Brad DeLong's Semi-Daily Journal (2004)

Did they speculate that the worst president might be a factor in this worst recovery?

So is this living proof that a refusal of the government to combat a recession with a credible jobs plan will lead to a jobless recovery? There is still plenty that needs to be done- infrastructure/training/new tech investment. Our government simply is not putting any revenue behind it.

Could this be a reflection of the ideology of supply side trickle down?

Read it and weep:

http://www.whitehouse.gov/omb/budget/fy2005/

Didn't the GOP used to declare budgets DOA?? How much chance does this have??

"Economic growth and good stewardship of taxpayer dollars will help us meet another important priority: cutting the budget deficit brought on by recession and war. We must continue to evaluate each Federal program, to make sure that it meets its goals, and produces the desired results. I propose to hold discretionary spending growth below four percent, less than the average rate of growth of American family incomes. And spending unrelated to defense and homeland security will be held below one percent growth—less than the rate of inflation—while continuing to meet education, health care, and other priorities of this Nation. With this spending restraint and continued pro-growth economic policies, we can cut the deficit in half over the next five years." -GW Bush

From Economy.com:

"The Biggest Threat to Spending is weak wage growth. Consumer debt burdens are near record highs. While they are manageable, debt burdens are sufficiently high to limit the ability of consumers to spending beyond their cash flow. In the next few months, that cash flow will be supplemented by larger bonus checks than seen the last few years, larger than normal tax refunds due to the retroactive nature of last year’s tax rate reductions, and cash from mortgage refinancings (although the recent bump in applications is small compared to last year’s surges). However, by late spring, there will be no further supplements to cash flow and consumers will be dependent on wage income to support their spending."

"Economy.com’s baseline forecast calls for accelerating wage and salary income as job gains accelerate. However, the data to date is moving in the opposite direction. Several measures of wage income, including wage and salary income released today, the employment cost index wages and salaries component released last week and average hourly earnings to be released on Friday with the employment data are all currently indicating a slowdown in wage growth. If this does not reverse, as expected, consumers will not have the cash to support forecast spending growth."

http://www.economy.com/dismal/pro/blog_main.asp?e=3A4B5965-76E2-4F4C-B8F6-31D6551DE3F9#3A4B5965-76E2-4F4C-B8F6-31D6551DE3F9

Notice the personal income and spending figures for December. Income rose 0.2%, while spending rose 0.4%. So, saving continues to decline. The labor market is not only very weak in job creation, but weak in salary and benefit gains for middle and lower income workers.

I thought Berner's point was that the 2+ million jobs "lost" were excess, unproductive jobs that would never have been established in a sensible economy.

Years of careless managerial oversight (hey, how are my stock options doing!) led to the building of fiefdoms. The return of standards has the economy back to where it should have been in the first place.

It's clear that Steven Roach is a commie-loving Pinko. Why does he hate America so?

I think that your main problem with economic analysis is that your cynicism simply hasn't caught up to the reality of Bush's America. Employment stats are hard to fake, since employers have to report employees in so many ways. Other stats aren't. Why wouldn't Bush just be faking the ones that show a recovery? I think we'd all have to agree that no sort of moral or pragmatic concern would stop him, so the only remaining question is whether it would be hard to do.

Government economic data can be trusted, the important issue is interpretation. Pooh poohing the data is to no avail.

Brad, you're an economist, right?

It would be useful, and interesting if you could wind back on the partisan stuff for a while and actually tell us (or at least speculate as to) what is going on with this recent productivity surge.

Because it's a genuine puzzle.

- It would be useful, and interesting if you could wind back on the partisan stuff for a while and actually tell us (or at least speculate as to) what is going on with this recent productivity surge. -

Brad has discussed productivity issues repeatedly, for years! Search???

lise, maybe I've missed it, but I don't recall any explanation or theorizing as to the mechanisms which underly the purported productivity increases in recent years.

If you wnat to find a jobless recovery, just look at core Europe in the 1980's. There was solid growth in most countries between 1983 and 1987, but unemployment remained very high (much higher, incidentally, than America's rate at the moment). But that would, of course, require America to admit it has anything to learn from Old Europe's experiences, which isn't going to happen.

IIRC, a major part of the US productivity boom is that those people who are working here work more hours -- a while ago I saw a comparison (sorry, can't remember the source) that indicated that the entire "productivity advantage" (and then some) that the US had over Europe was due to that.

Remember, "productivity" is output per worker, not output per hour of work.

Actually, productivity is output per hour of work, not output per worker: http://www.bls.gov/lpc/home.htm.

Government economic data can be trusted? Bush's political appointees are in charge of every governmental department. Would any have predicted, before Nixon, that presidents would be involved in cleaning out safes and planting evidence that someone else had done it? Yet we know that Bush is worse than Nixon. Why shouldn't we assume that the data itself, as well as the interpretation, has been fudged?

Daniel Gross weighs in on the Household survey vs payroll employment:

http://slate.msn.com/id/2094690/

Check out his chart of adjusted unemployment

me: Brad has stated several times that the present jobless recovery, however it is described, is a problem that neither he nor anyone else knows the answer to. A lot of people are working on it.

If you don't like the partisan stuff, I'm sure there's somewhere else for you to go to.

When one reads about economists who can't "make sense of America's jobless recovery" one wonders what business and economics class have been teaching for the last 30 years.

I can make sense of it and I haven't sat in an economics class room in 30 years.

First, we have a fundamental problem with distribution of income. Economics has nothing to do with this subject; distribution of income is always only a political question, as proved by slavery. Charleston SC and Savannah are not America's greatest urban environments from the 19th Century by accident and nothing has bettered either since.

Even Krugman sold his soul to Enron, helping to assure the political battles have all been lost. Similarly, who has taken a front line stance against immigration or against the horribly regressive FICA taxes, both of which crush the least well off in our society.

Second, everyone has forgotten Price. The paradox of economics is that what is good for the individual or firm is bad for the economy. All economists talk about is what is good for the firm (lower costs, fire, fire, fire), never what is good for the economy.

Third, economics has lost it way on free trade. There has never been any such thing as free trade and there never will be. Our trade policies have been nothing more or less than the political screwing of those who have to compete with foreign manufacturers. Academics who support free trade are nothing but paid whores for special interests. Free trade has been nothing more than unilateral disarmament of people like workers in mills (iron or textile) who lack the political power to avoid being screwed. Your college professor, lawyer, doctor, dentist, cpa and especially your banker, broker or investment banker face no foreign competition. Neither, for that matter, does your farmer.

When one reads about economists who can't "make sense of America's jobless recovery" one wonders what business and economics class have been teaching for the last 30 years.

I can make sense of it and I haven't sat in an economics class room in 30 years.

First, we have a fundamental problem with distribution of income. Economics has nothing to do with this subject; distribution of income is always only a political question, as proved by slavery. Charleston SC and Savannah are not America's greatest urban environments from the 19th Century by accident and nothing has bettered either since.

Even Krugman sold his soul to Enron, helping to assure the political battles have all been lost. Similarly, who has taken a front line stance against immigration or against the horribly regressive FICA taxes, both of which crush the least well off in our society.

Second, everyone has forgotten Price. The paradox of economics is that what is good for the individual or firm is bad for the economy. All economists talk about is what is good for the firm (lower costs, fire, fire, fire), never what is good for the economy.

Third, economics has lost it way on free trade. There has never been any such thing as free trade and there never will be. Our trade policies have been nothing more or less than the political screwing of those who have to compete with foreign manufacturers. Academics who support free trade are nothing but paid whores for special interests. Free trade has been nothing more than unilateral disarmament of people like workers in mills (iron or textile) who lack the political power to avoid being screwed. Your college professor, lawyer, doctor, dentist, cpa and especially your banker, broker or investment banker face no foreign competition. Neither, for that matter, does your farmer.

Has anyone analyzed what percentage of this is due to outsourced manufacturing (I understand this isn't a full explanation of the phenomenon, but want to better understand the %).

There wasn't significant contract manufacturing in the early 1990's, and in, for example, Jabil's last 10-Q, they should a 40% increase in revenue over the same period last year (400MM). I would think if the rest of the ~100B EMS market grew at a similar rate, it might explain a not insignificant %age of the gap.

Well, said, John. You wrote,
"... economics has lost it way on free trade. There has never been any such thing as free trade and there never will be. Our trade policies have been nothing more or less than the political screwing of those who have to compete with foreign manufacturers."

Ignorance of economics being a prerequisite of good citizenship, I have never sat in an economics classroom, even thirty years ago, but I have taken to reading this and other blogs to get some glimpse of the mind-set of those who serve our "higher institutions."

I think you may be wrong, John, about "your college professor, lawyer, doctor, dentist, cpa..." Sooner or later, they can and will be screwed. Online courses from Botswana, paralegals in Bangladesh, second opinions from India, dental drills remotely controlled from Morocco and bookkeepers in Thailand will take care of them.

Meanwhile, I am proposing that we reduce our healthcare costs by shipping our brain-dead patients to Mexico. Cost of shipping will be less than a week's stay in the hospital, and it will perk up the Mexican economy. When the patients expire, which eventually they will, we can even cut down on the burial costs, as both undertakers and burial plots are sure to be cheaper South of the Border. With all this money, the Mexicans in turn will buy more of our unique products, which will consist mostly of wood from old-growth forests to supply the raw material for the coffins. This will make timber companies very happy, since the labor will be mostly automated and the costs of acquisition will be subsidized by the American people via their government.

Very funny! But some of you aren't paying attention.

Jobless recoveries are understood and deplored. The magnitude of this joblessness was unexpected, and given the other realities, is frightening. As for productivity, the multitude of reasons is endlessly fascinating to anyone with a general curiousity about the world (see, e.g., the very next item down).

And as for free trade, "in the process of creative destruction, restrictive practices may do much to steady the ship and alleviate temporary difficulties. This is in fact a very familiar argument..." Joseph Schumpeter, "Capitalism, Socialism, and Democracy" (1942, Harper & Bros.) page 87.

But of course you already knew that.

James: "Actually, productivity is output per hour of work, ..."

Make that "reported hour of work". I suspect that while squeezing unreported (and, thus, presumably unpaid) hours from hourly workers is illegal and risky, and as such probably not done on a large scale, I suspect that hours of "exempt" (from the FLSA) employees are reported as their contractual hours, e.g. 40 hours weekly, regardless of how much they actually work. These days we may expect it's rather more than less.

Rich: reliability/fudging ov govt data

Keep in mind that all those government workers, various agencies, and the top echelons of the administration are not the same people, and do not necessarily have the same interests. Most government workers, including the statisticians, are ordinary professionals, who for one reason or another happen to work for the government, and insinuating that they have less integrity than, say, private sector employees or academics, is not fair. Don't confuse the ones with the others, and don't assume that the people doing all the work, or their supervisors, have more allegiance to any given administration or party than you. Demonizing them does not help anybody. (Think about your fire fighters who respond to each 911 call they get. They are for most intents and purposes the guy next door. Although they are not the federal government.)

In addition, all levels of a government agency are not answerable to this president and his circle, but ultimately to their supervisors and oversight agencies. Any wrongdoing today may be paid back tomorrow, and regardless of personal leanings, overall there is probably less to gain by doing somebody's bidding today than to lose when answering for unlawful conduct tomorrow.)

Having said that, there is almost certainly bending of the rules and doing favors, but the bias is probably more in what is being measured than the actual measurement result. Once you know how the result came about, you can usually apply the proper grain of salt. Forecasts may be another matter.

cm:

I'm familiar with govnermental agencies. So I'm aware that when a new administration comes in, it gets to apooint not only the head of each agency, but a number of other political appointees that occupy at least the next layer down of management, and more likely two layers. The ordinary statisticians may have one or perhaps two layers of supervisors between them and the political appointees, but that's it. Is that enough? I sincerely doubt it.

A great number of the protections that let our society work are not encoded into law, but are instead customary. As the Republicans have shown with redistricting on whim, looking at Democratic memos on a shared server, etc., none of these customary protections will hold. I don't see any reason why what remains of protections for career governmental employees will hold either.

Anurag,

"Has anyone analyzed what percentage of this is due to outsourced manufacturing (I understand this isn't a full explanation of the phenomenon, but want to better understand the %)."

This is pulled right from the Morgan Stanley debate to which Prof. Delong initially referred:

"There really aren’t any good estimates that capture the full impact of offshoring on US employment trends. The most widely cited figures come from the IT consulting group, Forrester, which estimates that the overseas outsourcing of IT processing jobs will climb from about 400,000 today to about 3.3 million by 2015. If that number is correct, the loss of about 300,000 jobs per year is hardly devastating for a US labor market that currently employs some 130 million workers."

That's not a percentage, but you can do the estimates easily enough.

One thing that bothers me about the debate is I didn't notice any reference to the jobs that were being created during this recent "boom". My understanding, from some source that I can't remember (unfortunately), was that the new jobs created in recent months had an average wage of $14.67/hour compared to an average wage of $17/hour for jobs lost during the same time period. While any employment at all beats no employment, isn't the lower-quality nature of new jobs a legitimate concern?

I'm a musician. Not an economist. Is it obvious?

Rich: Yes, this appointing of the top layers does take place, and they will take significant influence. You are right that many things in society are informal, and I did not mean to argue against that.

However, there are safeguards in place: government activities work essentially by the book, and many (but not all) of the rules, including how the work is done, wage and promotion rules, etc. are encoded in published directives. To the degree that people can point to (i.e. cover their butt with) a directive and thus are not entirely at the mercy of their superiors, oversight of the procedures is not completely shut out, and public servants are to a sufficient extent accountable (which I think is generally true of the US), it is difficult to force people to act against the rules.

In the census, a higher-level director cannot simply decree in a meeting how a population sample is chosen, or how statistical adjustments are made or the raw data are pruned. They may, however, influence what series are discontinued or newly created, how the statistic adjustments are done _in general_, etc., i.e. change the policy. But that's a different thing from doctoring with current data. (And even if policy is changed, it has to be documented, and internal opponents will make sure the information gets out, so it is available for review and questioning by the interested public, at least after the fact.)

This jobloss recovery is so depressing I can't think of anything more to say about it, other than if it keeps up Bush will likely lose. However that prospect is as cheering as the Vietnam adage, "We had to destroy the village in order to save it."

me

Sorry, I did not see the post. If you use the search here, you will find a host of discussions on productivity going back years. Brad enjoys the subject and thinks about it often. The topic is especially important as you indicate.

Would it be O.K. to count the jobs that have gone and are going to India?

Hal: Counting for what purpose? Those are not domestic jobs, but certainly there is also a "job multiplier" effect: for each so many white collar jobs (if you are talking about _their_ offshoring), there will be a number of jobs in office construction, building maintenance, restaurant/catering business, retail, etc., that will be there or not.

me -on productivity
Here's a recent one that turned a few lights on for me:
http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2004/IO_02_04.htm
So we need to wade through the literature on derivatives esp interest swaps. I find this more persuasive than the 'complementarity' piece here.

-site too partisan? You can't be serious. For real partisan stuff, visit Drezner. You'll be back in a heartbeat. (Ping pong is a good practice though.)

This is just an observation, but most of the States are still technically bankrupt, tho most of the impact of that bankrupcy on workforce and program cuts has yet to be felt, as capital and operating accounts are juggled and junk bonds are issued and everything skating on thin ice.
Many states are heading deeper in accrued debt, never mind issued bond debt, besides Arnold's, and their prolonged tax shortfall can't help.

I would propose that job growth will actually go negative again in 2Q04, after the typical annual hiring "binge" in 1Q of any year, and will go seriously south in 3Q/4Q at the end of the FY's, when states are stuck with funding re-approp's, and bridging shortfalls in matching Fed funds.

This raises interesting strategic questions for how to spin up an election party on the Titanic.

Given that core PCE is below 1% and disinflation may continue ahead, is it time the FOMC stopped ignoring this fact in its post meeting statement.....will the Fed have to acknowledge this in forthcoming events and bring back the spectre of de/disinflation to the financial markets?

cmdicely:
Regarding the "productivity advantage", I don't find the US data very impressive comparing real PPP-adjusted GDP per hour worked

Source: Eurostat (the statistical bureau of the European Commission)

http://europa.eu.int/comm/eurostat/newcronos/queen/display.do?screen=detail&language=en&product=LT&root=LT_copy_1031680375681/strind_copy_817397594099/ecobac_copy_872035736020/eb022_copy_929308708829

The professor makes the syllabus, not you.

Imitation is the sincerest form of television.