South By North Strategies, Ltd.

Bad Economists

In this video, Yves Smith of Naked Capitalism discusses the recent failures of the economics profession.

Around the Dial – April 20

Economic policy reports, blog postings, and media stories of interest:

• Economix offers a primer on value-added taxes.
• TaxVox asks whether subsidies or tax credits better aid low-income families.
• Marshall Auerback wonders what the Eurozone’s problems mean for the U.S.

Rising Social Inequality

From a report in The Economist on social mobility and inequality in America …

But the reality for most Americans is becoming more complicated. The recession came at the end of a period marked by record levels of inequality. Many Americans, lacking true upward mobility, bought its trappings, such as a bigger house or better car. Disaster duly followed. As a result, American optimism has been pierced by doubt. In a new poll for The Economist, 36% of respondents said they had less opportunity than their parents did, compared with 39% who thought they had more. Half thought the next generation would have a lower standard of living, double the share that thought living standards would rise. As the country recovers, two problems cloud its future. Rates of social mobility are unlikely to grow. Inequality, however, may widen even further.
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The recession, meanwhile, may have exacerbated trends in inequality. The capital markets, points out Timothy Smeeding of the University of Wisconsin, have recovered more quickly than the housing or labour markets. This is troubling for the poor and the middle class, since homes represent a greater share of their wealth. Unemployment has been concentrated in America’s lower ranks. As the rich recover, poor and middle-class people may lag behind. Young workers may fare badly, too. Those who graduate in recessions have lower incomes in the long term, according to Lisa Kahn of Yale University.

State Level ARRA Estimates

From the Council of Economic Advisers’ latest report on the American Recovery and Reinvestment Act …

The CEA’s third quarterly report on the impact of the American Recovery and Reinvestment Act (ARRA), released on April 14, 2010 (CEA 2010), found that the ARRA raised employment as of the first quarter of 2010 by between 2.2 million and 2.8 million jobs over what it would otherwise have been.

The following table estimates the number of jobs created or saved by state. Note that the estimate for North Carolina is 84,000 jobs.

Around the Dial – April 19

Economic policy reports, blog postings, and media stories of interest:

• Paul Krugman discusses “looters in loafers.”
• The News & Record reports on business incentives in Greensboro.
• Calculated Risk asks about the tie between household size & housing starts.
• Econbrowser analyzes recent drops in consumer confidence.

It’s Aggregate Demand, Stupid!

From a recent speech by Christina Romer of the Council of Economic Advisers …

My first and most fundamental point is that when it comes to the economy we are very far from normal.  The unemployment rate is currently 9.7 percent.  I find it distressing that some observers talk about unemployment remaining high for an extended period with resignation, rather than with a sense of urgency to find ways to address the problem.  Behind this fatalism, there seems to be a view that perhaps the high unemployment reflects structural changes or other factors not easily amenable to correction.  High unemployment in this view is simply “the new normal.”  I disagree.
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The high unemployment that the United States is experiencing reflects a severe shortfall of aggregate demand.  Despite three quarters of growth, real GDP is approximately 6 percent below its trend path.   Unemployment is high fundamentally because the economy is producing dramatically below its capacity.  That is, far from being “the new normal,” it is “the old cyclical.”

Regarding long-term unemployment …
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Is This Really Good News?

Mark Thoma asks if a falling deficit really is good news.

But taking a different view, one that focuses on people rather than votes, there is a reason to help households struggling to find employment. Even if there is little political gain to doing so, every job that is created changes the circumstances some household faces for the better, and that alone ought to be enough motivation to do as much as possible to help. But Stan Collender is correct, as I explain here, to conclude that the administration has no plans to even propose doing more to help. No matter what effect that decision has on votes, with households still struggling to find decent jobs, or any job, I think that’s the wrong choice to make.

NC March Employment Report

The March employment report released today by the Employment Security Commission points to few changes in the state’s labor market. Job growth remains insufficient to accommodate all those who wish to work, and unemployment remains at an elevated level.

Last month, North Carolina employers added 3,300 more positions than they eliminated; private-sector and public-sector employers contributed roughly equally to that gain. Since December 2007, North Carolina has lost, on net, 280,200 positions or 6.7 percent of its payroll employment base.

Moderating labor market conditions are reflected in March’s household data. Last month, the labor force expanded by 0.3 percent as 15,300 additional people sought work. The number of employed individuals rose, and the number of unemployed individuals declined. Consequently, the unemployment rate dipped from 11.2 percent to 11.1 percent. Nevertheless, the past year saw the number of unemployed Tar Heels grow by 7.3 percent and the unemployment rate rise to 11.1 percent from 10.3 percent.

Click here for South by North Strategies’ full analysis of the March employment report.