The editors of the Wall Street Journal are encouraged by the latest Bureau of Labor Statistics monthly unemployment situation report:

The U.S. labor market is proving to be remarkably resilient, which may be both good and bad news for the Federal Reserve. Employers added 517,000 jobs in January while the unemployment rate fell to a 53-year low of 3.4%, according to the Labor Department’s monthly report.

Recent jobs reports had signaled that hiring was slowing, especially in retail, manufacturing and warehousing as consumers spent less on goods. But the January report showed broad job growth, mostly in services, including leisure and hospitality (128,000), trade and transportation (63,000), healthcare (58,200), temporary services (25,900) and construction (25,000).

Information lost 5,000 jobs, which dovetails with layoffs in the tech industry. But most businesses continue to hire. The average workweek for private workers rose by 0.3 hours and overtime increased by 0.1 hours. As a result, average weekly earnings increased by 1.2% last month.

Wage growth seems to be slowing somewhat. Average hourly earnings increased by 0.3% last month and 4.4% over the past year. That means wages still aren’t keeping up with inflation, but they also aren’t evidence of a wage-price spiral.

but Mish Shedlock does a deep dive into it and isn’t as impressed:

• The divergence between jobs and employment continues for the tenth month but lessened in December of 2022 and January of 2023.
• The full time employment divergence is still huge.
• The divergences between jobs and employment date back to May.
• The BLS announced huge annual revisions in jobs and employment.
• Finally, even discounting the revisions, there is still a huge divergence between jobs and full time employment. We do not know how it evolved because the BLS doesn’t say.

with this important observation:

Please see revision details below because of the 894,000 rise in employment in January, 810,000 was due to annual revisions. And the BLS does not say what months were revised.

Fifteen years ago I used to report the monthly employment situation reports faithfully. When I began to understand just how they were constructed I realized that they were statistically suspect and not much could be derived from them. So I generally stopped reporting them. I want to remind my readers (both of them) that the BLS tends to bundle up a lot of errors in previous reporting and dump the errors into the report they just issued. I don’t believe that much can be inferred from the BLS empsit generally but particularly not this one.

Nowadays I go more by something like the “Mule Test”. When I was a kid down in the Ozarks they used to sell crude mule figurines with pieces of twine tacked to the hindquarters for a tail, captioned: “Mule’s tail dry: fair weather; mule’s tail wet: rain; mule’s tail frozen: cold; mule’s tale buring: hot; mule’s tail blows off: tornado”. If it feels like employment is good, it’s good. If it doesn’t, it isn’t.

So, we shot down the Chinese balloon drifting over the United States. At the Wall Street Journal Michael R. Gordon, Nancy A. Youssef, and Doug Cameron report:

WASHINGTON—The U.S. shot down a suspected Chinese surveillance balloon over the Atlantic Ocean, days after it was spotted crossing the U.S. and adding to already high tensions between Washington and Beijing.

An Air Force F-22 Raptor jet fighter on Saturday downed the balloon with a single AIM-9X Sidewinder missile off the coast of South Carolina at 2:39 p.m. ET within U.S. territorial waters, officials said. The jet fighter was flying at 58,000 feet, below the balloon, which had been flying as high as 65,000 feet.

U.S. Navy ships, as well as Coast Guard vessels, have begun the effort to recover the surveillance equipment the balloon was carrying, the Pentagon said.

Defense officials said they didn’t know how long the recovery would take and what could be gleaned from the recovered equipment. The debris fell in relatively shallow water about 47 feet deep and was spread out over at least 7 miles, a senior military official said.

President Biden had signaled earlier Saturday that the U.S. would “take care of” the balloon. After the downing, Mr. Biden said he had ordered the Pentagon on Wednesday to shoot down the balloon “as soon as possible.”

“They decided that the best time to do that was when it got over water,” said Mr. Biden. “They successfully took it down.”

Mr. Biden didn’t respond to a question about how the shootdown might affect U.S.-China relations.

China protested the military action in a statement early Sunday in Beijing by expressing its “strong dissatisfaction,” saying in a statement from the Foreign Ministry that the U.S. overreacted and violated international norms.

The presence of the balloon prompted Secretary of State Antony Blinken on Friday to postpone a visit to Beijing aimed at steadying the two powers’ tense relations, delaying a diplomatic effort both governments agree is needed to manage their geopolitical rivalry. It also touched off a debate within the administration and in Congress over how to handle a surveillance craft flying over much of the continental U.S., officials said.

I’m stuck trying to deduce what U. S. policy actually is. Some possibilities:

• The Chinese float spy balloons over the U. S.; we float spy balloons over China. Wink wink nudge nudge bob’s your uncle. Unless civilians notice and the president is embarrassed. Then it’s a dire violation.
• We think it’s wrong for other countries to violate U. S. sovereignty but just fine for us to violate the sovereignty of other countries (up to and including invasion if it strikes our fancy).
• We think that violation of another country’s sovereignty by us or anyone else is a serious violation unless the motives are benign and you can always infer the benignity of the motives.
• We think that violation of another country’s sovereignty by us or anyone else is no big deal as long as no one is injured or property damaged and you can always tell if that’s going to happen.

I’d welcome the suggestion of other possibilities. I tend to lean to one of the above at this point.

My own very Jeffersonian preference would be for our actions to be just, our intentions clear, and our actions predictable. In this particular case I think that as soon as the balloon was detected over U. S. territory it should have been intercepted and stopped, whether by shooting it down or otherwise. I also do not think we should fly intelligence-gathering balloons over other countries without those countries’ permission.

This post touches on a number of points. The first is that we shouldn’t be complacent about balloons over the United States. It seems to me that would be a relatively inexpensive means. The second is that the drawing above was produced based on my description by DALL-E 2, another artificial intelligence program written by OpenAI.

The third is that the description was based by me by shamelessly cribbing on the cover art of a copy of the pulp magazine Air Stories from a century ago. There is truly nothing new under the sun.

In a piece at Foreign Affairs retired Lt. Col. Alexander Vindman explains what it would require for Ukraine to retake Crimea:

For much of last year, while the idea of liberating Crimea remained academic, Ukrainian President Volodymyr Zelensky was willing to set aside the question of the region’s near-term status. Ukrainian forces were focused on liberating occupied territory outside the peninsula, and the future of Crimea seemed likely to be determined after the end of the war through diplomatic negotiations. But as the war has progressed and Ukraine has liberated large swaths of its territory from occupying Russian forces, Zelensky’s rhetoric regarding Crimea has shifted. “Crimea is our land, our territory,” he said last month in a video appeal to the World Economic Forum in Davos, Switzerland. “Give us your weapons,” he urged, and Ukraine will retake “what is ours.” And according to The New York Times, the Biden administration has begun to come around to the idea that Ukraine may need to threaten Russia’s foothold on the peninsula to strengthen its negotiating position, even at the risk of escalating the conflict.

If earnest negotiations were to start soon, Zelensky might still be open to a deal that ended the war and deferred the question of Crimea to a later date. But if the fighting drags on through the spring and summer and Ukraine inflicts enormous casualties on Russia while liberating substantial territory, it will become increasingly difficult for Zelensky to grant Putin a face-saving exit from the war and permit Russia’s continued but temporary occupation of Crimea. By the summer, Ukraine is likely to begin targeting more of Russia’s military infrastructure in Crimea in preparation for a broader campaign to liberate the peninsula. Instead of waiting for this scenario to play out, risking a longer and more dangerous war that could embroil NATO, Washington should give Ukraine the weapons and assistance it needs to win quickly and decisively in all occupied territories north of Crimea—and to credibly threaten to take the peninsula militarily.

Doing so would force Putin to the negotiating table and create an opening for diplomatic talks while the final status of Crimea remains unsettled, offering Putin a path out of Ukraine that doesn’t guarantee his political demise and allowing Ukraine to avoid an enormously costly military campaign that is by no means guaranteed to succeed. The eventual deal would require an immediate reduction of Russian conventional forces on the peninsula and outline a path to a referendum allowing the people of Crimea, including those displaced after the 2014 invasion, to determine the final status of the region.

Contrary to what some skeptical analysts have asserted, a Ukrainian military campaign to liberate Crimea is hardly out of the question. The first step would be to pin down Russia’s forces in the Kherson and Luhansk regions and in the northern part of Donetsk. Next, Ukraine would free the remainder of Zaporizhzhia Province and push through southern Donetsk to reach the Sea of Azov, severing Russia’s land bridge to Ukraine. Ukrainian forces would also need to destroy the Kerch Strait Bridge, which connects Russia to the Crimean Peninsula and allows Moscow to resupply its troops by road and rail. An explosion knocked out part of the bridge in October 2022, but it may be fully restored by the summer.

Without a land bridge or road or rail links to Crimea, the Kremlin would be forced to revert to maritime resupply, but ferries and barges would not meet its logistical needs for fighting in Crimea and southern Ukraine. Meanwhile, Ukrainian forces would carry out weeks of strikes on Russian forces and infrastructure to degrade the enemy’s military capability. Targets would include logistics hubs, air bases, command and control centers, naval installations, and transportation nodes.

If Ukraine were to succeed in this initial phase of the operation, it would need to conduct land and amphibious attacks to gain a foothold in Crimea—another herculean effort. Then it would need to build up forces in multiple locations in northern Crimea so that it could seize large strategic installations such as the base of Russia’s Black Sea Fleet in Sevastopol, the Crimean capital of Simferopol, the coastal city of Feodosiya, and the port of Kerch. To achieve these objectives, Ukraine would need to concentrate its forces in Kherson and in newly captured territory in northern Crimea, making them vulnerable to a Russian tactical nuclear strike. For this reason (and because the loss of Crimea could endanger Putin’s regime), the final phase of this campaign would be the most perilous.

Even with a flood of Western support, Ukraine would struggle to undertake such an operation. The German Leopard 2 tanks, British Challenger 2 tanks, and American M1 Abrams tanks and M2 Bradley infantry fighting vehicles promised in recent weeks would certainly improve the odds. But the Ukrainian military would need hundreds of these vehicles as well as an air attack capability (either a dozen well-armed combat drones or hundreds of smaller single-use anti-armor drones), thousands of HIMARS (High Mobility Artillery Rocket System) rounds and long-range missiles, and tens of thousands of artillery shells. It would also need greater manned airpower and engineering, amphibious, and logistics capacity to penetrate fortified Russian defensive lines, clear hundreds of miles of occupied territory, and conduct amphibious and ground assaults to cross into Crimea and dislodge Russian forces.

Meanwhile, in a piece at USNI News John Gates quotes former Defense Secretary Robert Gates on the implications of Ukraine’s recapturing Crimea:

Losing Crimea, which holds an important naval base in Sevastopol, to Ukraine would cross a “real red line” for Russia and likely risk an escalation of the ongoing war, a former U.S. defense secretary said Wednesday.
Reclaiming Crimea would be “an exceptionally difficult fight” because Russian President Vladimir Putin attaches so much importance to it, former Defense Secretary Robert Gates said during an online forum hosted by The Washington Post. Moscow annexed Crimea in 2014, saying it was protecting the base and defending its citizens living there.

Gates said he believes Ukraine could take back control of the Donbas region. It has seen more than eight years of fighting after the Kremlin openly backed separatists there with men, equipment and financial support as it was illegally annexing Crimea.

The critical issue for Ukraine is how quickly the United States and NATO allies can get equipment like tanks and other armored vehicles into the country, Gates said.

“We ought to be airlifting some of that equipment to Poland now,” he said.

This includes the American Abrams M-1A1 tanks and German Leopard tanks, armored personnel carriers and Mine-Resistant Ambush Protected [MRAP] vehicles, Gates said.

Russia is gauging the speed at which it can draft an additional 120,000 men, which would bring the number of new troops that need training and equipment to bolster defenses and launch a counteroffensive to 500,000. He said a new Russian push could begin as early as the anniversary of the invasion, Feb. 24.

Gates questioned whether Ukraine needs F-16 fighters since the Russians have not been able to gain air superiority even in areas they control in the eastern part of the country. Ukrainian “air defenses may make the need for F-16s moot,” he said.

There are a number of factors that go unmentioned in either article.

• Russia has few natural borders.
• Russia has been invaded by Britain, France, Germany, and, believe it or not, the United States (Ike was there as a young officer) over the period of the last 200 years. If you expand your timeline to 600 years, add Poland, Finland, Mongolia, and many others to that list.
• Russian access to the port at Sevastopol as well as denial of access to it by Britain, France, and now the United States has been a key factor in Russian foreign policy for 200 years.
• Until Crimea was ceded to the Ukraine Soviet Socialist Republic in 1954 it had been a part of Russia proper for 200 years.
• There is a direct causal relationship between Russia’s occupation of Crimea and the forcible replacement of a pro-Russian government in Kyiv with an anti-Russian one.
• It is alleged that Russian regulars prevented a free and fair election in Crimea in March 2014.
• If Putin is forced from power as a consequence of losing Crimea, the most likely candidates to replace him are more nationalistic, aggressive, and oriented towards the use of force than he.
• At present Ukraine is losing ground rather than gaining it.
• It is impossible to determine the veracity of either Russian or Ukrainian casualty figures. I have seen estimates by U. S. experts as high as 150,000 Ukrainian military deaths.
• Russia has been three and four times Ukraine’s population.
• We have no actual idea of Russia’s ability to produce heavy weapons, e.g. tanks and other armored vehicles.
• It may well be greater than the combined capacity of NATO countries for the simple reasons that we have been reducing our capacity rapidly, they have not, and it takes time to rebuild that capacity.
• Lt. Col. Vindman was born in Ukraine and has a notable anti-Russian bias.

That doesn’t mean that he’s wrong; it does suggest that we can’t assume that he’s right. Please note that I am not defending Russia’s actions. I’m attempting to explain them as well as suggest how events are likely to unfold. I doubt that I can persuade anybody that Russia is not expansionist but irredentist and paranoid but I do believe that those are the case.

or, what goes up must come down. Om Malik makes some interesting observations about the wave of tech layoffs we’ve been seeing for the last year or so:

An unprecedented boom in Silicon Valley that started with the once-in-a-generation convergence of three mega trends: mobile, social, and cloud computing, has peaked. It started in 2010, and it has been bananas around here for the past decade or so. The FAANG+Microsoft companies saw their revenues go from $196 billion to over $1.5 Trillion. Let that sink in. Booming stocks helped create an environment of excess like never before.

The companies got into the business of what Paul Kedrosky calls “people hoarding.” The pandemic and the resulting growth revved up the hiring machine even more. The over-hiring of talent has led to wage inflation, which had a ripple effect across the entire technology ecosystem. Technology insiders are happy to tell non-tech companies to use data and automation as tools to plan their future. It is easier to preach than practice.

Why does Google need close to 200,000 employees? Or does Microsoft need 225,000 people? Salesforce, till recently, had about 73,500 employees. Profitable as these companies have been, it is also clear that they have become sloppy and bloated.

While it’s possible to overestimate the significance of a few big companies, it’s just as possible to underestimate. Companies of all sizes and types are competing for the same rather limited pool of talent. It should also be understood that these are individuals in the “professional class”, the same group that includes doctors, lawyers, architects, teachers, and so on. The entire U. S. working age population has about 28 million of them. Other than in the tech sector jobs for those people aren’t increasing in number particularly quickly.

In an op-ed in the Wall Street Journal economist John H. Cochrane writes in support of the national sales tax about which I wrote the other day:

Something remarkable happened last month. On Jan. 9, Georgia Rep. Buddy Carter introduced the “Fair Tax” bill to the House of Representatives, and secured a promise of a floor vote. The bill eliminates the personal and corporate income tax, estate and gift tax, payroll (Social Security and Medicare) tax and the Internal Revenue Service. It replaces them with a single national sales tax. Business investment is exempt, so it is effectively a consumption tax. Each household would get a check each month, so that purchases up to the poverty line are effectively not taxed.

Mainstream media and Democrats instantly deplored the measure. Mother Jones said it would “turbocharge inequality.” Rep. Pramila Jayapal called it a “tax cut for the rich, period.” The New Republic asserted that consumption taxes are “always a dumb idea”—but presumably not in Europe, where 20% value-added taxes finance welfare states—and called it a “Republican dream to build a wealth aristocracy.”

Even the Journal’s editorial board disapproved, though mostly on politics rather than substance, admitting a consumption tax “might make sense” if Congress were “writing the tax code from scratch.” The board worried that we might end up with income and sales taxes, like Europe. And the tax change won’t pass, making it is a “masochistic vote” that it will “give Democrats a potent campaign issue.”

But our income and estate tax system is broken. It has high statutory rates with a Swiss cheese of exemptions, immense cost, unfairness and distortion. Former President Trump’s taxes are Exhibit A, no longer making headlines because we learned that he simply aggressively exploits the complex rules and deductions that Congress offers to wealthy politically connected real-estate investors.

A consumption tax, with none of the absurd complexity of our current taxes, is the answer. It funds the government with the least economic distortion. A consumption tax need not be regressive. It’s easy enough to exempt the first few thousand dollars of consumption, or add to the rebate.

More important, the progressivity of a whole tax and transfer system matters, not of a particular tax in isolation. If a flat consumption tax finances greater benefits to people of lesser means, the overall system could be more progressive than what we have now. A consumption tax would still finance food stamps, housing, Medicaid, and so forth. And it would be particularly efficient at raising revenue, meaning there would potentially be more to distribute—a point that has led some conservatives to object to a consumption tax.

If the legislation is as he describes it and as H. R. 25 seems to be, it goes a long way to satisfying the issues I raised in my post. Still to be added are the block grants to the states I mentioned and a clear statement of what consumption should be taxed. Does the federal government presently have a definition of “taxable property”? The definitions in the states of which I am aware satisfy my reservations about what consumption is to be taxed. I’m not sure the federal government has such a definition.

It should be clearly understood just how disruptive such a tax would be. Personal consumption expenditures are 70% of U. S. GDP, more than in any other developed country. Indeed, as I have noted in the past in that respect we are more like a developing country. As Dr. Cochrane intimates it is a step much needed but we should recognize how disruptive it will be.

I was unaware that the Chinese celebrated the Lunar New Year by floating high altitude balloons over other countries. Remarkable.

One of the biggest news stories of the day is about what is thought to be an intelligence-gathering balloon at high altitude, hovering over the United States. Vivian Salama reports at the Wall Street Journaol:

WASHINGTON—The State Department has indefinitely postponed Secretary of State Antony Blinken’s trip to Beijing after what U.S. officials identified as a Chinese reconnaissance balloon was detected loitering above the continental U.S., a U.S. official said.

U.S. officials on Thursday said the craft was loitering over Montana having earlier crossed Alaska’s Aleutian Islands and Canada. The Pentagon scrambled jets and at one point considered shooting down the balloon, the officials said, though didn’t over concerns that the debris posed a risk to people on the ground.

The Chinese Foreign Ministry on Friday denied that the craft was a spy vehicle but was in fact a civilian balloon designed primarily for meteorological study and had blown off course. “China will continue to maintain communication with the U.S. to properly handle the unexpected situation,” a brief ministry statement said.

While never officially announced, Mr. Blinken’s trip was supposed to take him to Beijing for meetings Sunday and Monday.

While I think the Department of Defense made the correct call in not bringing the balloon down where its descent might threaten a populated area, I find the fact that we did not detect the balloon until it had in fact continued to where it might threaten a populated area discouraging. I would think that such incidents were taken seriously.

I have every confidence in the ability of the Chinese government to control its aircraft, whether piloted or not, heavier than air or lighter than air. Translation: the Chinese government’s explanation is pretty lame.

Update

The present wind patterns, illustrated above, make the official explanation even less likely. They might explain why it’s near stationary at this point, however.

The editors of the Washington Post offer advice to the Congress on reforming the asylum system today. First, they state the problem:

Long-term stability at the border calls for a sustainable approach to asylum — the promise, enshrined in domestic and international law, of haven for people facing “persecution or well-founded fear of persecution based on race, religion, nationality, membership in a particular social group or political opinion” in their countries of origin. It is a noble and necessary commitment. In practice, however, it was being rendered untenable by the sheer number of migrants crossing the U.S.-Mexico border in recent years, each with a legal right to press an asylum claim.

and

Instead of the selective, humanitarian adjunct to general immigration flows that the law intended, asylum is evolving into an open-ended parallel system. The backlog encourages people to make a dangerous and expensive trip to the U.S. border, knowing that — even if their asylum cases are weak — they can live and work in the United States for years pending a ruling. Even those whose claims are rejected, as they were in most final rulings over the past decade, seldom face prompt removal. Meanwhile, those with strong claims wait longer than they should.

Then they offer advice:

One key to a more functional asylum system lies outside of it, in wider channels for legal immigration. As part of this, the Biden administration has already nearly doubled, by regulation, the current statutory cap of 66,000 per year on visas for nonagricultural “guest” workers. Of the additional visas, 20,000 are set aside for historical “sender” countries in Central America and Haiti. That share should be increased, as should the statutory caps. Opening lawful pathways for migrants seeking economic opportunity would reduce the number seeking to enter the country by gaming the asylum system. It would also enhance the legitimacy — actual and perceived — of the limitations on immigration that necessarily remain.

Meanwhile, the United States should seek to share responsibility with other countries to resettle asylum seekers. Mr. Biden needs to engage likely partners in the Americas and beyond, including by offering to support their capacities to absorb and protect people. His new plan sets a precedent by relying on Mexico to take in 30,000 people per month from Cuba, Haiti, Nicaragua and Venezuela — which had been refusing to accept returnees from the United States — and turning away more asylum seekers who travel through third countries such as Mexico before crossing the U.S. border.

I agree with their advice as far as it goes. I would offer more.

First, I think we should accept a considerable number of those seeking asylum but we should be clear-headed about what is and is not a legitimate cause for asylum. The passage from the Immigration and Naturalization Act quoted above should be an absolute guideline, expanded by statute. Unless otherwise provided by law simply having a poor country as a country of origin is not a legitimate cause for asylum. Although the quoted passage does not make it crystal clear, the “fear” must be personal, due to persecution directed at the individual or the individual as a member of a well-defined group for political or religious reasons. While we may sympathize with them deeply, battered wives don’t qualify as asylum-seekers.

Second, I think we should greatly expand the number of work visas for which people from Mexico and Guatemala are eligible and application for those visas should be through normal processes not by crossing the border and claiming asylum. As noted above most asylum requests by individuals from Mexico, Central, or South America or the Caribbean are declined.

I agree with the editors that Congress should approve funding for additional agents who should be doing on the spot determination of eligibility for asylum. That should be done by statute rather than executive order. If letting the determination of eligibility for asylum be done by agents (rather than by judges) according to clear and strict guidelines, a reform long overdue, is rejected by the courts, IMO judges should be drafted for the duty under the president’s emergency powers.

Lori Lightfoot took office in 2019 as the first openly gay and African American woman to serve as the mayor of Chicago. However, her performance in the role has been under scrutiny and criticism from various quarters.

One major issue is the city’s rising crime rate. Despite Lightfoot’s promises to tackle the issue, crime continues to be a significant problem in Chicago, particularly in areas with high levels of poverty and gun violence. The city has seen a rise in homicides and shootings in recent years, and many residents feel unsafe in their neighborhoods.

Another criticism of Lightfoot’s leadership is her handling of the city’s finances. Chicago has been facing a persistent budget deficit for many years, and Lightfoot has yet to offer a comprehensive plan to address the issue. Instead, she has resorted to budget cuts and layoffs, which have negatively impacted essential services such as schools and public transportation.

Lightfoot’s handling of the COVID-19 pandemic has also been the subject of criticism. Despite being in one of the largest cities in the US, Chicago was slow to respond to the pandemic, and the city has faced numerous supply shortages and other logistical problems. The mayor has been accused of being slow to act and of making contradictory statements about the pandemic, which has led to confusion and frustration among residents.

Lightfoot’s approach to governance has also been criticized as being heavy-handed and authoritarian. She has been accused of limiting freedom of speech and assembly, especially in regards to the ongoing protests and demonstrations against police brutality. Lightfoot has been criticized for her handling of the police department, which has faced numerous scandals in recent years. Many residents feel that she has not done enough to address police misconduct and accountability.

In addition, Lightfoot’s lack of transparency and willingness to engage with the public has been a source of frustration for many residents. Despite running on a platform of transparency and accountability, she has been accused of being inaccessible and unresponsive to the concerns of ordinary residents. Many feel that her administration has been more focused on protecting its own interests than on serving the needs of the city and its residents.

In conclusion, there are numerous reasons why Lori Lightfoot may not be the best choice for a second term as the mayor of Chicago. Her handling of the city’s finances, the rise in crime, her response to the COVID-19 pandemic, her approach to governance, and her lack of transparency and engagement with the public have all been sources of criticism and concern. Unless Lightfoot takes concrete steps to address these issues, it is unlikely that she will be able to secure another term in office.