Posts Tagged ‘Paul Krugman’

The Truth About Those Unemployment Numbers

Monday, October 29th, 2012

The nation’s unemployment rate fell to 7.8 percent in September, the lowest level reported since January of 2009.  That is a 0.4 percent decline from the 8.1 percent reported for the previous month, yet represents a slight hiring slowdown after the Department of Labor revised the July and August numbers upwards by 86,000.  A total of 114,000 jobs were added in September.

Despite the good news, the fact remains that the American work force is now down six million individuals from its 2007 levels. After adding those six million to the total, the unemployment rate rises to 11 percent.  These individuals are also known as “underutilized workers. Approximately one-third of that six million are actively looking for work; the rest have left the work force due to retirement, disability or another reason.  All told, 161.79 million American are currently employed.

Most people don’t realize that the jobs report actually collects data from two separate surveys.  In one, 140,000 employers report how many people are on their payrolls; in the second, 873,000 households report the number of members who have jobs.  While the employer-generated statistic reported in September was expected by economists, the household survey results were a surprise.  It reported the highest number of jobs filled since June of 1983.  It is not uncommon for the surveys to deviate from each other.   Here is how the household survey works is taken: an individual in the chosen household is asked if they own a business; do they work for pay; are they self-employed; do they work part time or full time.

Additionally, suggestions that the federal government had “cooked the books” are “nonsense”, according to New York Time s columnist and Nobel Price-winning economist Paul Krugman. “Job numbers are prepared by professional civil servants at an agency that currently has no political appointees,” Krugman wrote in a recent column.  “Furthermore, the methods the bureau uses are public – and anyone familiar with the data understands that they are ‘noisy,’ that especially good (or bad) months will be reported now and then as a simple consequence of statistical randomness.  And that, in turn, means that you shouldn’t put much weight on any one month’s report.”

Eurodammerung?

Wednesday, May 23rd, 2012

Despite Germany’s strong manufacturing output in March, it was not enough to compensate for a slump across the rest of the Eurozone with declining production, a signal that an expected recession may not be as mild as policymakers hope.  Industrial production in the 17 Eurozone countries declined 0.3 percent in March when compared with February, according to the European Union’s (EU) statistics office Eurostat.  Economists had expected a 0.4 percent increase.

The figures stood in stark contrast with German data showing output in the Eurozone’s largest economy rose 1.3 percent in March, according to Eurostat, 2.8 percent when energy and construction are taken into account.  “With the debt crisis, rising unemployment and inflation, household demand is weak and globally economic conditions are sluggish, so that is making people very reluctant to spend and invest,” said Joost Beaumont, a senior economist at ABN Amro.

According to Eurostat, output declined 1.8 percent in Spain; in France — the Eurozone’s second largest economy after Germany — output fell 0.9 percent in March.  Many economists expect Eurostat to announce that the Eurozone went into its second recession in just three years at the end of March, with households suffering the effects of austerity programs designed to slash debt and deficits.

“Industrial production is a timely reminder that first-quarter GDP will likely show a contraction,” said Martin van Vliet, an economist at ING.  “With the fiscal squeeze unlikely to ease soon and the debt crisis flaring up again, any upturn in industrial activity later this year will likely be modest.”  European officials believe that the slump will be mild, with recovery in the 2nd half of this year.  The strong economic data seen in January has unexpectedly faded point to a deeper downturn, with the drag coming from a debt-laden south, particularly Greece, Spain and Italy.

Economists polled by Reuters estimated the Eurozone economy contracted 0.2 percent in the 1st quarter, after shrinking 0.3 percent in the 4th quarter of 2011.  “We suspect that a further slowdown in the service sector meant that the wider economy contracted by around 0.2 percent last quarter,” said Ben May, an economist at Capital Economics.  “What’s more, April’s disappointing survey data for both the industrial and service sectors suggest that the recession may continue beyond the first quarter.”

“It is evident that Eurozone manufacturers are currently finding life very difficult amid challenging conditions,” said Howard Archer at IHS Global Insight. “Domestic demand is being handicapped by tighter fiscal policy in many Eurozone countries, still squeezed consumer purchasing power, and rising unemployment.”  Eurozone governments have introduced broad austerity measures in order to cut debt, and these have undermined economic growth.

European watchers also expect to see Greece exit the Eurozone.  Writing for Forbes, Tim Worstall says that “As Paul Krugman points out, the odds on Greece leaving the Eurozone are shortening by the day.  In and of itself this shouldn’t be all that much of a problem for anyone. Greece is only two percent of Eurozone GDP and it will be a blessed relief for the Greeks themselves.  However, the thing about the unraveling of such political plans as the Euro is that once they do start to unravel they tend not to stop.”

The European Commission hopes Greece will remain part of the Eurozone but Athens must respect its obligations, the European Unions executive Commission said.  “We don’t want Greece to leave the Euro, quite the contrary – we are doing our utmost to support Greece,” European Commission spokeswoman Pia Ahrenkilde Hansen said.  Greece is likely to face new elections next month after three failed attempts to form a government that would support the terms of an EU/IMF bailout.  Opinion polls show most Greeks want to stay in the Eurozone, but oppose the harsh austerity imposed by the emergency lending program.  “We wish Greece will remain in the euro and we hope Greece will remain in the euro … but it must respect its commitments,” according to Ahrenkilde.  “The Commission position remains completely unchanged: we want Greece to be able to stay in the Euro.  This is the best thing for Greece, for the Greek people and for Europe as a whole,” she said.

European Central Bank (ECB) policymakers Luc Coene and Patrick Honohan voiced the possibility that Greece might leave the currency bloc and reached the conclusion that it will not be fatal for the Eurozone.  According to Luxembourg’s Finance Minister Luc Frieden “If Greece needs help from outside, the conditions have to be met.  All political parties in Greece know that.”  There are powerful incentives for keeping Greece stable, one of which is that the ECB and Eurozone governments are major holders of Greek government debt.  A hard default could mean heavy losses for them; if the ECB needed recapitalizing as a result, that debt would fall on its members’ governments, with Germany first in line.  “If Greece moves towards exiting the Euro…the EU would then need to enlarge its bailout funds and prepare other emergency measures,” said Charles Grant, director of the Centre for European Reform think-tank.

Meanwhile, Britain’s Deputy Prime Minister Nick Clegg warned euro skeptics to avoid gloating over the state of the Eurozone as Greece tries to assemble a workable government.  According to Clegg, “We as a country depend massively on the prosperity of the Eurozone for our own prosperity, which is why I can never understand people who engage in schadenfreude – handwringing satisfaction that things are going wrong in the euro.  We have an overwhelming interest – whatever your views are on Brussels and the EU – in seeing a healthy Eurozone.  That’s why I very much hope, buffeted by these latest scares and crises in Greece and elsewhere, that the Eurozone moves as fast as possible to a sustainable solution because if the Eurozone is not growing and the Eurozone is not prosperous it will be much more difficult for the United Kingdom economy to gather momentum.”

Vive la France!!!

Monday, August 8th, 2011

The popular image of French men and women spending their time in sidewalk cafes sipping aperitifs, smoking Gauloises and watching the world go by belies the fact that the nation’s residents work the least amount of hours in the world, yet are among the most productiveAccording to a recent UBS survey, people globally work an average of 1,902 hours annually.  The work day is even longer for people in Asian and Middle Eastern cities.  By contrast, residents of Paris and Lyon have the shortest workday at 1,582 and 1,594 hours annually, respectively.

In 2010, France’s GDP totaled $2.113 trillion; that represented a 1.6 percent growth rate and a GDP per capita of $38,016.  The French achieve their high standard of living while working 16 percent fewer hours than the average person, and nearly 25 percent less than their Asian peers.  Visit France and you’ll see that their standard of living is probably significantly higher than the GDP numbers indicate.  If you divide France’s GDP per capita by actual hours worked, you’d probably learn that the French are achieving some of the highest returns on work-hours invested.

Because healthcare and education are virtually free, the French have the ability to put more emphasis on family and pleasure rather than making a profit.  Additionally, the French have 11 national holidays every year and many workers take extra time off if those holidays occur on a Tuesday or Thursday.  Then there’s France’s legendary vacation time – which can range from five to eight weeks a year.  Despite this and with an unemployment rate of 9.5 percent as of May 2011, France remains the world’s fifth largest economy.  And the French achieve all that with a 35-hour workweek, which was adopted in 1998 in an effort to create more jobs for the unemployed.  The early retirement age is 62, although most French opt to retire at 65.

France scores among the top 10 in International Living magazine’s “Best Quality of Life” survey.  According to the article on the results of the 2011 survey, “Still, it can be useful to step back and see how each nation fares relative to others when we do consider these categories.  To come out ahead, a country must be an all-around good pick, not just a standout in one area or two. And that explains why the top finishers are developed nations like the U.S. and the rest of our top 10 — New Zealand, Malta, France, Monaco, Belgium, Japan, United Kingdom, Austria, and Germany.  None is among the most affordable nations on the planet.  But they all offer other benefits.  These nations are home to plenty of expats who are thrilled with life in their chosen havens.”

Writing on Truthout.com, Nobel Prize-winning economist Paul Krugman says that “It’s true that French GDP per capita (output divided by the number of people in the nation), for example, is only about three-quarters of the American level, when adjusted for purchasing power.  But when you look closely at that number, the story is certainly more complex than many people think.  Let’s look at data released by the Bureau of Labor Statistics in the United States — at data on France in particular, since that’s the country Americans have strong feelings about, right?  I’m going to focus on the data from 2008, not 2009.  In 2009, businesses in the United States laid off a lot of workers, while European firms did not.  That produced a divergence in productivity that had more to do with short-run business cycle events than with fundamental trends.  Data from 2008 allows for a better sense of the underlying differences.  GDP, per capita, per person, France produces 73 percent of what the United States produces in a year.  GDP per hour worked: A French worker produces about 99 percent of what an American worker produces in one hour.  Number of workers: For every 100 workers in the United States, France has about 84 workers.  Hours per worker: For every 100 hours an American works, a French person works about 88.  So French workers are roughly as productive as American workers.”

At present, France is the fastest growing economy in the European Union.  According to Ken Hurst of Works Management, “New productivity data published today (4 February) highlights a further rise in labor productivity across the European Union, thereby extending the current period of improvement to 21 months.  Furthermore, the pace of increase accelerated since December to a five-month high and put France in first place in the growth league.  Broken down by nation, the latest data highlighted gains across the EU’s four largest economies, the strongest of which was recorded in France – where output per employee rose at the strongest pace since last July.  Marked gains were recorded in both the manufacturing and service sectors.”

Getting By on $250,000 a Year

Monday, October 11th, 2010

University of Chicago law professor complains about $250,000 yearly income.Todd Henderson is a University of Chicago law professor; his wife is a physician at the prestigious university’s hospital.  Although the family earns more than $250,000 a year, lives in a pricey house in the upscale Kenwood neighborhood, employs a nanny and sends their children to private schools, Henderson is upset with President Barack Obama’s plan to end Bush-era tax cuts on high-income families. Writing recently on the “Truth in the Market” blog, Henderson said that “A quick look at our family budget, which I will happily share with the White House, will show him that, like many Americans, we are just getting by despite seeming to be rich.  We aren’t.”

The blog entry, which Henderson hoped would spark a debate about taxes, turned into a firestorm in which he was accused of being out of touch and arrogant.  It also kicked off a discussion of what being rich means, especially in an economy where many people are unemployed and hurting financially.  Eventually, Henderson deleted the blog entry and says he will no longer contribute to “Truth in the Market”.  One of the people angry with Henderson is Michael O’Hare, a professor of public policy at University of California – Berkeley, who said “It’s just rude to be worrying in public about whether you have to fire the maid.  That didn’t used to be acceptable behavior, for people who were that much better off than the rest of us to complain about their misfortunes.”

Geoffrey Stone, a former University of Chicago law school dean, offered this criticism, “People are reasonably focused on the view that this is absurd for somebody who lives a relatively privileged life to define himself as not rich because there are people who are richer.  The way he wrote it opened him up to that.”  Even Nobel Prize-winning New York Times columnist and Princeton economist Paul Krugman got in on the act, calling Henderson the “whining Chicago professor.”

This story leads to the question of exactly what is the definition of being rich?  According to the Tax Policy Center, defining rich is a matter of analyzing income distribution.  Roberton Williams, senior fellow, said the top three percent of Americans have gross incomes in excess of $250.000.  That is the income bracket that President Obama is targeting with the tax increases.  As to the Hendersons, Williams said “They are spending what they are making.  They don’t feel like there is any fat in the budgets.  But the average person would take a look at their budget and say ‘Wow’.”