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

buffie vacancies 2016 04 11 fig1

The figure above compares the average 2015 rental vacancy rate with the percent increase in owner’s equivalent rent for 30 metropolitan areas. Although the relationship is imperfect, there is a clear trend to the data: higher vacancy rates are associated with lower inflation. The concept here is relatively simple: when a large number of rentals are vacantrentiers must set prices relatively low in order to compete for potential renters.

This becomes clear when you look at specific metropolitan areas. The three areas with the highest vacancy rates also happened to have the three lowest inflation rates. Two areas in Ohio  Akron and Cincinnati  had 12.1 and 10.2 percent vacancy rates, respectively. Increases in rents were just 1.5 and 1.1 percent in those two areas, compared to the sample median of 3.4 percent. St. Louis, Missouri had a 9.7 percent vacancy rate  3 percentage points above the median vacancy rate of 6.7 percent  and saw just a 2.0 percent increase in rental prices.

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Over the past three decades, the top 1 percent’s share of national income has more than doubled. In 1978, the richest 1 percent of income earners made less than 9 percent of total income; by 2014, their share was over 21 percent.

The growth of the financial sector has been one of the primary drivers of this increase. During the 1940s to 1970s, finance typically accounted for about 3 to 4 percent of GDP; by 2005 and 2006, just before the financial crisis, finance claimed 7.6 percent of GDP. While the industry’s share of national income fell during the recession, it is back above 7 percent today.

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Professor Andrew Levin (Dartmouth College), the former special advisor to Fed Chair Ben Bernanke and then-Vice Chair Janet Yellen, released a proposal for reform of the Federal Reserve Board’s governing structure in a press call sponsored by the Fed Up Campaign. The proposal has a number of important features, but the main point to make the Fed more accountable to democratically elected officials and to reduce the power of the banking industry in monetary policy.

Under its current structure, the banks largely control the twelve Federal Reserve district banks. This matters because the presidents of these banks are part of the Federal Reserve Board’s Open Market Committee (FOMC) which determines monetary policy. At any point in time five of twelve district bank presidents will be voting members of the FOMC, but all twelve take part in the discussion. The voting presidents will typically be outnumbered by the seven Federal Reserve Board governors, who appointed by the president and approved by the Senate, although there have been just five sitting governors for the last two years, as the Senate has refused to consider President Obama’s nominees.

There is no obvious reason that the banking industry should have special input into the country’s monetary policy. This would be comparable to reserving seats on the Federal Communications Commission’s board for the cable television industry. While there is no way to prevent an industry group from trying to influence a government regulatory body, in all other cases they at least must do so from the outside. It is only the Fed where we allow the most directly affected industry group to actually have a direct voice in the policies determined by its regulatory agency.

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

• CEPR’s international program joined the rest of the world in condemning the assassination of Honduran environmentalist and indigenous rights activist Berta Cáceres, who was murdered on March 3rd. CEPR issued this press release soon after the news of her killing had been announced, calling for an independent, international investigation to bring the perpetrators to justice. CEPR was also mentioned in this article in The Nation by Greg Grandin titled “The Clinton-Backed Honduran Regime Is Picking Off Indigenous Leaders.” Grandin writes of Hillary Clinton’s role in the Honduran coup: “Later, as Clinton’s emails were released, others, such as Robert Naiman, Mark Weisbrot and Alex Main, revealed the central role she played in undercutting Manuel Zelaya, the deposed president, and undercutting the opposition movement demanding his restoration. In so doing, Clinton allied with the worst sectors of Honduran society.” CEPR’s Honduras work was also cited in this post on NPR’s Latino USA, and this post on the Fairness and Accuracy in Reporting blog.

CEPR Co-Director Mark Weisbrot discussed Clinton’s role in the coup in this video by the Campaign for America’s Future, and CEPR International Intern Ming Chun Tang summarized Mark’s points in this post for CEPR’s Americas Blog.

CEPR International Communications Director Dan Beeton wrote this post for the Verso Books blog on Berta Cáceres’ legacy, while CEPR Senior Associate for International Policy Alexander Main accompanied members of Cáceres’ family to meetings on Capitol Hill and with various officials, including OAS Secretary General Luis Almagro and U.S. State Department staff.  CEPR co-sponsored a congressional briefing on March 23rd hosted by Representative Hank Johnson (D-Ga.) featuring Cáceres’ daughter, Laura Zúñiga Cáceres and Gaspar Sánchez, Member of the General Coordination of the organization Berta co-founded (COPINH) and its Coordinator for LGBTQ Rights. CEPR International Program Assistant Becca Watts wrote this post on the briefing for the Americas Blog, which includes video of the briefing.

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The following reports on labor market policy were recently released:

Political Economy Research Institute

Assessing the Jobs-Environment Relationship with Matched Data from US EEOC and US EPA
Michael Ash, James K. Boyce

Urban Institute

Context on the Six Work Support Strategies States: Supplement to WSS Evaluation Publications
Heather Hahn, Monica H. Rohacek, Julia B. Isaacs

Improving Business Processes for Delivery Work Supports for Low-Income Families: Findings from the Work Support Strategies Evaluation
Heather Hahn, Ria Amin, David Kassabian, Maeve E. Gearing

States’ Use of Technology to Improve Delivery of Benefits: Findings from the Work Support Strategies Evaluation
Pamela J. Loprest, Maeve E. Gearing, David Kassabian

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In March of last year, CEPR released a series of five measures tracking the rate of recovery from the 2008 recession. The series was created in order to show that the labor market is much weaker than the unemployment rate implies.

The five measures have been updated every month at CEPR’s Graphic Economics page after each new jobs report. However, we have modified the series in two ways for the latest jobs figures. These modifications are described below.

Using 2007 Annual Data as Our Starting Point

In CEPR’s “Real Rate of Recovery” series, we determine both the degree to which the economy weakened during the recession and also the extent of recovery since then. In our original series, we used December 2007 — officially the first month of the recession, according to NBER — as our starting point for the pre-recession state of the economy. However, it appears that the economy began weakening even before December 2007. For example, the prime-age employment rate averaged 79.9 percent during 2007 as a whole, but had fallen to 79.7 percent by December. The unemployment rate itself exhibits this tendency, as it jumped from 4.7 to 5.0 percent between November and December.

December 2007 is a flawed starting point, as the economy had already begun shedding jobs by then. Therefore, we have updated our series by taking the average annual data for 2007 as our starting point. This changes our calculations somewhat, as it means that the economy worsened more significantly between 2007 and the recession’s trough than we had originally estimated.

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buffie austerity 2016 04 01 fig1

The graph above displays the change in the prime-age employment rate for twenty countries between 2007 and 2015. Included in the graph are the United States, the remaining G-7 countries, various other advanced economies, and Mexico. (Mexico and Canada provide a useful point of comparison with the United States since they are part of the same regional economy.) 


The prime-age employment rate is a far better gauge of the labor market than the unemployment rate. As such, the graph above is useful in determining the level of employment lost in each country as a result of the 2008 recession.

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The economy added 215,000 jobs in March, with the unemployment rate rounding up to 5.0 percent from February's 4.9 percent. However, the modest increase in unemployment was largely good news, since it was the result of another 396,000 people entering the labor force.

There has been a large increase in the labor force over the last six months, especially among prime-age workers (ages 25-54). Since September, the labor force participation rate for prime-age workers has increased by 0.6 percentage points. This seems to support the view that the people who left the labor market during the downturn will come back if they see jobs available. However even with this rise, the employment-to-population ratio for prime-age workers is still down by more than two full percentage points from its pre-recession peak.

Another positive item in the household survey was a large jump in the percentage of unemployment due to voluntary quits. This sign of confidence in the labor market rose to 10.5 percent, the highest level in the recovery, although it's still more than a percentage point below the pre-recession peaks and almost four percentage points below the levels reached in 2000.

While the rate of employment growth in the establishment survey was in line with expectations, average weekly hours remained at 34.4, down from 34.6 in January. As a result, the index of aggregate hours worked is down by 0.2 percent from the January level. This could be a sign of slower job growth in future months.

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The following reports on labor market policy were recently released:

Economic Policy Institute

Wages Grew More for Low-Wage Workers in States that Raised their Minimum Wage in 2015
Elise Gould

Center on Budget and Policy Priorities

Policy Basics: How Many Weeks of Unemployment Compensation are Available?
Center on Budget and Policy Priorities

Institute for Women’s Policy Research

Women Gain 167,000 Jobs Out of 242,000 Jobs Added in February
Institute for Women’s Policy Research

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

National Employment Law Project

A “Training Wage” for Teens or New Hires would Hurt New York’s Workers and Undermine Responsible Employers
National Employment Law Project

Employers in the On-Demand Economy: Why Treating Workers as Employees is Good for Business
National Employment Law Project

Urban Institute

The Big States and Unemployement Insurance Financing
Wayne Vroman

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The following reports on labor market policy were recently released:

Center for American Progress

Partnered but Poor
Shawn Fremstad

Economic Policy Institute

New Legislation Could Help End Wage Theft Epidemic
Ross Eisenbrey

Political Economy Research Institute

A $15 Federal Minimum Wage: Who Would Benefit?
Jeannette Wicks-Lim

Urban Insitute

Understanding Local Workforce Systems
Lauren Eyster, Christin Durham, Michelle Van Noy, Neil Damron

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Earlier this morning, the Bureau of Labor Statistics (BLS) released the January 2016 results from the Job Openings and Labor Turnover Survey (JOLTS). In its summary of the newest JOLTS data, the BLS notes: “Job openings remain at historically high levels, rising to 5.5 million (+260,000) in January.” In fact, the 5.5 million openings is the third-highest level since the inception of JOLTS in December 2000.

A greater number of job openings means that more employers are looking to hire. And if employers are competing to hire workers, they will have to bid up wages to attract workers to their firms. So other things equal, a higher number of vacancies should benefit workers by pushing up wages.

However, what remains salient from a wage-setting perspective is not the number of job openings per se but rather the ratio of job openings to unemployed workers. If more job openings force employers to compete for workers and bid wages up, unemployment has the opposite effect: it forces prospective workers to compete for jobs and thus pushes wages down. Think of it this way: unemployed workers are desperate for jobs and will work at even very low wages, because any wage is an improvement over unemployment. When unemployment is high, employers need not bid up wages to attract workers to their firms, since the unemployed are desperate to work anyways.

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The Federal Reserve Board’s Open Market Committee (FOMC) voted not to raise interest rates at today’s meeting, but their statement indicates that they are still very much looking toward further rate hikes this year. It is difficult to see reason for this urgency.

The justification for raising rates is to prevent inflation from getting out of control, but inflation has been running well below the Fed’s 2.0 percent target for years. Furthermore, since the 2.0 percent target is an average inflation rate, the Fed should be prepared to tolerate several years in which the inflation rate is somewhat above 2.0 percent. In fact, since wages badly lagged productivity growth during the recession, the Fed should be prepared to allow for a period in which real wage growth slightly outpaces productivity growth in order to restore the pre-recession split between labor and capital. If preemptive steps are taken by the Fed in the near future that prevent workers from regaining their share of national income, that implies the use of the Fed’s power to make permanent the shift from wages to profits that took place in the recession.    

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Recent CPI data could give the impression that overall inflation is being held down by falling energy prices. While energy prices have fallen by 12.5 percent over the last year, the core inflation rate, which excludes food and energy prices, has risen by 2.3 percent. (The Federal Reserve Board actually targets the core Personal Consumption Expenditure Deflator, which has increased by 1.7 percent over the last year.)

However, it turns out that much of the inflation in the core index is driven by the shelter component as rents have been rising at more than a 3.0 percent annual rate. Excluding the shelter component, the core index is rising at just a 1.5 percent rate. While there has been some increase in this non-shelter core index in recent months, that was also true in 2001, when the economy and labor market were still quite weak by any measure.

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It’s presidential primary season!  That time every four years when the media focuses on all of the important policy issues facing our county with thorough, unbiased, factual analysis of all of the candidates’ proposals…

OK, we know that’s wishful thinking, especially this campaign season when the debate is about the size of the candidates’ “hands” rather than the size of workers’ paychecks. But on those occasions when the talk does turn to economic policy, CEPR is there - providing research and analysis that is truly fact-based and non-partisan.  

And we need your help to continue to inject some economic sanity into the news spin cycle this year.

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baker buffie unemployment budget 2016 03 14

The graph above shows the impact on the deficit of sustaining a 4.0 percent unemployment rate over the next decade, alongside projected spending on TANF, and SNAP. A 4.0 percent unemployment rate is 0.9 percentage points below the 4.9 percent average rate of unemployment projected by the Congressional Budget Office over the next decade.

The economy sustained a 4.0 percent unemployment rate as a year-round average in 2000, with the rate falling as low as 3.8 percent over the course of the year. Contrary to the predictions of most economists, there was no notable uptick in the rate of inflation despite this low unemployment rate. While we cannot know for certain the lowest unemployment rate the economy could sustain without leading to inflation, most economists had badly overstated this rate in the 1990s. There is reason to believe, most notably due to the aging of the labor force (older workers have lower unemployment rates), that the economy might be able to sustain a lower unemployment rate today than it did two decades ago.

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

Esther George has been one of the more hawkish members of the FOMC since becoming President of the Federal Reserve Bank of Kansas City in October of 2011. She first became a voting member of the FOMC in 2013. In her first seven meetings, she dissented from the majority each time and argued that the Fed should move to more restrictive monetary policy. (The statements on the dissents, from the Fed’s minutes, are at the end of this post.)  In six of the seven cases, she was the lone dissenter.

In 2014 and 2015 she continued to argue for tighter monetary policy in her public speeches. For example, in the summer of 2014 she argued that keeping the federal funds rate near zero could be signaling excessive pessimism and therefore have a negative effect on the economy:[1]

“And by keeping rates unusually low, policymakers may signal pessimism that the economy is not strong enough to begin moving to a more normal rate environment.”
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The following reports on labor market policy were recently released:

Institute for Research on Labor and Employment

The Effects of a $15 Minimum Wage in NewYork State
Michael Reich, Sylvia Allegretto, Ken Jacobs, Claire Montialoux

Current Challenges to Workers and Unions in Brazil
Roberto Véras de Oliveira

Center on Budget and Policy Priorities

Policy Basics: How Many Weeks of Unemployment Compensation Are Available?
Center on Budget and Policy Priorities

Chart Book: The Legacy of the Great Recession
Center on Budget and Policy Priorities

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Earlier this morning, the Bureau of Labor Statistics released its February jobs report. The February data are being well-received, with CEPR and other outlets highlighting the fact that workers finally seem to be moving back into the labor force.

One easy way to see this is by looking at the share of unemployed workers classified as “reentrants to the labor market.” Reentrants are people who have held a job at some point in the past and recently began searching for work after a period of non-employment.

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In 2015, the unemployment rate for black Americans aged 25 and older was 7.8 percent. For white Americans, it was just 3.8 percent. This large gap in unemployment rates persists even when controlling for educational attainment.

Figure 1 shows the average 2015 unemployment rates by race and educational attainment. The black unemployment rate is considerably higher than the white rate within each educational group.

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The Labor Department reported a sharp increase in the number of people entering the labor force in February and finding jobs, pushing the employment-to-population ratio (EPOP) to 59.8 percent, the highest rate in the recovery. This is 0.5 percentage points above the year-ago level, with all the increase coming since October. The recent rise in the EPOP suggests that many of the people who had left the labor force during the downturn are now coming back. However, the EPOP is still down by more than three full percentage points from the pre-recession level with most of the drop-off among prime age workers.

The establishment survey showed the economy creating 242,000 new jobs, with the gains broadly spread across sectors. Apparently the snow storms that hit the East Coast in early February did not markedly affect employment growth. Upward revisions to the prior two months data brought average growth over the last three months to 228,000.

Not all the news in the establishment survey was positive. The average workweek reportedly fell by 0.2 hours leading to a decline in the index of aggregate weekly hours, in spite of the increase in employment. The average hourly wage also reportedly fell by 3 cents in February. The reported decline is most likely a reporting error, but still the average hourly wage has only increased at a 2.0 percent annual rate comparing the last three months to the prior three months. There is certainly no case of accelerating wage growth in these data.

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During the 2016 campaign, a number of presidential candidates have proposed raising the retirement age to 70. Others want to raise the retirement age a bit less, and some don’t favor raising it at all.

When candidates talk about “raising the retirement age,” what they are referring to is the Social Security Full Retirement Age (SSFRA). This is the age at which retirees can begin receiving full Social Security benefits. Starting at age 62, retirees can receive partial benefits.

From 1937 through 2002, the SSFRA was 65. Based on a law from 1983, the SSFRA was gradually raised to 66 by 2009 and will be raised to 67 by 2027. While the age for receiving partial benefits wasn’t lifted, the amount of benefits was reduced. Figure 1 below shows how the SSFRA has and will increase according to current law.

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