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Government

United States

Workers

Can a Tight Labor Market Pull Young People Back to Full-time Work?

From 2001 to 2013, college enrollment in the US increased rapidly. Young people delayed the full-time work portion of their lives, ostensibly to seek skills for an evolving set of jobs. Trends since 2014, however, suggest that the increase in education is not an entirely structural change. Over the past few years, a tighter labor market has been leading more young people to full-time work, suggesting that a weak labor market, rather than simply concern over a changing set of jobs, was pushing some young people to enroll from 2001 to 2013.

CEPR and Brian Dew / July 31, 2018

Article Artículo

Quick Thoughts on Trump's "Amazing" Economy

Donald Trump has gotten some well-deserved ridicule his boasts about the "amazing" economy. While the 4.1 percent growth figure reported for the second quarter is impressive, it is hardly qualifies as amazing. There were four quarters in the Obama years with faster growth. Going back before the Great Recession, there were many quarters with much more rapid growth. My favorite is the second quarter of 1978, back when Jimmy Carter was president, and the economy grew at a 16.4 percent rate.

But getting beyond Donald Trump's conception of "amazing," the real issues are whether the rate is sustainable and whether Trump's policies deserve credit. On the second point, his tax cut almost certainly deserves some of the credit for the quarter's growth. The tax cut is putting more than $150 billion into people's pockets this year. While it is true that the bulk of this money is going to the rich, who will spend a smaller share of their tax cut than a middle-income household, the extent to which they will increase their spending is not zero.

A quick check on whether people are spending their tax cut is the saving rate. If people are not spending the tax cut, the saving rate should jump. There has been a modest increase, with an average of 7.0 percent in first half of 2018 compared to 6.7 percent for 2017. This would suggest that people are spending the bulk of their tax cuts. This assessment requires an important qualification: savings data are subject to very large revisions, so when we have the final data for the first half of 2018, it may look very different from what the numbers show now.

Consumption increased at a 4.0 percent annual rate in the quarter, making it the largest contributor to the quarter's growth. This is largely a bounce back from weak growth of 0.5 percent in the first quarter. The two-quarter average is 2.3 percent, which is respectable, but hardly exceptional. It is certainly plausible that consumption will continue to grow at roughly this pace.

Non-residential investment grew at a 7.3 percent annual rate, adding 0.98 percentage points to growth for the quarter. This is a respectable rate, but hardly in keeping with the investment boom story that provided the rationale for the corporate tax cut.

Furthermore, the biggest factor in the jump in investment was an increase in investment in mining structures (primarily oil and gas drilling) of 97.1 percent. While this increase may be partly attributable to Trump's drill everywhere policy, the more likely cause is the increase in world oil prices from around $40 a barrel three years ago to close to $70 today.

CEPR / July 28, 2018