The April Jobs Report: Is That All There is to This Economic Recovery?

 

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So, a decent snapback in the US labor market. Net new jobs increased by 223,000 in April — matching the consensus forecast –while the unemployment rate fell by 0.1 percentage point to 5.4%, according to the Bureau of Labor Statistics. Labor force participation ticked up, making that jobless rate improvement look a bit stronger. The U-6 underemployment rate edged lower. Also, some more progress in the long-term jobless numbers.

Not so decent: The employment rate went nowhere. The March jobs number was revised lower from 126,000 to 85,000. Over the past three months, job gains have averaged 191,000 per month vs. 260,000 monthly in 2014. And, once again, weak wages: The broadest measure of average hourly earnings was up 0.1%, leaving average hourly earnings up 2.2% over the past year. Average hourly earnings for production and non-supervisory workers were up 0.1% and 1.9% year over year. (Double that rate would be nice.) What’s more, the US may still have a 3-6 million “jobs gap.”

Again, the 1980s Boom Was About More Than Just the Reagan Tax Cuts

 

Until I started reading the new issue of the Economist magazine, I was unaware that a new Ronald Reagan biography — “Reagan: The Life” by H.W. Brands — would soon hit the market. (“Mr Brands recounts Reagan’s triumphs and the scandals even-handedly, and concludes that the Gipper’s achievements were comparable to those of Franklin D. Roosevelt, the president who led America most of the way towards winning the second world war.”)

But maybe I telepathically sensed the book’s impending arrival and that explains why I have been blogging so much lately about the Gipper. Or, more likely, I have felt compelled to throw a penalty flag on the improper use of Reaganomics by some current GOP presidential candidates. I don’t have a whole lot to add to what I’ve written previously, except to tie up a few loose ends on issues suggested by readers.

How Dirigiste Are We?

 

AAA red tape vs small businessThis CNNMoney list of the best jobs in America caught my eye. Obviously, it’s subjective, but someone thought these sounded like great bets for “big growth, great pay, and satisfying work.” Here’s the methodology they used.

Go through the list, and give me your best guess: What percentage of the week do these people devote, in some way, to dealing with the government? What percentage of their income comes in one or another fashion from the government? How many of these jobs exist for the purpose of navigating between citizens and the government?

  1.  Software Architect $124,000
  2.  Video Game Designer $79,900
  3.  Landman $103,000
  4. Patent Agent $126,000
  5. Hospital Administrator $114,000
  6. Continuous Improvement Manager $96,600
  7. Clinical Nurse Specialist (CNS) $89,300
  8. Database Developer $88,200
  9. Information Assurance Analyst $96,400
  10. Pilates/Yoga Instructor $62,400
  11. Clinical Applications Specialist $84,300
  12. Portfolio Manager $123,000
  13. Dentist $152,000
  14. User Experience Designer $89,300
  15. Auditing Director $132,000
  16. Real Estate Development Manager $107,000
  17. IT Program Manager $122,000
  18. Project Control Specialist $86,600
  19. Pharmacist in Charge $125,000
  20. Quality Assurance (QA) Coordinator (RN) $69,300
  21. Strategy Manager $112,000
  22. Product Development Director $131,000
  23. Physical Therapy Director $87,900
  24. Emergency Room Physician $274,000
  25. Product Analyst $67,800
  26. Rehabilitation Services Manager $86,900
  27. Health Information Management (HIM) Director $81,900
  28. Product Management Director $148,000
  29. Practice Administrator $78,300
  30. Facilities Director $97,500
  31. Accounting Director $103,000
  32. Software Quality Assurance Manager $110,000
  33. Orthopedic Surgeon $410,000
  34. Clinical Services Director $77,600
  35. Clinical Pharmacist $117,000
  36. Anesthesiologist $340,000
  37. Biomedical Engineer $82,400
  38. IT Security Consultant $110,000
  39. Telecommunications Network Engineer $90,500
  40. Technical Consultant $101,000
  41. Customer Service Director $103,000
  42. Payroll Director $99,000
  43. Private Banker $86,500
  44. Operations Director $108,000
  45. Risk Management Director $121,000
  46. Construction Manager $88,700
  47. Research & Development Engineer, IT $108,000
  48. Business Development Director $136,000
  49. Proposal Manager $87,600
  50. Financial Accounting Manager $74,500
  51. Career Services Director $62,700
  52. Hand Therapist $83,000
  53. Strategic Planning Director $139,000
  54. Internal Auditing Manager $101,000
  55. Consulting Manager $130,000
  56. Alumni Affairs Director $64,200
  57. Finance & Administration Manager $74,300
  58. Analytics Manager $109,000
  59. Nursing Manager $82,400
  60. Web Analyst $72,300
  61. Health Care Administrator $81,000
  62. Business Development Manager $99,600
  63. Regional HR Manager $84,900
  64. Athletic Director (College/University) $70,500
  65. Product Marketing Specialist $67,600
  66. Implementation Consultant $91,800
  67. Network Architect $122,000
  68. Nursing Informatics Analyst $69,400
  69. Research Analyst $64,400
  70. Assisted Living Director $56,400
  71. IT Network Engineer $79,100
  72. Business Manager, eCommerce/Web $82,600
  73. Associate Partner, Consulting Services $196,000
  74. Healthcare Consultant $108,000
  75. Contract Administration Manager $77,400
  76. Regional Property Manager $80,600
  77. Principal Architect $132,000
  78. Practice Manager $63,900
  79. Analytics Director $142,000
  80. Civil Engineer $77,400
  81. Lead Physical Therapist $84,700
  82. Financial Reporting Manager $96,800
  83. Database Administration (DBA) Manager $120,000
  84. Marketing Consultant $90,700
  85. Biostatistician $98,800
  86. Athletic Coach $47,000
  87. Financial Analysis Manager $99,800
  88. Content Strategist $80,000
  89. Transportation Engineer $78,100
  90. Information Technology Auditor $88,200
  91. Assisted Living Administrator $55,500
  92. Systems Analyst $83,800
  93. Tech Support Engineer $75,400
  94. Public Relations Director $90,500
  95. Auditing Manager $90,900 13%
  96. Program Management Director, Human Services $55,500
  97. Environmental Health & Safety Director $114,000
  98. Database Administrator $89,100
  99. Structural Engineer $80,400
  100. Laboratory Supervisor, Medical/Clinical $66,900

What do you think? What do you imagine the ratio would have been 20 years ago? 50?

Why Those ‘Reagan Recovery’ vs. ‘Obama Recovery’ Comparisons Don’t Tell Us Much

 

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The Drudge Report recently linked (“OBAMA VS. REAGAN ON GROWTH — NOT EVEN CLOSE”) to a Gateway Pundit blog post featuring the above jobs chart, which was first posted at IJ Review.  Now, it is hardly the only or first chart to highlight that the economic recovery after the 1981-82 recession was stronger than the recovery we’ve seen after the 2007-2009 recession. I’ve done a few of them myself. I mean, it’s not a difficult point to argue when economic growth was so much faster in the 1980s. In the 23 quarters since the end of the Great Recession, real GDP is up 14% vs 30% after Really Bad Recession. Or to put it another way, the “Reagan Recovery” was twice as strong as the “Obama Recovery.” The Four Percent Recovery vs. the Two Percent Recovery.

But what conclusions should we draw from that comparison? And how should those conclusions inform both economic policy going forward and responses to future downturns? Now, I am not about to write the definite blog post that answers those questions. Instead, I will ask even more questions: Were the two recessions of a similar kind? And if they weren’t — maybe one was driven by the Federal Reserve, the other by debt-laden balance sheets and financial collapse — does that make a difference in the depth and strength of the subsequent recovery?

The Fed’s Failed — And That’s a Good Thing

 

shutterstock_236267482Don’t expect any miracles from the economy. But don’t expect a collapse either.

In political terms, it’s kind of a Mexican standoff. Team Obama says they saved us from another Great Depression. And they point out that 3.1 million jobs have been created in the last 12 months. Republicans counter that this is the slowest post-WWII recovery on record and that real GDP is roughly $2 trillion below potential. They add that the labor-force participation rate is 62.7 percent, a 39-year low, and that there are at least 15 million people who work but can’t get jobs.

Yet both sides may actually come together for a major pro-growth initiative: an Asia-Pacific free-trade deal that will lower tariffs and other barriers. Lower tariffs are lower taxes.

The Story of the Most Amazing Economic Chart in Western Civilization

 

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I have referred to the above chart as “The most important economic chart in Western civilization.” How did that amazing growth trajectory happen? As Deirdre McCloskey suggests, the West became a business-admiring civilization and that changed everything. We started respecting and rewarding innovators — and the creative destruction they unleash. But as James Bessen explains in Harvard Business Review, it took awhile for workers to benefit:

Too often, when people think about technology, they only think about the initial invention … Yet most major technologies develop over decades, as large numbers of people learn how to apply, adapt, and improve the initial invention. The initial power loom—one of the transformative technologies of the Industrial Revolution—automated weaving tasks, allowing a weaver to produce twice as much cloth per hour. But over the next century, weavers improved their skills and mechanics and managers made adaptations and improvements, generating a twenty-fold increase in output per hour. Most of the gains from this technology took a long time to realize, and involved the skills and knowledge of many people. …

Will Lord Keynes Save Lord Baltimore’s City?

 

Baltimore RiotsBaltimore was torn to bits last night. But according to the economic philosophy introduced by Lord John Maynard Keynes and espoused by the progressive elite across the world, this is great news for the city! Broken windows, burned cars, shattered lives. It’s as if the people of Baltimore have hit the Keynesian Powerball! The people will be swimming in prosperity any day now.

Nuts, right?

Of course it is. However, it’s exactly what Dr. Paul Krugman or any other Keynesian economists would order for the city. Baltimore, like many of the other cities that have recently suffered mass violence, has a poverty problem masquerading in the media as a race problem. Certainly there are huge issues to work on between the black community and local law enforcement, but the scene of individuals out rioting is an indication of a dearth of economic opportunity.

Here Comes Generation Katniss. What do They Believe?

 

042715katnissWikipedia tells me that “Generation K” refers to “the collective nickname given to a trio of young starting pitchers in the New York Mets organization in 1995.” Of course, “K” is baseball shorthand for a strikeout. But the next time you hear about “Generation K,” it will almost assuredly be pop-culture shorthand for “Generation Katniss,” the catchy demographic title given to girls ages 13 to 20 —  devised by British economist Noreena Hertz — assumed to be fans of Hunger Games heroine Katniss Everdeen.

And what are political and policy impulses of Generation K? Hertz, who discussed her research at the Women in the World event last week, outlined some her findings in a recent Financial Times note:

They are concerned about existential threats. Sadly, their anxieties stretch way beyond the typical teenage anxieties. Seventy-five per cent of teenage girls I surveyed are worried about terrorism; 66 per cent worry about climate change; 50 per cent worry about Iran. They also worry inordinately about their own futures. Eighty-six per cent are worried about getting a job; 77 per cent about getting into debt. …  Only 4 per cent of Generation K girls trust big corporations to do the right thing (as opposed to 60 per cent of adults). Only one in 10 trusts the government to do the right thing — half the percentage of older millennials. …

Snarking about Hillary Is Not the Way to the White House

 

YER-economic-growth-sqA number of GOP candidates are engaging in Hillary-bashing over allegations that she used her office as secretary of state to help her husband’s business dealings, prop up speech-making fees, and grease the path for foreign governments to donate massive amounts of money to the Clinton Foundation. But here’s a warning to my friends on the presidential campaign trail: Bashing Hillary is only going to make the Republican party look mean-spirited and snarky. It’s no road to the White House.

I would suggest laying off Hillary and instead showing us what you got in the way of economic-growth policies that will foster 4 to 5 percent growth and maybe another 12 million jobs. The GOP needs a positive growth message, along with a strong national-security message, because the party needs a positive rebranding and a positive vision. But Hillary-bashing will drown that out.

Snarking your way to the presidency is not likely to happen. And if you go that route, slamming Hillary at every turn, you’re going to lose female voters, minority voters, and young voters — constituencies that the GOP desperately needs to win. It might even help Hillary.

The Real Lessons of Reaganomics, At Least As I See Them

 

Official_Portrait_of_President_Reagan_1981If you want to promote pro-market policies by citing the success of Reaganomics, don’t do it the wrong way. And the wrong way is suggesting that the Reagan tax cuts paid for themselves. They didn’t (although their deficit impact was smaller than a static analysis shows). And that’s true whether you look at (a) income tax revenue/GDP or (b) real GDP growth to real revenue in the 1970s vs. 1980s, or (c) academic research.

Nor should you suggest the Reagan tax cuts immediately ushered in a period of crazy-go-nuts hypergrowth.They didn’t. Real GDP growth in the 1980s was about the same as the 1970s. Nor was their a pickup in productivity.

But, but, but … the way to judge a huge change in public policy is over the long term. “Making changes to the tax system and regulatory policies of a mammoth economy like the U.S. is like turning the rudder slightly on a supertanker: The initial effects are small, but it leads to a big shift in course over time,” economist Michael Mandel wrote in a fantastic 2004 magazine piece on Reagan’s economic legacy. This is especially true of sweeping tax reform and how changes in tax rates affect “investment in schooling, occupational choice, and business creation and development,” as AEI’s Aparna Mathur, Sita Slavov, and Michael Strain explain in“Should the Top Marginal Income Tax Rate Be 73 Percent?”

Why Does Hillary Clinton Want to ‘Topple’ Americans Making $346,000 a Year?

 

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Oh, Piketty and Saez, what you have wrought? From the New York Times:

In a meeting with economists this year, Mrs. Clinton intensely studied a chart that showed income inequality in the United States. The graph charted how real wages, adjusted for inflation, had increased exponentially for the wealthiest Americans, making the bar so steep it hardly fit on the chart. Mrs. Clinton pointed at the top category and said the economy required a “toppling” of the wealthiest 1 percent, according to several people who were briefed on Mrs. Clinton’s policy discussions but could not discuss private conversations for attribution.

There’s No Good Conservative Case Against Fast-Track Trade Authority

 

shutterstock_142905070 (1)The Senate Finance Committee is taking up the topic of “fast track” trade authority today, which would empower President Obama to negotiate trade deals, namely the Trans-Pacific Partnership, an ambitious free-trade area that would cover most of our Asian trading partners (except China) and rival the European Union in size. Some conservatives, however, are resisting the proposal, claiming that it only further consolidates power in an already out-of-control executive. While I’ve been a staunch critic of President Obama’s executive overreach, I don’t think that argument holds up here. As I write at National Review:

…Critics are missing the mark by confusing fast track with Obama’s executive power grabs. Fast track does not delegate any power to the executive branch. Under fast track, the president does not exercise any new authority that he lacked before. Under normal constitutional practice, the president negotiates an international agreement and then submits it to Congress for approval. Fast-track doesn’t change that fundamental order. President Obama can negotiate any agreement he likes, and Congress is free to vote it up or down.

Instead, fast track lives up to its name: It gives expedited congressional consideration to any trade agreement. It promises that any trade agreement will be considered within a short period of time and without amendments — promises necessary in order for our trade partners to take negotiations seriously. Fast track only changes the internal procedures of Congress, which are only within Congress’s power to change, on the timing and speed of the vote on the agreement. In fact, there are some innovations in the bill that might allow even a negative vote in the House and Senate committees to effectively derail a bill. If the executive branch does not closely consult and engage Congress, the bill could also lose the promise of an expedited vote. In that event, any Obama trade pact would undergo the rules that apply to any ordinary bill, which could never come up for a vote or be so encumbered with amendments that our foreign partners will pull out.

Does a Tesla Electric Car Qualify as a Disruptive Innovation?

 

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Here is a brief description of disruptive innovation theory, via the Clayton Christensen Institute:

The theory explains the phenomenon by which an innovation transforms an existing market or sector by introducing simplicity, convenience, accessibility, and affordability where complication and high cost are the status quo. Initially, a disruptive innovation is formed in a niche market that may appear unattractive or inconsequential to industry incumbents, but eventually the new product or idea completely redefines the industry.

Are Republicans Going to Abandon Entitlement Reform?

 

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A few quick facts on entitlement spending: (a) CBO projects federal spending on Medicare and Social Security over the next 25 years will rise by roughly 3 percentage points of GDP,  to 11% from 8%; (b) an aging US population will be the prime driver of that projected higher spending; (c) a middle-class, one-earner couple retiring in 2030 will receive $1.3 million in lifetime Medicare and Social Security benefits having paid in just under $500,000.

To me, these numbers argue pretty strong in favor of reforming entitlements to spend less than projected and weight that future spending more toward lower-income Americans. Now, I have been worried that Republicans are backing way from reforming Medicare and Social Security in favor of cutting Medicaid and various income support programs. The former would be classified as “earned benefits” or as the WSJ’s Homan Jenkins has put it,  “… middle-class rewards for a life of hard work and tax-paying, against Mr. Obama’s vast expansion of the means-tested welfare state for working-age Americans. ”

A Challenge for Hillary Clinton: Return to a JFK Growth Agenda

 

JFK 2_0When John F. Kennedy was elected president he surprised both Democrats and Republicans with a bold tax-cutting plan to solve the problem of a moribund economy. He had campaigned on “getting the country moving again,” and had set a 5 percent economic-growth target, but he never specified how he was going to do it. Then he opened everyone’s eyes with a plan to lower marginal tax rates across-the-board.

JFK’s advisors proposed a traditional Democratic approach: temporary targeted tax cuts. But Kennedy insisted on lower tax rates that would create much higher rewards for work, saving, and investment. And Kennedy argued that his lower tax-rate incentives would so expand the economy that after a few years his tax cuts would pay for themselves.

He was right.

Tipping: The Mr. Pink Solution?

 

PinkThere’s a famous scene in Quentin Tarantino’s film Reservoir Dogs — and it’s so far out of compliance with Ricochet’s Code of Conduct that I’ll have to just point you here, with a warning for delicate sensibilities, if you want to see it — in which Steve Buscemi’s Mr. Pink refuses, on principle, to chip in for the tip at the end of a group meal. The original dialogue is so heavily spiced with trademark Tarantino scatology that it can’t be reproduced here, but here’s the argument with the saltiness elided:

I don’t tip because society says I have to. If they really put forth the effort, I’ll give ’em something extra. But this tipping automatically is for the birds. As far as I’m concerned, they’re just doing their job.

When confronted with the argument that servers are making minimum wage:

How Chris Christie Will Try to Put a Pro-Growth Spin on Entitlement Reform

 

shutterstock_180967034-e1429040149655Yes, Governor Chris Christie is still going to run for president. And it appears that, just as pension reform has been a core part of his New Jersey agenda, entitlement reform will be key to his national presidential agenda. From the WSJ: “Gov. Chris Christie called for reduced Social Security benefits for retired seniors earning more than $80,000 and eliminating the benefit entirely for individuals making $200,000 and up in other income, along with raising the retirement age to 69 from 67.”

This proposal will get lots of attention for touching the “third rail” and all that. (Here is AEI’s Andrew Biggs on the Christie plan.) Republicans have recently seemed less enthusiastic in talking about Social Security and Medicare reform. House GOP budgets, for instance, have only called for a plan to create a plan on Social Security. But here’s where it gets interesting. Again, from the WSJ: “Mr. Christie’s speech comes at a moment when the fiscal austerity impulse in Washington has diminished.”

I am guessing that Christie will portray entitlement reform as pro-growth, not just as a way to shore up the programs and avoid a fiscal crisis. Here’s Christie yesterday: “Every other national priority will be sacrificed, our economic growth will grind to a complete halt and our national security will be put at even graver risk.” Christie economic adviser Robert Grady makes the growth argument in greater detail in a 2013 WSJ op-ed:

An Important Piece of Evidence That Argues Against America’s “Great Stagnation”

 

041315chipsIt’s an economic puzzlement. The US producer inflation index suggests computer chip prices have been flattish in recent years after a rapid decline from the mid-1980s through the early 2000s. Yet there is also evidence that microprocessor performance has continued to improve. Given the apparent relationship between declining chip prices and the pace of innovation, it would be really bad news if the slowing pace of price declines means innovation is slowing too. And really bad news for the overall economy. After all, semiconductors are “general purpose” technology behind advances in areas such as machine learning, robotics, and big data. As researchers David Byrne, [AEI’s] Stephen Oliner, and Daniel Sichel explain in “How Fast are Semiconductor Prices Falling?”:

… adverse developments in the semiconductor sector could damp the growth potential of the overall economy. On the other hand, if technological progress and attendant price declines were to continue at a rapid pace, powerful incentives would be in place for continued development and diffusion of new applications of this general-purpose technology. Such applications could both enhance the economy’s growth potential and push forward the ongoing automation that has generated concerns about job displacement.

But the puzzle may been solved. Byrne-Oliner-Sichel point out that in 2006, Intel began to dominate competitor AMD such that by 2013 AMD effectively “had been relegated” to the bottom end of the market. And with less competition, Intel changed its pricing structure by keeping list prices constant — “maybe attempting to extract more revenue from price-insensitive buyers” — while offering discounts to some customers on a case-by-case basis.  And such “price discrimination could reduce the information content of its posted list prices, potentially biasing the quality-adjusted indexes generated from these prices,” the researchers conclude. Indeed, there may also be price measurement problem with the computing equipment that use these microprocessors. The slowing decline in their prices is also a part of the argument that US innovation is stagnating. Here is the bottom line [also refer to the above chart from the study]: