I'd guess that since baseline productivity growth is so damn strong it makes it extra-easy to meet incremental demand without a lot of hiring. I can't find a per-industry trendline graph, but construction is still horrid:
I'd guess that since baseline productivity growth is so damn strong it makes it extra-easy to meet incremental demand without a lot of hiring. I can't find a per-industry trendline graph, but construction is still horrid:
Again on the size of the stimulus, someone sums up several reactions to the 787 Billion deal:
http://firedoglake.com/2011/09/04/wr...glingly-large/
No one knew it wasn't enough, but a whole lot of people thought it wasn't.
http://economix.blogs.nytimes.com/20...able-recovery/
According to the study, between the second quarter of 2009, when the recovery began, and the fourth quarter of 2010, national income rose by $528 billion, with $464 billion of that growth going to pretax corporate profits, while just $7 billion went to aggregate wages and salaries, after accounting for inflation.
The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades, the study found.
“The lack of any net job growth in the current recovery combined with stagnant real hourly and weekly wages is responsible for this unique, devastating outcome,” wrote the report’s authors, Andrew Sum, Ishwar Khatiwada, Joseph McLaughlin and Sheila Palma.
According to the Bureau of Labor Statistics, average real hourly earnings for all employees actually declined by 1.1 percent from June 2009, when the recovery began, to May 2011, the month for which the most recent earnings numbers are available.
The authors said another factor explaining the weak performance for aggregate wages and salaries was the slow growth in weekly hours during the recovery. At the same time, worker productivity has grown just under 6 percent since the recovery began, helping to keep employment down while lifting corporate profits, the study said.
It might be that companies were able to extract more productivity due to fear. Or there is something else going on. I'm not sure.
Anyway, talking about fear -- right now Europe is the center of terror in the markets. I know we have a few stalwarts saying it is about a double dip trying to avoid the issue, but all anyone is talking about is Europe. I have no idea how they are going to fix the issue but it had better get fixed. Greek two year bonds are yielding 52% right now. Insane.
I don't get how that is incompatible with what I said. When I say we know that spending helps the economy, I mean in a theoretical sense. Everyone knows that if people were spending more, it would help the economy. Can you prove that's not true? But I don't mean that they know that if they personally spend it would help. they know that if everyone was spending, it would help. But they don't want to be the first to spend, because they can't trust that others will join them. How is that clearly backward? Fearing you'll lose your job is an aspect of that. If you weren't worried about things like that, you could spend anyway, and you wouldn't worry about what others are doing, because you would know you still have money coming in. So of course job security is part of the fear I'm talking about.Originally Posted by Jason McCullough
As for the newspaper dig, where you are getting your info from?
I wish I had confidence that Greece would have an economy and way to pay those in two years. I'd love to get a 50% bond rate!
I think you're wildly overestimating the amount of economic knowledge the general public has. They don't understand the slightest about how it all works, other than occasionally repeating or disagreeing with talking points from politicians they agree or disagree with. For example, Bush's talk about "get out there and spend" was popular on the right, unpopular on the left.
....
That's kind of the point.
On the investment that companies are doing right now: A large amount of that is (as far as I can tell) companies buying capital because there are some extremely favorable tax breaks that expire at the end of this year.
I was at one customer this year, about two months ago, and they had just purchased about 10 Italian (don't remember the name) machines that basically bend steel and punch holes in it. Each one cost over $1 MM. The guy I was talking with said that they had to race to buy them, because so many companies were trying to buy such equipment before the tax breaks went away at the end of this year. Saw the same thing at Caterpillar back in August - different capital, but a rush to get the capital on the books in 2011.
I'm going to go out on a limb and guess that tax incentive chasing is not the source of the entire non-residential investment fall since 2008 of 200 billion coming back.
Fascinating discussion at our company today about our global teams. In particular we are not and have not been investing in labor in counties with stronger labor protections. Further, we are actively attempting to slowly migrate skilled labor to countries with more flexible labor policies.
Incentives do matter! Who knew?
And micro does not translate automatically to macro! Who knew?
So, how do you define "labour protection"?
Are you talking about no minimum wage, strong enforcement of employment contracts, no requirement for private provision of pension or healthcare and low corruption?
(Yes, which country might I be talking about?)
Speaking of labor and offshore stuff, just saw this morning that about 85% of products in Walmart come from Chinese suppliers.
They should hang a Chinese flag outside the front doors.
Walmart has always been a huge retailer of mostly chinese goods. That's why their crap is so cheap.
It's one of the great paradoxes of protectionist policies....
Oh, you want to stop folks from buying crap from China, right? That sounds good. Buy American, rah rah rah!
Oh no! Now you have to actually buy American, which costs twice as much, which means you are now much more poor! Boo!
Folks want to buy stuff and have it be really cheap, but made by Americans, who got paid great wages... somehow.
That is the irony, isn't it? I suspect that if you stood with the WalMart greeters and did a poll interview, most would express disgust with America letting so many jobs go offshore, would describe how China was a threat to America, etc.
It was about two main factors: flexibility (so your definition of employment contracts) and cost (other items on the list). It is hard to say which one was more important, I would have said cost (since in the final analysis everything is a cost) but much of the focus was on flexibility. Although these were not minimum wage jobs.
And the countries were a from the top end (where investment is very low) European countries to the US all the way down to China.
Shockingly frank discussion.
I'm sure that's what's happening. The ruling class loves this shit. High unemployment makes (in general) for employees who put up with a lot more BS from employers, especially if they're not unionized.It might be that companies were able to extract more productivity due to fear.
Not necessarily... hopefully people would buy less crap they don't need anyway -- which is much more sustainable in the long-term.
Except right now we need people to buy a LOT more crap.
Correction: we need people to spend a lot more dollars.
But it is America! But then, one person's crap.....
Yeah, we don't need people to buy a lot more crap (and particularly crap where the majority of the money doesn't even go to our country). Travel. Going out to eat. Having a romantic getaway near home. Buying more expensive first-world manufactured stuff. All spending and keeping a lot of it in the country.
True. As mentioned, 85% of the items in WalMart are from China. Red Menace, indeed. ;)
Heh. Yes, I know. I guess I didn't make that jokey enough.
A speech from Krugman with some links journal articles:
http://www.palgrave-journals.com/eej...eej20118a.html
There is a real sense in which times like these are what economists are for, just as wars are what career military officers are for. OK, maybe I can let microeconomists off the hook. But macroeconomics is, above all, about understanding and preventing or at least mitigating economic downturns. This crisis was the time for the economics profession to justify its existence, for us academic scribblers to show what all our models and analysis are good for.
We have not, to put it mildly, delivered.
What do I mean by that? As I see it, there are three main complaints one can make about economists and their role in the current crisis. First is the complaint that economists fell down on the job by not seeing the crisis coming. Second is the complaint that economists failed even to see the possibility of this kind of crisis — and that by pointing out the possibility, they could have helped head the crisis off. Third is the complaint that they have either failed to offer useful advice on what to do after the crisis struck, or that they have offered such a cacophony of voices as to provide no useful guidance for policy.
As I see it, the first complaint is mostly — though not entirely — unfair. The second is much more substantial: anyone with some knowledge of history should have realized that the age of financial crises was far from over. But the most damning failure of economists, I’d argue, was their acquired ignorance of what I’ve called depression economics — the principles that should govern policy after a financial crisis has left conventional open-market operations impotent.
At about half way through, I think this is the best thing Krugman's ever written. I'm impressed with his frankness at identifying mistakes which were made by the macroeconomics community. This is the kind of analysis which actually helps improve the community.
Yeah. It's honestly a horn that's been being tooted for a while.
In the other thread I mentioned the apparent general uselessness of DSGE and the neoclassical movement toward microfoundations, etc. That's what Krugman is alluding to when he talks about the dark age of macro. Unfortunately this movement has a chokehold on all of the major journals; if you are an economist and you want to get published you must be publishing something that's acceptable to the neoclassical guys. I can't recall who it was - maybe Brad DeLong - but at one point he mentioned that if you wanted to publish a Keynesian paper you had to sneak the Keynesian part in around all the DSGE stuff.
It's a very big problem in macro, but until someone figures out a way to shake up the major journals (or maybe start a reputable journal to compete with them) it's one that is going to persist.
Personally I'm very comfotable with the micro/macro discontinuity. My impression (amateur though it is) is that trying to soundly base macro on micro is useless because all sorts of emergent behaviors are going to occur when you get a bajillion micro actors interacting with one another.
Are you saying the consensus amongst economists these days is wrong? Not arguing, asking to see if I understand what you're saying.
How does one define "a consensus among economists?" I guess on any given issue you could talk about the biggest plurality of economists publicly taking positions on it?
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