(Roughly) Daily

Posts Tagged ‘economy

“The only function of economic forecasting is to make astrology look respectable”*…

The pandemic economy has been strange and unpredictable from the get-go.

Throughout the past 14 months, the twists and turns have been surprising: The housing market boomedthe stock market soaredpeople got into day tradingeveryone hoarded toilet paper, and lumber became a must-have. There’s been widespread disagreement about how much support from the government was needed, whether the country was doing too much or not enough, or whether help would come at all. We won’t know whether the country overshot or undershot the response for years, and there’s still uncertainty about what’s happening in the labor marketprices, and other areas. And the prevailing theme has been one that has nothing to do with the economy directly: As long as Covid-19 isn’t under control, the economy isn’t either.

“Having been a forecaster for 10 years, we were surprised all the time, because nobody has a crystal ball and particularly if you just pull out one data series, one month, there’s just no way,” said Claudia Sahm, a former Federal Reserve economist and now a senior fellow at the Jain Family Institute. “It’s going to be a wild ride; the data through the end of this year, they’re going to be tough.”

The country and the world are staring into a black box of uncertainty on the economy. It’s frustrating, but it’s also inevitable. Anyone who says they know exactly what is going on in the economy right now is lying. The same goes for anyone who says they know what’s going to happen next.

“Because of the unique nature of this crisis, there are going to be some swings,” said Mike Konczal, director of macroeconomic analysis at the Roosevelt Institute. “In a year, they’re going to be trivia questions, but right now we’re obsessing about them.”

Few people will probably remember two years from now that the price of used cars and trucks went up by 10 percent in April. 

We know that the economy is different now than it was a year ago and that it will be different a year from now. What’s not clear is exactly how. And what we need now — including economists, experts, and policymakers — is the intellectual humility to recognize that’s the case.

“At this point, most things should be presumed temporary until proven permanent,” said Jed Kolko, chief economist at the jobs website Indeed.

It’s unnerving to admit what we don’t know, and the pandemic has been a real exercise in that. But after so long of staring into the abyss, maybe it’s time we embrace it…

Anyone who says they know exactly what’s happening in the economy is lying. Emily Stewart (@EmilyStewartM) explores that uncertainty and what it might mean: “The black box economy.”

* John Kenneth Galbraith

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As we consult the stars, we might note that today is National Be a Millionaire Day. While many sources confirm this celebratory fact, there’s no real information on its origin. The term “millionaire” was coined in France around 1719 to describe speculators in the Mississippi Bubble who earned millions of livres in weeks before the bubble burst; it seems first to have appeared in the U.S. in 1786, when Thomas Jefferson wrote about the French… so the “holiday” surely dates from sometime after that.

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“An imbalance between rich and poor is the oldest and most fatal ailment of all republics”*…

In a stark sign of the economic inequality that has marked the pandemic recession and recovery, Americans as a whole are now earning the same amount in wages and salaries that they did before the virus struck — even with nearly 9 million fewer people working. 

The turnaround in total wages underscores how disproportionately America’s job losses have afflicted workers in lower-income occupations rather than in higher-paying industries, where employees have actually gained jobs as well as income since early last year.

In February 2020, Americans earned $9.66 trillion in wages and salaries, at a seasonally adjusted annual rate, according to the Commerce Department data. By April, after the virus had flattened the U.S. economy, that figure had shrunk by 10%. It then gradually recovered before reaching $9.67 trillion in December, the latest period for which data is available. 

Those dollar figures include only wages and salaries that people earned from jobs. They don’t include money that tens of millions of Americans have received from unemployment benefits or the Social Security and other aid that goes to many other households. The figures also don’t include investment income… 

The figures document that the vanished earnings from 8.9 million Americans who have lost jobs to the pandemic remain less than the combined salaries of new hires and the pay raises that the 150 million Americans who have kept their jobs have received.

The job cuts resulting from the pandemic recession have fallen heavily on lower-income workers across the service sector— from restaurants and hotels to retail stores and entertainment venues. By contrast, tens of millions of higher-income Americans, especially those able to work from home, have managed to keep or acquire jobs and continue to receive pay increases.

“We’ve never seen anything like that before,” said Richard Deitz, a senior economist at the Federal Reserve Bank of New York, referring to the concentration of job losses. “It’s a totally different kind of downturn than we’ve experienced in modern times.”

The figures also underscore the unusually accelerated nature of this recession. As a whole, both the job losses that struck early last spring and the initial rebound in hiring that followed have happened much faster than they did in previous recessions and recoveries. After the Great Recession, for example, it took nearly 2 1/2 years for wages and salaries to regain their pre-recession levels…

One reason why the job losses have had relatively little impact on the nation’s total pay is that so many of the affected employees worked part time. The average work week in the industry that includes hotels, restaurants and bars is just below 26 hours. That’s the shortest such figure among 13 major industries tracked by the government. The next shortest is retail, at about 31 hours. The average for all industries is nearly 35 hours. 

The recovery in wages and salaries helps explain why some states haven’t suffered as sharp a drop in tax revenue as many had feared. That is especially true for states that rely on progressive taxes that fall more heavily on the rich. California, for example, said last month that it has a $15 billion budget surplus. Yet many cities are still struggling, and local transit agencies, such as New York City’s subway, have been hammered by the pandemic.

The wage and salary data also helps explain the steady gains in the stock market, which have been led by high-tech companies whose products are being heavily purchased and used by higher-income Americans, such as Apple iPads, Peloton bikes, or Amazon’s online shopping.

This week, the New York Fed released research that underscored how focused the job losses have been. For people making less than $30,000 a year, employment has fallen 14% as of December. For those earning more than $85,000, it has actually risen slightly. For those in-between, employment has fallen 4%… 

Some companies have cut wages in this recession, but on the whole the many millions of Americans fortunate enough to keep their jobs have generally received pay raises at largely pre-recession rates. Some of those income gains likely reflect cost-of-living raises; the Commerce Department’s wage and salary data isn’t adjusted for inflation…

Truman Bewley, a retired Yale University economist who wrote a book about the concept of sticky wages, said that most companies have a key core of workers they rely on through hard times and are reluctant to cut pay for them. 

And there’s another reason, Bewley said, why many companies cut jobs instead of pay. While researching his book, he said a factory manager told him why his company did so: “It gets the misery out the door.”  

More at: “Sign of inequality: US salaries recover even as jobs haven’t.”

See also “More Than 33 Million Americans Have Filed for Unemployment During Coronavirus Pandemic.” source of the image above.

And to compare the U.S. to other countries, try this nifty interactive visualization.

* Plutarch

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As we examine equity, we might send foundational birthday greetings to Pierre le Pesant, sieur de Boisguilbert; he was born on this date in 1646. A French lawmaker and a Jansenist, he is best remembered as one of the inventors of the notion of an economic market– he championed free trade in opposition to Colbert‘s mercantilist views (which generated government revenues through duties and tariffs).

But he is also noteworthy as the champion of a single tax on each citizen (in lieu of all tariffs, customs, and other trade-related fees) that in some ways presaged Henry George‘s proposals.

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“A prudent question is one-half of wisdom”*…

Some of the music to which we listened in 1971 [source]

What a difference five decades makes…

1971 was an eventful year: Intel released the world’s first commercial microprocessor, the 4004; the Aswan Dam was completed; Charles Manson and three of his followers received the death penalty: National Public Radio (NPR) broadcast for the first time; Walt Disney World opened in Florida: Mount Etna erupted (again): The “Pentagon Papers” were made public; the Attica Prion riots happened; the 26th Amendment (lowering the voting age to 18) was ratified; Amtrak, FedEx, the Nasdaq, and Greenpeace were created; China was admitted to the U.N.; Qatar and what is now the UAE were freed from British colonial rule; and so very much more…

Richard Nixon was U.S. President. Average income in the U.S. was $10,600; the average home price was $25,250. A movie ticket cost $1.50; a gallon of gas, $0.33. We listened to music the featured the albums pictured above; we saw Dirty Harry, A Clockwork Orange, The Last Picture Show, and Diamonds Are Forever at the movies; and we watched The Mary Tyler Moore Show, The Partridge Family, McCloud, and Walter Cronkite on TV.

As we look back fifty years, we can see that 1971 seems– beyond the idiosyncratic consequences of the many events that distinguished it– to have been a point of inflection, of sustained changes in direction economically, politically, socially, and culturally:

A small selection from a plethora of charts that ask: “WTF Happened In 1971?

* Francis Bacon

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As we hit the stacks, we might recall that it was on this date in 1964 that the Surgeon General of the United States, Dr. Luther Terry, M.D., published the landmark report Smoking and Health: Report of the Advisory Committee to the Surgeon General of the United States saying that smoking may be hazardous to health– and sparking national (and worldwide) anti-smoking efforts. While it wasn’t the first such declaration (nor even the first declaration by a U.S. official), it is notable for being arguably the most famous such declaration for its lasting and widespread effects both on the tobacco industry and on the worldwide perception of smoking. A federal ban on cigarette advertising on television went into effect… in 1971.

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Written by (Roughly) Daily

January 11, 2021 at 1:01 am

“Life without industry is guilt; industry without art is brutality”*…

 

People walk past the Egyptian Theatre along Main Street before the opening day of the Sundance Film Festival in Park City

 

It is often said that art feeds the soul. But culture and the arts also fuel the economy directly: The arts contribute more than $800 billion a year to U.S. economic output, amounting to more than 4 percent of GDP.

That figure is based on detailed data from the U.S. Bureau of Economic Analysis (part of the Department of Commerce) and the National Endowment for the Arts, summarized in a report released earlier this month.The report tracks the aggregate performance of 35 key arts-and-culture fields, including broadcasting, movies, streaming, publishing, the performing arts, arts-related retail, and more…

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The contribution of culture and art to the U.S. economy is bigger than the economic output of Sweden or Switzerland; learn more at “The Economic Power of American Arts and Culture.”

* John Ruskin

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As we see to our souls, we might spare a pining thought for Petrarch (Francesco Petrarca); it was on this date in 1327, after he’d given up his vocation as a priest, that he first set eyes on “Laura” in the church of Sainte-Claire d’Avignon– an encounter that awoke in him a passion that spawned the 366 poems in Il Canzoniere (“Song Book”).

Considered by many to have been “the Father of Humanism,” and reputed to have coined the term “Renaissance,” Petrarch was most famous in his time for his paeans to his idealized lover (who was, many scholars believe, Laura de Noves, the wife of Hugues de Sade).  But Petrarch’s more fundamental and lasting contribution to culture came via Pietro Bembo who created the model for the modern Italian language in the 16th century largely based on the works of Petrarch (and to a lesser degree, those of Dante and Boccaccio).

Laura de Noves died on this date in 1348.

Lura de Noves

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Petrarch

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Written by (Roughly) Daily

April 6, 2019 at 1:01 am

“When we achieved, and the new world dawned, the old men came out again and took our victory to re-make in the likeness of the former world they knew”*…

 

The term “technological unemployment” is from John Maynard Keynes’s 1930 lecture, “Economic possibilities for our grandchildren,” where he predicted that in the future, around 2030, the production problem would be solved and there would be enough for everyone, but machines (robots, he thought) would cause “technological unemployment.” There would be plenty to go around, but the means of getting a share in it, jobs, might be scarce.

We are not quite at 2030, but I believe we have reached the “Keynes point,” where indeed enough is produced by the economy, both physical and virtual, for all of us. (If total US household income of $8.495 trillion were shared by America’s 116 million households, each would earn $73,000, enough for a decent middle-class life.) And we have reached a point where technological unemployment is becoming a reality.

The problem in this new phase we’ve entered is not quite jobs, it is access to what’s produced. Jobs have been the main means of access for only 200 or 300 years. Before that, farm labor, small craft workshops, voluntary piecework, or inherited wealth provided access. Now access needs to change again.

However this happens, we have entered a different phase for the economy, a new era where production matters less and what matters more is access to that production: distribution, in other words—who gets what and how they get it.

We have entered the distributive era…

From a very provocative essay by a very wise man, Brian Arthur.  You can– and should– read it in its entirety at “Where is technology taking the economy?

See also: “Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution”*…

[Image above: source]

* T.E. Lawrence

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As we rethink the fundamentals, we might recall that it was on this date in 1994 that The Superhighway Summit was held at the University of California, Los Angeles’s Royce Hall.

It was the “first public conference bringing together all of the major industry, government and academic leaders in the field [and] also began the national dialogue about the Information Superhighway and its implications.” The conference was organized by Richard Frank of the Academy of Television Arts & Sciences and Jeffrey Cole and Geoffrey Cowan, the former co-directors of UCLA’s Center for Communication Policy.The keynote speaker was Vice President Al Gore who said:  “We have a dream for…an information superhighway that can save lives, create jobs and give every American, young and old, the chance for the best education available to anyone, anywhere.”

According to Cynthia Lee in UCLA Today: “The participants underscored the point that the major challenge of the Information Highway would lie in access or the ‘gap between those who will have access to it because they can afford to equip themselves with the latest electronic devices and those who can’t.’”  [source]

Vice President Gore at the Summit’s podium

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Written by (Roughly) Daily

January 11, 2018 at 1:01 am

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