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Article Artículo

NYT Falls Victim to Trump Derangement Syndrome in Warning of Clouds for the Economy

Donald Trump provides no shortage of grounds for criticism, but the NYT is really grasping at straws in it editorial headlined, "clouds darken Trump's sunny economic view." The confusion that characterizes the piece starts in the first paragraph when it tells us "the stock market seemed unimpressed" by the 157,000 jobs reported for July.

This is bizarre for two reasons. First, a major complaint of the piece is that workers are not getting their share of productivity gains, instead, it is going to profits. While this is true (although the revised data do show a substantial shift from profits to wages in the last three years), the story of stagnant wages and rising profits should lead to a higher stock market, other things equal.

If shareholders believe that Trump policies will shift income from wages to profits, this would be a reason for the market to rise. If we are supposed to be impressed by the market's decline then this could mean shareholders are worried about future profits. This is again a case where it is worth pointing out that the stock market is not the economy.

The other point is that monthly jobs data are erratic. It is common for bad months to be followed by good months and vice versa. This is why economists typically focus on job growth over several months, as opposed to a single month.

We created 268,000 jobs in May and 248,000 jobs in June. Both numbers were revised upward with the July data. This gives us an average of 224,000 new jobs over the last three months. That is a pretty damn good story by any measure.

CEPR / August 07, 2018

Article Artículo

The Story of Stagnant Wage Growth

This recovery has not been great for workers. They have seen modest real wage gains over the last five years, but these gains have not come close to making up the ground lost in the recession and the first years of the recovery.

Nonetheless, real wages have been growing for most of the last five years. The last month has been an exception to this pattern, not because nominal wages have grown less, but because we had a large jump in energy prices, which has depressed real wage growth. Here's picture for the last five years.

fredgraph1

As can be seen, there is a very modest acceleration in the rate of average hourly wage growth over this period from just over 2.0 percent in the middle of 2013 to 2.7 percent in the most recent data. Real wage growth, which is the difference between the rate of wage growth and the rate of inflation, as measured by the Consumer Price Index, has mostly been positive, with the exception of a few months at the end of 2016 and beginning of 2017 and last month.

CEPR / August 04, 2018

Article Artículo

China and the United States: Who Has More Innovation to "Steal?"

One of the truly amazing aspects of Donald Trump's trade war with China is how all the pundits agree that we have a legitimate beef with China over stealing "our" intellectual property. This is true pretty much across the board, even among the harshest critics of Trump and his tariffs. As I have argued almost alone, this one needs a bit more thought.

First, the "our" part of the story needs some examination. The vast majority of us don't own any substantial amount of intellectual property that is being compromised by China's practices, Somehow we are supposed to be concerned that Boeing, Microsoft, Pfizer, Disney, and the rest are seeing lower profits because China doesn't follow the rules they want them to follow.

Sorry folks, these are not the homes teams that we are supposed to root for in baseball. These are huge multinationals that have made their largest shareholders and top executives incredibly rich. The rest of us are supposed to want to stick it to China to make these people even richer?

It's actually even worse. The simple story is that if China has to pay less money to Boeing et al. for their intellectual property claims they will have more money to buy other things from the United States, like soybeans and whiskey. Tell me again about "our" intellectual property.

CEPR / August 04, 2018

Article Artículo

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