Dean Baker's Blog, page 394

Low Unemployment in Germany: The Story Is Not GDP Growth

Floyd Norris has a good piece today comparing trends in unemployment rates across countries in the downturn. He notes that Germany alone has seen a drop in its unemployment rate since the downturn began. While he notes that Germany has pursued work sharing policies that have encouraged employers to keep workers on the job working shorter hours, readers may not appreciate the full importance of this policy.

Growth in Germany and the United States have been virtually identical since the beginni...

It's So Hard to Find Good Help: Businessweek Edition

Businessweek tells us that homebuilders would be building more homes, if only they could find qualified construction workers. Hmmm, that must mean that wages for construction workers are soaring as the shortage causes employers to bid up wages in an effort to grab workers away from competitors or hold on to their current workforce.

That's not what the data say. According to data from the Bureau of Labor Statistics, after adjusting for inflation the average hourly wage in construction has rise...

Post Continues Jihad Against Social Security and Medicare

The Washington Post continued to use its news section to advance its agenda for cutting Social Security and Medicare. It headlined an AP article on how these programs have not been cut by the sequester, "entitlement programs thrive amid gridlock, shifting money from younger generations to older."

The headline and the article wrongly imply that cuts to programs will benefit the young and increase economic growth. This is not true. The proximate cause for these cuts is a decision by political l...

Homeownership and Unemployment: Not So Fast

Folks have been asking me about a new study showing a strong link between homeownership and unemployment. The study finds a long-term of elasticity of the unemployment rate with respect to homeownership close to 1. This means that if the homeownership rate in a state doubles then we should expect its unemployment rate to double. For the country as a whole, since the homeownership rate has risen by roughly 20 percent from its 1950 level we should expect the unemployment rate to be roughly 20 p...

Casey Mulligan on Work Sharing

Casey Mulligan used his Economix blogpost to discuss the topic of work sharing. It's always good to see work sharing get some attention and Mulligan raises many of the right issues.

I will correct a couple of points. Mulligan tells readers:

"It is also possible that work-sharing would reduce employment by making jobs less attractive to people who desire full-time work. One reason that people sometimes justify commuting long distances to work or enrolling in demanding training programs – truck...

Why Does the Post Think It's Bad News that the Republican Budget Strategy is Falling Apart?

That is what readers a front page Washington Post news story on the budget must be asking. The piece notes the sharp decline in the budget deficit, then tells readers:

"That might seem like good news, but it is unraveling Republican plans to force a budget deal before Congress takes its August break (emphasis added)."

It's not obvious why the piece would use "but" in this sentence as opposed to "and." Obviously the Post considers it bad news that the Republican strategy is unraveling. Most pa...

Someone Notices the Decline in Hours

Most coverage of the April jobs report celebrated the 165,000 new jobs reported for the month which was somewhat better than consensus predictions. Almost no one noticed the decline in the length of the average workweek. As a result of the fall in average hours, the April reduction in the index for total hours worked tied for the largest drop in the recovery.

Catherine Rampell does pick up on this point in a NYT Economix blogpost today. Noting the decline, she raises the possibility that it i...

Economics 101 for WAPO: Supply and Demand in the Labor Market

Economists generally like to see supply and demand determine prices. When there is a shortage of an item then the price is supposed to rise. At higher prices the supply increases and the demand falls, this eliminates the shortage.

For some reason this simple logic was altogether absent from a Washington Post article that was headlined "Germany struggles with skilled labor shortage, shrinking population." Remarkably the piece never once mentions increasing wages. Instead it talks about efforts...

Larry Summers Says that Reinhart-Rogoff Type Mistakes Are "Distressingly Common" Then Goes on to Prove His Point

Larry Summers weighed in on the famous Reinhart-Rogoff Excel spreadsheet error in a Washington Post column this morning. His first big lesson from the debate is:

"Anyone close to the process of economic research will recognize that data errors like the ones they made are distressingly common."

Summers immediately demonstrates the truth of this assertion as he tries to make a second point about inferring the future based on statistical regularities from the past.

"Trillions of dollars have bee...

The Secret of the Weak Recovery: We Had a F***ing Housing Bubble

The problem with economics is not that it's too complicated; the problem is that it's too damn simple. This problem is amply demonstrated by all the heroic efforts made by economists to explain the weakness of the current recovery.

We've had economists tell us that the problem is that we are now a service sector economy rather than a manufacturing economy. The story is that inventory fluctuations explain much of the cycle. Since we don't inventory services, we will have a slower bounceback in...