The Employment Situation for November 2014

I would be remiss if I didn’t mention the good employment report the Bureau of Labor Statistics released yesterday:

Total nonfarm payroll employment increased by 321,000 in November, and the unemployment rate was unchanged at 5.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains were widespread, led by growth in professional and business services, retail
trade, health care, and manufacturing.

There’s a substantial list of reasons that this was a good report. The baseline number of jobs was high, especially by present standards. The median hourly wage went up. The improvement was spread across the economy rather than being concentrated in just a sector or two. And, believe it or not, that the unemployment rate didn’t go down as the number of jobs grew is actually a good sign since it suggests that more people are coming back into the job market. Time will tell.

The editors of the New York Times are largely on the same page:

Yet, it is still too soon to say with any confidence that the labor market has found its footing. Some of November’s unexpected strength in job creation could turn out to be the result of seasonal factors. And even if the growth numbers hold up, problems persist in job quality, as measured by pay and working conditions.

For example, the 9-cent increase in average hourly wages in November, to $24.66, while welcome, is not enough to make up for prolonged wage stagnation. Measured year to year, hourly wage growth hasn’t accelerated since 2010; it remains stuck at around 2 percent, which is barely ahead of inflation. When hourly wages are flat, the only way to earn more is to work more.

What would have made it better? If it had been 20th month of that kind of growth which is about what it would take to bring all the people who’ve left the job market since the last peak back to work. I think I’ll stop there before I harsh the mellow.

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The Council Has Spoken!

The Watcher’s Council has announced its winners for last week.

Council Winners

Non-Council Winners

The announcement post at the Watcher’s site is here.

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Public Pensions and Fairness

Josh Gotbaum explains that we’re unlikely to see sharp curtailing of public pensions through basic considerations of fairness:

Of course, the world changes and sometimes commitments cannot be kept. That’s why we have bankruptcy. Bankruptcy is a process by which people and organizations who cannot afford to keep their commitments can be relieved of some of them. But bankruptcy is not a ‘get out of jail free’ card. It’s a process under which people, businesses and local governments first show they really cannot keep their commitments and then work out a fair way to reduce them. That means that changes in bankruptcy must be both necessary and fair. (State government pensions are in a different situation, because the US Congress hasn’t chosen to legislate a bankruptcy process for states.)

IMO there is some level of public pension—pick a number, $200,000 per year, $300,000 per year—at which the commitment is itself unfair.

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The Awful Truth

Do you believe that we’re in the middle of an upsurge in crime and that police officers are increasingly going on killing sprees, mostly directed at black men? Think again, says Steve Malanga at City Journal:

After the Ferguson grand jury made its ruling, President Obama told the nation that “the law too often feels like it’s being applied in a discriminatory fashion.” Since the Ferguson incident involving Michael Brown and officer Darren Wilson last August, the New York Times has published stories about communities where minorities get stopped more frequently than whites, implying racial discrimination. But these stories ignore Bureau of Justice Statistics data showing that crime victims disproportionately identify minorities as perpetrators of crime, too. Senator Rand Paul has even used Ferguson to launch an attack on the war on drugs, saying that it puts the police in a difficult situation in dealing with the public—though drugs had little to do with the confrontation between Brown and Wilson (except as they may have influenced Brown’s aggressive behavior).

Despite such pronouncements, two decades of data on police interactions with the public don’t support the idea that something extraordinary is afoot, that the police are becoming “militarized” as President Obama has suggested, or that distrust between police and local communities has produced an enormous spike in conflicts. By contrast, the data show that significant crime declines have been accompanied by a leveling off and then a reduction in confrontations with the police, as reported by Americans of all races.

To believe otherwise you must believe that the data are wrong, fabricated, and a lot of effort is being devoted to that assertion.

If, on the other hand, you think that people are reacting to the mistaken things they believe, we might devote a little attention to wondering why they believe them.

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Crime and Punishment

Should every homicide be prosecuted as a crime?

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FiveThirtyEight Considers a Clinton Presidential Run

Harry Enten examines the reasons that Hillary Clinton may decide not to run for the presidency after all:

The current environment suggests Clinton would need to be stronger than a generic Democratic candidate to be considered the favorite. Instead, her standing has deteriorated. YouGov has been polling Clinton’s favorable ratings among adults over the past six years (adults overall tend to be more Democratic leaning than just registered voters).

I’ll give you several reasons she may decide not to run and one reason she might. The factors against her running are:

  • Her trends are going the wrong way. Her popularity is decreasing not increasing.
  • Democrats’ trends are going the wrong way. Same with the popularity of “generic Democrat”.
  • The underlying economic and political factors in 2016 may not favor a third Obama term which is how she would inevitably be seen.
  • She would take a serious financial hit to run for the presidency.

IMO the honest truth is that if Sec. Clinton runs it doesn’t much matter who she’s running against. Her name recognition approaches 100% and everybody’s already made up their minds about her.

Here’s the reason she’ll run. Running for president is a nasty habit like gambling or narcotics. Once you’re hooked it’s hard to shake.

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What Ya Gonna Do When the Well Runs Dry?

Over at City Journal Steve Malanga has a pretty fair summary of how Illinois got into the mess it’s in with respect to public pensions:

Late last month, a Sangamon County circuit court judge overturned Illinois’s pension reforms, which the legislature passed in the waning days of 2013 in order to cut the state’s enormous retirement debt. Workers and retirees celebrated, but theirs is a Pyrrhic victory. Without the ability to fix a hugely indebted retirement system with more than $100 billion in unfunded liabilities, Illinois legislators and local officials will continue to rely on harsh fiscal remedies to balance their budgets. Government employees in the Prairie State can expect layoffs and stagnant wages for years. This is the price of victory when there’s no more money to go around.

If you read it in full, you will learn several things:

  • Illinois now pays $1.2 billion a year more for present and retiree employee benefits than it does for present employee salaries. And rising fast.
  • The problem is almost completely a creation of the Illinois legislature which has systematically expanded services in preference to paying its debts.
  • It has become increasingly difficult for Illinois to satisfy its present commitments by borrowing, the preferred strategy.

There are several things that aren’t mention which might help you to understand the problem a little better. First, Illinois’s problems are not the fault of the Republicans. Democrats have controlled the governor’s mansion and the state legislature for roughly the last 15 years.

Second, Illinois has structural problems. Since Illinois is dead last when it comes to the state’s contribution to education, that means that districts are overwhelmingly responsible for paying the salaries of present teachers. However, since the state is primarily responsible for making the payments into the Teachers Retirement System, the fund from which retired teachers’ pensions are paid, districts have powerful incentives to negotiate contracts in which today’s wages are deferred in the form of future pensions.

Third, just about half of Illinois’s spending goes to pensions and Medicaid while another third goes to education, the balance to everything else. Clearly, Illinois can’t solve its problems by cutting everything else.

Fourth, the results of the bump in Illinois’s personal income tax a few years back demonstrate pretty clearly that Illinois has reached the segment of the tax rate-revenue curve in which increases in rate produce decreasing revenues. Illinois’s problems can’t be solved by increasing taxes.

There are things which might have been done by the federal government to ease Illinois’s pain and the pains of the other states including bringing healthcare costs down, controlling immigration, reducing federal taxation, and promoting economic growth. The federal government had other priorities.

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Stick to What You’re Good At

The Illinois House decided to go with its core competency—not voting—and did not vote on a number of thorny issues including a new statewide minimum wage and the creation of a state healthcare insurance exchange. You may recall that Illinois determined not to create its own healthcare exchange because the legislature and governor were confident that the federal government would be much better at it than they would.

That makes it quite unlikely that Illinois will create its own exchange for the foreseeable future. When the legislature goes into session no federal subsidies will be available to finance creating the exchange and the legislative environment will be even less favorable for the creation of an exchange than it is now.

I think that Speaker Madigan is making a wager here and it goes something like this. The PPACA is unpopular and will remain so; there’s really no political benefit to him in having the state create its own exchange. And he’s assuming the Supreme Court won’t declare the subsidies for those insured under the federal exchange for residents of states that didn’t create their own exchanges unconstitutional.

If he’s right he’s no worse off than he is now. If he’s wrong he’s going to make a lot of Illinoisans who formerly qualified for subsidies very unhappy. Maybe he doesn’t care. What are they going to do? Vote Republican?

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Missing Brains

When I first read this headline about 100 missing brains I thought it would be about the Senate.

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Move On, Yes, But Where?

In an op-ed in the Wall Street Journal William Galston asks Democrats a series of questions:

If the information revolution is transforming the labor market, how can we bring computer-science courses into every American public school?

If soaring costs are reducing college attendance and imposing large debt burdens on students, can we use technology to deliver high-quality postsecondary education more affordably?

If new businesses are a key source of innovation and jobs, what should we do to turn around the alarming decline in startups?

If basic research is both a public good and an essential foundation for long-term growth, where can we find the public resources for the sustainable investments in research that the private market will not make?

If the public sector can no longer muster the funds required to meet our infrastructure needs, how can we create incentives for private capital to fill the gap?

If we want a tax code that favors growth, job creation and opportunity for average Americans, what are the key ingredients of tax reform?

If a rising tide no longer lifts all boats, how can we ensure that average Americans share the fruits of 21st-century economic growth?

which I presume to be rhetorical.

I’ll devote most of my time to the first question. Both the telephone and the automobile revolutionized the American economy despite the reality that most Americans never took electrical or mechanical engineering courses. What was important was being able to use them not build them and the same will be true in the case of the information revolution.

We need to devote a lot less energy to making physicians and college professors more efficient via information technology and a lot more energy to harnessing the power of computer and information technology to bring delivering those services to a lot more people. That will create jobs. The jobs they create won’t pay $250,000 a year but they’ll still be good jobs and people who haven’t devoted twelve years to higher education will be able to perform them. Our problem is our commitment to artisanal medicine and education and those are what must go.

I’ve answered many of the other questions before. Unfortunately, I think that more Democrats will fight to hold onto their present strategies than will decide to change them to benefit more average Americans. The basic conceptual change is just too great.

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