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Article Artículo

Robert Samuelson Wants the Fed to Raise Interest Rates and Throw People Out of Work

Yes, what else is new? The basic story is that Robert Samuelson has discovered a wage series that shows, "many workers are actually receiving modest increases." Samuelson tells readers:

"...the study [the one showing modest wage growth] exerts pressure on the Fed to raise interest rates."

The series that has Samuelson so excited is a wage series that tracks the same workers over time. It looks at full-time workers and compares their wages this year with their wages last year. It will exclude anyone who was not employed full-time in both periods and it also will miss anyone who moves, since it is a household survey.

My friend Jared Bernstein has already given a good argument as to why the Fed should not jump on this new series as an excuse to raise interest rates. Let me add three additional points.

First, the gap between this series and the other wage series can be explained by an increased premium for longer tenured workers. More than 4 million workers leave their jobs every month. This series is picking up only the people who stay in their full-time job or leave their job and find a new full-time job, but do not move. That exlcudes a very large segment of the labor force. Suppose this group is getting an increased wage premium. Why is this a rationale for the Fed to raise to interest rates? In this respect, it is worth noting that the wage gains shown by this measure are still almost a full percentage point below the pre-recession pace.

CEPR / May 27, 2016

Article Artículo

Latin America and the Caribbean

Hillary Clinton’s Memoir Deletions, in Detail

As was reported following the assassination of prominent Honduran environmental activist Berta Cáceres in March, former Secretary of State Hillary Clinton erased all references to the 2009 coup in Honduras in the paperback edition of her memoirs, “Hard Choices.” Her three-page account of the coup in the original hardcover edition, where she admitted to having sanctioned it, was one of several lengthy sections cut from the paperback, published in April 2015 shortly after she had launched her presidential campaign.

A short, inconspicuous statement on the copyright page is the only indication that “a limited number of sections” — amounting to roughly 96 pages — had been cut “to accommodate a shorter length for this edition.” Many of the abridgements consist of narrative and description and are largely trivial, but there are a number of sections that were deleted from the original that also deserve attention.

CEPR and Ming Chun Tang / May 26, 2016

Article Artículo

The Trump Supporters in Econ Departments and Central Banks Everywhere

Eduardo Porter used his NYT column this week to remind us that we have seen people like Donald Trump before and it didn't turn out well. Porter is of course right, but it is worth carrying the argument a bit further.

Hitler came to power following the devastating peace terms that the allies imposed on Germany following World War I. This lead to first the hyper-inflation that we will continue to hear about until the end of time, and then austerity and high unemployment that was the immediate economic environment in which Hitler came to power.

The point that we should all take away is that there was nothing natural about the desperate situation that many Germans found themselves in when they turned to Hitler for relief. Their desperation was the result of conscious economic decisions made by both the leaders of the victorious countries as well as the leaders of the Weimar Republic. (It is not as though the latter had any good choices.) Nothing can excuse support for a genocidal maniac, but we should be clear about what prompted the German people to turn in that direction. 

When we look at the rise of Trump and other right-wing populists across Western Europe, we see people responding to similar decisions by their leaders. The European Commission has imposed austerity across the euro zone largely at the insistence of Germany. It is not clear what economic theory explains the infatuation with austerity, but nonetheless it is now the golden rule across Europe. The U.K. has gone in the same direction even though it is not bound by the euro rules. Even Denmark has been making cuts to its health care system and other aspects of its welfare state in spite of the fact that its debt to GDP ratio is less than 10.0 percent and it is running a massive trade surplus.

CEPR / May 24, 2016

Article Artículo

Maximum Potential Employment and the Jobs Gap

In 2007, the employment rate – the percentage of all Americans 16 and older who have a job – averaged 63.0 percent. The rate fell as low as 58.2 percent during the recession, and has since recovered to just 59.7 percent.

There are significant questions about how much of the drop reflects weakness in the economy as opposed to just an aging population. Between 2007 and 2015, the share of the population aged 25 to 54 – the ages when we expect people to be employed – fell from 54 to 50 percent. Over the same period, the share of the population 55 and older increased 5 percentage points from 30 to 35 percent.

However, it’s also the case that employment has fallen within most age groups. The employment rate of the 25-54 population dropped 5.2 percentage points during the recession and has risen just 3.0 percentage points since then. The employment rate for 55-64 year-olds is close to where it was before the recession, while the employment rate of Americans 65 and older is actually up.

We are not left with an “either-or” proposition. The employment rate has fallen due to cyclical weakness and the aging of the population. So it’s worth asking: how much higher could the employment rate be given the demographic composition of the population?

CEPR and Nicolas Buffie / May 24, 2016

Article Artículo

Economic Growth

United States

FedWatch Bonus Edition: William Dudley on Financial Regulation

This is a bonus blog post in a series of profiles of the members of the Federal Reserve Board’s Open Market Committee [FOMC]. The profiles focus on their writings, public statements, and voting records as members of the FOMC.

Last Monday, CEPR released a FedWatch piece on William Dudley’s views on monetary policy. Dudley is the head of the New York Federal Reserve (one of the Fed’s 12 regional banks) and the Vice-Chairman of the FOMC. The New York Fed is different from the other regional banks because, along with fulfilling normal regional bank functions, it also serves as a regulator of the Wall Street banks.

As part of CEPR’s ongoing FedWatch series looking at the views of FOMC members, we are releasing an extra “bonus” post examining Dudley’s views on the financial sector.

CEPR and Nicolas Buffie / May 23, 2016

Article Artículo

Saving Clintonism? How About an Honest Discussion?

David Shribman wants to tell us how to "save Clintonism." In doing so he seriously misrepresents the issues at hand.

He tells readers:

"The 42nd president left the White House with high approval ratings after serving during years of economic growth. Many liberals felt bruised, even betrayed — there were some high-profile repudiations of the president, especially when he signed a welfare overhaul in 1996 that set time limits on benefits. But no one doubted that he had given new life to the party when he left office in 2001."

Of course, Clinton left the White House as the stock bubble that had fueled the prosperity of his second term was in the process of collapsing. It led to a recession that began less than two months after he left office. From the perspective of working people this was the worst recession of the post-World War II era until the Great Recession. The economy did not get back the jobs lost until January of 2005.

Shribman's treatment of this period would be comparable to a situation where George W. Bush left office at the end of 2007 and describing his departure as being a period of prosperity. Of course by the end of 2007, the seeds of the crash had already been planted just as was the case with the recession of 2001.

Clinton also left a large and rapidly rising trade deficit. The United States has only been able to fill the demand lost as a result of this trade deficit with asset bubbles: first the stock bubble in the 1990s and then the housing bubble in the last decade.

CEPR / May 22, 2016