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On an economy-wide basis, the fact that the trade deficit narrowed was a prop to growth. As a share of overall economic output, the gap between imports and exports fell from 3.3 percent of gross domestic product in 2012 to 2.8 percent last year, meaning the deficit was less of a drag on the economy as a whole.
“In terms of the macro impact and the impact on growth, what matters is the narrowing of the deficit. That is helping growth in the U.S., and it is what would help job growth,” said Nariman Behravesh, chief economist with the IHS Global Insight consulting firm.
But from there, the debate gets messier. Much of the improvement in U.S. trade accounts came from the displacement of imported oil with domestically produced energy. The folks at the Economic Policy Institute and the Alliance for American Manufacturing were quick to note that, once oil is factored out, the deficit in manufactured goods grew wider over the year, while the gap with China stood at over $318 billion. That makes a single country responsible for two-thirds of the total U.S. goods and services trade deficit of $471 billion.
The Washington Post February 7, 2014 -
The money would be invested in a government-backed bond with a yield pegged to the Government Securities Investment Fund offered to federal employees through the government’s Thrift Savings Plan, a retirement program. That low-risk, low-return fund yielded 1.47% over the last year and an average 2.24% over the last three years. Like Series EE savings bonds, the myRA bonds wouldn’t lose face value, which means the investments would be protected from market losses. But with such low yields they might barely keep up with inflation.
Once the accounts reach $15,000 in value, they would have to be rolled over into a conventional Individual Investment Account. That’s a sop to the financial services industry, which makes billions from managing IRAS. And that’s bad news, says economist Monique Morrissey of the Economic Policy Institute. “The president’s plan may serve to channel more savings into a high-risk, high-fee system without first addressing its failings,” she wrote on EPI’s blog.
Los Angeles Times February 6, 2014 -
Economists who see the minimum wage having negative consequences subscribe to classic pricing theories. If the price of a commodity increases, be it apples or low-wage labor, demand for that good should decline. Purchasers may instead choose a banana and businesses may turn to a self-checkout machine.
Here’s some of the recent research from economists on both sides of the debate:
“Under current labor market conditions, where tepid consumer demand is a major factor holding businesses back from expanding their payrolls, raising the minimum wage can provide a catalyst for new hiring. Economists generally agree that low-wage workers are more likely than any other income group to spend any additional earnings they receive, largely because they must in order to meet their basic needs. Higher-income individuals, corporations, and beneficiaries of corporate profits are more likely to save at least a portion of any additional income. Thus, in a period of depressed consumer demand, raising the minimum wage can provide a modest boost to overall economic activity because it shifts income to workers who are very likely to spend it immediately.” –David Cooper, Economic Policy Institute “Raising the Federal Minimum Wage to $10.10 Would Lift Wages for Millions and Provide a Modest Economic Boost,” Dec. 19, 2013.Wall Street Journal February 6, 2014 -
Politically, the question is whether a less-than-inspiring talking point—sure, most Americans don’t feel great about America right now, but we should feel better than everyone else!—can be a path to Democratic electoral success in 2016. Touting America as No. 1 probably won’t do much to rally the Democratic base, especially since a central part of the administration’s strategy is to push hard for free-trade agreements with Europe and Asia that may only heighten income inequality at home. Liberals are already suspicious of Obama’s centrism and are somewhat concerned that the party’s potential standard-bearer, Hillary Clinton, may be more inclined to follow her husband’s moderate, Democratic Leadership Council-led path than go progressive. (Nonetheless, Bill Clinton’s appeals to globalization during the faster-growth ’90s were the basis of two successful presidential campaigns.)
In the end, Obama’s quixotic call to American businesses to “join us” and “do what you can to raise your employees’ wages” will probably make as little headway as the president’s ceaseless appeals to the Republican-led House. “The reason businesses are not hiring or raising wages is not because they’re acting badly and hating America. It’s because they’re not seeing enough demand for their stuff,” says economist Heidi Shierholz of the progressive Economic Policy Institute.
National Journal February 6, 2014 -
Technically, a correction is a change of 10 percent or more, so the Dow would need to lose around 650 more points and the S&P 500 would need to drop by another 100.
“The S&p 500 has averaged a correction, that is a drop of 10 percent of more, every 18 months and currently we haven’t had one since 2011, so we’re about 28 months overdue,” says Alec Young, Global Equity Strategist at S&P Capital IQ.
Plus, many key economic indicators like manufacturing and unemployment indicate stocks should be a little lower says Bill Stone, Chief Investment Strategist at PNC Wealth Management. “We will get a 10 percent pullback sometime. Whether this is it or not is hard to say, but you ought to a be ready for it.”
Still, we’re probably not talking about a crash, because companies’ profits are pretty much in line with current stock values.
“The best measures of long run stock market fundamentals, the price to earnings ratio, is not in bubble territory,” says economist Heidi Shierholz, with the Economic Policy Institute in Washington DC.
Marketplace February 6, 2014 -
The blue line on the chart above is derived from this assumption. It shows the sustainable level of employment expressed as a share of working-age adults. The red line shows the share of adults who actually had jobs. The implication is that, in effect, there were too many jobs before the recession – that the labor market was overheating – and, as a result, that some of the recent losses should be seen as a return to health.
But as Josh Bivens of the Economic Policy Institute noted Monday, the Fed in recent decades has actually tolerated higher unemployment for long periods because it was focused primarily on controlling inflation. The methodology of the new study, in effect, is basically using the Fed’s long history of allowing unnecessary unemployment as a justification for continuing the same policy.
New York Times February 6, 2014 -
Still, the structure of the Obamacare subsidies makes it less likely that workers would make that choice at all, according to Elise Gould, the director of health policy research at the left-leaning Economic Policy Institute.
An extra $100 in income doesn’t directly translate into $100 less in subsidies, meaning that for many low-income workers, there would probably be more of an incentive to make more money than to get the government breaks.
“It’s hard to imagine that people don’t want to move up the wage scale and do better in that way,” Gould said. “It’s not unreasonable, but if you’re the only wage earner in your house, then you’re going to be making very different decisions than if you are a second wage earner.”
Huffington Post February 6, 2014 -
Hilary Wething and Daniel Costa are featured on the “Young and the Guest List” in Washington Life magazine.
See page 45.Washington Life Magazine February 6, 2014 -
For some time now, there has been a debate about why the labor-force participation rate has fallen so far. Some analysts point to demographics: the aging of baby boomers. Others blame low levels of demand and hiring, which have prompted some of the unemployed to give up on looking for work. The C.B.O. study splits things down the middle. Of the roughly three-percentage-point fall in the participation rate since 2007, the study attributes 1.5 percentage points to “long term trends (particularly the aging of the population)” and the other 1.5 percentage points to “weak employment prospects” and other “unusual aspects of the slow recovery.”
One can quibble with these figures. At least one other study, by the Economic Policy Institute, found that weak demand accounted for two-thirds of the fall in the participation rate. But, even if we accept the C.B.O.’s conclusions, they imply that about three million Americans who should be working have vanished from the labor force.
The New Yorker February 6, 2014 -
Elaine Weiss of the Economic Policy Institute in Washington speaks at a Tennesseans Reclaiming Educational Excellence event at the legislative office complex in Nashville, Tenn., on Monday, Jan. 27, 2014. The event was the first of a series scheduled from supporters and opponents of creating a school voucher program and expanding charter schools in the state.
AP January 30, 2014