Media clips
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Our friend and former colleague Jared Bernstein has mounted a small but strategic retreat in the campaign to have the Fed continue focusing on full employment. He has written that Friday’s jobs report, though not stellar, was good enough to make a December increase in interest rates a near-certainty. He then argues that this might not be the worst thing in the world: “Even while I do not see much rationale for an increase, especially given elevated underemployment and the stark lack of inflationary pressures, given their recent messaging, a non-liftoff in December would suggest the economy is a lot worse than they thought in some secret way they’ve been keeping from us. Such a negative surprise would be ill-advised. “Presuming that they won’t want to go there, it’s now all about the ‘path to normalization:’ how fast they raise. … [I]f I’m Chair Yellen, my message to the hawks is: ‘OK, you got your rate liftoff even though the data weren’t really there for it. Now back…off and let’s go back to being data-driven about future increases.’”
Jared is right that the larger economic question is not just about a 25-basis-point increase this month but about how rapidly interest rates climb over the next year or so. But we’re still really uncomfortable with starting lift-off before the data support it. Once you start indulging faith-based arguments about monetary policy, you’ve lowered the bar for data-driven analysis, making smart policy choices harder and harder to sustain.
Wall Street Journal December 7, 2015 -
[Some] analysts and many liberal Democrats believe the Fed may still be moving too early while wage gains remain soft and economic growth is still struggling to stay above 2 percent. They fear tighter monetary policy will choke off real progress on wage gains — the lack of which has left the electorate sour and dissatisfied “‘They should wait. It is still too soon to declare victory,’ said Elise Gould, senior economist at the progressive Economic Policy Institute.
Politico December 7, 2015 -
While financial markets have been clamoring for a rate hike to ease uncertainty, not everyone is thrilled with the prospect of an immediate hike. “It’s all about wages,” said Josh Bivens, research and policy director at the left-leaning Economic Policy Institute. “We have a lot of room before we have an overheating economy that’s generating inflation,” Bivens said, arguing that the Fed should wait until wage increases ramp up before hiking rates. The Fed is charged with maximizing employment and keeping inflation in check. Thirteen million jobs have returned since the depths of the recession. But with inflation largely nonexistent and wage gains yet to break out, Bivens said, the Fed shouldn’t rush to lift rates. In the latest jobs report, wages picked up 2.3 percent overall and 2 percent for nonsupervisory workers. But wage gains of at least 3.5 percent are necessary to push up inflation, Bivens said, as companies counter the higher cost of compensation by increasing prices of goods and services.
International Business Times December 7, 2015 -
But the federal funds rate flatlines at zero whenever the Fed tries to chase the real natural rate of interest below the zero lower bound. The Fed isn’t just prevented from helping the economy — it’s effectively forced to hold it back from recovering. This, according to Josh Bivens, research director of the Economic Policy Institute, is why fiscal policy is the best option for boosting the economy out of recessions: It’s direct spending, and faces no zero lower bound problem.
The Week December 7, 2015 -
As the unemployment rate has gone down, employers have had to offer better pay to attract better job applicants. While economists like Faucher have declared this a “very good” report, not everyone agrees. “While many people are saying this morning’s report clears the way for liftoff, it still is too soon to declare victory in the economy. We won’t be at full employment until we see durable acceleration of wage growth, and only once we have achieved full employment will all workers be able to get the jobs they need and the hours they want, and be better positioned to negotiate for higher pay,” said Elise Gould, senior economist at left-leaning Economic Policy Institute. “Yes, interest rates have been low for a long time, but the Fed should not raise rates simply to scratch a seven year itch.”
The Guardian December 7, 2015 -
Yet, fiscal doves continue to argue that it’s too soon to raise rates. On Twitter, Elise Gould of the left-leaning Economic Policy Institute cautioned against scratching the itch — that is, moving on interest rates — too soon. “I don’t think the matter of time should determine it, the data should determine it,” Gould told the PBS NewsHour. She points to wages as one place that still needs improving. Average hourly earnings rose a mere 4 cents to $25.25 in November, following a 9 cent gain in October, and have risen by only 2.3 percent over the year.
PBS News Hour December 7, 2015 -
The case also emerges against a backdrop of two decades in which black freshman enrollment at UT has remained essentially flat, averaging 4.3 percent of the class, despite the university’s efforts in recruitment, scholarships, holistic application review and other measures. Nor has the automatic admission law done much to boost black enrollment. Ostensibly race-neutral, the law “exploits the fact that Texas high schools are highly segregated,” Richard Rothstein, a research associate at the Economic Policy Institute in Washington, wrote in a post on scotusblog.com.
Austin American-Statesman December 7, 2015 -
Many experts do estimate that gig work is becoming more prevalent, but the numbers are not entirely straightforward; the Economic Policy Institute’s Lawrence Mishel has argued in The Atlantic that the rise of Uber-like freelancing is actually overstated. At any rate, the Government Accountability Office has estimated that contingent workers, which includes temps, the self-employed, and on-call workers, accounted for about 8 percent of the workforce in 2010.
The Atlantic December 4, 2015 -
Currency manipulation and unfair trade practices by China and other countries, not high wages, are to blame for the decline of U.S. manufacturing, according to a study released Wednesday by the Economic Policy Institute. The left-leaning Washington, D.C., think tank cited Germany as evidence that manufacturers can pay high wages and still be competitive. German manufacturing workers received hourly compensation of $48.98 in 2013, about a third more than the $36.34 per hour their American counterparts were paid, the study said. “The idea that high wages in the manufacturing industry are causing job losses is common, but incorrect,” the institute’s Robert E. Scott, the author of the study, said in a statement.
Pittsburgh Post Gazette December 4, 2015 -
For Josh Bivens, the Economic Policy Institute’s research and policy director, however, the discrepancy is not a mystery. The low official unemployment rate conceals the degree to which workers have settled for part-time work when they want to work full time, or those who have given up looking for a job altogether. “This is not a puzzle,” Bivens said at the briefing on Tuesday. “It is the evidence for why it is too soon to start putting the brakes on the economy.”
The Huffington Post December 2, 2015