The pressure for a Fed rate hike is building as consumer spending in April came in somewhat higher than expected. Other data remain mixed, with investment notably weak.
The Washington Post ran an article that seemed to support the rate hike agenda. It told readers that the Fed’s key measure of inflation, the core personal consumption expenditure deflator, had ticked up in recent months. This is not true.
If we take the measure as being the year over year change, this was just 1.6 percent from April of 2015 to April of 2016. It was 1.7 percent for both January and February.
The pressure for a Fed rate hike is building as consumer spending in April came in somewhat higher than expected. Other data remain mixed, with investment notably weak.
The Washington Post ran an article that seemed to support the rate hike agenda. It told readers that the Fed’s key measure of inflation, the core personal consumption expenditure deflator, had ticked up in recent months. This is not true.
If we take the measure as being the year over year change, this was just 1.6 percent from April of 2015 to April of 2016. It was 1.7 percent for both January and February.
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Robert Samuelson says it does, using his column, “Good News for the Middle Class,” to highlight the findings of the Fed’s Report on the Economic Well-Being of U.S. Households in 2015. For Samuelson, the big news is that 69?percent of households said they were “living comfortably” or “doing okay,” up from 62 percent in 2013.
Okay, that one is clearly going in the right direction, although this is not terribly surprising given that we are two years further along in a recovery, which now has a respectable rate of job growth. But this aside, it is hard to view much of the other information in the report as being very positive.
For example, the report finds that:
“Twenty-two percent of employed adults indicate that they are either working multiple jobs, doing informal work for pay in addition to their main job, or both.”
“Thirty-one percent of non-retired respondents report that they have no retirement savings or pension at all, including 27 percent of non-retired respondents age 60 or older.”
“Forty-six percent of adults say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money.”
None of these findings look like good news to me. Samuelson does note the last one on the ability to cover emergency expenses, but strangely tells readers:
“…almost 30 percent of respondents said they’d have trouble covering an unanticipated expense of $400.”
The 46 percent figure is in the executive summary.
Some other items that folks may find interesting:
“Just 16 percent of young adults (ages 25 to 34) whose parents both have only a high-school degree or less completed a bachelor’s degree, whereas 65 percent of young adults with a parent who completed a bachelor’s degree have completed one themselves.”
This is certainly not a very good story on mobility.
And finally one about the future:
“Twenty-three percent of respondents expect their income to be higher in the year after the survey, down from 29 percent who expected income growth in the year after the 2014 survey.”
That one doesn’t look great. People’s ability to see the economy’s future tends not to be very good (probably because they mostly get information from reading what economists say), but this certainly does not suggest optimism about their economic prospects. On net, I don’t know if the picture here is good news, but I suppose we can say that it could be worse.
Robert Samuelson says it does, using his column, “Good News for the Middle Class,” to highlight the findings of the Fed’s Report on the Economic Well-Being of U.S. Households in 2015. For Samuelson, the big news is that 69?percent of households said they were “living comfortably” or “doing okay,” up from 62 percent in 2013.
Okay, that one is clearly going in the right direction, although this is not terribly surprising given that we are two years further along in a recovery, which now has a respectable rate of job growth. But this aside, it is hard to view much of the other information in the report as being very positive.
For example, the report finds that:
“Twenty-two percent of employed adults indicate that they are either working multiple jobs, doing informal work for pay in addition to their main job, or both.”
“Thirty-one percent of non-retired respondents report that they have no retirement savings or pension at all, including 27 percent of non-retired respondents age 60 or older.”
“Forty-six percent of adults say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money.”
None of these findings look like good news to me. Samuelson does note the last one on the ability to cover emergency expenses, but strangely tells readers:
“…almost 30 percent of respondents said they’d have trouble covering an unanticipated expense of $400.”
The 46 percent figure is in the executive summary.
Some other items that folks may find interesting:
“Just 16 percent of young adults (ages 25 to 34) whose parents both have only a high-school degree or less completed a bachelor’s degree, whereas 65 percent of young adults with a parent who completed a bachelor’s degree have completed one themselves.”
This is certainly not a very good story on mobility.
And finally one about the future:
“Twenty-three percent of respondents expect their income to be higher in the year after the survey, down from 29 percent who expected income growth in the year after the 2014 survey.”
That one doesn’t look great. People’s ability to see the economy’s future tends not to be very good (probably because they mostly get information from reading what economists say), but this certainly does not suggest optimism about their economic prospects. On net, I don’t know if the picture here is good news, but I suppose we can say that it could be worse.
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The NYT had an interesting column on how we can reduce the length of the security lines at airports. (Start with your shoes.) However, the piece left out one obvious factor lengthening security lines: carry on baggage.
Security lines would move much quicker if more people checked their luggage rather than carry it on board. Of course, there is a good reason that people want to carry their bags on board, most airlines charge them $25 per checked bag. (Southwest is a notable exception, allowing two free checked bags per passenger.) So we have airlines carrying through a policy that is making everyone’s life miserable to squeeze a few extra dollars out of their passengers.
We can counter the airlines bad behavior. Suppose that TSA charged a $10 fee for each bag that goes through security. That would give people more incentive to check their bags, thereby reducing the length of the security lines. If that is too radical, we can change an absurdity in current law under which airline tickets are subject to a 7.5 percent tax used to fund airport operations, but fees like those for checking bags are not. If there is a planet where this makes sense, I haven’t seen it.
Anyhow, trying to get more people to check their bags is a really simple way to reduce the length of the security lines. Southwest is a highly profitable airline, maybe they could provide some management training to their competitors.
Irrelevant sidebar — here’s the reference for my title.
The NYT had an interesting column on how we can reduce the length of the security lines at airports. (Start with your shoes.) However, the piece left out one obvious factor lengthening security lines: carry on baggage.
Security lines would move much quicker if more people checked their luggage rather than carry it on board. Of course, there is a good reason that people want to carry their bags on board, most airlines charge them $25 per checked bag. (Southwest is a notable exception, allowing two free checked bags per passenger.) So we have airlines carrying through a policy that is making everyone’s life miserable to squeeze a few extra dollars out of their passengers.
We can counter the airlines bad behavior. Suppose that TSA charged a $10 fee for each bag that goes through security. That would give people more incentive to check their bags, thereby reducing the length of the security lines. If that is too radical, we can change an absurdity in current law under which airline tickets are subject to a 7.5 percent tax used to fund airport operations, but fees like those for checking bags are not. If there is a planet where this makes sense, I haven’t seen it.
Anyhow, trying to get more people to check their bags is a really simple way to reduce the length of the security lines. Southwest is a highly profitable airline, maybe they could provide some management training to their competitors.
Irrelevant sidebar — here’s the reference for my title.
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The Washington Post has an article telling readers that a former McDonald’s CEO is warning that a $15 minimum wage will lead to widespread use of robots at fast food restaurants. The piece goes on to warn about the danger that robots pose to jobs more generally:
“Robotics and artificial intelligence are hot areas in the technology sector, and the World Economic Forum estimated earlier this year that their rise would cause a net loss of 5.1 million jobs over the next five years.
“Some experts are so concerned about looming unemployment that they are calling for a basic income, a regular stipend to be paid to citizens who are likely to lose their jobs and cannot be retrained.”
When robots replace workers it is known as “productivity growth.” Productivity growth has actually been incredibly slow in the last decade and has even been negative the last two years.
It is not clear who the “some experts” are (names please), but actual experts know that the economy’s problem is too little productivity growth, not too much. Productivity growth allows for higher living standards. With more rapid productivity growth we can either have more goods or services or work fewer hours to have the same amount of goods and services.
Of course this depends on their being enough demand in the economy. Lack of demand can lead to unemployment. It is not hard to create demand. For example, we could have the government spend money. That is not hard in principle, but deficit cultists, like the Washington Post editorial board and much of the leadership in Congress (in both parties) start yelling and screaming about budget deficits.
We could try to get the trade deficit down, for example by lowering the value of the dollar against other currencies, which makes our goods and services more competitive. People in policy positions generally don’t like to discuss this policy, which would hurt manufacturers like GE which have relocated much of their production overseas and major retailers like Walmart, which has profited by establishing low-cost supply chains.
We can also take steps to reduce average work time, for example by promoting work-sharing as an alternative to layoffs. We can also push for paid family leave, sick days, and vacations, like they have in other wealthy countries.
And, we could discourage the Fed from raising interest rates to choke off demand. Higher interest rates are a policy explicitly designed to keep people from getting jobs.
In short, there are many ways to ensure that the economy has enough demand to employ workers, but the Washington Post would rather yell about robots.
The Washington Post has an article telling readers that a former McDonald’s CEO is warning that a $15 minimum wage will lead to widespread use of robots at fast food restaurants. The piece goes on to warn about the danger that robots pose to jobs more generally:
“Robotics and artificial intelligence are hot areas in the technology sector, and the World Economic Forum estimated earlier this year that their rise would cause a net loss of 5.1 million jobs over the next five years.
“Some experts are so concerned about looming unemployment that they are calling for a basic income, a regular stipend to be paid to citizens who are likely to lose their jobs and cannot be retrained.”
When robots replace workers it is known as “productivity growth.” Productivity growth has actually been incredibly slow in the last decade and has even been negative the last two years.
It is not clear who the “some experts” are (names please), but actual experts know that the economy’s problem is too little productivity growth, not too much. Productivity growth allows for higher living standards. With more rapid productivity growth we can either have more goods or services or work fewer hours to have the same amount of goods and services.
Of course this depends on their being enough demand in the economy. Lack of demand can lead to unemployment. It is not hard to create demand. For example, we could have the government spend money. That is not hard in principle, but deficit cultists, like the Washington Post editorial board and much of the leadership in Congress (in both parties) start yelling and screaming about budget deficits.
We could try to get the trade deficit down, for example by lowering the value of the dollar against other currencies, which makes our goods and services more competitive. People in policy positions generally don’t like to discuss this policy, which would hurt manufacturers like GE which have relocated much of their production overseas and major retailers like Walmart, which has profited by establishing low-cost supply chains.
We can also take steps to reduce average work time, for example by promoting work-sharing as an alternative to layoffs. We can also push for paid family leave, sick days, and vacations, like they have in other wealthy countries.
And, we could discourage the Fed from raising interest rates to choke off demand. Higher interest rates are a policy explicitly designed to keep people from getting jobs.
In short, there are many ways to ensure that the economy has enough demand to employ workers, but the Washington Post would rather yell about robots.
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That’s the question millions are asking, or at least the one they should be asking. The OECD recently did an analysis of the economic consequences for the U.K. if it decides to leave the European Union. It concluded that it would cost the country 5.1 percent of GDP in its central estimate. Other analyses have arrived at similar estimates. Such estimates have been cited by right-thinking people everywhere as a powerful argument against the U.K. leaving the European Union. (It is.)
But Brexit is not the only policy that can cost the U.K. large amounts of output. Since the Cameron government came to power in 2010 it has placed a priority on reducing the budget deficit rather than restoring the economy to full employment. As a result, the U.K. economy is still well below its potential level of output. (The potential has undoubtedly fallen as a result due to weak public and private investment since the downturn and workers experiencing prolonged stretches of unemployment and thereby losing skills.)
To get a simple estimate of the output lost due to Cameron’s austerity policies, we can compare the I.M.F.’s projected growth path for the U.K. from 2008, before the severity of the recession was recognized and its current level of output. In 2008, the I.M.F. projected that the U.K. economy would be 26.2 percent larger in 2016 than it was in 2007. (Since the projection only runs to 2013 I have assumed that the growth rate for 2012 to 2013 [2.7 percent] continues for the next three years.) The most recent projection shows that 2016 GDP will be just 9.4 percent higher than the 2007 level.
If we can credit the I.M.F. research staff for knowing what they were doing in their 2008 projections, then the U.K.’s austerity policies have cost it an amount of output equal to 16.8 percentage points of 2007 GDP or more than three times the estimated cost of Brexit. This means that if Brexit is an economic disaster then Cameron’s austerity has been three times as costly as an economic disaster.
For the curious ones out there, the I.M.F’s projections showed the U.S. economy being 26.4 percent larger in 2016 than in 2007. The most recent projection shows the economy being 12.6 larger. The implied loss of 13.8 percentage points of 2007 is a bit less than the three times Brexit measure.
That’s the question millions are asking, or at least the one they should be asking. The OECD recently did an analysis of the economic consequences for the U.K. if it decides to leave the European Union. It concluded that it would cost the country 5.1 percent of GDP in its central estimate. Other analyses have arrived at similar estimates. Such estimates have been cited by right-thinking people everywhere as a powerful argument against the U.K. leaving the European Union. (It is.)
But Brexit is not the only policy that can cost the U.K. large amounts of output. Since the Cameron government came to power in 2010 it has placed a priority on reducing the budget deficit rather than restoring the economy to full employment. As a result, the U.K. economy is still well below its potential level of output. (The potential has undoubtedly fallen as a result due to weak public and private investment since the downturn and workers experiencing prolonged stretches of unemployment and thereby losing skills.)
To get a simple estimate of the output lost due to Cameron’s austerity policies, we can compare the I.M.F.’s projected growth path for the U.K. from 2008, before the severity of the recession was recognized and its current level of output. In 2008, the I.M.F. projected that the U.K. economy would be 26.2 percent larger in 2016 than it was in 2007. (Since the projection only runs to 2013 I have assumed that the growth rate for 2012 to 2013 [2.7 percent] continues for the next three years.) The most recent projection shows that 2016 GDP will be just 9.4 percent higher than the 2007 level.
If we can credit the I.M.F. research staff for knowing what they were doing in their 2008 projections, then the U.K.’s austerity policies have cost it an amount of output equal to 16.8 percentage points of 2007 GDP or more than three times the estimated cost of Brexit. This means that if Brexit is an economic disaster then Cameron’s austerity has been three times as costly as an economic disaster.
For the curious ones out there, the I.M.F’s projections showed the U.S. economy being 26.4 percent larger in 2016 than in 2007. The most recent projection shows the economy being 12.6 larger. The implied loss of 13.8 percentage points of 2007 is a bit less than the three times Brexit measure.
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The NYT apparently wants its readers to believe that the economic policies put in place by Shinzo Abe, Japan’s prime minister, have been a failure. In an article on G-7 summit meeting it quoted Kenneth S. Courtis, chairman of Starfort Holdings and a former Asia vice chairman at Goldman Sachs Group Inc., as saying that Abe’s policies are “viewed mainly as a ‘marketing slogan.'” According to Courtis:
“Japan needs to ‘take a blowtorch’ to regulations and red tape that discourage competition.”
It would have been useful to include some actual data in the piece instead of just presenting readers with disparaging comments from someone in the financial industry. According to the OECD, Japan’s employment rate has increased by 3.2 percentage points since Abe took office in the fall of 2012. This would be equivalent to an increase in employment in the United States of more than 6.4 million workers.
By comparison, the employment rate in the United States has risen by just 1.9 percentage points over this same period. Articles in the New York Times and elsewhere have often praised the pace of job growth in the United States over this period.
While it is clear that Mr. Courtis is unhappy with the regulatory structure in Japan, the data seem to indicate less need for change than he implies in this article.
The NYT apparently wants its readers to believe that the economic policies put in place by Shinzo Abe, Japan’s prime minister, have been a failure. In an article on G-7 summit meeting it quoted Kenneth S. Courtis, chairman of Starfort Holdings and a former Asia vice chairman at Goldman Sachs Group Inc., as saying that Abe’s policies are “viewed mainly as a ‘marketing slogan.'” According to Courtis:
“Japan needs to ‘take a blowtorch’ to regulations and red tape that discourage competition.”
It would have been useful to include some actual data in the piece instead of just presenting readers with disparaging comments from someone in the financial industry. According to the OECD, Japan’s employment rate has increased by 3.2 percentage points since Abe took office in the fall of 2012. This would be equivalent to an increase in employment in the United States of more than 6.4 million workers.
By comparison, the employment rate in the United States has risen by just 1.9 percentage points over this same period. Articles in the New York Times and elsewhere have often praised the pace of job growth in the United States over this period.
While it is clear that Mr. Courtis is unhappy with the regulatory structure in Japan, the data seem to indicate less need for change than he implies in this article.
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In an article that reports on plans by a new coalition to challenge the financial industry, the Washington Post implied that the financial transaction tax (FTT) supported by the coalition would hurt ordinary investors. The piece told readers:
“The proposed so-called transaction tax has already raised concerns among some on Wall Street. Such a tax would also effect pension funds or other large investors who sometimes trade thousands of stocks a day, they say.
“‘While some politicians claim this tax is directed at high frequency trading, the truth is that it would directly hit the pension funds of hard-working teachers, nurses and teamsters,’ said Bill Harts, chief executive of Modern Markets Initiative, which represents high frequency trading firms.
“‘We don’t understand why unions would support something that would so clearly hurt their membership’s pension funds.'”
It’s interesting that the Washington Post chose to turn to a representative of the financial industry as its major source on this proposal. This would be comparable to relying on a spokesperson from the tobacco industry as the main source on tobacco taxes.
If the Post had turned to a more neutral source, like the Tax Policy Center of the Brookings Institution and the Urban Institute, it would have discovered that Mr. Harts is completely wrong. According to the Tax Policy Center’s analysis of a FTT, the volume of trading would actually decline by a larger percentage than the increase in trading costs due to a FTT. (In other words, the demand for trading is elastic.)
This means that on average the pension funds of hard-working teachers, nurses, and teamsters would be paying less money on trading costs after the tax was put in place than they do now. The tax would be more than fully offset by lower trading fees paid to the people that Mr. Harts represents.
In an article that reports on plans by a new coalition to challenge the financial industry, the Washington Post implied that the financial transaction tax (FTT) supported by the coalition would hurt ordinary investors. The piece told readers:
“The proposed so-called transaction tax has already raised concerns among some on Wall Street. Such a tax would also effect pension funds or other large investors who sometimes trade thousands of stocks a day, they say.
“‘While some politicians claim this tax is directed at high frequency trading, the truth is that it would directly hit the pension funds of hard-working teachers, nurses and teamsters,’ said Bill Harts, chief executive of Modern Markets Initiative, which represents high frequency trading firms.
“‘We don’t understand why unions would support something that would so clearly hurt their membership’s pension funds.'”
It’s interesting that the Washington Post chose to turn to a representative of the financial industry as its major source on this proposal. This would be comparable to relying on a spokesperson from the tobacco industry as the main source on tobacco taxes.
If the Post had turned to a more neutral source, like the Tax Policy Center of the Brookings Institution and the Urban Institute, it would have discovered that Mr. Harts is completely wrong. According to the Tax Policy Center’s analysis of a FTT, the volume of trading would actually decline by a larger percentage than the increase in trading costs due to a FTT. (In other words, the demand for trading is elastic.)
This means that on average the pension funds of hard-working teachers, nurses, and teamsters would be paying less money on trading costs after the tax was put in place than they do now. The tax would be more than fully offset by lower trading fees paid to the people that Mr. Harts represents.
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It is a question that goes unasked in a NYT piece that touted the Trans-Pacific Partnership (TPP) as providing the glue for an alliance of the U.S. and East Asian countries against China. While the deal will increase trade between the member countries in some areas, a major thrust of the deal is to increase patent and copyright protections. These increased protections will raise prices in many areas, most importantly prescription drugs.
If the TPP results in some of the poorer countries in the pact paying much higher prices for their drugs (to U.S. drug companies), imposing a large burden on government health care programs or possibly making drugs unaffordable for many citizens, it is not clear that it will make the countries closer allies with the United States. The NYT article does not consider this possibility.
It is a question that goes unasked in a NYT piece that touted the Trans-Pacific Partnership (TPP) as providing the glue for an alliance of the U.S. and East Asian countries against China. While the deal will increase trade between the member countries in some areas, a major thrust of the deal is to increase patent and copyright protections. These increased protections will raise prices in many areas, most importantly prescription drugs.
If the TPP results in some of the poorer countries in the pact paying much higher prices for their drugs (to U.S. drug companies), imposing a large burden on government health care programs or possibly making drugs unaffordable for many citizens, it is not clear that it will make the countries closer allies with the United States. The NYT article does not consider this possibility.
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