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Article Artículo

What's This "We" Jazz, Matt O'Brien?

One of the few pleasures of the dismal science is getting to watch the surprised faces of economists and economic analysts when things don't turn out as they expect. NAFTA didn't lead to a boom in Mexico, who could have imagined? The 1990s stock bubble burst and took the economy and those big budget surpluses with it, how could that be? The housing bubble exploded, sending house prices plummeting and the financial system into the abyss, who could have imagined?

We got a smaller item in this sequence in response to yesterday's weak job report. The 126,000 jobs reported for March was far below most analysts' expectations. This report, coupled with weak data in other areas, is now leading many to question the predictions of an economic boom. One especially visible questioner was Wonkblog's Matt O'Brien. He told readers:

"the depressing message is that things weren't as good as we thought they were [emphasis added]."

I am going to beat up on Matt for the use of the plural here. Some of us knew that things were not very good and we said that repeatedly. For example, here I am back in early February making fun of Matt for telling readers that the U.S. economy is booming. I don't mean to make this personal. Matt was pretty much in tune with most people writing about the economy at the time, he was just perhaps a bit more forthright in putting his assessment into print.

Dean Baker / April 04, 2015

Article Artículo

Bad Weather Slows Job Growth in March

The Labor Department reported that the economy added just 126,000 jobs in March, its weakest showing in two years. Downward revisions to the prior two month's data brought the three month average to 197,000. Clearly, weather played an important role in the weaker than expected report, as much of the Midwest and Northeast was hit by unusually severe weather in the second half of February and early March. As a result, construction lost 1,000 jobs after adding an average of 36,000 jobs in the prior four months. Manufacturing also lost 1,000 jobs after adding an average of 21,000 in the prior four months. Restaurants added 8,000 jobs in March, compared to an average of 43,000 a month from October to February. While not all of this slowdown was due to weather, it surely was an important factor.

Dean Baker / April 03, 2015

Article Artículo

Poll: Majority of Haitians Say Country “Headed in the Wrong Direction”

A new opinion poll, reported on Wednesday by Jacqueline Charles of The Miami Herald, reveals that while Haitian President Michel Martelly’s personal approval rating remains high, more than 50 percent of respondents thought the country was “headed in the wrong direction.” The Herald reports:

Martelly, who will begin the final year of his five-year term in May, got a 57 percent job approval rating. But it’s an open question whether his popularity will give his choice of presidential candidate the win. Martelly is barred from running again, and Haitians are waiting to see which candidate gets his support.

More than half of Haitians believe the country is headed in the wrong direction, while nearly 70 percent do not believe things are going well today.

Eduardo Gamarra, a professor at Florida International University who conducted the poll (PDF), told the Herald that “members of the private sector” funded the poll and had contracted him to do a number of polls over the past few years. Gamarra was also an advisor to the Government of Haiti, contracted by the Ministry of Planning, until August 2014.

Given Gamarra’s previous relationship with the government, and the contradictions in the poll (such as Martelly having high approval, despite a majority believing the country is moving in the wrong direction and that their personal situations are worse than a year ago), questions have arisen about the methodology of the survey. Further, some 60 percent of respondents reported having voted in the last presidential election, though the official turnout was only about 20 percent. Either the sample was not representative, or a significant portion of the respondents were not completely honest.

In a conversation with HRRW however, Gamarra defended the survey and noted that the only reason it had been published was because the most pro-government findings had previously been leaked.

While Gamarra acknowledged that using cell phone numbers to obtain the survey sample could introduce a bias to the results, he noted that largely as a result of Digicel’s presence, market penetration of cell phones has reached unprecedented levels and that the results are consistent with prior face-to-face polling he had done in Haiti.

“A lot of people are surprised by the contradictions,” Gamarra said, but “this is typical in Haiti.” Haitians, he said, are not generally critical of the government, despite that the majority feel their situation is getting worse.

Earlier this week, Haiti’s electoral authority published the final list of 166 political parties that have successfully registered for planned elections later this year. With elections delayed for over three years and such a large number of parties participating, the election is seen as wide open.

While the headline number looks good for Martelly, Gamarra urged caution, pointing to the results in the important west department, home to nearly 30 percent of Haiti’s population and a key base of support for Martelly earlier in his term. “The government faces its greatest opposition in the west….as a result, I believe that the elections are wide-open,” he added. Indeed, the poll shows Martelly faring worse on almost every indicator in the department. Whereas his national approval rating is 57 percent, in the west department, it is just 38 percent, some 15 percentage points lower than in any other department.

Jake Johnston / April 03, 2015

Article Artículo

Ben Bernanke and the "Ask Nicely" Strategy for the Trade Deficit

Josh Barro comments on the exchange between former Federal Reserve Board Chair Ben Bernanke and Larry Summers and Paul Krugman. The key issue is whether the main problem with inadequate demand stems from the trade deficit or weak consumption and investment demand. I weighed in earlier on Bernanke's side.

Josh's question for Bernanke is that if the problem is the trade deficit, what do we do about it? Of course the main reason for the trade deficit is the over-valued dollar, which makes our goods and services less competitive internationally. This in turn is the result of the decision by other central banks, most importantly China's, to buy up large amounts of U.S. government bonds.

As Josh notes, some folks, like me, have urged that there be rules on currency values in trade deals like the Trans-Pacific Partnership (TPP). Bernanke rejects this route saying that it would be too complicated. (Hey, if you want complicated, try the TPP chapter on intellectual property.)

While currency rules would be fairly simple by trade agreement standards, Bernanke is right, we don't have to use trade deals like TPP to address the problem of an over-valued currency. Bernanke's proposed alternative is to "ask nicely."

Well, that's not exactly the way things work in international negotiations. Obviously China and the other countries who are deliberately propping up the dollar against their currency see it as being in their interest to do so. They are not going to hurt their economies, if they view this as the outcome of ending their currency intervention, just because President Obama asked nicely.

Dean Baker / April 02, 2015

Article Artículo

Postal Banking: Charles Lane Edition

Charles Lane doesn't want the Postal Service to get involved in banking. That much is clear from his column, even if his argument doesn't necessarily support the case.

The argument seems mostly that the government can't compete with the dynamic private sector, although he also seems to worry about the opposite:

"(Yes, postal banking also undermines check-cashing liquor stores and pawn shops, a desirable goal if you buy into the stereotype that these are unscrupulous exploiters, as opposed to family-run small businesses, that the government would be crushing.)"

Hmmm, some of these operations are sizable chains. But yes, some are also family run, like the juice loan racket. Not sure of the point here exactly, but certainly a well-run postal bank would put a lot of sleazy operators out of business.

Dean Baker / April 02, 2015

Article Artículo

Second USAID Contractor Suspended Following Caracol Housing Debacle

Caracol flood
Image from internal USAID document, caption reads: “Site flooding due to improper drainage”

On March 25, 2015, USAID suspended CEEPCO Contracting – which had been working on shelter programs in Haiti –from receiving further government contracts, pending the outcome of an ongoing investigation. CEEPCO joins Thor Construction, which was suspended in early February. The investigation concerns faulty construction practices related to 750 houses built in Caracol, Haiti by USAID. CEPR Research Associate Jake Johnston reported in February for VICE News:

CEEPCO's CEO is Harold Charles, a Haitian-American who was formerly one of the Haitian government's representatives to the Interim Haiti Reconstruction Commission (IHRC), run by Bill Clinton and meant to be in charge of the $10 billion in earthquake relief. The IHRC had initially approved the USAID shelter program back in December 2010.

Charles also enjoys a close, personal relationship with Haitian President Michel Martelly. In an interview in 2013, Charles said, "I do know and have very close friends up through the highest ranks of government," adding, "Martelly is a childhood friend of mine." One former government official in Haiti said in an interview, "this was seen as a deal that would please Martelly."

Despite the initial assessment in August, 2014 that revealed the construction problems, USAID extended CEEPCO's contract for work at other shelter sites in Haiti this past January. CEEPCO’s contract for the Caracol site was awarded without competition. A Freedom of Information Act (FOIA) request for the justification document is ongoing. A FOIA request for the initial assessment documenting the problems with the houses was recently responded to, but USAID withheld the entire document that was sought, citing the ongoing legal investigation.

Though the investigation continues, many thousands of Haitians continue to live in the poorly constructed houses. A contracting document from November, 2014, stated that repairs must be “carried out immediately in order to prevent possible harm to residents.” But it is unclear if meaningful remediation efforts have taken place.  An internal document reveals that many of the identified problems would require serious structural work to the houses.

In November, Tetra Tech, another U.S.-based firm, received a $5 million contract to oversee the repair efforts. The firm has been performing structural evaluations of the houses in anticipation of a future legal suit. One draft document, prepared by Tetra Tech and obtained by HRRW, details 29 instances “of material substitutions, field design changes, lack of quality assurance/quality control (QA/QC) and lack of quality workmanship.”

Jake Johnston / March 30, 2015