Tuesday, February 21, 2012

The long-term unemployed and high school dropouts

This 60 Minutes episode focused on the "carnage" caused by long-term unemployment. It highlights one program, Platform to Employment, that has successfully helped the long-term unemployed reenter the workforce. This program starts by revamping its unemployed clients' confidence, and then finding internships for these mid-career professionals. It also helps them navigate discrimination against the long-term unemployed.


Bernanke's 9-30-2011 speech at the Cleveland Fed is mentioned in the 60 minutes clip. In that speech, Bernanke notes that 45% of the unemployed have been unemployed for 6 months or longer, which is unprecedented in the post-WW II era. The long-term unemployed risk losing their skills, connections, and attachment to the workforce -  to the detriment of the whole economy  (click here to see 53 second excerpt from Bernanke speech).

The long-term unemployed are not the only group suffering especially hard; people with less education face much higher unemployment rates, as well as lower earnings. The following graph can be found at http://www.bls.gov/emp/ep_chart_001.htm.

For more on the challenges facing those without a high school degree see, WSJ (2-21-2012) "As Job Market Mends, Dropouts Fall Behind" by CLARE ANSBERRY.  You can find the numbers reported in this WSJ article in the Bureau of Labor Statistics' (BLS) archives of Employment Situation News Releases, http://www.bls.gov/schedule/archives/empsit_nr.htm.

It should come as no surprise that high school dropouts are also more likely to stay unemployed a long time. According to a 2010 article in the Monthly Labor Review (http://www.bls.gov/opub/mlr/2010/10/art1full.pdf),  in 2009 persons without a high school diploma accounted for only 11% of the labor force, but they accounted for 28.6% of the unemployed and 19% of the long-term unemployed (unemployed at least 27 weeks).

Monday, February 20, 2012

Productivity and U.S. Competitiveness

The link between competitiveness, productivity and regulation gets special focus in this issue of the Economist. For those of you who are new to the reading the Economist, Schumpeter is a weekly column about markets. It is named after an economist, Joseph Schumpeter, who championed the "creative destruction" of markets.

Economist (2-18-2012) United States' economy Over-regulated America

Economist (2-18-2012) Schumpeter: This times it's serious


In this interview (6 minutes), the Chief Economist for the Conference Board, Bart van Ark, explains how productivity is measured ( = real GDP/hours) and worrisome signs for the future. With real GDP growing slowly and hours finally increasing as more workers are hired, productivity growth is slowing. Productivity is pro-cyclical - it grows when real GDP grows.

Productivity in developed nations is still 4 times higher than in emerging nations. While productivity is growing faster in developing nation as they borrow technology, they still have along way to go to catch up.

Saturday, February 18, 2012

Reagan and Thatcher

To gain insight on the partnership of these world leaders, watch this fascinating 5 minute segment of interviews with each. Interestingly, Reagan saw her as a potential Prime Minister early in her career.


An opinion piece in this Friday's WSJ called for a new European revival of Reagan and Thatcher's free market approach.

WSJ (2-17-2012) "Europe's Supply-Side Revolution" by By DONALD L. LUSKIN AND LORCAN ROCHE KELLY

Luskin and Kelly suggest European governments should focus more on growing out of the crisis, i.e. focus on the supply side of the economy.

"In the 1970s, conventional wisdom held that the U.S. couldn't compete against Japan and, yes, Europe. But fear clarified our minds, and the supply-side revolution we dared to undertake in the 1980s restored America's growth and competitiveness. Conventional wisdom today holds that Europe is doomed. To the contrary. It is, bravely, starting its own supply-side revolution."

Wednesday, February 15, 2012

How much of a role should the government play in the national economy?

This special report in the Economist magazine addresses state capitalism, with a focus on China, Russia, and Brazil.

Economist (1-21-2012) "The Visible Hand"



List and discuss three pros and cons of state capitalism, a system in which the government plays a very large and direct role in the economy. State capitalism is on the rise in many countries, and some countries, such as China, claim it explains their recent success.

Is this a flash in the pan? What hazards are lurking in the future for this approach?

Monday, February 6, 2012

NYT (2-7-2012) "Data show Greece's debt ratio growing as economy-shrinks" by DAVID JOLLY

By treaty, countries in the euro zone are supposed to keep their debt/GDP ratio under 60%. Greece has never met that target since it joined the euro zone. In 2001, it had a debt/GDP ratio of around 100% (debt =  GDP). Due to raising debt and shrinking GDP, its debt/GDP ratio now is close to 160% (debt > GDP).  According to the CIA World Factbook, Greece's GDP shrunk 2% in 2009, 4% in 2010, and 5% in 2011.

To get its debt ratio back down to 60%, Greece will need to 
1. decrease debt (default)
2. increase GDP

Cutting current government spending to stop adding new debt ("austerity") has not helped much, because it has also negatively affected GDP.  If the EU really wanted to stave off default, it could  promote (and fund) new policies that increase Greece's GDP. Labor market reforms would be a promising area to start. 

Really good news clip about Greece's debt to GDP numbers

"As recently as Jan. 23, creditors wanted an average coupon of about 4.25 percent, two people familiar with the talks said then. That offer equated to a loss of about 69 percent on the net present value of Greek debt." from Bloomsberg (1-30-2012) "EU stumbles over Greek aid package as Merkel signals debt agreement delay" by By James G. Neuger and Jurjen van de Pol