Results for “unemployment” 676 found
Thursday assorted links
1. Is this possible?: “Criminals may have stolen as much as half of the unemployment benefits the U.S. has been pumping out over the past year, some experts say.”
2. When should ngdp be unstable?
3. Is Nero underrated? (New Yorker)
4. Sixty times the speed of sound? (USS Princeton radar team and pilot source, also a good presentation of the multiple data sources which are neglected by West and PewdiePie.) And here is the common briefing message given to the ex-presidents.
5. Where are the Chinese elephants going and why?
6. Darrell Duffie argues for CBDC.
7. Kristof on the new Claudia Goldin book (NYT).
Structural adjustment for thee but not allowed for me
The economy has not bounced back to prepandemic employment levels, even as G.D.P. effectively has.
Some blame unemployment benefits for keeping workers at home, while others claim that it is the virus still holding back customers and therefore employers from adding jobs. Yet there is a third factor that is likely the labor market’s primary challenge: We are undergoing an enormous reallocation of people and jobs. People need time to find their new position in the labor market.
The early hope among policymakers and economists was that the pandemic aid offered to businesses and families would mean that once we recovered from the pandemic, workers would simply return to their old jobs, sending millions back to work each month and closing the employment gap quickly.
The problem is that old jobs are long gone for the vast majority of those who remain unemployed.
That is from Betsey Stevenson (NYT), and I am not taking issue with her arguments. Note that if you look about the debate over 2021 more broadly, pretty much everyone agrees there might be too much AD rather than too little. And yet these matching problems are still around? Hmm….once you are in a mess, supply-side labor adjustment problems just cannot be fixed so easily by nominal demand and nominal demand only. See my earlier recent post on this point, namely that business cycle recoveries tend to look the same on the labor side for supply-side reasons. During recoveries a lot of people just don’t want to go back to work or even look for a job! That was true in the last recession as well, read this paper, or this research. People hate the idea if you call them ZMP, but it’s right there in the numbers…how can someone be MP > 0 if they won’t even show up for an interview?
You might notice, by the way, I am not a huge fan of the NAIRU concept and you won’t see me cite it very often (occasionally it is useful shorthand for a less controversial concept.) The following notion, however, is well-defined: “What the rate of unemployment would be if there were no major negative shocks for a decade and people had seven, eight, or even more years to search for the right job match.” Yes that is indeed a well-defined number, and that number is pretty low. I’m just not sure that is very “natural.” What would John Gray say? The Marquis de Sade?
Jonathan Hazell emails me about inflation indicators
You asked Mark Carney what the best indicators were for inflation. Let me take the liberty of giving you mine.
1) Median CPI inflation, i.e. the weighted median value of CPI inflation across products. This measure tracks the underlying signal in inflation because it filters out volatile shocks hitting certain industries (e.g. airlines or used cars now, healthcare during 2010-2015, food and energy perennially). Median CPI has a good time series correlation with unemployment, better than the other series (see Ball & Mazumder, JMCB 2019).
2) 5 year, 5 year forward expected inflation. This is what markets expect inflation will be, in 5 years’ time, for the next 5 years. This measure tracks long run inflation expectations and removes the effects of short run shocks. In US data, big changes in inflation have been caused by unanchored long run inflation expectations, not by short run shocks to demand (see e.g. Hazell, Herreno, Nakamura & Steinsson 2021). So, if inflation is going to rise by a lot, long run inflation expectations are a good leading indicator.
For now, neither measure is high by historical standards but of course that could change. I hope some of this is interesting, anyway.
The excellent Tim Sackett on the labor shortage
I’m a daily reader of your stuff and I just love the sharing you do. Thank you! I’m a blogger and analyst in the HR and Talent Acquisition space and speak to CHROs and Org Executives every day and over the past 90 days or so there has been a giant disconnect between something I frequently see Economists saying in the media verse what is reality in the job market. I was hoping you guys could tackle this subject in a future post!
Specifically, around this idea that extended Unemployment Insurance and the extra federal government stimulus being given out to unemployed workers having only a “marginal” effect on the amount of available workers. A great example of this – https://www.wsj.com/articles/millions-are-unemployed-why-cant-companies-find-workers-11620302440
Economists claim that these policies have little impact to availability of workers, but CHROs at every size company, every industry, in all markets are begging for workers right now, and every one of them I speak to complain that they have workers telling them they won’t come back until they have to because they can make as much, or more, or even slightly less, but don’t have to work because of these additional benefits.
Why the giant disconnects between what Economists believe about UI verse what the reality is on the ground for organizations trying to hire? Also, I’ll give you UI/Stimulus isn’t the only factor driving difficult hiring. We have a ton of older workers leaving the workforce for retirement, which is giving us this step-up kind of hiring, where younger workers are skipping traditional entry level jobs and getting opportunities up the job food chain, we have GenZ who doesn’t want to work some dirty, crappy $12/hr job, so we see fewer GenZ in the labor force than previous generations at the same age, fear of Covid, etc. I still believe, especially in the $12-22/hr job market, UI plays a significant impact to worker availability currently.
File under #TheGreatForgetting. Noah fortunately remembers.
Not everywhere needs another $1 trillion in stimulus
A McDonald’s in Florida is paying people $50 just to show up for a job interview. But it’s still not attracting many applicants.
Blake Casper, the franchisee who owns the restaurant, told Insider that a general manager and supervisor came up with the idea for the interview reward after he told them to “do whatever you need to do” to hire workers.
“At this point, if we can’t keep our drive-thrus moving, then I’ll pay $50 for an interview,” said Casper, who owns 60 McDonald’s restaurants in the Tampa, Florida area.
Here is the full story, via the excellent Samir Varma, excess unemployment insurance of course is an issue, and here is Scott Sumner on the summer of 2021. So many data points about the rapid recovery and the prescience of Summers and Blanchard, right?
The relevance of ZMP and near-ZMP workers
From the St. Louis Fed:
Based on patterns of employment transitions, we identify three different types of workers in the US labor market: α’s β’s and γ’s. Workers of type α make up over half of all workers, are most likely to remain on the same job for more than 2 years and, when they become unemployed, typically find a new job within 1 quarter. Workers of type γ comprise less than one-fifth of workers, have a low probability of staying on the same job for more than 2 years and, when they become unemployed, face a high probability of remaining jobless for more than 1 year. Workers of type β are in between αs and γ’s. The earnings losses caused by displacement are relatively small and transitory for α-workers, while they are large and persistent for γ-workers. During the Great Recession, excess unemployment for α-workers rose by little and was reabsorbed quickly; unemployment for γ-workers rose by 20 percentage points and was not reabsorbed 4 years after its peak. We use a search-theoretic model of the labor market to rationalize the different patterns of employment transitions across types. The model naturally explains both the variation in the consequences of job displacement across types, and the variation in the dynamics of unemployment during the Great Recession. Our view is that several puzzling micro and macro phenomena about the labor market are driven by the behavior of the small group of γ-workers.
Here is the NBER link. The authors are Victoria Gregory, Guido Menzio, and David Wiczer. The ZMP concept remains maligned and misrepresented, sometimes caricatured as a one-blade theory or as demand denialism, so I am happy to see this new evidence capturing the original intuition.
Via David Sinsky.
Has Covid ushered in a new era of U.S. regional decentralization?
That is the topic of my latest Bloomberg column, and here is the opener:
The homogenization of America — through national TV and politics, cheap transportation and big online or nationwide businesses such as Walmart and Amazon — is a longstanding story. Regardless of how true it is, or ever was, a new truth is emerging from the pandemic: In the last year, the differences among the U.S.’s states and regions have become increasingly apparent — and they are more temperamental than political.
I recently spent two weeks in Miami Beach, and the mood was festive. On the street, many people wore masks, but once they entered the packed restaurants and clubs, the masks came off and the partying started. (Disclosure: I am vaccinated, and was an observer, not a participant.) The midnight curfew was by no means always respected.
That scene might make you recoil in horror, and many observers predicted catastrophe for Florida’s policies. But Florida’s death toll is close to the national average, and Governor Ron DeSantis is extremely popular. The state’s lockdowns were never very strict, its schools have been open since August, and Miami’s NBA team is welcoming fans, albeit with seating restrictions. The economy has been booming for some time, in part because people who wish to spend money or organize get-togethers have been drawn to Florida.
And my sense is that most Floridians feel vindicated. I spoke to several people who admitted they had had Covid earlier in the year and described the experience with a giggle or a smirk, as if it were nothing serious. Just last week DeSantis announced that Florida would have nothing to do with plans for vaccine passports…
San Francisco is one obvious point of contrast. The schools still have not reopened, with no clear date in sight, even though the teachers have been offered vaccines. (Meanwhile, the school board decided to rename many of its schools.) Large public gatherings are rare, and inside dining has been largely prohibited. Like Florida, the city can boast of very low death rates from Covid, and like Floridians, many San Franciscans seem proud of their course.
You might think this is all because Florida is a Republican-leaning state. But Donald Trump won only 51.2% of the vote there last year, and Joe Biden won Miami-Dade County by seven percentage points…
Overall the Southeast would seem to be a big winner, as the psychological effects of low rates of unemployment may prove more durable than the effects of high rates of casualties.
There is much more at the link, including a comparison of Virginia and Maryland.
Personal bankruptcies have declined during the pandemic
The number of people seeking bankruptcy fell sharply during the pandemic as government aid propped up income and staved off housing and student-loan obligations.
Bankruptcy filings by consumers under chapter 7 were down 22% last year compared with 2019, while individual filings under chapter 13 fell 46%, according to Epiq data. After holding above 50,000 filings a month in 2019 and in the first quarter of 2020, bankruptcy filings have remained below 40,000 a month since last March when the pandemic hit.
By contrast, commercial bankruptcy filings rose 29%, with more than 7,100 businesses seeking chapter 11 protection last year, according to Epiq…
Economists and bankruptcy lawyers say federal suspensions of evictions, home foreclosures and student-loan obligations have helped limit bankruptcies—though they worry bankruptcy rates could go up after aid ends. Household spending also dropped as people stayed home, canceled travel and socially distanced to avoid the coronavirus. Several rounds of government aid padded incomes with direct payments to households and enhanced unemployment benefits. The personal saving rate rose.
Here is more from the WSJ.
The conversation some of you want to have
The most frequently upvoted request was this, noting that I will add in numbers so you may follow my replies:
1. Looking back on your history of blogging, what were you most right about? And what were you most wrong about? Are there any posts you regret?
2. If you were to go back in time and choose a profession other than economics, what field would you choose, and why?
3. What important questions are the least answerable empirically, and how should these questions be approached?
4. What questions would benefit most from better empirical evidence?
5. A number of years ago, I recall you saying something like “Bloggers get the commenters that they deserve.” Do you regret saying this? (Sorry–ha ha).
Thinking back on the history of MR, here are my answers:
1. I believe I was right (and proven right) about the Great Stagnation, a controversial proposition at the time. I also believe I have been right about many aspects of the Covid crisis, as Alex has been as well. See also my earlier writings.
I still like last year’s blog post on State Capacity Libertarianism.
Perhaps two things I was right about, but still not recognized as correct are: 1) post-2012 or so (but not earlier), unemployment was fundamentally a re-matching problem, and would not have been helped much by nominal decisions by the Fed, and 2) we could have done much better than Obamacare and no I don’t mean single payer.
Two of my more obvious errors were dismissing the notion of a major financial crisis in the early days, as I didn’t see that a bursting real estate bubble would wreck the shadow banking system, rather I expected (at worst) something like the recession of the early 1990s.
I also was wrong to think that Greece and Italy would leave the eurozone after the crisis of 2011. I thought deposits would be more mobile across borders than they turned out to be, thus crushing domestic banking systems and requiring a breaking with par.
I was originally wrong in calling bitcoin a bubble, though I improved and earlier yet MR was one of the first outlets to call attention to bitcoin; see also this earlier 2007 post, when I wrote: “…monetary economics will end up as a special case of a more general theory of encryption. One day they’ll solve Riemann’s Hypothesis and the price level will just go poof…!”
I am pleased to have played early roles boosting ngdp work, especially in free market circles, and standing firm on the need for some kind of green energy policy, though neither involved any originality on my part. I see both decisions as vindicated.
That all said, I regret the post where I wrote “Bloggers get the commenters that they deserve.” Even if it is true.
2. if my current profession were inaccessible to me, I would be either a philosopher or a legal academic, but trying to replicate the essential features of my current life as I know it. I feel I would be much less effective in either venue, however.
3. “What important questions are the least answerable empirically, and how should these questions be approached?” Maybe that is too broad a question, but two responses. First, I am not sure we ever will understand “culture,” as more empirical work perhaps will broaden the concentric circles of our ignorance and create more open questions, by both teaching us more detail and showing how much context-dependence matters. Second, I am increasingly skeptical that we will ever find “the theory of everything” in physics. Maybe it is all just a sprawling mess that resists systematization and comprehension by our feeble little brains. How well do felines grasp Keynesian macroeconomics?
That said, approach these dilemmas by fighting to understand and indeed doubling down.
4. “What questions would benefit most from better empirical evidence?” Well, many of them, but be ready to deal with this notion of broadening and expanding the concentric circles of our knowledge — and ignorance — at the same time. In many, many areas that is at least as likely as convergence on a definite set of answers.
Do commenters get the bloggers they deserve? I don’t think so.
Stimulus sentences to ponder
Estimates by Harvard economics professor Raj Chetty and his colleagues suggest that consumer spending by low-income consumers is up more than 13 percent from January 2020 to January 2021, before any new stimulus. Researchers working with data from the JPMorgan Chase Institute find household cash balances have risen across the income distribution during the pandemic. At the proposed level of unemployment benefits, more than half of laid-off workers will see their incomes rise. Proposed expenditure levels for school support exceed $2,000 per student.
That is from Lawrence H. Summers, answering further questions about his stimulus stance. Do read the whole thing. Again people, you are being sold a bill of goods on this one…
The South Korean minimum wage hike
A controversial study on the effect of a radical rise in the legal minimum wage level came out Tuesday, pitting employers against employees in the midst of negotiations for the next year’s wage standard.
Researchers at the Korea Economic Research Institute analyzed in the study the impact of the 16.4 percent increase in the 2018 wage level on low-income workers to find that many low-paying jobs were erased, while those who were employed enjoyed higher pay. The institute is affiliated with the country’s top business lobby, the Federation of Korean Industries.
The minimum wage is updated on an annual basis, and the rate currently stands at 8,590 won ($7.10) per hour. In 2018, the rate rose 16.4 percent from 6,470 won a year earlier to 7,530 won, the steepest increase in 17 years.
The KERI report said the employment rate in 2018 for workers directed affected by the hike — those who were getting paid less than the 2018 legal wage in 2017 — was as much as 4.6 percentage points lower than other income groups.
Some 15.1 percent of this group were jobless in 2018.
The study calculated that between 27.4 percent and 30.5 percent of the unemployment cases were due to the higher wage level, which prompted employers to cut jobs.
Here is the article. I cannot find this study, it may well only be in Korean (addendum: here is the link in Korean), and I note it is connected to a business lobby. Still, I will take this opportunity to ask: what else do we know about the recent and radical South Korean wage hike?
Here are some general remarks at Wikipedia. And here is a relevant paper about minimum wage hikes in Hungary: small disemployment effects after four years, and most of the burden carried by consumers, which implies the monopsony model does not apply — in that model prices should fall!
And do read Brian Albrecht on the minimum wage.
Larry Summers on the cash payments
The data are striking. Total employee compensation is now running only about $30 billion per month behind the pre-Covid baseline. Measures in the congressional stimulus bill to strengthen unemployment insurance and to support business will add about $150 billion a month to household income in order to replace all this loss.
The question is whether there is a rationale for further tax rebate of more than $200 billion a month over the next quarter. This would represent additional support equal to an additional seven times the loss of household wage and salary income over the next quarter.
Here is the full Bloomberg piece, file under “questions that are rarely asked.”
Canada gamble of the day
Canada’s deficit is growing at the fastest rate among developed nations as it seeks to prop up its economy during the Covid-19 pandemic.
Canadian officials are betting the aggressive approach will pay off, pointing to the number of jobs already recovered, and argue that the country can afford to pour money into the economy while borrowing costs are historically low. But some economists warn the heavy spending could lead to a fiscal crisis, and one major ratings firm has already stripped the country of its triple-A rating…
Canada’s virus-related spending, the bulk of which originates with the federal government, has totaled about 382 billion Canadian dollars, the equivalent of $294 billion, and accounts for roughly 19% of Canada’s total economic output.
Yet data from the IMF indicate Canada’s fiscal position during the pandemic—incorporating all levels of government—has deteriorated at the fastest pace among the major economies in the Group of 20 industrialized countries as it seeks to keep the economy pumping.
…So far, Canada has recovered about 80% of the jobs lost in March and April because of the virus, whereas the U.S. has regained just over half of employees shed. Canada’s economy grew by a record 40.5% annual rate in the third quarter, Statistics Canada said Tuesday. However, growth is expected to grind to a halt in the final three months of 2020 as restrictions re-emerged to deal with a rise in Covid-19 infections.
The federal government’s debt is also set to surpass C$1 trillion for the first time this year, or 50% of GDP, and debt from all levels of Canadian government will surge to roughly 115% of GDP this year from 89% in 2019, the IMF said.
Here is the WSJ article, do stay tuned…
Wage stickiness for incumbents vs. new workers
Masao Fukui, job market candidate from MIT, has made some significant progress on this problem, paper here. You should cringe if you just hear ‘wage stickiness” — for the incumbents, maybe, due to morale effects, because a grumpy worker who just took a pay cut might wreck things. But why is there wage stickiness for the new, not yet hired workers? Isn’t the new wage bargain what they need to negotiate in the first place? Other than postulating stubborn unemployed workers who overestimate their worth, how might we generate microfoundations for wage stickiness for the not yet hired, also known as “the unemployed”? Here is Fukui’s abstract:
I develop a new theory of wage rigidity and unemployment fluctuations. The starting point of my analysis is a generalized version of Burdett and Mortensen’s (1998) job ladder model featuring risk-neutral firms, risk-averse workers, and aggregate risk. Because of on-the-job search, my model generates wage rigidity both for incumbent workers, through standard insurance motives, and for new hires, through novel strategic complementarities in wage setting between firms. In contrast to the conventional wisdom in the macro literature, the introduction of on-the-job search implies that: (i) the wage rigidity of incumbent workers, rather than new hires, is the critical determinant of unemployment fluctuations; (ii) fairness considerations in wage setting dampen, rather than amplify, unemployment fluctuations; and (iii) new hire wages are too flexible, rather than too rigid, in the decentralized equilibrium. Quantitatively, the wage rigidity of incumbent workers caused by the insurance motive alone accounts for about one fifth of the unemployment fluctuations observed in the data.
As for wage stickiness for the not yet hired workers, here is I think the key point:
I show using simple phase diagrams that new hire wages must always feature rigidity at the top of the job ladder. This comes from the fact that at the very top of the job ladder, potential new employers have no incentive to increase wages above what the incumbent firms offer because there would be no additional workers to poach. This extremely strong strategic complementarity spills over toward lower job ladder rungs, and the wages are asymptotically rigid regardless of functional forms or parameter values. This result provides an explanation for the recent evidence on new hire wage rigidity.
The paper has many other interesting features. For instance, once wage rigidity for incumbent workers is a larger cause of unemployment, as opposed to just wage rigidity for new hires, the Shimer empirical critiques of labor market matching models dissipate. So matching models are strengthened, as are models of real rather than nominal rigidity of wages.
I am not yet sure if Fukui is right, but in any case this paper is a major contribution to the theory of wage-setting and it seems he is getting closer to the truth than anyone else has.
Tricky stuff! Via Ivan Werning.
Sunny Days Protect Against Flu
Vitamin D supplementation is cheap. Walking in sunlight is even cheaper. I’ve been doing more of both since the beginnings of the pandemic. Slusky and Zekhauser add to the evidence:
Sunlight, likely operating through the well-established channel of producing vitamin D, has the potential to play a significant role in reducing flu incidence. A recent meta-analysis of 25 randomized controlled trials of vitamin D supplementation (Martineau et al. 2017) demonstrated significant benefits of such supplements for reducing the likelihood that an individual will contract an acute upper respiratory infection. The current study considers sunlight as an alternate, natural path through which humans can and do secure vitamin D. This study’s findings complement and reinforce the Martineau et al. findings.
Our major result is that incremental sunlight in the late summer and early fall has the potential to reduce the incidence of influenza. Sunlight had a dramatic effect in 2009, when sunlight was well below average at the national level, and the flu came early. Our result is potentially relevant not just to the current COVID-19 pandemic, but also to a future outlier H1N1 pandemic. The threat is there; some H1N1 viruses already exist in animals (Sun et al. 2020). One must be cautious, though, with generalizations, given the unique economic circumstances (e.g., a 25-year high unemployment rate) in the fall of 2009.
A remaining question is whether sunlight matters more broadly for flu, or whether it is unique to H1N1. While we lack a counterfactual of an early flu from a different strain, we do have two pieces of evidence to suggest that the effect is broader than just H1N1. First, as described throughout the paper, the Martineau et al. study about the relationship between Vitamin D and upper respiratory infections are not specific to H1N1. Second, with granular, county level data, we do see strongly statistically significant negative effects of fall sunlight on influenza for years other than 2009 (see Columns (2) and (3) of Panel of Table 7). Therefore, apart from its methodological contributions, this study reinforces the long-held assertion that vitamin D protects against acute upper respiratory infections. One can secure vitamin D through supplements, or through a walk outdoors, particularly on a day when the sun shines brightly. When most walk, herd protection provides benefit to all.
The Scots are giving out free vitamin D to people stuck indoors. My view is that Vitamin D supplementation is worthwhile but where and when possible the sunlight approach is better as the effect may work through mechanisms beyond vitamin D.
Coincidentally neuroscience says this is one of the happiest songs ever.
Hat tip: The sunny Kevin Lewis.