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Article Artículo

Robert Samuelson Spreads Confusion on Manufacturing

The Washington Post seems to have a quota for pieces that spread misinformation on manufacturing. Today's piece by Robert Samuelson fills the quota for the day.

The gist of the piece is that manufacturing employment has been declining in importance in the U.S. for decades and also everywhere else around the world. Therefore we should not expect any substantial boost to manufacturing employment.

This is the sort of three-card Monte story that people expect from the Post when discussing economic issues that are relevant to working people. Yes, manufacturing has declined in importance everywhere and yes, it has long been declining in the United States. However the issue is the rate of decline.

According to the Bureau of Labor Statistics, from 1973 to 1989 manufacturing employment declined at an annual rate of 0.3 percent. By contrast, it declined at a rate of 1.7 percent annually between the years of 1989 to 2012. If we had simply maintained the earlier rate of decline we would have another 4.7 million manufacturing jobs. 

These years are business cycle peaks, however we get an ever sharper picture if we put the break in 1997 when Robert Rubin was able to put muscle behind his high dollar policy through his control of the IMF's bailout of the East Asian countries from their financial crisis. The annual rate of decline from 1973 remains the same at 0.3 percent, however the decline since 1997 has been 2.5 percent. If we had maintained the 1973 to 1997 rate of decline through 2012 we would have 4.9 million more manufacturing jobs today. That would be more than a 40 percent increase in manufacturing employment.

In the same vein, we have the comparison with other countries. As Samuelson's colleague Dylan Matthews showed us last month, the manufacturing share of employment in Germany fell by roughly a third between 1973 and 2010. By contrast, it fell by 60 percent in the United States. If the U.S. had seen the same pace of decline as Germany we would have another 8 million manufacturing jobs.

Dean Baker / April 08, 2013

Article Artículo

The Missing Workforce: It's Worse Than the Post Says

The Post had a good piece noting the large number of people dropping out of the workforce, presumably because they can't find jobs in the weak economy. However the problem is likely worse than the piece indicates.

There are a large number of people who do not respond to the Bureau of Labor Statistics' Current Population Survey (CPS), the standard survey used to measure labor force participation. In recent years the non-response rate overall has been close to 12 percent, as opposed to just 5 percent three decades ago. The non-response rate varies hugely by demographic group. For older white men and women it is 1-2 percent. By contrast, for young African American men it is close to one-third.

The Bureau of Labor Statistics effectively assumes that the people who don't get picked up in the CPS are just like the people who do. This assumption may not be plausible. The people who don't respond may be more transient or may have legal issues that make them less willing to speak to a government survey taker. For these reasons they may be less likely to be employed than the people who do respond to the survey.

My colleague, John Schmitt, examined this issue by looking at the 2000 Census (which has a 99 percent response rate) and comparing the employment rates overall and for different demographic groups in the CPS and the Census for the months when the Census was conducted. He found that the overall employment rate was 1.0 percentage point higher in the CPS. For groups with high non-response rates the gap was larger, with a gap of 8 percentage points for young African American men.

Dean Baker / April 07, 2013

Article Artículo

The Media Again Turn to Surprised Economists as Experts on Job Report

It was easy to see that the economy was not growing rapidly long before Friday's jobs reports. The economy grew at just a 0.4 percent annual rate in the fourth quarter. While this weakness was largely attributable to unusual factors, even averaging in the prior quarter the economy only grew at a 1.7 percent rate in the second half of 2012.

It's not clear what someone would have had to have been smoking to expect a marked upturn from this pace. Did they think the ending of the payroll tax cut would spur growth? Did the fact that new orders for capital goods (excluding aircraft) in February of 2013 were virtually unchanged from February of 2012 lead them to expect an investment boom? Perhaps the fact that job growth over the  5 months from October to February averaged just 40,000 less than in the same months a year ago was the basis for predictions of acceleration?

Yes, housing construction is up. That's good news. Residential construction is 2 percent of GDP. Get out your calculator and figure out how much impact this has.

In short, any serious look at the data would have told people that the economy was weak before the March numbers were released yesterday, nonetheless the Post tells us:

"The economy added a paltry 88,000 jobs last month, less than half the number expected. The healing housing market, resilient consumers and record highs on Wall Street had fueled hope that the recovery was finally taking off. That momentum was seen as essential to helping the economy overcome the drag of automatic government spending cuts known as the sequester over the next few months."

Dean Baker / April 06, 2013

Article Artículo

Brazil

Latin America and the Caribbean

Venezuela

World

The Real Lula Speaks Out

Earlier this week, former president of Brazil Lula da Silva gave a warm and unequivocal endorsement of Nicolás Maduro in Venezuela’s presidential race.  Given that the campaign officially started only two days ago, it would seem that this announcement was well timed for maximum effect.  The video was screened first at the Sao Paulo Forum on Monday at a meeting in Caracas , and it has since been aired as a campaign ad on several television stations.  Lula made a similar video praising Chávez for the Sao Paulo Forum in 2012. 

As many have pointed out, there is a deep irony here.  While Venezuela’s socialist party (PSUV) receives praise from political leaders of the Workers Party in Brazil, Henrique Capriles has lauded Brazil’s policy choices under Lula and his successor, Dilma Rousseff.  Capriles has pointed out gains under both these leftist leaders, and has said that he plans to follow the “Brazilian model” if elected, even saying “I'm 100 percent Lula.” 

Capriles’ basic argument is that Venezuela has been misgoverned under Chávez and needs to undergo a transformation like the one Brazil experienced since 2002, when Lula was elected.  What he does not acknowledge is that while both Venezuela and Brazil have been successful in achieving a more equitable society, in some ways Venezuela has been more successful.  For example, during the period when both Lula and Chávez were in office both inequality (as measured by the Gini coefficient) and poverty rates dropped faster in Venezuela.  Also, it is important to note that these statistics are based on measures that include only household income, which underestimates gains made through public programs like those in education, healthcare and pensions, which were expanded more in Venezuela than in Brazil.

Capriles is trying to tap into the “good left / bad left” dichotomy in which Brazil is praised as a regional political leader (and one with a gigantic economy), while distancing himself from the ALBA countries.  If we look at recent history, though, this arbitrary division doesn’t make sense.  At the last Summit of the Americas, the region united around the issues of (1) ending Cuba’s isolation, (2) finding alternatives to the drug war and (3) ending the occupation of the Falklands/Malvinas Islands.  Further, we can see that the ALBA countries are not a fringe group and have important ties to leftist political parties in the entire region, as well as the governments of Argentina and Brazil.

CEPR and Stephan Lefebvre / April 04, 2013