Greg Mankiw is allowed out of his secured bunker:
The New York Times > Opinion > Op-Ed Contributor: Not a Hooverville in Sight: By N. GREGORY MANKIW: This is "the worst economic recovery period in terms of job creation that the nation has experienced since the Great Depression," said Laura D'Andrea Tyson, who was chairman of President Bill Clinton's Council of Economic Advisers. So many other pessimists have echoed her in drawing analogies to the 1930's, you might think that millions of Americans are living in Hoovervilles. Nothing could be further from the truth....
Note that the "nothing [that] could be further from the truth" is not Laura's statement that this is worst business-cycle recovery in terms of job creation since the Great Depression. That Mankiw agrees with, and dares not contradict. The "nothing [that] could be further than the truth" is Mankiw's own statement that millions of Americans are living in Hoovervilles. But Mankiw's hope is that his carefully-crafted rejection of the claim of Hoovervilles will be taken as a refutation of Laura.
Let's go on:
The [u]nemployment [rate] has fallen, [pessimists] say, only because the economy is so bad that people have become discouraged and given up looking for work. But that also does not square with the facts. The Bureau of Labor Statistics has a little-publicized alternative measure of unemployment, called the U-4, which includes those discouraged workers. And what does it show?... [I]t peaked in June 2003 at 6.6 percent and has since fallen to 5.9 percent....
Here we need to do a little data analysis. The seasonally-adjusted U-4 unemployment rate started 2001 at 4.4%, rose to 6.0% by the end of 2001, continued a slow rise to 6.6% by June of 2003, fell back to 6.0% by the end of 2003, and since then has stuck at 5.9%-6.0%. At the same time, employees on nonfarm payrolls fell from 132.4 million in January 2001 to 130.7 million by December 2001, continued a slow fall to 129.9 million by June 2003, were still at 130.0 million in December 2003, and have risen to 131.3 million since.
Given the trend growth of the population and other more detailed demographic patterns, we would expect a constant unemployment rate to be associated with about 125,000 a month growth in payroll jobs. And we would expect each 100,000 fall (or rise) in payroll jobs relative to that trend to be followed by an increase (or decrease) in unemployed+discouraged workers of 75,000 or so, and by a further decrease (or increase) in the labor force of 25,000 or so, as people who have lost (or gained) their jobs drop out of (or enter) the labor force--but without giving the state of the labor market as reason for doing so. No economist believes that the U-4 measure captures all the "discouraged workers". The rule of thumb is that a 100,000 change in payroll unemployment has about an 0.05% change in the opposite direction in the unemployment rate.
Thus if you'd told us in January 2001 what was going to happen to the U-4 unemployment rate over the next eleven months, we economists would have predicted a change in payroll employment of -1.8 million: a 1.4 million gain from trend growth, minus a 3.2 million loss that corresponds to the rise in the unemployment rate. Since the actual change in unemployment over those 11 months was -1.7 million, we would have been dead-on.
Then from December 2001 to June 2003 the unemployment rate creeps up by a further 0.6% over 18 months. Our economists' prediction would be that payroll employment would have grown by 1.1 million: 2.3 million from trend growth - 1.2 million from the rise in unemployment. But payroll employment did not grow by 1.1 million from December 2001 to June 2003: it shrank by 0.8 million. Our prediction of what employment should do given what the unemployment rate was predicting was thus off by nearly 2 million.
Since June 2003 the unemployment rate has fallen by 0.7%. 13 months of trend employment growth should boost employment by 1.6 million. The fall in the unemployment rate should boost employment by another 1.4 million. Under normal patterns, we would have expected to see 3.0 million payroll jobs created over the past thirteen months--but we've only seen 1.4 million. Here's another 1.6 million shortfall relative to our expectations.
Add them all up, and discover that since 2001 our two main labor market indicators--the unemployment rate and the payroll employment count--have been giving us contradictory readings. Given where the unemployment rate is now, we would under normal conditions expect payroll employment to be 3.5 million higher than it is. Given where payroll employment is now, we would expect the unemployment rate to be 1.7% higher than it is now. The unemployment number is the number we would expect to have with a 134.8 million job economy (but we actually have a 131.3 million job economy). The payroll number is the number we would expect to have with a 7.6% U-4 unemployment rate economy (but we actually have a 5.9% U-4 unemployment rate economy).
Now, everything Mankiw says about the number of jobs and unemployed in the labor market,* up to the culminating invocation of George W. Bush as an independent expert on the state of the economy--"President Bush is exactly right when he says the economy is strong and that his policies are making it stronger"--hinges on the unemployment rate being the right statistic to look at in assessing the state of the labor market, and on the payroll employment number being the wrong one.
What reasons does he have for thinking this?
Well, it appears that he has none. The most he says is to hint that only politically-motivated pessimists distrust the unemployment rate: "Although economists have long viewed the unemployment rate as one of the best measures of the labor market, we are now supposed to ignore it." He doesn't say that the unemployment rate is the best measure of the labor market and that only politically-motivated pessimists distrust it--to say that would be to get a big black political-hack mark on his economist's union card. But implying it is OK, and his political masters hope that the implication is what the vast bulk of New York Times readers will remember.
So are there reasons to think that the unemployment rate is a better measure of the state of the job market than the payroll employment count? The answer to this question hinges on what has happened to the 3.5 million extra people who--surprisingly, given what the unemployment rate has been doing--don't have jobs. Do they lack jobs because they would not want jobs even if the labor market were in its normal full-employment configuration--because they would rather be raising children or going to school or traveling around the world or living the life of Reilly in some manner? Or are they people who would want jobs if the labor market were in its normal full-employment configuration, but who don't have jobs because the labor market is depressed and have decided to try to do something else with their time--in which case they are raising children or going to school or traveling around the world not as a free choice but as a second-best.
When the anomalous contrast between the unemployment rate and the payroll employment count first emerged in 2002 and early 2003, there were then two reasons to think that perhaps the unemployment rate was the correct measure. First was the fact that the payroll series had been wrong in the past because the Labor Department's adjustment for workers newly-hired in new firms was too low. But this proved to be a red herring: data revisions and closer looks have confirmed that, this business cycle at least, the Labor Department's new-firm adjustment has worked quite well. Second was the fact that the 3.5 million without jobs were not reporting that they were "discouraged workers"--if they had so reported themselves, they would have been in the U-4 unemployment count. But in past business cycles the number who reported themselves as "discouraged workers" had always fallen short of the reality: labor force growth speeds up when the unemployment falls and jobs become easier to get and slows down when the labor market heads south three or four times as much as it should if those calling themselves "discouraged workers" were indeed all the discouraged workers there were.
Are there reasons to think that the payroll employment count is the more useful measure? It is based on a much larger sample than the estimates of the unemployment rate, has much less statistical noise in it, and thus is more accurate (as long as the Labor Department's new-firm adjustment is working well). Financial markets jump in response to payroll employment news and not in response to unemployment rate news: if you are any sort of economist at all, the fact that people with their money on the line pay close attention to one number and not another is a powerful piece of evidence that the first is more important. Moreover, other measures of labor market slack like the average workweek and the average length of spells of unemployment are not at all what one would expect from the unemployment rate, but are close to the values one would expect them to have from what has happened to payroll employment.
Fourth, and most important, is the fact that the payroll employment numbers make sense of real wage trends in a way that the unemployment rate does not. The past four years have seen an extraordinary decline in the real wage share. Firms' productivity levels have boomed--have grown astonishingly fast. Thus how valuable workers are to firms (as long as the demand for goods is there) has grown by leaps and bounds as well. If the labor market were as healthy and near full employment as the unemployment rate is telling us, we would expect to have seen rapid real wage and salary growth in the past four years, as firms that can afford to pay run up against a limited number of trained and experienced workers who want to work.
We haven't. The past four years have seen a remarkable stagnation in real wages--consistent with low bargaining power on the part of workers, jobs that are hard to get, and a lot of potential competitors out there to whom your boss might decide to give your job if you ask for a raise.
It's for these reasons that I believe that the unemployment rate is--for reasons I admit I don't understand well--giving us erratic and misleading indications of the state of the labor market, and that the payroll employment estimates give a more accurate picture. And I, at least, would hold that view no matter what the party of the current president.
Now I wouldn't expect any appointee of this administration--in an op-ed vetted by White House Media Affairs--to give a full picture of the data. That as of the July survey week payroll employment was still some 1.2 million below its last business cycle peak, even though the adult population was some 5.1 million higher; or that as of July payroll employment was some 1.6 million below the level projected for July in a forecast released only six months ago, last February--these are not points we expect to see covered. (Although I would dearly, dearly love somebody at CEA to call me up and tell me just what extraordinarily bad unsuspected shocks to employment have caused us to lag so far behind their forecast; and I would dearly, dearly love to have a real press corps that would pin the administration to the wall on this.)
But surely one should not spread disinformation? Surely one should not try to trick readers into thinking that the only reasons for distrusting the unemployment rate are partisan political ones, or that employment growth since the last business cycle trough has not been lousy. At the CEA, especially, one's duty to raise the level of the debate is--or ought to be--a higher duty than pleasing one's political masters.
*Mankiw also talks about the "quality" of jobs that are being created, He says he doesn't know. It's a strange thing to be worried about: the fact that real wages and salaries haven't grown much is a much more important, relevant, and worrisome fact than whether the bulk of the jobs being created are in low-skill low-wage or high-skill high-wage occupations.
However, the fact that average wages and salaries are stagnant is very hard to make consistent with claims that new jobs are high-wage jobs.
Posted by DeLong at August 22, 2004 07:24 PM | TrackBack... the fact that average wages and salaries are stagnant is very hard to make consistent with claims that new jobs are high-wage jobs.
Not at all - you only have to suppose continuing falls in pay in existing low-wage jobs, which would square with a soft labour market. You wouldn't expect Mankiw to point this out though.
Posted by: derrrida derider at August 22, 2004 07:44 PMWouldn't you think that burgeoning trade with low-wage Giga-states like China, who seem to make everything sold in Walmart nowadays, might have something to do with stagnant wages in America, via "factor price equalization" as it is known in trade theory? I know Paul Samuelson has said as much, in a quote in Newsweek last year; why is it so hard for the rest of the economics profession to make the same admission?
Posted by: Luke Lea at August 22, 2004 07:47 PMBrad: "Do they lack jobs because they would not want jobs even if the labor market were in its normal full-employment configuration--because they would rather be raising children or going to school or traveling around the world or living the life of Reilly in some manner? Or are they people who would want jobs if the labor market were in its normal full-employment configuration, but who don't have jobs because the labor market is depressed and have decided to try to do something else with their time--in which case they are raising children or going to school or traveling around the world not as a free choice but as a second-best."
While almost certainly not explaining everything, couldn't this explain some of the situation? When the job is an $80K/year job as a Web designer for a dot-com or a financial analyst at a telecom, perhaps the benefits exceed the higher family tax bracket, the day-care costs, etc. But if the job turns into a $40K/year sysadmin or a low-end accountant instead, perhaps the benefits do not exceed the costs.
I suspect that we all know families in this situation -- I know I do. When that second family income has higher marginal taxes and involves costs such as day care and commuting, unless the pay reaches the appropriate level, it is better to not work. These are not discouraged workers, but workers that seek employment only when the economy is booming and they can command sufficiently high wages to offset the expenses.
Posted by: Michael Cain at August 22, 2004 08:10 PMI think Brad presents a good case that the economy is not creating jobs at the rate we might want or expect. However, I don’t think it’s particularly useful or informative to make comparisons to the Great Depression. We have a very different economy now. One thing the Administration and Congress could have done to help Americans find work was end the Non-immigrant Visa (NIV) Program. Since 1985 about 17 million NIVs have been issued to aliens to compete with American job seekers. We didn’t have that in the Great Depression. In 2001, nine out of ten new jobs in IT went to NIV holders. No small effect. I don’t know if NIV holders are included in the population count because they are not residents, and don’t hold green-card work permits. I suspect many more Americans would be holding high paying jobs if we sent the NIV holders back home. NIV holders will accept much lower wages because they are holding on to try to grab the brass ring: a green card work permit. As such they can’t leave their jobs without re-setting the green-card clock. Employers like having docile workers who won’t change jobs. So even if Americans are willing to take lower salaries, they still can’t compete. Both political parties have abandoned the American worker on this issue. John Kerry is no better than Bush on the issue of NIVs. He and his party have abandoned New Deal labor concepts, he is a fake.
Posted by: A. Zarkov at August 22, 2004 08:25 PMBrad DeLong writes:
> The past four years have seen an extraordinary decline in
> the real wage share. Firms' productivity levels have
> boomed--have grown astonishingly fast. Thus how
> valuable workers are to firms (as long as the demand for
> goods is there) has grown by leaps and bounds as well.
I thought the response to Mankiw was the kind of thing that would likely make him wince ("ooh--he noticed that glitch too, and that one!"). But this statement plus the bad news about employment make me wonder if this interpretation of the productivity miracle isn't really screwy. So if Firm X grows real sales at 3% per year while reducing staff by 3% per year, we have a productivity miracle. But don't we also have the question of why that firm (or some other firm with similar numbers) needs to reduce staff, if each worker is now so much more potentially valuable to the firm? Something is screwy here. Demand could be low, which would be a problem. Or something even nastier could be happening. Most large organizations I know of have something like the mythological 80/20 split between who does nothing and who does everything. If productivity for those workers that "do" grows at the nice rate of 3% per year, while those that don't "do" have a productivity of zero, then you can toss a lot of the second category out on the street, and use the threat of the street to keep the wage demands of the valuable ones in check. At least for some period of time. You do run the risk of either crashing demand or needing to pay your existing workers more because somebody else can. But I think it would make the meaning of the current productivity miracle something very different than you might think.
Posted by: Jonathan King at August 22, 2004 08:35 PMJonathan has a good point; my neighbor works for one of those firms that has tossed out the second category in the recent past.
The 80%ers hit the street, and the 20%ers are working their *sses off now, and most (according to my neighbor) are reaching burnout mode.
The product my neighbor works on is something you - and most of the readers here - know. And the engineers are rapidly becoming burned out because the company is 'running lean'.
I suspect this is the case in many American companies right about now.
D
Posted by: Dano at August 22, 2004 09:33 PMWARNING **off topic post***
But, heck, I can't add comments to the old posts, which is no fair, is it? This is on the last post the Prof made complaining about some famous economist not raising the debate (Feldstein on social security). But I can post it good conscience now since the last two comments raise interesting points about the interpretation of the recent producivity growth statistics. And productivity growth is question number one for all of us baby boomers, and X-ers, and tweeners, and Y-ers, and whatever the new bunch is called.
*******
Bill White provides some history re the change in the worker/retiree dependency ratio. I think this is connected to the history of social security sovlency scares. Look at the huge drop from 16:1 in the beginning to 3.7 in 1970. Probably there was much handwringing as this ratio fell. Again, anyone have any references for the history of social security scares?
Also, I don't have the figures at hand, but it comes to mind now that the total dependency ratio (ratio of workers to all not working which included kids and retirees) was very low when the baby boomers where born. That makes sense, since (even though some of us hate to admit it) they are not the spawn of Satan or some space alien demons that evil alien bugs dropped onto the earth. In fact the baby boomers' impact on the dependency ratio must have been higher when they were born, since the baby boomers' deaths are certainly spread out more than their births (though, I guess some people in their darker moments wish that this might not be so).
I think some economists who are experts in social insurance like Auerbach and Aaron have admitted this point, and have said that the dependency ratio during the birth of the baby boom was higher than anything we will see in the next 75 years. They point out that the annual costs of raising a kid in the 1950s might in real terms by somewhat less than the costs of a retiree
in the early 21st century. And they have pointed out that a low dependency ratio caused by kids in one's own family produces a different attitude toward shelling out the dough, than a low ratio caused by some old stranger down the block in a run down apartment. But I think both Auerbach and Aaron, and others, have admitted that this indicates that we *have indeed* experienced demographic challanges to social security similar to what we will face in the future, and the world did not end.
Probably because in the long run labor producitivty and per capita GDP growth is much higher than assumed by the social security actuaries forecasts.
I don't think anyone visits this thread anymore, but I will copy it into the comments the next time that darn pro-commie but anti-Marxist living devil self proclaimed Democrat Prof DeLong deigns to post some pinko Ponzi-loving screed trying to defend the **living death** and **ghastly immoral fraud*** of social insurance.
Bill Whites excellent comments on the dependency ratio:
"A look at the number of active workers supporting each retiree demonstrates that this ratio, which was about 16:1 in the beginning, falling to 3.7:1 by 1970, is now 3.4:1 and will fall to 1.9:1 over the next 75 years if we don’t make any changes. I propose that a gradual postponing of the retirement age could be implemented that would stabilize that ratio at 2.5 to 2.8:1, where current benefits would roughly equal current taxes, and the system could then continue on a “pay-as-you-go” basis"
Recent post in Nebraska Cornhusker Classifieds:
Regional Water Resources Manager
Advanced degree and 10 year's experience
$36,000 to $42,000 a year <== !!!
Back in 1973 during the post-Viet Nam Recession, I applied for a manual labor job in Denver as a sewage sampler, to have an income, so I didn't have to live with relatives and on food stamps.
The interviewer looked at my Ivy league degree and nearly burst into tears. He had over forty applicants, many of them with PhD's, for a job that only required the ability to pass an Army Intelligence Test and an 8th grade education.
I shit you not. (little pun there %)
It's not getting better, it's getting much worse, and yet, amazingly, it's flying right under the pre-election radar of the media.
Hear no evil, see no evil and speak no evil.
Talking of UE may just tip US into a tailspin.
I am a security guard at a software company. I have a two year degree in computer science, with four years of credits, which needs to be a masters to get an entry level job.
My coworker on swing shift has a part time job in radio frequency circuit design. It pays almost fifty percent more than his security guard job, but he keeps his security guard job because it has benefits.
My fear is that the echo chamber of the media fed by right wingers, apologists, and namby pamby cheerleaders will force a return to the early strategies of the labor movement, and the regime has anticipated this as part of their "domestic terrorism" scare talk. Oil price shocks, burn out, the failure of the social safety net, and the de facto conscription of reserve and National Guard troops combined with a downward readjustment of wages to match China and other third world labor markets will result in significant and severe social shocks.
Posted by: bigfoot at August 23, 2004 01:07 AMThe other point is that I think there is a great deal of disappointment that N. Greg didn't improve things at CEA. One would have thought he had the stature to make things change...and that by bringing him in, there was a sign of a commitment to getting away from political hackdom and back towards economics.
I knew Mankiw had his own personal political views, but I never imagined he would have turned out to be such a sellout.
Posted by: cb at August 23, 2004 04:27 AMHow about a more direct measurement of unemployment? With all the extrapolating going on, often using coefficients which are themselves extrapolations, you would think someone would do a simple poll of 100 taxpaying individuals per state with a question like: Are you employed?
Posted by: pwax at August 23, 2004 04:32 AMpwax - There are more than a couple of problems with that, found only as you start digging into what seems a good idea.
"Are you employed?" Define employment. Is a parent who is on the list as an on-call substitute teacher employed? Does the person holding down two or three part-time jobs count two or three or 1.5 times?
"Are you employed?" Who gets the answer and what happens if XXX [Immigration, Welfare, Alimony services, pick another] finds out what I said?
As I understand it, that's basically the employment survey - the household number that's used against the payroll number if the latter isn't so good. And it's got flaws as reported here and elsewhere many times.
Posted by: Kirk Spencer at August 23, 2004 05:53 AMTwo things. First, if you are implying, as I think you are, that Mankiw is giving us a complete load of crap, I wonder, how can he do that? Surely he's a good economist who knows how to work his way around this stuff. You are essentially implying that he's distorting things to shill for the administration, but isn't he worried about his academic reputation? Or is there some sort of unwritten rule that lets people in Mankiw's position to do this without getting too much crap once he's out of a role like this, one that I'm not aware of?
Second, isn't this another hint that the Bush administration was taking another step to fulfill some sort of political and ideological goal, instead of making actual sound policy, with its fiscal policy?
Posted by: Brian at August 23, 2004 05:56 AMThere is another measure worth considering: thye employment to population ratio, which is still only 62.5% v. the 64.4% level in Jan. 2001 - albeit a tad above its bottom of 62.1%.
Posted by: Harold McClure at August 23, 2004 06:32 AM>Do they lack jobs because they would not want jobs even if the labor market were in its normal full-employment configuration--because they would rather be raising children or going to school or traveling around the world or living the life of Reilly in some manner?
In my case, it was the complete lack of jobs in the IT sector, combined with exhausting my "lifetime unemployment benefits" in the state of Florida (which only takes 20 weeks). Couldn't even get a job pushing carts at walmart. Went out applying for any job that I could. Was out of work for 12 months between 2003 and 2004. My current position pays half what I was earning 18 months ago.
What I find to be obscene is that many IT workers are still unemployed, while the wingnuts proclaim a shortage of IT workers.
Posted by: Peter at August 23, 2004 06:58 AMBrad, why do you continue the sexist tradition of calling men by their last names and women by their first names, as if they were children? "Laura", when she's acting as an economist, should be D'Andrea Tyson, just as Mankiw is not "Greg" in your post.
Posted by: pj at August 23, 2004 07:27 AMI hate it when they try to paper over the problems instead of addressing them head on. How are they supposed to "fix" the economic and fiscal problems if they don't admit they have a problem?
Posted by: bakho at August 23, 2004 07:43 AMIsn't the traditional job of the president's economic advisor to give unbiased economic analysis (bad news and good advice) to the president? Not that this would prevent him from penning editorials for the WSJ, but the nature of the editorial must lead to concern that Mankiw is off track, that the president is no longer being given the bad news - or perhaps the good advice. So not only should we distrust Mankiw's editorials, but also his advice to the president.
Posted by: kharris at August 23, 2004 08:21 AMBrad. Maybe you've already done this. But wouldn't a succinct letter to the editor to the NY Times be in order. Or, perhaps you could get an op ed piece. You're the man. Go for it.
This is all rather interesting, but personally, the state of the economy will have nothing to do with my vote against George Bush. Neither party has a clue as to how to deal with this. Just pumping up aggregate demand even higher is not going to get it in the global economy. Where capital is free, combined with immigrant labor, there is no end in sight to the degradation of American wages.
Posted by: tstreet at August 23, 2004 08:38 AMJournalists have still not caught on that the numbers coming out of the WH and Treasury are very partisan and they need to go to CBO.
http://nationaljournal.com/members/news/2004/08/0820nj2.htm
Scroll down to "Taxes". Another reason for Brad not to subscribe.
OTOH, I think the NYT has it figured out. They posted this about Holtz-Eakin and CBO.
http://www.nytimes.com/2004/08/23/politics/23budget.html
Is it a counterpoint to Mankiw?
Posted by: bakho at August 23, 2004 08:45 AMNeil Munro
http://nationaljournal.com/members/news/2004/08/0820nj2.htm
"• Taxes. In the presidential debate on October 3, 2000, Bush touted his proposed tax cut for the middle class. "If you're a family of four making $50,000 in Massachusetts, you get a 50 percent tax cut," he said. "My plan drops the rate from 15 percent to 10 percent and increases the child credit from $500 to $1,000."
The tax cuts of 2001 and 2003 increased the child tax credit to $1,000, greatly reduced the tax penalty paid by married couples, and boosted a tax credit for child care. Taxes for a two-child family earning $40,000 dropped from $1,900 to zero, according to the administration's analysis. For a family earning $60,000, Bush's cuts dropped taxes by 38 percent to $2,805, according to the analysis done by the Treasury Department. The cuts ensured that an additional 4 million parents don't have to pay income taxes, and provided more than twice the value to families of a Baby Boom tax cut enacted in 1948, according to Treasury.
"They've made progress in that area ... [but] more can be done," said Barrett Duke, vice president for public policy at the Ethics and Religious Liberty Commission, an arm of the Southern Baptist Convention."
Barrett Duke???
Posted by: bakho at August 23, 2004 08:48 AMBrian,
As I read Brad (and the op-ed itself), Mankiw is trying to stick to the administration line while not actually saying anything egregiously wrong. As Brad argues, he does this by indirection -- for instance, he doesn't actually challenge Tyson's claim about job creation, but an ordinary reader will think that he has.
Is Mankiw's reputation safe? It depends (guessing based on how my field operates). He might develop a reputation for being reliable as an academic albeit unreliable as an op-ed writer. But sucker-punching colleagues in a national newspaper is somewhat risky. (The defense of Mankiw would run that he is simply trying to present a corrective to one-sided presentations of what is _wrong_ with the job market.)
Honestly, do we need any more "hints" that the Bush administration hasn't been concerned with sound fiscal policy?
Mark Lindeman
Posted by: Mark Lindeman at August 23, 2004 11:15 AMJust what do they serve at the White House cafeteria that so many previously reputable people are willing to sacrifice themselves to protect this contemptible little man?
Posted by: Hack at August 23, 2004 12:51 PMpj,
This is only a guess, but didn't Professor DeLong work closely with Ms. Tyson, both in the Clinton administration and at Berkeley? If that's true, then he probably caused her "Laura" while working. And even if he did have some contact with Professor Mankiw at Harvard, he might not have had as much as he had with Professor Tyson.
Posted by: Brian at August 23, 2004 03:59 PMMark,
It's actually quite interesting. The Bush administration makes a bunch of misleading, but not technically incorrect claims - like those "average tax cuts" - while Mankiw kind of does the same thing. That's trickle down something, no?
As for his reputation, I can only speculate, since I am not (yet) an academic. I'd have to imagine that it's not too serious a crime - after all, why give up so much for something so little?
And no, we really don't need many more hints, unfortunately.
Posted by: Brian at August 23, 2004 04:04 PMBrad -
Is a bigger sample always better? You assert that payroll survey sample bigness is the reason it is definitively better, but I think that fails your test of "raising the level of debate." You might as well have written that correlation shows causation. Sample size is itself a red herring, and you know it.
Sample quality matters as well, yes?
So why not tell your readers about the BLS study published on August 6th that acknowledges payroll sample problems with overcounting that have inflated job loss estimates for the last 3 years? Granted, BLS hasn't exactly emphasized the study, but you can find it on their website if you look hard enough. If you need a pointer, come to heritage.org, where we initiated this research line.
Also, what gives with the low jobless claim numbers? Does that not indicate an improving labor market? The evidence is mounting that payrolls are not measuring the new economy well. Mankiw is right.
Posted by: Tim Kane at August 24, 2004 06:57 AMI wonder if the collective American "maxed-out platinum card" feeling is playing a major factor in the state of low payrolls.
Sub-factors causing :
Anti-American sentiment abroad causing would be lenders to be reluctant to invest. I know of many friends that basically are reluctant to take a vacation in the States if it implies being man-handled by cretins who confuse security with impoliteness or take a detour to Guantanamo. Not all utility calculations are rational, after all, and money in this case would be a measure of utility.
The construction boom means that people may have locked themselves into payments for long term"investments" that have to come from somewhere. 2 Examples: Long-term goods bought on 90's credit, such as ludicrously overvalued houses, or people who took liquid assets such as stocks out of the market to prevent them from loosing their value during the downward spiral, and plowed them into homes because interest rates were low.
These two factors can be causing demand to be weak enough so that the people remaining in the market can meet the sluggish demand through burnout. For proof of this I would point to the erratic Consumer Confidence numbers.
The cake-topper is that those people with the maxed out credit cards have to accept real-wage decreases in ordet to pay for what is owed. This could include overeducated Cal alumni working as coffee-serving wenches - meaning that they have to work more to keep the same income. It also means that someone who's making $6.50 an hour will find a bargain at Walmart (because the Chinese make stuff cheaper)...dragging us into continued lower than expected job growth.
Furthermore if oil prices remain high we could be pulled into a miniature stagflation dilio where companies would rather spend the money on oil than new workers and not pass the costs on to consumers who are buying skidishly.
As to the prior comment on jobless claims, did he forget that welfare reform was meant to discourage people from applying?? And that they were kicked off and told that they have to find the first job they can, even if it is greeting people at Walmart?? Mankiw is taking an abstract non-qualitative view of one indicator and extrapolating from there. Its the subjective utility criteria that drive market transactions, the agreggate of which, look rather bad.
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(5) The NIV programme and increasing young labor pool (demographics), entering the market with larger debt (costs of education outpacing inflation), good points made by A. Zarkov and Grecia B.
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