Blog postings by CEPR staff and updates on the latest briefings and activities at the Center for Economic and Policy Research.

As you may have heard, spending on Social Security Disability Insurance has been rising over the past 25 years. Many major news outlets have portrayed this increase as a looming disaster with headlines such as the following:

It’s Time to Reform Our Bankrupt Disability Insurance,” National Review, September 2015

Social Security Disability Insurance Program Is Financially Unsustainable,” Mercatus Center, September 2015

With Social Security Disability Fund Going Broke by 2016, Congress Set for Partisan, Election-Year Showdown,” Fox News, August 2015

Another Looming Crisis: Social Security Disability Insurance,” The Hill, July 2015

Social Security Disability Insurance Is Failing,” Senate Republic Policy Committee, March 2015

Averting the Disability-Insurance Meltdown,” Wall Street Journal, February 2015

7 Facts About America’s Disability Check Explosion,” Breitbart, January 2015

SSA: Disability Recipients Soar, Funding Nearly Depleted Under Obama,” Newsmax, December 2013

Social Security Disability Claims Out-Of-Control,” NewsBlaze, October 2013

The Rising Cost of Social Security Disability Insurance,” Cato Institute, August 2013

Social Security Disability Insurance Costs Are Exploding,” Washington Examiner, August 2013

Social Security Disability Fund to Go Broke in 2016,” Washington Examiner, July 2013

Disability Explosion Puts Social Security in Danger,” Investor’s Business Daily, June 2013

Disability Insurance, Out of Control,” Chicago Tribune, April 2013

Disability Insurance: America’s $124 Billion Secret Welfare Program,” The Atlantic, March 2013

Unfit for Work: The Startling Rise of Disability in America,” Planet Money (National Public Radio), March 2013

Social Security Disability Program Reveals Budget Quagmire,” Washington Post, February 2012

Social Security Disability Benefits Unsustainable,” Cato Institute, November 2010

America’s Hidden Welfare Program: Social Security’s Disability Insurance Is Expensive, Destructive, and Out of Control,” Slate, September 2010

Given this sort of reporting, a normal reader might think that assistance to disabled workers has been “spiraling out of control.” But that just isn’t true.

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Paul Krugman recently wrote an interesting blog post titled “The Curious Confidence of Charlatans and Cranks Krugman starts off with an interesting graph showing the total number of private sector payroll jobs gained or lost under each U.S. president from Jimmy Carter to Barack Obama.

While this metric is informative, it is imperfect in at least two ways. First,a president’s track record on jobs will depend to a significant degree on his total time spent in office. Fortunately, it is easy to correct for this problem all we need to do is look at the average change in jobs per year. Second, the total number of jobs gained is an imprecise metric, given that at least part of the differences between time periods can be attributed to different rates of population growth. An easy way of correcting for this is to measure the percent change in the total number of jobs. Therefore the best metric for comparing different presidents’ track records would be the average annual percent change in jobs.

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The following reports on labor market policy were recently released:

Center for Economic and Policy Research

The Case for a Weak Labor Market
Nick Buffie


Center for American Progress

The Cost of Work-Family Policy Inaction
Sarah Jane Glynn, Danielle Corley

The Economic Impacts of Removing Unauthorized Immigrant Workers
Ryan Edwards, Francesc Ortega


Institute for Women’s Policy Research

Five Ways to Win an Argument about the Gender Wage Gap
Heidi Hartmann, Ariane Hegewisch, Barbara Gault, Gina Chirillo, Jennifer Clark


Economic Policy Institute

Black-white wage gaps expand with rising wage inequality
Valerie Wilson, William M. Rodgers III

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Earlier this year, Heather Boushey and Bridget Ansel of the Washington Center for Equitable Growth released a report titled “Overworked America: The Economic Causes and Consequences of Long Work Hours.” For those who work excessively long hours at their jobs and don’t have time to read the full report, this blog post by the authors succinctly summarizes many of the paper’s key findings.

Boushey and Ansel show that, between 2011 and 2014, a large number of Americans worked beyond the typical 40-hour workweek. (In 2015, exactly 25 percent of the labor force worked 41 or more hours per week.) Moreover, long hours show up predominantly in occupations with significant wage disparities — most notably in legal, management, and finance occupations.

One point that isn’t discussed in the piece is the degree to which other developed countries — many of which, incidentally, have much lower income inequality than the U.S. — have been able to rid themselves of this problem. As productivity rises, countries have the option of improving workers’ well-being not through higher incomes, but rather through greater leisure time. And in general, most countries have opted for a bit of both. Annual incomes have continued rising, but working hours have declined as well.

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Analyzing the percentage of the labor force holding multiple jobs is a key to understanding the labor market. While very recent data is not available on the reasons for holding multiple jobs, the Bureau of Labor Statistics’ (BLS) occasional surveys from the 1990s and early 2000s consistently identified financial reasons as the main cause for holding multiple jobs.

Data released by the BLS show that the overall percentage of workers with multiple jobs has been on a downward path. In 1996, over six percent of the labor force was working multiple jobs. By 2015, this number decreased to 4.9 percent of the labor force.

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The following reports on labor market policy were recently released:

Center for American Progress

Raising Wages and Rebuilding Wealth
Carmel Martin, Andy Green, Brendan Duke


Center for Economic and Policy Research

No Big Deal: The Impact of New York City’s Paid Sick Days Law on Employers
Eileen Appelbaum, Ruth Milkman


Institute for Women’s Policy Research

The Gender Wage Gap: 2015; Annual Earnings Differences by Race and Ethnicity
Ariane Hegewisch, Asha DuMonthier

 


COWS

State of Working Wisconsin 2016
Laura Dresser, Joel Rogers, Javier Rodriguez S.

 


Center on Budget and Policy Priorities

Monetary Rules and Targets: Finding the Best Path to Full Employment
Carola Binder, Alex Rodrigue

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If you listen to enough debates on economic inequality, there is one assertion you are bound to hear from those defending the status quo: the inequality statistics are bunk. Basically, the dramatic increase in economic inequality over the past 40 years is a mirage.

Consider, for example, the frequent assertion about differences in household size. This argument is relatively straightforward: statistics on household income inequality don’t adjust for differences in the number of people per household, and therefore likely overstate economic inequality. For example, $80,000 split between a husband and wife with no children can provide roughly the same standard of living as $40,000 for a single individual; therefore, even if statistics on household inequality show that the first household makes twice as much as the second, there is little to no difference in economic well-being.

However, data released earlier this week from the Census Bureau show that disparities in household size have little impact on measures of economic inequality. Furthermore, to the extent that these disparities do matter, their importance has decreased over time; this means that the rise in economic inequality has actually been more significant than the normal statistics indicate.

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On January 25, 2012, the Federal Reserve (“Fed”) announced that it would target an inflation rate of 2.0 percent per year. In its press release, the Fed stated:

“The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent…is most consistent over the longer run with the Federal Reserve's statutory mandate.”

In public debates, this statement has frequently been misinterpreted in at least two ways. The first relates to treating 2.0 percent as a ceiling rather than a target; the second relates to the timeframe over which the target is supposed to be achieved. 

With respect to the first issue: because 2.0 percent is a target, the Fed should find 1.0 percent inflation just as problematic as 3.0 percent inflation. However, some members of the Fed have been treating 2.0 percent more like a ceiling than a middle-of-the-road target. About two weeks ago, Vice Chairman of the Fed Stanley Fischer praised the U.S. economy partially on the basis that inflation was “within hailing distance” of the Fed’s target. Other members of the Fed have made similar statements.

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As a policy, the goal of the Affordable Care Act (ACA) is to reduce the number of uninsured people in the United States. With the release of the Census Bureau report on health insurance coverage for 2015, it is hard to make the case that the ACA has not been a success. The report demonstrates that the number of uninsured in the U.S. has continued to fall significantly and at 9.1 percent, it is now at the lowest level to date.  And while the number of uninsured did not go up in any of the 50 states or the District of Columbia, the rate of the change in the uninsured varied between states.

The trend of increased coverage held across different age, educational, and racial demographics and is consistent with results from the Centers for Disease Control and Prevention’s National Health interview Survey, which also found the share of the uninsured to be 9.1 percent. As well, the Census Bureau’s American Community Survey gives historical estimates of health insurance coverage. Looking back to 2008, the percent of uninsured had risen prior to 2010. It was at this time that an early provision of the ACA began to allow adults to remain on their parents’ health insurance plan until the age of 26 and the percent of uninsured began to decrease. This group has continued to see the largest decreases in the number of people uninsured with 2015 showing an additional decline of 2.6 percent.

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Earlier this morning, the Bureau of Labor Statistics released the August jobs report. The new numbers were mostly positive, with employers reporting net job growth of 151,000 for the month.

However, one disturbing aspect of the report should be the relatively high rate of long-term unemployment. While the percentage of jobless workers unemployed 27 weeks and longer has been trending downward in recent years, it is still exceptionally high by historical standards.

Even more disturbing is the relatively high rate of “extreme” long-term unemployment, the condition of being unemployed one year or longer. The figure below shows extreme long-term unemployment as a percentage of total unemployment from May 1977 to present. Currently there are over 1.3 million Americans who have been out of work for over a year.

buffie long term 2016 09 02

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The Labor Department reported that the economy created 151,000 new jobs in August – slightly less than generally expected. The unemployment rate was unchanged at 4.9 percent and the employment-to-population ratio was also unchanged.

The big job gainers in August were restaurants, which added 34,000 jobs; government, which added 25,000 (almost all at the local level); and social assistance, which added 21,700 jobs. Mining continued to lose jobs, with a drop of 4,300 in August, while manufacturing lost 14,000.

While the overall pace of job growth is still reasonably healthy even with the slowdown, a disconcerting item is a decline in the duration of the average workweek. This stood at 34.3 hours in August, down from 34.4 hours in July and 34.6 hours in August of 2015. The drop was large enough to lead to a decline of 0.2 percent in the index of aggregate weekly hours, in spite of the growth in employment.

This downward trend could indicate slower hiring in the future. It also seems to contradict the common assertion in the business press that employers are having difficulty finding qualified workers. If this were true, they would be pushing the workers they have to work longer hours.

On the household side the news was mostly positive. There was an increase in the percentage of unemployment due to voluntary quits to 11.3 percent, the highest for the recovery. All the duration measures of unemployment fell in the month. And there was a rise in the percentage of black teens with jobs to 23.3 percent, an increase of 2.7 percentage points from the July figure.

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The following highlights CEPR’s latest research, publications, events, and much more.

CEPR on Trade and the Economy, Election 2016 Edition

CEPR Co-Director Dean Baker wrote for CNN how Trump’s economic agenda looks like more of the same Republican agenda.. He was also cited in an article for Fortune, agreeing with the headline “Trump Just Made a Huge Exaggeration About Small Businesses”. In an article in The Week, author Jeff Spross named Dean as one of eight members of a possible “economic dream team” in a Clinton administration, writing that Dean is “the antidote to the intellectual sclerosis and rigid narratives that so often bedevil mainstream economic policy thinking.” He also compared Dean and fellow economist and Jared Bernstein to another famous duo.

Meanwhile, CEPR Co-Director Mark Weisbrot wrote that the historically important candidacy in this cycle was not Trump’s, but Bernie Sanders’, in an op-ed in The Hill. Mark also wrote a post for his “World in Transition” blog that answered the question, “Which Presidential Candidate is Worse for Latin America?” Mark did two video interviews on the US elections with Brazilian journalist Fernando Morais.

CEPR continued to focus on an issue that is front and center in the presidential campaign: trade. In this widely shared op-ed for The Hill, Mark explained how President Obama’s push for the Trans-Pacific Partnership (TPP) could drag down Democrats in the fall, while Dean penned a piece titled “Trade, Truth and Trump.” Dean also wrote an op-ed debunking TPP proponents’ claim that rejecting the TPP would jeopardize relations between the United States and Asia.

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The share of employees with union representation has been steadily declining for the past three decades. Because unions are one of the most important institutions within the political sphere for non-elites to advance their interests — higher wages, better work conditions, hours, benefits, etc. — this is unfortunate. Unsurprisingly, the dramatic decline in union representation since the 1980s has been accompanied by widening economic inequality.

The private sector, accounting for roughly 85 percent of those employed in 2015, has experienced the largest decline in employees represented by a union, down just over 11 percentage points from 1983 to 2015. This dramatic decline means fewer workers have the opportunity to advocate for their interests. Unionization rates in the public sector have declined as well, though at a significantly lower rate (down 6.5 percentage points, from 45.5 percent in 1983 to 39 percent in 2015). Technological advances and a more global economy are less the cause of this decline than legislation that purposefully weakens unions and employers’ unfavorable attitudes towards unions.

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Welfare reform hits 20 this month. The Center for Economic and Policy Research has done much work examining how full employment in the 1990s shaped employment, income, and poverty. In observation of this 20th anniversary, CEPR prepared a graph that tells an important, often neglected, piece of the story:

Change in Employment, Women Ages 20 to 49 with a High School Degree or Less and Any Work During the Year and Change in Families Receiving TANF Benefits

Using data from the Current Population Survey and Department of Health and Human Services TANF Caseload report, the figure tells a simple story. Never-married mothers with a high school degree or less increased their rate of work from the early to the late 1990s by nearly 30 percentage points. As Philip Cohen also discusses, this trend began well before the 1996 welfare reform, suggesting that the policy was not the source of the rise, but that other macroeconomic forces were helping these families do better.

As the graph also demonstrates, the rise in employment is associated with a decline in reliance on the welfare program, Temporary Aid to Needy Families (TANF). The line at the bottom of the chart shows a steady decline in the late 1990s that corresponds to the rise in women’s work in the line above.

Here’s the catch: Employment stopped rising, and began to fall by the early 2000s. Yet, TANF, as part of the so-called safety net, did not move upwards as less-skilled jobs disappeared. Instead, the TANF rolls continued to decline, as Shawn Fremstad details in his report on millennial parents.

What does this mean? CEPR director Dean Baker has written extensively about how to fight poverty through full employment. This chart suggests that the current system of welfare is not part of the solution, and stands as a reminder that data, not ideology, will help us reduce poverty.

This piece was originally published at the Council on Contemporary Families.

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Tomorrow, the Bureau of Labor Statistics (BLS) will release the newest data for the Consumer Price Index (CPI), the most widely cited indicator of consumer inflation. One important measure to watch will be childcare and nursery school, whose costs have risen faster than overall inflation for the past quarter-century.

The figure below shows the annual rates of inflation for five different five-year periods from 1991 to present. Between 1991 and 2016, the costs of childcare and nursery school rose 177 percent; by contrast, prices for the economy as a whole have risen just 77 percent. (The figure will be updated to include the latest data in tomorrow’s CEPR Prices Byte.)

prices 2016 08

Now, for many consumers, this isn’t a significant worry — childcare and nursery school are just 0.7 percent of current consumer spending. However, this 0.7 percent figure represents an average across all consumers, most of whom do not currently have young children.

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The July jobs report was mostly positive with the unemployment rate holding steady at 4.9 percent and the economy adding 255,000 jobs. While these data points grabbed most of the headlines, other aspects of the Bureau of Labor Statistics report were noteworthy, including job gains spread across sectors and indications that wage growth accelerated. Though there is still room for improvement, the report contradicts horror stories about an American economy on the brink.

Another less discussed aspect of the jobs report that deserves attention is the change in the number of people that work part-time. This is especially relevant when considering the impact of the Affordable Care Act (ACA).

Prior to its adoption, numerous opponents of the Act — also called “Obamacare” — claimed (and still claim) that the program would be a job-killer and lead to large-scale cuts in hours for full-time workers in order to avoid paying for employee healthcare. (The ACA penalizes employers that have over 50  employees and that do not provide healthcare for workers that log greater than 30 hours a week.)

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In February of last year, the Center for American Progress (CAP) released a report titled The Effect of Rising Inequality on Social Security. The report shows how the increase in economic inequality in the U.S. has led to deteriorating Social Security revenues, often to the tune of tens of billions of dollars a year. Earlier research by Dean Baker showed that the upward redistribution of wage income was responsible for 43.5 percent of the projected 75-year shortfall in Social Security funding as of 2013.

Social Security is funded through federal payroll taxes. These taxes are currently applied to the first $118,500 of a worker’s wages; this means that only a portion of high-wage workers’ earnings are subject to taxation. For example, a worker earning $237,000 a year will pay payroll taxes on just half his earnings in 2016; a worker earning a million dollars will pay payroll taxes on less than 12 percent of his earnings. By contrast, any worker making $118,500 or less will have all of his earnings held subject to taxation. This $118,500 “cap” rises in line with average wage growth every year.

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One of the most striking aspects of the 2008–2009 recession was the rise in involuntary part-time employment. In 2007, involuntary part-time employment — the condition of working a part-time job while seeking a full-time one — was just 3.0 percent of total employment. The rate peaked at 6.7 percent in March 2010 and has averaged 4.0 percent through the first six months of 2016.

This is important for two reasons. First, it is a source of labor market weakness that results in a significant loss of income for many workers. Over 6 million people are working part-time involuntarily, and on average they work 23 hours per week. Because full-time workers are typically employed 42–43 hours per week, this is effectively a wage cut of almost 50 percent for the affected workers. When the labor market fully recovers from the recession, over 1.5 million involuntary part-time workers will be moved to full-time hours.

Second, today’s relatively high rate of involuntary part-time employment stands as evidence that the unemployment rate is overstating the strength of the economy. Currently the unemployment rate is 4.9 percent, just slightly above the pre-recession rate of 4.6 percent. This implies that the economy has almost fully recovered since unemployment peaked at 10.0 percent in October 2009. However, the unemployment rate falls when the unemployed stop searching for work, and given how many of the unemployed gave up on finding a job during the recession, it is clear that the unemployment rate is failing to pick up on a large number of jobless Americans who would like to work. The involuntary part-time employment rate, by contrast, is not subject to this bias.

To illustrate this point, Table 1 compares the rate of involuntary part-time employment for the year ending in May 2016 with two other periods with a similar unemployment rate. Between June 2015 and May 2016, the unemployment rate averaged 5.0 percent; between 2000 and the recession, there were two other periods with the same unemployment rate. (We start with the year 2000 because much of the demographic data on involuntary part-time employment only go back to 2000.) Those two periods were March 2001 to February 2002 and February 2005 to January 2006. If the unemployment rate were painting an accurate picture of the labor market, we’d expect the current involuntary part-time employment rate to be about the same as during the two previous periods.

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The Labor Department reported the economy added 255,000 jobs in July. With the June number revised up to 292,000, the average for the last three months now stands at 190,000. The job gains were broadly based. Health care added 43,200 jobs, professional and technical services added 37,400, while the government sector added 38,000. Much of the last figure was due to education, which added 26,700 jobs in the month. Part of this is due to timing, with many schools starting earlier and having teachers begin preparations in July. There was also an uptick in hours worked, with the index of aggregate weekly hours rising by 0.5 percent.

The household data was also positive. The number of people reported as employed rose by 420,000 after being virtually flat the prior three months. With new people entering the labor force, the employment-to-population ratio edged up by 0.1 percentage point to 50.7 percent, while the unemployment rate remained unchanged at 4.9 percent.

One interesting note is that the least educated workers appear to be the biggest beneficiaries of recent job growth. The employment-to-population ratio (EPOP) for workers without high school degrees rose by 2.1 percentage points for the month and is 1.6 percentage points above its year ago level. The unemployment rate for this group is 1.9 percentage points below the year ago level. By contrast, the EPOP for college grads is down by 0.5 percentage points from its year ago level, while the unemployment rate is unchanged.

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The following highlights CEPR’s latest research, publications, events, and much more.

CEPR on Trade and Other Issues: The 2016 Election Edition

The Republican and Democratic Conventions just concluded and CEPR experts were watching. CEPR Co-Director Dean Baker discussed Donald Trump and trade on NPR’s Morning Edition and he wrote an op-ed on Trump’s trade viewshere, while Co-Director Mark Weisbrot weighed in with this piece for The Hill. Mark also penned an op-ed titled “This is a Test: What Kind Of Democracy Do We Have in the United States?” about Hillary Clinton’s strategic blocking of votes on the proposed progressive DNC platform, which would have included opposition to the TPP. Mark also discussed the candidates’ positions on trade and the TPP on The Big Picture with Thom Hartman, here and here. (Mark is now a weekly guest on the show, broadcast on RT).

Mark and Dean addressed trade issues in their respective blogs. Mark wrote a post titled: “Democratic Delegates Should Help Save Obama’s Legacy by Blocking the TPP,” as well as this one critiquing David Brooks for his “World In Transition blog, while in this “Beat the Press” post, Dean reminds the Washington Post that recent US trade deals are “not about free trade.” Dean also corrected the New York Times, here.

While efforts to get the Democratic Party platform to take an official stance against the TPP were defeated, the platform includes language calling for “streamlined and effective enforcement mechanisms” that “protect workers and the environment,” including in the TPP. Prior to Scott Walker’s speech addressing the RNC, CEPR Domestic Intern Michael Ratliff examined the track record of Wisconsin and Minnesota since 2010. He found that after liberal governor Mark Dayton took office in Minnesota and conservative Scott Walker took office in Wisconsin, Minnesota has a better record than Wisconsin on employment growth, poverty levels, and unionization. And despite Trump’s commitment to protecting Social Security, the Republican platform contains language calling for cuts, which Dean discussed here.

And last but not least, CEPR joins the Center for Popular Democracy and others in the FedUp campaign in celebrating the Democratic Party’s platform’s call to reform the Federal Reserve. The platform includes language about reforming the Fed to make it more representative of America as a whole and for the first time since 1988 commits to promoting full employment policies.

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A sharp slowing of the rate of inventory accumulation led to a lower than expected 1.2 percent GDP growth rate in the second quarter. The weakness of inventories subtracted 1.16 percentage points from the quarter's growth. Final demand grew at a moderate 2.4 percent annual rate. The first quarter's data were also revised down from 1.1 to 0.8 percent, meaning that the economy grew at just a 1.0 percent annual rate in the first half of the year.

Consumption is by far the main factor driving growth in the quarter, growing at a 4.2 percent annual rate. Most of this growth was on the goods side, which grew at a 6.8 percent annual rate, while consumption of services grew at a more modest 3.0 percent rate.

Most categories of investment were negative, with non-residential structures falling at a 7.9 percent rate, and equipment investment falling at a 3.5 percent rate. Investment in intellectual property products grew at a modest 3.5 percent rate. Residential construction fell at a 6.1 percent rate, after six consecutive quarters of strong growth.

Trade was a small positive, adding 0.23 percentage points to growth in the quarter, while government was a small negative. Government spending fell at a 0.9 percent annual rate, subtracting 0.16 percentage points from the quarter's growth. Federal, state, and local spending declined in the quarter, but most of the drop was due to a 1.3 percent drop in state and local spending.

While the inventory situation will be reversed in future quarters, leading to a positive contribution to growth, it is questionable whether growth will even cross 2.0 percent for the year. Concerns at the Fed and elsewhere about overly rapid growth seem to be seriously misplaced.

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