…As it happens, all of the job gains that have occurred since March 2010 have been in full-time employment…. Has the ACA increased part-time work among people who would prefer to hold full-time jobs?… The percentage of job holders who have part-time jobs but who would prefer full-time work… remains stubbornly higher than it was the last time the unemployment rate was 5.5%. If the entire gap is traceable to the impact of the ACA, the law has increased the number of workers who involuntarily hold part-time jobs by more than 1 million. My guess is that the number of workers who involuntarily hold part-time jobs has remained high because of the weakness of the economic recovery rather than the effect of the ACA. It is not easy to devise a statistical test that allows us to confirm this suspicion, however. Even if it were true that the ACA has induced employers to create more part-time jobs and fewer full-time jobs, it is not obvious whether this shift reduced workers’ well-being…. If total work hours remain unchanged it also follows that more workers must hold jobs, reducing the number of involuntarily unemployed workers. It seems odd that critics of the ACA emphasize the potentially adverse impacts of the law on workers forced to accept part-time jobs but fail to notice that their logic suggests more workers in total must be employed…
Things to Read on the Morning of April 1, 2015
Must- and Should-Reads:
- Afternoon Must-Read: : Pooling Multiple Case Studies Using Synthetic Controls: An Application to Minimum Wage Policies
- Lunchtime Must-Read: : Barney Frank Explains the Financial Crisis
- Today’s Must-Must-Read: : The Missing Deflation and the Argument for a Higher Inflation Target
- : Labor Market Slack and Monetary Policy
- : Response to Robert Caro’s The Power Broker
- : Monetary Policy for a High-Pressure Economy
- (1986): Spurious Volatility in Historical Unemployment Data
Might Like to Be Aware of:
- : “You must overcome any shyness and have a conversation with the librarian, because he can offer you reliable advice that will save you much time. You must consider that the librarian (if not overworked or neurotic) is happy when he can demonstrate two things: the quality of his memory and erudition and the richness of his library, especially if it is small. The more isolated and disregarded the library, the more the librarian is consumed with sorrow for its underestimation. A person who asks for help makes the librarian happy…”
- (1998): Racism and Science Fiction
How much does job search matter for job switching?
When economists, policymakers or the general public talk about searching for a job, we often assume the one doing the searching is the worker. Under this view, most workers end up with a job because they went out and looked for one. But new research published yesterday by the Federal Reserve Bank of San Francisco challenges this notion.
The authors of the “economic letter,” Carlos Carrillo-Tudella of the University of Essex, Bart Hobijn and Patryk Perkowski of the San Francisco Fed, and Ludo Visschers of the University of Edinburgh point out that the most commonly used data set about the U.S. labor market doesn’t tell us anything about the search for jobs. The Current Population Survey, run by the U.S. Bureau of Labor Statistics, doesn’t tell researchers anything about the search effort that workers put into finding a job. Instead they look at the Contingent Worker Supplement to the CPS, which has data about job searches three months prior to the survey.
Unfortunately, the most recent data is from 2005, yet the results they find are still quite interesting. More than 67 percent of workers who were hired didn’t look for a job in the previous three months. So less than one-third of total hires were workers who were actively searching for a job. What’s more, the importance of non-searchers in switching jobs holds up when the researchers break the data down by the employment state of these workers as well.
According to the authors’ analysis, about 26 percent of overall hires were of employed workers who weren’t searching for a job. Another 42 percent of new hires were workers without jobs who weren’t looking for a job. In other words, they were out of the labor force. This second result is particularly interesting. We often think of workers out of the labor force as discouraged workers who won’t find jobs. Or if they are on their way to employment, they need to start searching first and enter the ranks of the officially unemployed.
Consider the Beveridge Curve, which looks at the relationship between job openings and the unemployment rate. This curve is supposed to show the relationship of workers transitioning from not having a job to having one. If this new analysis out of the San Francisco Fed is true, it emphasizes the need for a better understanding of the data that underlies the curve.
But let’s put these numbers into context. These results don’t mean that searching for a job is futile. In fact, quite the opposite. Workers who actively search for a job were far more likely to move over into a job (11 percent) than workers who didn’t look for a job (1.8 percent). So looking for a job is incredibly important for individual workers—even though the act of not looking for a job doesn’t mean workers won’t soon switch jobs.
If workers aren’t searching for new employment, then it appears employers are the ones conducting a search. Recruitment and poaching are likely ways employers do this, the authors point out. But how can researchers measure employer recruitment efforts? The Job Openings and Labor Turnover Survey, published by the Bureau of Labor Statistics every month, measures job openings. But Carrillo-Tudella, Hobijn, Perkowski, and Visschers cite research that finds over 40 percent of hires at firms were for jobs that were never publically advertised.
What to make of this research? The big picture is that some very important dynamics of job-to-job mobility don’t register in important data sets and the common conception of the U.S. labor market. Of course, the data used in this analysis is about 10 years old at this point. But that means looking into this question is perhaps even more pressing.
Afternoon Must-Read: Arindrajit Dube and and Ben Zipperer: Pooling Multiple Case Studies Using Synthetic Controls: An Application to Minimum Wage Policies
…We also test for heterogeneous treatment effects using the distribution of estimated ranks, which has a known form. We propose a cross-validation based procedure for model selection. Using 29 cases of state minimum wage increases between 1979 and 2013, we find a sizable, positive and statistically significant effect on the average teen wage. We do detect heterogeneity in the wage elasticities, consistent with differential bites in the policy. In contrast, the employment estimates suggest a small constant effect not distinguishable from zero.
Lunchtime Must-Read: David Dayen: Barney Frank Explains the Financial Crisis
…Without that language, TARP would not have passed…. The Bush administration… used none of the first tranche on mortgage relief, nor did Treasury Secretary Henry Paulson use any leverage over firms receiving the money to persuade them to lower mortgage balances and prevent foreclosures. Frank made his anger clear over this ignoring of Congress’ intentions at a hearing with Paulson that November…. Frank writes, ‘Paulson agreed to include homeowner relief in his upcoming request for a second tranche of TARP funding. But there was one condition: He would only do it if the President-elect asked him to.’…
Obama rejected the request, saying ‘we have only one president at a time.’ Frank writes, ‘my frustrated response was that he had overstated the number of presidents currently on duty’…. Obama’s unwillingness to take responsibility before holding full authority doesn’t match other decisions made at that time. We know from David Axelrod’s book that the Obama transition did urge the Bush administration to provide TARP loans to GM and Chrysler…. It was OK to help auto companies prior to Inauguration Day, just not homeowners. In the end, the Obama transition wrote a letter promising to get to the foreclosure relief later, if Congress would only pass the second tranche of TARP funds. Congress fulfilled its obligation, and the Administration didn’t….
Frank… first leveled [this] in May 2012 in an interview with New York magazine. Nobody in the Obama Administration has ever denied the anecdote…. I suppose those reviewing ’Frank’ can offer an excuse about this being ‘old news’…. The political media’s allergy to policy is a clear culprit here. Jamie Kirchick’s blanket statement in his review of ‘Frank’ that ‘readers’ eyes will glaze over’ at the recounting of the financial crisis is a typical attitude. But… people [who] suffered needlessly for Wall Street’s sins… would perhaps be interested in understanding why…
Today’s Must-Must-Read: Paul Krugman: The Missing Deflation and the Argument for a Higher Inflation Target
…so were many of us, and we treated it as a problem to be solved. And what emerged as at least one likely culprit was downward nominal wage rigidity, which has been overwhelmingly obvious in recent years…. The case for a higher inflation target… rests on the… two zeroes: it’s very hard to cut interest rates below zero… to get cuts in nominal wages. Both problems are… more… serious… for the economy with… 1 percent… than with 4 percent inflation. Economists and central bankers were aware of the two-zeroes problem back when they converged on the 2 percent inflation target. That’s why the target was 2, not 0. But they wrongly believed that 2 was enough…. What we’ve learned since then is that the zeroes are a much bigger issue than the consensus had it…. The failure of inflation to fall as much as predicted in 2009 was part of a series of events that were trying to tell us that the initial inflation target was too low.
Department of “Huh?!”: Martin Feldstein and the Interest Rate Path Edition
It is the absence of any recognition of the asymmetric power of the Federal Reserve’s policy tools that leaves me most puzzled by the extremely-sharp Marty Feldstein this morning:
…Only in 2017 would the real fed-funds rate even exceed 1%…. The Fed is… projecting that its policies will cause unemployment to decline to 5% by the end of 2015 and even lower in the next two years. Historical experience suggests that means inflation would eventually increase year after year….
Recent academic research… implies that what matters for accelerating inflation is not overall unemployment but unemployment among those who have been out of work for less than six months. For this group of short-term unemployed, the inflation threshold is estimated to be between 4% and 4.5%. The latest count by the Bureau of Labor Statistics puts the unemployment rate for that group at less than 3.9%. This could mean inflation will soon begin to rise year after year without any further decline in overall unemployment….
Finally there is the important issue of financial stability…. The process of reaching for yield has increased bond prices, narrowed credit spreads, and pushed the stock market’s price-earnings ratio to 19, 25% above its historic average…. Investors believe they have complete liquidity because they can redeem their investments at any time. But if many of them tried to do so, the bond funds and ETFs would have to sell the underlying corporate bonds. It is not clear who the buyers would be…. The Fed’s current slow path to more normal interest rates is not justified by its employment and inflation mandates…
Let’s review the videotape. The Federal Reserve believes that the proper longer-run mid- and late-expansion value for the federal funds rate is 3.75%. It expects to be within half a percentage point of that rate in twenty months–by the end of 2017:
Core inflation has not been at its 2% per year rate target for more than a month in the past three years:
We thus need a period in which unemployment is beneath the NAIRU in order to even return inflation to its target. But there is no sign as of yet in wage growth that it is:
Janet Yellen projects and wishes for unemployment to fall further, and is confident that when it falls further wage growth will reemerge and inflation climb back to its target. She is confident that if inflation climbs above its target she can quickly and substantially raise interest rates to bring inflation back to target. But she is not at all confident that if she raises interest rates as fast as Feldstein wishes and the economy weakens that she will then be able to strengthen it.
Yet there is no acknowledgement of this asymmetry anywhere in Feldstein’s piece.
The future of the global savings glut
Just over ten years ago, before he became Chairman of the Federal Reserve, Ben Bernanke gave a speech trying to explain why long-term interest rates weren’t increasing as the Fed was increasing short-term interest rates. Bernanke’s answer was the “global savings glut,” which he defined as savings from emerging markets, such as China, and oil producing nations—all of which were creating a surplus of savings that was keeping interest rates low. But a decade and a global financial crisis later, Bernanke has re-evaluated the global savings glut and presented an update.
The occasion for Bernanke’s remarks yesterday was a conference hosted by the Center on Budget and Policy Priorities about the importance of full employment. Bernanke started his talk by discussing secular stagnation, the argument that says interest rates need to be extremely low to produce anything close to full employment. The former Fed chair said he agrees with some parts of Larry Summers’ story, but he seems to have one major disagreement with secular stagnation.
Bernanke mentioned a paper by economists James D. Hamilton of the University of California-San Diego, Ethan S. Harris of Bank of America Merrill Lynch, Jan Hatzius of Goldman Sachs, and Kenneth D. West of the University of Wisconsin that looked at secular stagnation. Part of Summers’ argument is that the lack of overheating in the U.S. economy during the housing bubble is indicative of how much more demand the economy could use. What the four economists point out is that the large, simultaneous trade deficit basically cancelled out the increased demand from the housing bubble.
As Bernanke pointed out, secular stagnation seems to be focused only on individual economies and ignores the international aspects. Secular stagnation, he argues, really only works if we think the entire global economy is in that state. And this is where Bernanke turns to the global savings glut. He points out that the U.S. trade deficit has declined by half since 2006. Part of that decline is because the United States has again become an oil exporter.
But at the same time, the traditional sources of global savings have changed. China, one of the great sources of savings, is restricting its economy to make it more consumption-based and therefore less oriented toward savings. Latin American countries are less likely to run surpluses now, with Brazil being Bernanke’s specific example. And oil-producing countries are also saving less as oil prices have been dropping.
Yet there is a new home for the shrinking though still consequential global savings glut. Bernanke points to Europe as a new source of global imbalances and savings. Part of the rapid increase in European savings over the past 10 years has been German savings. But the majority of the savings has been from the countries in the European periphery, such as Greece and Spain. As these economies recover, they should be saving less, Bernanke argues. But then again, the increase in German savings seems to be structural. Bernanke promised a blog post with figures on this point later in the week.
So when it comes to demand in the global economy, Bernanke doesn’t seem to think the problem is a general shortfall. Rather it’s the distribution of demand in the global economy that seems to be out of whack. The issue of global imbalances, a topic of much demand prior to the Great Recession, might be making a return.
Things to Read on the Afternoon of March 30, 2015
Must- and Should-Reads:
- Today’s Must-Must-Read: : Climate Change? Nothing to Worry About… If You’re Happy to Ignore Physics
- Afternoon Must-Read: : Why Our Success in Managing the 2008 Banking Crisis Was the Mother of Failure
- Afternoon Must-Read: : Austerity Is Still Popular Despite an Abject Record of Failure
- : Secular Stagnation for Free
- : Review of Gernot Wagner and Martin Weitzman: “Climate Shock: The Economic Consequences of a Hotter Planet”
- : Why you shouldn’t lose sleep over the biggest ‘bubble’ in the markets today
Lots to Worry About in Climate Change
The Curious Case of the Curious Sea Lions Clifford Asness and Aaron Brown
Over at Medium: I have a different take on Asness and Brown than Mark Buchanan does — largely because I take Asness and Brown’s claim to be just doing “climate-knowledge-free statistics” to be made in bad-faith.
I take their paper to be an episode of a weird and perverse rhetorical game that has now come to be called “Sealioning”.
“Sealioning” is a term coined by David Malki of Wondermark to be applied to those pretending to be simply interested merely in having an objective and rational discussion of “the facts” while actually attempting to strengthen a side of a public argument that one does not dare explicitly defend.
If Asness and Brown were, say, in the “climate-knowledge-free statistics” game — as they claim they are — they would not have taken the temperature record since 1880:
simply fit a linear time trend to the whole thing:
projected that time trend out to the end of the twenty-first century:
and then professed surprise that that projected time trend was well below IPCC global warming projections.
Suppose that they were not engaged in Sealioning. Suppose that they had wanted to undertake the exercise of engaging in a real “climate-knowlege-free statistics” projection.
A real “climate-knowledge-free statistics” projection would have started with human greenhouse-gas emissions as the supposed driver of global warming:
A real “climate-knowledge-free statistics” projection would have noted that there was a lot more forcing from human greenhouse-gas emission in 2000 than in 1900 — more than ten times as much, in fact.
A real “climate-knowledge-free statistics” projection would have noted that emissions now are three times average emissions over the course of the century. A real “climate-knowledge-free statistics” projection would thus have taken the 1900–2000 trend… and multiplied it by three in projecting it out into the future in order to obtain an estimate of what temperatures will be if emissions continue at their current rate, like so:
Moreover, as the world industrializes, under business-as-usual emissions will not stay constant but rather increase. A real “climate-knowledge-free statistics” projection would have global carbon emissions not at their current level of three times but at five times the twentieth century average. If we multiply the average twentieth-century trend by five, we get a “climate-knowledge-free statistics” projection like so:
If Asness and Brown had done that — had done a real “climate-knowledge-free statistics” projection, they would then not have written anything like what they did write, viz.:
The IPCC projections could certainly turn out to be correct, but there’s little sign of that in the data (admittedly, again, data analysis, not climate science, is what we do).
Instead, they would have written: “that the globe warmed at the rate of 0.67C per century makes us think that with five times twentieth-century emissions projected for the twenty-first century IPCC projections are very reasonable, for 0.67C x 5 = 3.33C — well within the range of IPCC’s forecasts.”
They would not have written anything like:
They are predicting a sharp increase in the rate of warming that has not yet been observed.
Instead, they would have written: “while we have not yet observed a sharp increase in the rate of warming, we have observed a sharp and continuing rise in the rate of emissions.”
They would not have written anything like:
Other evidence for warming, such as decline in Arctic sea ice from 1980 to 2012 or sea level increases since the early 1900s, if measured accurately, could easily be consequences of the moderate degree of actual warming we have already observed, not evidence that the rate of warming is about to make a dramatic increase. While we aren’t climate scientists we are reasonably confident that ice melts from actual warming not future forecasted warming, whether forecasted accurately or not…. It is certainly not new evidence independent of the 0.67° Celsius per century warming trend…. When you see a picture of a polar bear stranded on a tiny piece of rapidly melting ice, it may indeed be a consequence of the 0.67° per century warming we’ve seen, and it may indeed be a serious problem, but it can’t be the consequence of, or the proof of, a model for the future, as forecasts of the future have, as of now, not harmed any polar bears…
Instead, they would have written: “Since 0.67C of warming has had significant effects on global features like the Arctic ice cap, there is every reason to worry about the destabilizing effects on natural systems that we humans depend on of the roughly fivefold greater warming projected for the twenty-first century.”
If Asness and Brown had actually been engaged in climate-knowledge-free statistics, somewhere in their paper there should be a sentence like: “Since it looks like the twenty-first century will see five times the emissions of the twentieth, we expect five times the warming.”
It is the absence of that sentence that leads me to classify it as bad-faith Sealioning.
I suggest that they please go away.
I wish that they would leave the global-warming debate to people who are not trying to play some kind of weird and perverse rhetorical game with us.