Tag Archives: employment

CNBC: No hike till mid-2016: Pro

“Digging into U.S. growth economics and when the Fed could realistically hike rates, with Steve Ricchiuto, Mizuho Securities.”

Source: CNBC: No hike till mid-2016: Pro (February 10th, 2015)

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Filed under Consumer, Economics

Two Fed Economists Sound the Alarm

When a former Fed Reserve Chairman and a [recovering Keynesian] Fed economist sound the alarm, one should take heed.

A Little Inflation Can Be a Dangerous ThingPaul Volcker (New York Times, Sep 18, 2011)

At a time when foreign countries own trillions of our dollars, when we are dependent on borrowing still more abroad, and when the whole world counts on the dollar’s maintaining its purchasing power, taking on the risks of deliberately promoting inflation would be simply irresponsible.

The Soothsayers of MacroeconometricsArnold Kling (The American, Sep 19, 2011)

Until the press, the public, and policy makers understand the utter unreliability of macroeconometric estimates of the impact of policies on employment and growth, the answers provided by the usual suspects are worse than nothing. They give policy makers the illusion of precise control over the economy, based on methods that are no more reliable than soothsaying or entrail-reading.

Interesting Graph: Share of Total Wealth Gain, 1983 – 2009 (Source: Economic Policy Institute)

Related GraphEffective Federal Funds Rate, 1983-2009 (Source: St. Louis Fed)

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Filed under Economics, Politics, Zeitgeist

Annual Federal Budget Deficit v. Jobs

Are people really this Keynesian? A New York Times/CBS News poll (Apr 21, 2011) asked the following question (among others):

What effect do you think a major reduction in the annual federal budget deficit would have on the number of jobs in the U.S.?

The results are not surprising, given some major problems with the question.

  • Create Jobs – 29%
  • No opinion – 15%
  • No effect – 27%
  • Cost jobs – 29%

The question’s greatest flaw is that it omits time scale, and in so doing, predisposes the respondent to assume the near-term, immediate, or first effects. (Now that’s thinking politically!)

If we borrow from the future to pay for jobs today, debt isn’t the only item that increases. Money supply increases in the short term, and so do prices if the economy does not grow commensurately. Contrary-wise, while the first effect of an immediate decline in government spending may be some lost jobs, the second effect would be a fall in money supply and almost certainly prices. The third effect would be falling wage rates (with greater purchasing power), followed by expanded employment.

Had the question asked what effect respondents thought major reductions in annual federal budget deficits would have on long-term stability of the job market, the answers would have been very different.

Further Reading:

Wikipedia: Irving Fisher (and his seminal work, Appreciation and Interest)

However Fisher believed that investors and savers—people in general—were afflicted in varying degrees by “money illusion”; they could not see past the money to the goods the money could buy.

Random study: NBER: Time Preference and Health: An Exploratory Study (PDF) Jul 1982

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Filed under Economics, Rant, Zeitgeist

Unemployment Duration and the Labor Market

While the headlines often report on the “official unemployment rate*” (U-3 Total unemployed, as a percent of the civilian labor force, seasonally adjusted), the average duration of unemployment tells us much more about the seriousness of conditions in the labor market. From January 2001 through December 2007, the mean Average Weeks Unemployed is 17.2 weeks; and on the graph below, one can clearly see how far we have departed from that benchmark.

Average Weeks Unemployed (blue line, left axis) and Percent Change Year-Over-Year** (red line, right axis)

Data provided by the Bureau of Labor Statistics (BLS)

Series Id: LNU03008275
Not Seasonally Adjusted
Series title:  (Unadj) Average Weeks Unemployed
Labor force status: Unemployed
Type of data: Number of weeks
Age: 16 years and over

For the current release only (which contains 5 months SA and 3 months NSA), visit Table A-12. Unemployed persons by duration of unemployment

*For alternative measures of labor underutilization, visit BLS Table A-15
**I initially looked at percent change month-over-month, but it seems more intuitive to compare year-over-year due to seasonality.

In the news:

‘Normal’ Unemployment Rate May Be 6.7%, Fed Paper Says, Bloomberg, February 14th, 2011.
Fed officials not attached to dual mandate, Reuters, January 9th, 2011

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Filed under Economics, Zeitgeist