Wonkblog had a post telling readers that the U.S. labor market is doing better in the recovery than the labor market in most other wealthy countries. While this is true if we look at unemployment rates, is far less clear if the focus is employment rates (EPOP), the percentage of the population who is working.
This is true even we control for demographics. The EPOP for prime age men (ages 25-54) in the United States is still down 3.7 percentage points from its pre-recession level. By comparison, in Japan the EPOP for prime age men is up by 2.0 percentage points and in Germany it’s up by 3.3 percentage points.
France has seen a drop in its EPOP from pre-recession levels, but only 0.7 percentage points — still much better than the U.S. In fact, with a drop of in its EPOP for prime age men of 2.7 percentage points, the euro zone as a whole is doing better than the United States, in spite of the inclusion of crisis countries like Spain and Greece with double-digit drops in EPOPS.
In short, the case that the U.S. labor market has fared better than the labor markets in most other wealthy countries is much weaker than this piece indicates.
Thanks to Seth Ackerman for calling this one to my attention.
Wonkblog had a post telling readers that the U.S. labor market is doing better in the recovery than the labor market in most other wealthy countries. While this is true if we look at unemployment rates, is far less clear if the focus is employment rates (EPOP), the percentage of the population who is working.
This is true even we control for demographics. The EPOP for prime age men (ages 25-54) in the United States is still down 3.7 percentage points from its pre-recession level. By comparison, in Japan the EPOP for prime age men is up by 2.0 percentage points and in Germany it’s up by 3.3 percentage points.
France has seen a drop in its EPOP from pre-recession levels, but only 0.7 percentage points — still much better than the U.S. In fact, with a drop of in its EPOP for prime age men of 2.7 percentage points, the euro zone as a whole is doing better than the United States, in spite of the inclusion of crisis countries like Spain and Greece with double-digit drops in EPOPS.
In short, the case that the U.S. labor market has fared better than the labor markets in most other wealthy countries is much weaker than this piece indicates.
Thanks to Seth Ackerman for calling this one to my attention.
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That’s what a Reuters story on the NYT website said Japanese leaders are troubled by. The piece told readers:
“Policymakers are also pledging to draft a vision of how to keep Japan’s ageing population from shrinking into oblivion, holding the line at 100 million in 2060, a 20 percent drop from now.”
And what bad thing happens if Japan continues to become a less crowded island through the rest of the century and beyond, more room at the beach and less pollution?
That’s what a Reuters story on the NYT website said Japanese leaders are troubled by. The piece told readers:
“Policymakers are also pledging to draft a vision of how to keep Japan’s ageing population from shrinking into oblivion, holding the line at 100 million in 2060, a 20 percent drop from now.”
And what bad thing happens if Japan continues to become a less crowded island through the rest of the century and beyond, more room at the beach and less pollution?
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Joe Nocera had a good piece discussing the plight of factory workers in the United States subjected to low cost competition from China and other developing countries. He argues that the government has done too little to help the workers and the communities that have suffered from such competition. However his prescription, that workers should get more skills, is somewhat misleading.
While it is always better to have a more skilled workforce, one of the main reasons that more skilled workers have done better in the era of globalization is that they have been largely protected from the same sort of competition faced by less-educated workers. While trade agreements were explicitly designed to put manufacturing workers in direct competition with the low-paid workers in the developing world, there has been no similar effort to subject our doctors, dentists, lawyers and other highly paid professionals to the same sort of competition.
Trade agreements could have focused on reducing barriers that make it difficult for qualified professionals from the developing world to work in the United States. For example, we could have fully transparent sets of standards to become a doctor or lawyer in the United States, with tests administered in other countries (by U.S. certified test givers). Anyone from Mexico, India, or China who passed these tests would have the same ability to work in the United States as someone who grew up in Kansas.
The potential benefits to consumers and the economy would run into the hundreds of billions of dollars annually. And this would have the effect of shifting income downward rather than upward. (Yes folks, we can design a mechanism to reimburse developing countries for the professionals they educated who come here, which would ensure they gain as well.)
Trade agreements did not put professionals into competition because they are a powerful enough lobby to block such actions. However it is important to be clear in our understanding. It was not “globalization” that redistributed income upward. It was a pattern of trade that was intended to put downward pressure on the wages of the bulk of the population while protecting those at the top.
Addendum:
Just a few quick points – doctors and lawyers (especially doctors) are not members of the middle class in the normal usage of the term. About 25 percent of doctors are in the one percent and the vast majority are in the top two percent. If the rest of us are going to get more, they must be among the group that gets less.
Second, lower wages for manufacturing workers have translated into lower prices. Part of it has gone to profits, but shirts and cars are cheaper than they would be if we didn’t have low-paid labor doing much of the work.
Finally, there is no way that a lower valued dollar is going to bring us to developing country living standards as fans of arithmetic everywhere can verify. Imports are equal to roughly 20 percent of our GDP. Suppose a 30 percent drop in the dollar leads to a 20 percent rise in import prices (both very large changes). This implies that we can buy 4 percent less than we did previously. That still leaves us far ahead of Mexico and China. And for debt-phobia fans, we are saving this amount today by borrowing.
Joe Nocera had a good piece discussing the plight of factory workers in the United States subjected to low cost competition from China and other developing countries. He argues that the government has done too little to help the workers and the communities that have suffered from such competition. However his prescription, that workers should get more skills, is somewhat misleading.
While it is always better to have a more skilled workforce, one of the main reasons that more skilled workers have done better in the era of globalization is that they have been largely protected from the same sort of competition faced by less-educated workers. While trade agreements were explicitly designed to put manufacturing workers in direct competition with the low-paid workers in the developing world, there has been no similar effort to subject our doctors, dentists, lawyers and other highly paid professionals to the same sort of competition.
Trade agreements could have focused on reducing barriers that make it difficult for qualified professionals from the developing world to work in the United States. For example, we could have fully transparent sets of standards to become a doctor or lawyer in the United States, with tests administered in other countries (by U.S. certified test givers). Anyone from Mexico, India, or China who passed these tests would have the same ability to work in the United States as someone who grew up in Kansas.
The potential benefits to consumers and the economy would run into the hundreds of billions of dollars annually. And this would have the effect of shifting income downward rather than upward. (Yes folks, we can design a mechanism to reimburse developing countries for the professionals they educated who come here, which would ensure they gain as well.)
Trade agreements did not put professionals into competition because they are a powerful enough lobby to block such actions. However it is important to be clear in our understanding. It was not “globalization” that redistributed income upward. It was a pattern of trade that was intended to put downward pressure on the wages of the bulk of the population while protecting those at the top.
Addendum:
Just a few quick points – doctors and lawyers (especially doctors) are not members of the middle class in the normal usage of the term. About 25 percent of doctors are in the one percent and the vast majority are in the top two percent. If the rest of us are going to get more, they must be among the group that gets less.
Second, lower wages for manufacturing workers have translated into lower prices. Part of it has gone to profits, but shirts and cars are cheaper than they would be if we didn’t have low-paid labor doing much of the work.
Finally, there is no way that a lower valued dollar is going to bring us to developing country living standards as fans of arithmetic everywhere can verify. Imports are equal to roughly 20 percent of our GDP. Suppose a 30 percent drop in the dollar leads to a 20 percent rise in import prices (both very large changes). This implies that we can buy 4 percent less than we did previously. That still leaves us far ahead of Mexico and China. And for debt-phobia fans, we are saving this amount today by borrowing.
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Austin Frakt had an interesting piece in the Upshot section of the NYT reporting research finding that show substantial reduction in health care premiums when there is more competition in the market. The implication is that prices could fall substantially in the exchanges where there are a small numbers of insurers and especially in states like New Hampshire or West Virginia where there is only a single insurer in the market.
At the end of the piece Frakt notes that more insurers appear to be entering the exchanges in 2015 than in their first year of operation. He also suggests some policies that the federal government could pursue to encourage more competition. In addition to the policies Frakt listed, in principle the federal government could also allow Medicare and/or Medicaid to offer plans for purchase in the market in areas with less than a specified number of insurers. This should ensure people the option to have a reasonably priced plan.
At the start of the piece Frakt refers to President Obama’s pledge that his health care plan would lower family premiums by as much as $2,500 a year. It is worth noting that per person health care costs in the United States in 2014 are around 15 percent less than had been projected in 2008. This would be a savings in the neighborhood of more than $2,000 a year for a typical family plan. Clearly not all of these savings can be attributed to the Affordable Care Act, but people are paying considerably less for health care in 2014 than had been expected in 2008.
Austin Frakt had an interesting piece in the Upshot section of the NYT reporting research finding that show substantial reduction in health care premiums when there is more competition in the market. The implication is that prices could fall substantially in the exchanges where there are a small numbers of insurers and especially in states like New Hampshire or West Virginia where there is only a single insurer in the market.
At the end of the piece Frakt notes that more insurers appear to be entering the exchanges in 2015 than in their first year of operation. He also suggests some policies that the federal government could pursue to encourage more competition. In addition to the policies Frakt listed, in principle the federal government could also allow Medicare and/or Medicaid to offer plans for purchase in the market in areas with less than a specified number of insurers. This should ensure people the option to have a reasonably priced plan.
At the start of the piece Frakt refers to President Obama’s pledge that his health care plan would lower family premiums by as much as $2,500 a year. It is worth noting that per person health care costs in the United States in 2014 are around 15 percent less than had been projected in 2008. This would be a savings in the neighborhood of more than $2,000 a year for a typical family plan. Clearly not all of these savings can be attributed to the Affordable Care Act, but people are paying considerably less for health care in 2014 than had been expected in 2008.
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Folks who are not DC insiders might think it would take courage to stand up to the rich people who have done so well (and caused so much harm) over the last three decades. Or, we might think it would take courage to standup to nonsense about budget deficits to point out that we need larger deficits now to create the demand necessary to bring the economy back to full employment. (Yes, we all love the private sector, but the private sector doesn’t create jobs for love.) Taking those positions might seem to require courage, but in DC insider circles real courage is demanding that we cut Social Security and Medicare; and that is independent of any of the facts.
Hence we see Dana Milbank telling us that new CBO projections, showing that deficits will be lower over the next decade than in the prior set of projections,”threw cold water on my tranquility.” He went on to say the new report was “downright bone-chilling” and that the “top-line conclusions were grim enough, if not catastrophic.” It’s scary to think what his reaction would have been if the new projections showed a worsening picture.
But his real horror story is that the debt to GDP ratio will be over 77 percent in a decade. Wow, and this means what? Milbank was on vacation so he probably missed the collapse of the housing bubble and the worst downturn since the Great Depression. That really was (and is) bone-chilling and catastrophic, but apparently not the sort of thing that worries DC insider types.
Just for purposes of comparison, just about every country in the euro zone has debt to GDP ratios well above 77 percent and many are borrowing at lower interest rates than the United States. Japan has a debt to GDP ratio more than three times as high and borrows long-term at less than a one percent interest rate. So, these debt numbers might make good scare stories for the DC insider crowd, but they have nothing to do with real world economics.
There are of course things we should be worried about, like continued slow growth and high unemployment, but the best remedy for that would be a higher budget deficit or a lower valued dollar that would reduce the trade deficit. We should also worry about the fact that we pay twice as much for our health care per person than people in other wealthy countries with nothing to show for it in terms of outcomes. If we fixed health care that would also take care of the budget deficit, shifting the projected deficits to surpluses.
But fixing health care would mean taking money away from drug companies, doctors, medical equipment suppliers and insurers. The Post doesn’t pay people to push taking away money from those interest groups,, just seniors.
Folks who are not DC insiders might think it would take courage to stand up to the rich people who have done so well (and caused so much harm) over the last three decades. Or, we might think it would take courage to standup to nonsense about budget deficits to point out that we need larger deficits now to create the demand necessary to bring the economy back to full employment. (Yes, we all love the private sector, but the private sector doesn’t create jobs for love.) Taking those positions might seem to require courage, but in DC insider circles real courage is demanding that we cut Social Security and Medicare; and that is independent of any of the facts.
Hence we see Dana Milbank telling us that new CBO projections, showing that deficits will be lower over the next decade than in the prior set of projections,”threw cold water on my tranquility.” He went on to say the new report was “downright bone-chilling” and that the “top-line conclusions were grim enough, if not catastrophic.” It’s scary to think what his reaction would have been if the new projections showed a worsening picture.
But his real horror story is that the debt to GDP ratio will be over 77 percent in a decade. Wow, and this means what? Milbank was on vacation so he probably missed the collapse of the housing bubble and the worst downturn since the Great Depression. That really was (and is) bone-chilling and catastrophic, but apparently not the sort of thing that worries DC insider types.
Just for purposes of comparison, just about every country in the euro zone has debt to GDP ratios well above 77 percent and many are borrowing at lower interest rates than the United States. Japan has a debt to GDP ratio more than three times as high and borrows long-term at less than a one percent interest rate. So, these debt numbers might make good scare stories for the DC insider crowd, but they have nothing to do with real world economics.
There are of course things we should be worried about, like continued slow growth and high unemployment, but the best remedy for that would be a higher budget deficit or a lower valued dollar that would reduce the trade deficit. We should also worry about the fact that we pay twice as much for our health care per person than people in other wealthy countries with nothing to show for it in terms of outcomes. If we fixed health care that would also take care of the budget deficit, shifting the projected deficits to surpluses.
But fixing health care would mean taking money away from drug companies, doctors, medical equipment suppliers and insurers. The Post doesn’t pay people to push taking away money from those interest groups,, just seniors.
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In an article discussing the drop in the year over year inflation rate in the euro zone to 0.4 percent, the New York Times told readers that the inflation rate could fall further, turning into deflation, which it told readers:
“causes consumers to delay purchases and undercuts corporate profits and jobs.”
That is true of deflation, but it is also true of very low inflation. The reported inflation rate is an average of the inflation rate seen in millions of different goods and services being sold at millions of different outlets. At any point in time roughly half of these inflation rates are more rapid than the average inflation rate and half are less. This means that the prices of a large number of goods and services are already falling. Insofar as this is a factor causing a delay in the purchase of goods, we would already be seeing it. A further drop in the overall rate of inflation to make it negative would change the picture little.
In terms of the impact on corporate profits and jobs, the issue here is the real interest rate, which is the nominal interest rate minus the inflation rate. Any drop in the inflation rate means a higher real interest rate and therefore provides a disincentive for investment. Whether the inflation rate crosses zero and turns negative really has no consequence in this story.
The point here is important. The euro zone is already suffering from an inflation rate that is way too low, causing real interest rates to be far higher than would be desired given the weakness of its economy. The problems of deflation are not something that it may have to worry about in the future. Those problems are here now. The situation worsens anytime the inflation rate falls further, but crossing zero and turning negative has no particular economic significance.
I should probably also mention that there is huge error in measurement. The Boskin Commission, to the widespread applause of most elite economists, said that our consumer price index overstated the annual inflation rate by 1.1 percentage point. After some changes in the index were made, they said it still overstated inflation by 0.8 percentage points. There is no reason to think the euro zone measure is more accurate than the U.S. measure, which means if people follow our elite economists then they should believe that the euro zone already is facing deflation.
I should probably also mention that the Boskin Commission’s estimates were pushed as part of an effort at the time to cut the annual cost of living adjustment to Social Security benefits. For some reason no one seems to mention their work anymore, even though the Bureau of Labor Statistics has not addressed most the sources of bias they identified.
Note: Typo corrected, “inflation” changed to “deflation.” Thanks kea.
In an article discussing the drop in the year over year inflation rate in the euro zone to 0.4 percent, the New York Times told readers that the inflation rate could fall further, turning into deflation, which it told readers:
“causes consumers to delay purchases and undercuts corporate profits and jobs.”
That is true of deflation, but it is also true of very low inflation. The reported inflation rate is an average of the inflation rate seen in millions of different goods and services being sold at millions of different outlets. At any point in time roughly half of these inflation rates are more rapid than the average inflation rate and half are less. This means that the prices of a large number of goods and services are already falling. Insofar as this is a factor causing a delay in the purchase of goods, we would already be seeing it. A further drop in the overall rate of inflation to make it negative would change the picture little.
In terms of the impact on corporate profits and jobs, the issue here is the real interest rate, which is the nominal interest rate minus the inflation rate. Any drop in the inflation rate means a higher real interest rate and therefore provides a disincentive for investment. Whether the inflation rate crosses zero and turns negative really has no consequence in this story.
The point here is important. The euro zone is already suffering from an inflation rate that is way too low, causing real interest rates to be far higher than would be desired given the weakness of its economy. The problems of deflation are not something that it may have to worry about in the future. Those problems are here now. The situation worsens anytime the inflation rate falls further, but crossing zero and turning negative has no particular economic significance.
I should probably also mention that there is huge error in measurement. The Boskin Commission, to the widespread applause of most elite economists, said that our consumer price index overstated the annual inflation rate by 1.1 percentage point. After some changes in the index were made, they said it still overstated inflation by 0.8 percentage points. There is no reason to think the euro zone measure is more accurate than the U.S. measure, which means if people follow our elite economists then they should believe that the euro zone already is facing deflation.
I should probably also mention that the Boskin Commission’s estimates were pushed as part of an effort at the time to cut the annual cost of living adjustment to Social Security benefits. For some reason no one seems to mention their work anymore, even though the Bureau of Labor Statistics has not addressed most the sources of bias they identified.
Note: Typo corrected, “inflation” changed to “deflation.” Thanks kea.
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The NYT noted that gas prices remain relatively low in spite of the fighting taking place in or near several major oil producers. In an article entitled “a new American oil bonanza, it told readers:
“The reason for the improved economics of road travel can be found 10,000 feet below the ground here, where the South Texas Eagle Ford shale is providing more than a million new barrels of oil supplies to the world market every day. United States refinery production in recent weeks reached record highs and left supply depots flush, cushioning the impact of all the instability surrounding traditional global oil fields.”
The piece also includes a chart showing daily production at around 2.5 million barrels more than its pre-recession level. While this increased production has undoubtedly had an impact on world prices (it is world prices that matter — oil is bought and sold in the global market), so has declines in demand. There has been a sharp drop in vehicle miles driven compared with projected travel.
Vehicle Miles Traveled: Total and Per Capita
Figure 1. VMT trends for the United States through 2013. Source: FHWA and Census Bureau.
If per person consumption had risen in line with the projected trend, it would be around 15 percent higher than it is today. Since U.S. oil consumption is around 19.0 million barrels a day (not all of it is for gasoline), this means that the reduction in driving below its trend path is saving us around 2.5 million barrels of oil a day, roughly the same amount as the increase in production.
In other words, this article could have been dedicated to the bonanza from conservation and told readers how all the happy people interviewed are enjoying lower gas prices because many people across the country (and the world) are now driving less than was projected based on prior trends. The piece then could have focused on mass transit or other factors that are leading people to drive less. (unfortunately, one of these would be the weak economy.)
The NYT noted that gas prices remain relatively low in spite of the fighting taking place in or near several major oil producers. In an article entitled “a new American oil bonanza, it told readers:
“The reason for the improved economics of road travel can be found 10,000 feet below the ground here, where the South Texas Eagle Ford shale is providing more than a million new barrels of oil supplies to the world market every day. United States refinery production in recent weeks reached record highs and left supply depots flush, cushioning the impact of all the instability surrounding traditional global oil fields.”
The piece also includes a chart showing daily production at around 2.5 million barrels more than its pre-recession level. While this increased production has undoubtedly had an impact on world prices (it is world prices that matter — oil is bought and sold in the global market), so has declines in demand. There has been a sharp drop in vehicle miles driven compared with projected travel.
Vehicle Miles Traveled: Total and Per Capita
Figure 1. VMT trends for the United States through 2013. Source: FHWA and Census Bureau.
If per person consumption had risen in line with the projected trend, it would be around 15 percent higher than it is today. Since U.S. oil consumption is around 19.0 million barrels a day (not all of it is for gasoline), this means that the reduction in driving below its trend path is saving us around 2.5 million barrels of oil a day, roughly the same amount as the increase in production.
In other words, this article could have been dedicated to the bonanza from conservation and told readers how all the happy people interviewed are enjoying lower gas prices because many people across the country (and the world) are now driving less than was projected based on prior trends. The piece then could have focused on mass transit or other factors that are leading people to drive less. (unfortunately, one of these would be the weak economy.)
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A Morning Edition report on French President Francois Hollande’s decision to reshuffle his cabinet and eliminate members who complained about the cutbacks in government spending that are slowing growth and destroying jobs, treated him as a potential hero for trying to restructure France’s labor market. This coverage directly contradicts economics, since there is no plausible story whereby the economic gains from whatever restructuring Mr. Hollande is able to engineer will be more than a small fraction of the losses it is incurring due to austerity being imposed by Germany on the whole euro zone. This austerity will have cost France several trillion dollars in lost output by the end of the decade.
A Morning Edition report on French President Francois Hollande’s decision to reshuffle his cabinet and eliminate members who complained about the cutbacks in government spending that are slowing growth and destroying jobs, treated him as a potential hero for trying to restructure France’s labor market. This coverage directly contradicts economics, since there is no plausible story whereby the economic gains from whatever restructuring Mr. Hollande is able to engineer will be more than a small fraction of the losses it is incurring due to austerity being imposed by Germany on the whole euro zone. This austerity will have cost France several trillion dollars in lost output by the end of the decade.
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The NYT had a piece on the upward revision of second quarter GDP data to a growth rate of 4.2 percent from 4.0 percent in the advance report. It would have been worth reminding readers that the jump was a reversal from a weather induced plunge of 2.1 percent in the first quarter. This leaves the economy growing at annual rate of just 1.1 percent for the first half of the year. Even if the growth rate is 3.0 percent for the second half that would still leave year-round growth at just 2.0 percent. This is below almost all estimates of the economy’s potential which means that rather than making up ground lost during the recession, the economy is falling further below its potential level of output.
The piece also is a bit off in a couple of other areas. It noted the upward revision to investment and told readers:
“Since the economy emerged from the recession five years ago, companies have been hesitant to spend heavily on new capacity, but these figures and other recent data indicate that is finally changing.”
Actually the revised 8.4 percent growth rate for investment is not especially impressive. There have been many previous quarters in the recovery where investment grew more rapidly. For example, in the second, third, and fourth quarters of 2011 investment grew at 8.8 percent, 19.4 percent, and 9.5 percent annual rates, respectively. As recenly as the fourth quarter of last year it grew at a 10.4 percent annual rate, so the most recent quarterly rate is not impressive, especially since it follows growth of just 1.6 percent in the first quarter.
One area where it paints an overly pessimistic picture is in reporting the split between wages and profits:
“Despite the faster overall growth rate, businesses still seem to be benefiting more from the economy’s upward trajectory than many individual consumers are.
“The revision on Thursday, for example, lowered the estimate of workers’ wage and salary growth slightly in the first half of 2014, with income rising 5.8 percent in the second quarter. Corporate profits, on the other hand, jumped 8 percent in the second quarter, the Commerce Department said.”
The comparison with the first quarter is misleading. The profit data are always erratic and the first quarter showed a surprisingly large drop in profits. If the comparison is made with the second quarter of 2013 nominal before-tax profits are actually down by 0.3 percent. By contrast, labor compensation is up by 4.4 percent. These data are too erratic to make much of this shift, but the numbers actually suggest some redistribution from capital to labor over the last year.
The NYT had a piece on the upward revision of second quarter GDP data to a growth rate of 4.2 percent from 4.0 percent in the advance report. It would have been worth reminding readers that the jump was a reversal from a weather induced plunge of 2.1 percent in the first quarter. This leaves the economy growing at annual rate of just 1.1 percent for the first half of the year. Even if the growth rate is 3.0 percent for the second half that would still leave year-round growth at just 2.0 percent. This is below almost all estimates of the economy’s potential which means that rather than making up ground lost during the recession, the economy is falling further below its potential level of output.
The piece also is a bit off in a couple of other areas. It noted the upward revision to investment and told readers:
“Since the economy emerged from the recession five years ago, companies have been hesitant to spend heavily on new capacity, but these figures and other recent data indicate that is finally changing.”
Actually the revised 8.4 percent growth rate for investment is not especially impressive. There have been many previous quarters in the recovery where investment grew more rapidly. For example, in the second, third, and fourth quarters of 2011 investment grew at 8.8 percent, 19.4 percent, and 9.5 percent annual rates, respectively. As recenly as the fourth quarter of last year it grew at a 10.4 percent annual rate, so the most recent quarterly rate is not impressive, especially since it follows growth of just 1.6 percent in the first quarter.
One area where it paints an overly pessimistic picture is in reporting the split between wages and profits:
“Despite the faster overall growth rate, businesses still seem to be benefiting more from the economy’s upward trajectory than many individual consumers are.
“The revision on Thursday, for example, lowered the estimate of workers’ wage and salary growth slightly in the first half of 2014, with income rising 5.8 percent in the second quarter. Corporate profits, on the other hand, jumped 8 percent in the second quarter, the Commerce Department said.”
The comparison with the first quarter is misleading. The profit data are always erratic and the first quarter showed a surprisingly large drop in profits. If the comparison is made with the second quarter of 2013 nominal before-tax profits are actually down by 0.3 percent. By contrast, labor compensation is up by 4.4 percent. These data are too erratic to make much of this shift, but the numbers actually suggest some redistribution from capital to labor over the last year.
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