Semi-Daily Journal

The number to follow is full time employment based on payroll data. Full-time employment demand is the job market, and last month it took another large hit, right on schedule.

ah, but he did create the one job; undersecretary of something or the other.

Well, I suppose there's another year or so in which the "jobs" thing could take off, though right now, we're clearly behind the ambitious pace the White House has promised us.

Of course, when measured even in terms of "401K values", I daresay my own 401K has not yet returned to Clinton era levels-- and its been nearly three years-- so I would argue by that measure, the economic plan has been a failure too.

This isn't really an economic issue- its a political one. Consumer confidence continues to sag, as many people fear for (or have already lost) their jobs. What remains interesting is what the voting public does about it. If the voting public is as squeamish politically as it is on consumer confidence measures (at least, as measured right now), the Bush Administration will be routed in November '04. Despite the talk, as a matter of basic "forget what he says-- is what he's DOING improving the jobs outlook", Bush has done nothing to recommend him. Most people are well aware of this.

Its really a question of whether enough people simply LIKE the swagger of the wars and the tax cuts, vs. whether enough people are concerned about the sagging job market, value of retirement savings, future deficits (and the attendant rise in long term interest rates, to be reflected in higher mortgage rates, in turn to be reflected in sagging home values). As I said-- by any rational basis, if the economy and jobs growth is important, Bush should be routed.

I doubt very much he will be.

ah, but he did create the one job; undersecretary of something or the other.

ah, but he did create the one job; undersecretary of something or the other.

ah, but he did create the one job; undersecretary of something or the other.

Ah, Suresh has obviously been away for awhile. He doesn't know about the new improved posting system.

The speechifying pooch reminds me... Folks around here (often with Brad's prompting) give the press a hard time for handing Bush a free pass when he spouts nonsense. I am beginning to think a number of reporters, editors and the like haven't found a way around whatever it is that keeps them from coming right out and saying Bush is a liar or a dope. The technique seems to be to find some pundit or other who claims to have found a weakness in Bush's electoral armor and then quote liberally. Recent suggested vulnerabilities include job losses, seniors who won't be satisfied with the Medicare drug benefit however it turns out, Iraq, power outages, high gasoline prices. I've probably forgotten a few. It is easy enough to see that Bush's slide from polling heaven back down to earth has opened the way to articles about vulnerability, but I now wonder whether reporters aren't doing a bit of coaching. "Don't forget to be angry about this...dont't forget to be bitter about that." Am I giving them too much credit?

To get back on the jobs thing for a moment:

Prof Delong posted a link to this:

http://www.newyorkfed.org/rmaghome/curr_iss/html/civ9n8/civ9n8.html

Which tries to hide the point, there hasn't been a "structural" change that has lead to a jobless recovery - there is no such thing as a jobless recovery. What has happened is a basic change in political economy, and that change can be seen from a variety of statistics: most importantly, a reduction in volatility of GDP growth and Producer Price Indexes through the 1980's and 1990's. This period is brought on, not by "structural" changes, but by a change in political economy.

This is the story that needs to be told: that the entire myth of "the government doesn't matter" is leading people to look in the wrong places for answers, and is creating epicycled theories which are designed to ignore the obvious linkages.

The basic dynamic is that after 1981, the policy of the US was to sell paper to buy oil, and to preemptively cut consumer demand before that demand became demand for oil.

This works in the sense that it did, slowly, beat the price of oil into the ground, and as a side effect other commodities as well in what Prof Solow of MIT labelled "the great commodities depression" - but it had a cost, and that cost was that it placed a very strong cap on labor demand. In regular expansion this is seen by the stagnant real wages of industrial and service workers - and during contraction periods it is seen by the absence of job demand - particularly evident when one measure full time job demand.

This isn't a structural change - the capping of labor demand was, in itself, a government priority. Now that we have a situation where the problem is to stimulate job demand, the government has no tools available to do so that do not increase the price of oil.

The problem is not that the economy has strucutrally changed - it is that it hasn't. The government cannot stimulate general consumer demand without overheating either oil or residential property markets, or both.

The shape of stimulus which is viable is, at the moment, in investment demand - which generates little new oil demand - and in military demand, which can be used very carefully and have its appetite for feul rationed carefully. Targetted improvments in the job market in electorally critical states do not generate general improvment, but the might be enough to maintain a political mandate - aided by some gerrymandering of districts along the way.

What, in fact, needs to happen, is a structural change in the economy, which will create demand that does not use more energy. Right now computer technology is allowed to grow, even though it does not necessary make people more "productive" because it generates GDP at a lower BTU/GDP ratio, and thus can grow more without generating oil inflation.

However, the current borrow and squander spree is upsetting this delicate balance, and we should expect that either propety values will superheat or that oil will continue to charge upwards - or both. Because the danger right now is an oversupply of dollars, not deflation, not inflation of consumer goods - but devaluation measured against the new gold standard - oil.

Actually that "one job" in question is not new. They are taking an existing position in Commerce with a similar mandate and giving it a new title.

i have lots of questions here. economists assure us that in the long run productivity gains will be redistributed economy wide so that living standards will rise for all. but by what pathways and mechanisms is this supposed to occur? lower prices and the relative price effect, to be sure,
but price deflation in a relatively low demand environment is a dubious blessing. and what is to prevent a large part of productivity gains from being captured as quasi-monopoly rents, especially
considering how the new information technologies can bring about large changes in overall business organization, giving some firms enormous market power (e.g. walmart)? in fact, there has been a long secular trend of rising productivity and stagnant wages; i believe the figure is that that since 1973 in the u.s.a. productivity has risen by 66% overall whereas the average real wage has increased by 7%. given that we are in a situation of low demand growth, but, due to our brilliant leadership, we are trapped into large deficits with no further room for fiscal stimulus or public goods investment will monetary policy is tapped out (1% interest), shouldn't consideration be given to policies that raise real wages, starting with a large increase in the federal minimum wage (cf. nathannewman.org for a discussion of this) which at the federal level has not be this low in real terms since 1955 (and not the minimum wage in the u.k. is 5 pounds = $7.50 though i am pretty sure the u.k. has a markedly low per capita gdp and measured productivity rate than the u.s.a.)? where else would demand stimulus come from now that the housing boom is tapped out due to the realisation of the markets that long term interest rates must inevitably rise due to the large deficit? on another topic, i am dimly aware that in the higher reaches of academic economics work has been done on long term growth theory, e.g. solow, lucas, and, between the two, romer,which emphasises the lowering of taxes on capital as a policy for assuring a higher long term growth path for the economy, (though a lower real tax burden on corporations has also been a long secular trend). i have seen almost no discussion of this issue, but i assume that this sort of theorizing is behind the bush tax cut policies, after one gets past the charges of political corruption/cronyism/pay-offs to corporate fund-raising backers, especially the dividend tax cuts, (though the idea of reinflating a still overpriced stock market as a means of economic stimulus strikes me as just plain bonkers, especially in the light of all the economics distortion created and left by the last stock market boom/bubble). obviously if such tax cuts on capital simply lead to huge deficits, this would not improve the growth path of the economy but rather depress the growth of the economy due to fiscal drag and crowding out. but leaving aside the problems of current implementation, given the extremely poor powers of economic "science" for short term prediction, what is the basis for expecting a decades long projection for holding true? is there any empirical evidence for these theories or are they purely a result of formal modelling? in particular,this all began with solow"s "discovery" that market exchange models including capital deepening could not account for most of the actually measured economic grow, whereby he labeled the "growth residual" technical change, i.e. capital improvement. but technical change is an exogenous variable, which economists or for that matter just about anybody else are incapable of predicting. simply accumulating excess capital of the same quality is not a recipe for growth but rather for waste, excess capacity. and why are investments in public choice public goods to be ruled out of the growth picture, since they are tax financed and taxes must be reduced on private and corporate capital? i don't understand all this. is there somebody out there who is willing to explain it all to me in clear layman's terms?

Actually that "one job" in question is not new. They are taking an existing position in Commerce with a similar mandate and giving it a new title.

Ahah! Another productivity improvement.

In a few months we'll be told that it's not about jobs, it's about job programs.

Mr. Bush is blaming the sunset on his tax cuts for lack of job stimulation. I am not sure that his comments are explained by a good predictive economic model.

Mr. Bush said, "... people are more likely to find work if businesses and their workers can be certain that the lower tax rates of the last years will stay in place. Today you don't have that confidence they'll stay in place, and there's a good reason -- because under the laws that were passed, tax relief is set to expire."

What do tax rates, especially income tax rates and inheritance tax rates have to do with the number of jobs??? or hiring??? If Mr. Bush were cutting payroll taxes paid by employers, I could understand the connection between taxes and workers hired. Does someone understand the connection Mr. Bush is trying to make?

Mr. Bush said, "The death tax -- which is being phased out and will disappear in 2010, but comes back to life, because of a quirk in Senate rules -- will be revived in 2011. That doesn't make any sense to say to the small business owner or the farmer or the rancher, we're going to phase out the death tax -- which is a bad tax to begin with -- and then let it pop back to life. But that's reality."

But reality is that the small business owner, farmer or rancher are mostly unaffected by Federal inheritence taxes unless the rancher is Ted Turner. The people affected by the inheritence tax are mostly legacies that will live off Daddy's trust fund for their entire life. What do inheritence taxes have to do with employment, except creating jobs for the lawyers and accountants that find the loopholes? How does any change in the so called "death tax" have a major effect on jobs??? Does anyone know what economic model Mr. Bush is using to make these predictions???

Am I thick? Or is Mr. Bush throwing out a red herring? Do these statements make sense to anyone else?

KHarris says "I am beginning to think a number of reporters, editors and the like haven't found a way around whatever it is that keeps them from coming right out and saying Bush is a liar or a dope. The technique seems to be to find some pundit or other who claims to have found a weakness in Bush's electoral armor and then quote liberally."

One of the blogs points out that journalists want to be fair and balanced. There are two ways to do it: 1) research the issue intensively and explain it to the reader or 2) quoting both sides as though there were no way to tell thge difference. Journalists, being lazy, usually do the latter.

I would disagree slightly with Mr. Newberry as to whether full-time payrolls give the full story. The figure we really need to understand is distribution of real family incomes. The assumption involved in using the word "recession" is that gains to GDP will eventually be distributed to all participants in the economy through capital gains, dividends and salary.

In this economy, GDP growth has barely faltered, to the point that later revisions in statistics could conceivably conclude that there never was a recession. Hourly wages rose even as people were laid off, but those rises now seem to be moderating. Federal wages are effectively frozen, while military pay is in danger of being sliced. On the horizon is the offshore mass outsourcing of IT and telephone call jobs, meaning falling median incomes. Mr. Newberry also points to the devaluation of the dollar, particularly in regard to the purchase of oil. All of these developments lower the purchasing power of the typical family.

That statistic is what we need to know to understand how people are really doing.

I would like to ask a question that may seem simple-minded to the economically savvy, so bear with me.
Why are current productivity gains so impressive?
I understand that in theory, productivity gains allow employers to increase wages without increasing prices and thereby avoid inflation.
But it seems to me that the current productivity gains have occurred because as companies reduce payrolls, those workers that remain see their responsibilities and work hours increase without a comensurate increase in pay. The weak job market and the job insecurity it entails allow employers to do this with aplumb.
Since fewer people than ever are actualy paid by the hour, an increase in workdays will almost inevitably show up as "productivity gains".
Furthermore, since in service sector jobs, one can increase ones output per hour simply by piling on the stress (calling clients on the cell while debugging code for example) output can be increased without the very significant costs entailed being factored into labor statistics.

But since these two factors - extra (unpaid) hours worked, and stressful multi-tasking - are predicated on a weak job market, can we actualy rely on current productivity levels as the labor market recovers (as it presumably will some day)?

Finaly, doesn't the continued trend of increased corporate profits with shrinking payrolls and rising executive compensation mean that business risk is being shifted from propreitors to employees? If so doesn't this very regressive trend have potentialy dangerous long-term consequences?

If the above seems even remotely coherent to anyone at all, I'd appreciate some enlightenment.

"Actually that "one job" in question is not new. They are taking an existing position in Commerce with a similar mandate and giving it a new title."

Posted by Max Sawicky at September 5, 2003 02:13 PM

Yes, but I'm sure that there was a raise, a move to a new office (furniture, remodeling), a new secretary, a second PR BS artist just for that slot, etc.

Possibly *several* jobs were created!!!

"In a few months we'll be told that it's not about jobs, it's about job programs."

What a brilliant comparison....

NYTimes -

"Jobs Report Leads Bush to Defend Reliance on Tax Cuts"

Want jobs? Just make the tax cuts permanent. Oh....

http://www.mnftiu.cc/mnftiu.cc/images/war.163.gif

Brad, it would help if you would keep separate two issues. One is the behavior of employment. The other is the comparative statics exercise of what employment would have been with the tax cuts, with no tax cuts, or with some other tax cuts of the same magnitude but more in tune with liberals' preferences.

My guess is that the comparative statics exercise would not show much difference among the three scenarios. Do you have a different view?

Arnold got two out of three. Analyses at CBO done under the supervision of Douglas Holtz-Eakin, former Bush CEA staffer, comparing the President's plan to doing nothing, showed little difference, as far as GDP growth was concerned. The employment implications of that scenario would be much worse than what we are witnessing. Under some variations, the implication was for negative growth. Pity they didn't run the same tests on the Democratic caucus plan.

The Bush Bomb claims that the Republicans knew that the tax cuts would not create jobs, and that this was a feature, not a bug:

Part I:
http://www.theclarksphere.com/archives/000298.html#000298

Part II:
http://www.theclarksphere.com/archives/000310.html#000310

The Administration gets a bad grade on forecasting the labor market, but so would anybody. As Brad put it elsewhere, Okun's Law is eroding.

In this article, I give Bush a grade on *policy* as opposed to forecasting. I say that he should get an A- or B+. http://www.techcentralstation.com/090803B.html

Since we grade the president's proposal, I figure we should grade a counterproposal, which I will give an F.

Counterproposal: Tax increases
Case Study (The post hoc ergo propter hoc; just like most of the conclusions drawn in analyzing government economic policy): The Bush I tax hikes.

Details:

The United States government adopted its largest budget deficit reduction bill ever in 1990.
With a majority of Republicans voting no, Congress on October 27 authorized $164.6 billion
(Clinton's increase was supposed to raise $241 billion) in tax increases over the next five
years.

Income tax changes

The plan increased the top tax rate from 28 per cent to 31 per cent. The 31 per cent tax
bracket applies to individuals earning more than $49,300 in 1991 and to couples filing
jointly earning more than $82,150. The plan limited deductions that can be claimed by
individuals and couples with incomes of more than $100,000. It gradually eliminated the
personal exemption for individuals whose incomes exceed $100,000 and couples whose incomes
top $150,000. Analysts expect these changes to offset the deficit by about $29 billion
over five years.

Congress gave tax breaks to families with incomes of less than $20,000-the so-called
working poor-in the form of an expansion of the earned income credit.

Year - Unemployment Rate
1990 - 5.6%
1991 - 6.8%
1992 - 7.5%

What occured:
-Unemployment went up.
-Government spending went up each year.
-The deficit widened.

Lastly, since we are drawing illogical conclusions on tax policy I will bring up the Clinton tax increases on the "rich" (couples earning $140,000, or in other words two people each earning $70,000). Result: the rich got richer and the gap between the poor widedned.

Since we grade the president's proposal, I figure we should grade a counterproposal, which I will give an F.

Counterproposal: Tax increases
Case Study (The post hoc ergo propter hoc; just like most of the conclusions drawn in analyzing government economic policy): The Bush I tax hikes.

Details:

The United States government adopted its largest budget deficit reduction bill ever in 1990.
With a majority of Republicans voting no, Congress on October 27 authorized $164.6 billion
(Clinton's increase was supposed to raise $241 billion) in tax increases over the next five
years.

Income tax changes

The plan increased the top tax rate from 28 per cent to 31 per cent. The 31 per cent tax
bracket applies to individuals earning more than $49,300 in 1991 and to couples filing
jointly earning more than $82,150. The plan limited deductions that can be claimed by
individuals and couples with incomes of more than $100,000. It gradually eliminated the
personal exemption for individuals whose incomes exceed $100,000 and couples whose incomes
top $150,000. Analysts expect these changes to offset the deficit by about $29 billion
over five years.

Congress gave tax breaks to families with incomes of less than $20,000-the so-called
working poor-in the form of an expansion of the earned income credit.

Year - Unemployment Rate
1990 - 5.6%
1991 - 6.8%
1992 - 7.5%

What occured:
-Unemployment went up.
-Government spending went up each year.
-The deficit widened.

Lastly, since we are drawing illogical conclusions on tax policy, I will bring up the Clinton tax increases on the "rich" (couples earning $140,000, or in other words two people each earning $70,000, or in other other words some of them were not rich). Result: the rich got richer and the gap between the poor widened.

Since we grade the president's proposal, I figure we should grade a counterproposal, which I will give an F.

Counterproposal: Tax increases
Case Study (The post hoc ergo propter hoc; just like most of the conclusions drawn in analyzing government economic policy): The Bush I tax hikes.

Details:

The United States government adopted its largest budget deficit reduction bill ever in 1990.
With a majority of Republicans voting no, Congress on October 27 authorized $164.6 billion
(Clinton's increase was supposed to raise $241 billion) in tax increases over the next five
years.

Income tax changes

The plan increased the top tax rate from 28 per cent to 31 per cent. The 31 per cent tax
bracket applies to individuals earning more than $49,300 in 1991 and to couples filing
jointly earning more than $82,150. The plan limited deductions that can be claimed by
individuals and couples with incomes of more than $100,000. It gradually eliminated the
personal exemption for individuals whose incomes exceed $100,000 and couples whose incomes
top $150,000. Analysts expect these changes to offset the deficit by about $29 billion
over five years.

Congress gave tax breaks to families with incomes of less than $20,000-the so-called
working poor-in the form of an expansion of the earned income credit.

Year - Unemployment Rate
1990 - 5.6%
1991 - 6.8%
1992 - 7.5%

What occured:
-Unemployment went up.
-Government spending went up each year.
-The deficit widened.

Lastly, since we are drawing illogical conclusions on tax policy, I will bring up the Clinton tax increases on the "rich" (couples earning $140,000, or in other words two people each earning $70,000, or in other other words some of them were not rich). Result: the rich got richer and the gap between the poor widened.

I'm not surprised, but still disappointed, that there hasn't been a greater Federal effort to increase "half-time" 5 hours/day job-sharing, inside of Fed bureaus.

Democratic tax cuts for poorer people will more likely be spent on consumption (of imports), than investment. Rep tax cuts for the rich will more likely be invested, which more directly creates jobs. But the jobs have to produce goods/services, which need customers, like the poor who would have bought more had they more money and less unemployment fear.

With underused capital mis-invested in the 90s boom, it is natural that current workers can easily increase productivity without needing more bodies. But then, the (rich) cuts for more investment are unneeded until demand increases.

Tax cuts & gov't spending increases is (basically) the way Keynes said to gov't should reduce excessive unemployment. Bush gets at least a B for both.