanged at 67.9 percent. The labor force was up 27,000 from the 3,809,100 January 2019 estimate, with 39,400 more residents employed and 12,300 fewer residents unemployed.

Detailed labor market information is available at www.mass.gov/lmi.

Consumer responses to COVID-19 -- Friday, March 13, 2020: Scenes from the rush to stock up, Danvers and Middleton

Shoppers pretty much cleared out the tomato sauce aisle at MarketBasket in Middleton

The oil glut is showing up at the pump. 

The line at the Costco in Danvers was at least 100 yards long

On my reading list: Selected papers

Some collected readings for my list. 


Julian Reiss. The Methodology of Positive Economics: Reflections on the Milton Friedman Legacy, ed. Uskali Mäki. Cambridge: Cambridge University Press,  Link.

Pablo D. Fajgelbaum, Pinelopi K. Goldberg, Patrick J. Kennedy and Amit K. Khandelwal. The Return to Protectionism. Link.

Gilbert Cette, Lorraine Koehl, Thomas Philippon. Labor Shares in Some Advanced Economies. Link.

Grace Weishi Gu, Eswar Prasad. New Evidence on Cyclical Variation in Labor Costs in the U.S. Link.

Robert J. Gordon. Friedman and Phelps on the Phillips Curve Viewed from a Half Century's Perspective. Link. 

Andrew B. Hall, Jesse Yoder. Does Homeownership Influence Political Behavior? Evidence from Administrative Data. Link.

Anna Maria Mayda, Giovanni Peri, Walter Steingress. The Political Impact of Immigration: Evidence from the United States. Link.

Patrick Bajari, Victor Chernozhukov, Ali Hortaçsu, Junichi Suzuki. The Impact of Big Data on Firm Performance: An Empirical Investigation. Link. 

Jared Walczak, Tax Trends at the Dawn of 2020. Tax Foundation. Link.

David Neumark, Peter Shirley. The Long-Run Effects of the Earned Income Tax Credit on Women's Earnings. Link.

David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, John Van Reenen. Concentrating on the Fall of the Labor Share. Link.

David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, John Van Reenen. The Fall of the Labor Share and the Rise of Superstar Firms. Link.

Murray Rothbard. Robert Nozick and the Immaculate Conception of the State. Link.

Austan Goolsbee. Public Policy in an AI Economy. NBER. Link. 

Dani Rodrik. What Do Trade Agreements Really Do? Link. 

Seminar Series: Three Ways to Use WSJ in Your Course

Average Hourly Wages Exceed Consumer Price Index (Inflation)

An Introduction to Linear Regression Analysis

The Heckscher-Ohlin Theorem

The Heckscher Ohlin model of International Trade

IMF suggests a $75 per ton carbon tax. What would it mean?

You will find more infographics at Statista

Does the Equilibrium Model Work?

• Chart: U.S. Poverty Levels Fall To Pre-Recession Low | Statista

• Chart: U.S. Poverty Levels Fall To Pre-Recession Low | Statista

What it will cost you to rent a one-bedroom apartment in Boston: Latest stats

The ideas of Harold Demsetz, 1930-2019 | VOX, CEPR Policy Portal

The ideas of Harold Demsetz, 1930-2019 | VOX, CEPR Policy Portal

The Progressive Feeding Frenzy – Reason.com

The Progressive Feeding Frenzy – Reason.com

From Robert Hughes over at the American Institute for Economic Research.

U.S. nonfarm payrolls added 130,000 jobs in August, below the consensus expectation of 158,000. The prior two months were revised down, showing gains of 159,000 and 178,000 for July and June, respectively. The three-month average from June to August was 156,000, well below the 199,000 average since 2011, but still a decent performance. Despite the slowdown in jobs growth, hourly earnings rose, the length of the workweek increased, the unemployment rate held steady and the participation rate rose. Overall, the report provides mixed signals.

U.S. GDP slows down...

source: tradingeconomics.com

Highly Recommended: "Commanding Nature by Obeying Her; A Review Essay on Joel Mokyr's Culture of Growth"

From NBER Working Paper 26061: Enrico Spolaore: Commanding Nature by Obeying Her; A Review Essay on Joel Mokyr's Culture of Growth

Abstract:

Why is modern society capable of cumulative innovation? In A Culture of Growth: The Origins of the Modern Economy, Joel Mokyr persuasively argues that sustained technological progress stemmed from a change in cultural beliefs. The change occurred gradually during the seventeenth and eighteenth century and was fostered by an intellectual elite that formed a transnational community and adopted new attitudes toward the creation and diffusion of knowledge, setting the foundation for the ethos of modern science. The book is a significant contribution to the growing literature that links culture and economics. This review discusses Mokyr’s historical analysis in relation to the following questions: What is culture and how should we use it in economics? How can culture explain modern economic growth? Will the culture of growth that caused modern prosperity persist in the future?

This essay is highly recommended. Link here. 

New NBER Working Paper: Improving the accuracy of economic measurement with multiple data sources: The case of payroll employment data

A new NBER Working Paper, "Improving the accuracy of economic measurement with multiple data sources: The case of payroll employment data," by Cajner, Crane, Decker, Hamins-Puertolas, and Kurz.

Abstract:

This paper combines information from two sources of U.S. private payroll employment to increase the accuracy of real-time measurement of the labor market. The sources are the Current Employment Statistics (CES) from BLS and microdata from the payroll processing firm ADP. We briefly describe the ADP-derived data series, compare it to the BLS data, and describe an exercise that benchmarks the data series to an employment census. The CES and the ADP employment data are each derived from roughly equal-sized samples. We argue that combining CES and ADP data series reduces the measurement error inherent in both data sources. In particular, we infer “true” unobserved payroll employment growth using a state-space model and find that the optimal predictor of the unobserved state puts approximately equal weight on theCES and ADP-derived series. Moreover, the estimated state contains information about future readings of payroll employment.

Available at NBER. 

Notes on the U.S. Employment Situation for June 2019: U-rate 3.7%, Jobs +224,000

OVERVIEW

• Total non-farm payroll employment increased by 224,000 and the unemployment rate rose to 3.7 percent, according to the Bureau of Labor Statistics.  
• The Labor Force Participation (LFP) rate remained at 62.9 percent the same rate from one year ago. The Employment-Population ratio also remained at 60.6 percent. 
• Professional and Business Services (+51,000) and Health Care (+35,000) led all sectors in May.  Construction added 21,000 jobs. Manufacturing added 17,000 jobs.
• Employment in other industries did not change from May to June. Mining, Wholesale Trade, Retail Trade, Information, Financial Activities, Leisure and Hospitality and Government changed little. 
• Average hourly earnings rose by 6 cents to $27.90. Since June 2018 wages are up 3.1 percent. 
• In June, the average workweek for all employees remained at 34.4 hours.  
• The number of persons employed part-time was unchanged in June (4.3 million). The number of long-termed unemployed (greater than 27 weeks) remained unchanged at 1.4 million and accounted for 23.7 percent of all unemployed. 
• In June 1.6 million persons were not in the workforce but wanted and were available for work and sought employment in the last year. This group known as “workers marginally attached to the labor force” was unchanged since last year. BLS reports that 1.1 million of this group had not searched for work “for reasons such as school attendance or family responsibilities.” 
• Revisions to the two previous months counted 11,000 less jobs than reported initially. April 2019 was revised from 224,000 to 216,000 while May 2019 was revised from 75,000 to 72,000. 

ANALYSIS

After a weak May payrolls report (+72,000) the U.S. jobs machine roared back with 224,000 new jobs in June. 

Professional and Business Services, Health Care and Transportation and Warehousing sectors lead June’s growth. 

Overall, the jobs machine is clearly slowing down. Employment growth, according to the BLS, has averaged 172,000 this calendar year compared with an average of 223,000 in 2018. 

However, today’s BLS report shattered expectations;  Wall Street expected a gain of 160,000 new jobs. While slower than one year ago, the private sector culled 191,000 new jobs. The parallel measure, the ADP National Employment Report, earlier this week projected a gain of 106,000 private jobs.  

With the BLS revisions, the three-month average for U.S. job growth rang in at 171,000. 

Despite uncertainty about international trade, the U.S. Manufacturing sector is holding its own. The Manufacturing sector added 17,000 jobs in June; while little changed over the past four months, manufacturing is growing albeit slowly. Thus far the sector has averaged 8,000 per month, compared with 22,000 last year. 

The trade-tariff impasse is not diminishing growth in the sector. While the manufacturing sector employs approximately 120,000 less workers than it did before the Great Recession, average hourly wages are rising steadily. (See Figure A.)  

Unemployment in the manufacturing sector declined from June 2018 to June 2019, from 3.1 percent to 2.8 percent. For most part, manufacturing attracts workers on the lower end of educational attainment, but wages are good entry point to the middle class. These workers have also fared well overall in the economy. Unemployment for those with less than a high school degree was 5.8 percent in May. Workers with a high school diploma and no college and some college faced unemployment rates of 3.9 percent and 3.0 percent, respectively. 

Figure A:  Employment and Average Hourly Wages in the U.S. Manufacturing Sector

Notes on the May 2019 Massachusetts Employment Situation: U-Rate: 3.0 %; Jobs: -3,600

OVERVIEW

• The state’s total unemployment rate for May increased to 3.0 percent according to the Executive Office of Labor and Workforce Development.  
• From May 2018 to May 2019, the Bureau of Labor Statistics estimates that Massachusetts added 26,700 jobs.  
• Professional, Scientific and Business Services added 1,000 jobs with 7,100 jobs added over the past 12 months. 
• Education and Health Services lost 300 jobs over the month. Over the year, this sector gained 14,300 jobs
• Manufacturing gained 100 jobs in May and has lost 1,800 jobs over the year. 
• The Construction sector lost 2,300 jobs and has lost 700 over the year. 
• Trade, Transportation and Utilities lost 2,300 jobs over the month. Over the year, the sector lost 600 jobs.
• Financial Activities lost 100 while Information added 300 jobs in May. 
• Growth in the Other Services sector remained unchanged but is up 2,300 over the year. 
• Government added 400 jobs in May. Over the past 12 months this sector has gained 4,900 jobs.
• The 3.0 percent rate in Massachusetts is six-tenths of a point lower than the national rate of 3.6 percent.
• According to the Bureau of Labor Statistics, unemployment rates were lower in 6 states, higher in 2 states, and stable in 42 states and the District of Columbia in May. Nonfarm payroll employment increased in Washington state and was essentially unchanged in 49 states and in D.C. 

ANALYSIS

Until last month, December 2016 was the last time the unemployment rate in Massachusetts ticked up by one-tenth of a point. In May 2019, the state’s rate ticked up to 3.0 percent.  The state’s economy is still at full employment.  

“Massachusetts continues to experience a strong economy with a low unemployment rate of 3.0 percent and over 60,000 more employed residents and 17,500 fewer unemployed residents in the last year. Also, the Commonwealth’s labor force participation rate remains at a near 15-year high and is 5 points above the US rate,” Labor and Workforce Development Secretary Rosalin Acosta said.  

The state’s labor force totals 3.84 million representing a 67.8 percent labor force participation rate. 

Manufacturing gained 100 jobs over the month, but the sector is still losing jobs since last year (1,800). Trade, Transportation and Utilities lost 2,300 jobs and Education and Health Services lost 300 jobs. However, Government added 400 jobs, part of the 4,200 jobs it gained year over year. 

Since the end of the Great Recession in June 2009, the state’s unemployment rate has dropped significantly from 8.1 percent. During the recovery, the Massachusetts unemployment rate increased by no more than 0.1 percent six times. That means the rate has dropped or remained unchanged for 109 of the 120 months that mark the recession (see Chart A). 

Chart A.

Massachusetts enjoys the 12th best unemployment rate in the U.S. (See Table A.) Two other New England states are atop the nation: Vermont has the lowest unemployment rate at 2.1 percent while New Hampshire registers third in the nation with its 2.4 percent rate.  

Table A: New England Unemployment Rates

Source: Bureau of Labor Statistics

The BLS updated the state’s county employment picture with April 2019 data.  Middlesex and Hampshire counties enjoyed the lowest unemployment rates. More than half of the counties — 8 of 14— recorded rates lower than the statewide rate of 3.0 percent for April 2019 (See Table B).

Table B: County Unemployment Rates

Democrats Would Resolve the Question of Whether Illegal Immigrants Burden Society

Merrill Matthews: Democrats Would Resolve the Question of Whether Illegal Immigrants Burden Society

Like most economists, we think legal immigrants can be a huge benefit to the economy—because historically most immigrants, whether legal or otherwise, came here to work.

Explainer: What makes up the Gross Domestic Product?

You will find more infographics at Statista

Bloomberg's David Wilson: U.S. Stock Success Without Profit Brings Doubt at Oaktree

More here.

You will find more infographics at Statista

Not Many See Full Employment in U.S. Economy: Conference Update

From Bloomberg

Central bankers are already making waves at what may well be the monetary-policy event of the year in the U.S.

Federal Reserve officials and leading academics are gathered in Chicago Tuesday and Wednesday to debate whether policy makers need to overhaul their strategies, tools and communication for managing inflation and preparing for the next economic downturn. 

Federal Reserve Chair Jerome Powell kicked off the conference Tuesday with a few words on the global trade tensions that are rattling financial markets and leading investors to believe the Fed will cut rates soon.

Google claims: 100 percent renewable energy, for the second year in a row

From Google's blog 100 percent renewable energy, for the second year in a row

In 2017, we first reached our longstanding goal of buying enough renewable energy to match 100 percent of Google’s global annual electricity use. And we’re on a roll: during 2018, our purchases of energy from sources like solar and wind once again matched our entire annual electricity consumption. 

We’re the first organization of our size to achieve 100 percent renewable energy two years running, but just as important as reaching our goal is how we did it. Addressing climate change will require adding renewable energy wherever possible and, for us as a company, making decisions that have an impact beyond our walls. We’ve asked ourselves: how can we use our purchasing to do the most good in the broader energy system?

Our first priority is to use as little energy as possible, operating our offices and facilities sustain-ably, with a strong focus on our data centers.

‘Lost Decade’ Casts a Post-Recession Shadow on State Finances | The Pew Charitable Trusts

‘Lost Decade’ Casts a Post-Recession Shadow on State Finances | The Pew Charitable Trusts