Economics Links (9 June 2009)

Sorry for not posting this here last week.

Angry Bear:
Untitled post on the Unemployment Report

Current Recession vs the 1980-82 Recession


Econbrowser:
DeGlobalization: Transitory or Persistent?

Not a Robust Recovery

James Pethokoukis: "An Improving Job Market"

Output, Employment and Industrial Production in the "1980-82 Recession"

More on Bank Lending Data

High Anxiety (about Interest and Inflation Rates)


Economist's View:
Too Big to be Restructured (The theme of this essay ties in very well with my post on Mikhail Gorbachev's essay from the other day, "We Had Our Perestroika. It's High Time for Yours.".)

Contributions to the Change in Nonfarm Payroll Employment

Shiller: Home Prices May Keep Falling

Uneven Unemployment Rates

"VAT Time?"

Bank Mergers

"Reducing Inequality: Put the Brakes on Globalization?"


Financial Times:
The ‘part-timezation’ of America


Reuters:
China influence to grow faster than most expect: Soros


Real Property Alpha:
California Home Prices in Ounces of Gold


True/Slant:
NASCAR helped GM down its path of self-destruction ("Better equipped to compete? How ironic, given NASCAR’s role in helping the auto industry race down its path of self-destruction. Major auto companies used NASCAR for years to push cars and trucks with poor fuel economy numbers. The sport, in some ways, came to symbolize America’s embrace of consumption.")


VoxEU:
Why is Japan so heavily affected by the global economic crisis? An analysis based on the Asian international input-output tables

Does climate change affect economic growth?


Washington Post:
Book Review: The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street

The Big Money: China's Stimulus is Working

A very short but interesting - and I dare say important - article from Slate's The Big Money. Important for two reasons: first, because it reinforces Paul Krugman's argument that the size of the stimulus package matters and that the recently passed economic stimulus bill is most likely too small; secondly, because it refutes the noise coming from the hysterical wing of the Republican party as to why the stimulus bill needed to be passed in the first place.

Many commenters, including TBM's Charles Wallace, have argued that the Chinese stimulus package is superior to America's. Partly that's because it represents a larger proportion of GDP and partly because it is more focused on housing and infrastructure, which can create jobs quickly and thereby circulate money through communities. Those points will continue to be debated.

But there's a case to be made that the Chinese stimulus package is now working, both on a psychological level and an economic level. A Reuters story yesterday pointed out that the mere promise that China will increase its stimulus if it needs to boosts confidence and might therefore paradoxically make more stimulus unnecessary. Now comes today's Wall Street Journal, reporting that both housing sales and construction starts are on a mild upswing in China. This is crucial because the world's metal and oil markets are dependent on Chinese demand; not surprisingly, reports the Financial Times, both experienced a jolt yesterday.

True, the Chinese economy will not grow in 2009 at the dizzying pace of the last decade or so. But it's also not going to shrink, and that will provide a needed cushion for the drops occurring elsewhere. The bottom line, as David Leonhardt wrote in yesterday's New York Times, is: "Yes, stimulus works." Critics can say it's too expensive or doesn't stimulate fast enough or deeply enough. But consider the alternatives.

HT: Economist's View

Want a Job? Vote for a Democrat!

A couple of interesting posts on unemployment today, the first being from Spencer at Angry Bear:

So much for Sarah Palin's claim that Republican tax cuts create jobs. In the post WW II era every Democratic President has left office with a lower unemployment rate than they inherited from their predecessor while only one Republican president left office with a lower unemployment rate than they inherited. That was Ronald Reagan, but his first term still holds the record for the highest average unemployment rate of any post - WW II four year Presidential term.

George Bush inherited a 3.9% unemployment rate and the results of all his tax cuts has been a rise in the unemployment rate to 6.1%, so far. By contrast Bill Clinton inherited a 7.4% unemployment rate and with his prudent fiscal policy left Bush a 3.9% unemployment rate.

Leave it to Team Bush to be the only American President to throw a war that failed to stimulate the economy.

Another scary graph comes from Economist's View:

A grim morning: Double plus ungood news on multiple fronts this morning. The credit crunch is getting worse: LIBOR jumped again, the TED spread is at a new record. Bad news on employment: payrolls down 159,000, average work week down, official unemployment rate flat at 6.1 percent but broad measure (U6) up from 10.7 to 11.

We are going over the edge.

The track record: This chart shows U6, the broadest measure of unemployment and underemployment from the Bureau of Labor Statistics. (No data available before 1994.)

State Coincident Indexes

Every month, the Federal Reserve Bank of Philadelphia produces a "State Coincident Index" that allows economists to see how well each of the individual states are doing economically:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

What the graphs below show is a state-by-state analysis of the economy. The first three maps show the month of January for 2005, 2006 and 2007, respectively. (Note that in these maps, a five-point scale is used with dark blue being the best and dark red being the worst.) The last six maps are for the last six months available, December 2007 through May 2008. While the scale has been increased from five points to seven points, the same basic color scheme is still used; i.e., dark blue is the best, dark red is the worst.

As you can see, the American economy has gotten quite bad over the past six months, especially in the Northwest and, to a slightly lesser degree, in the Midwest and South. Some of the states in the Mountain West and Northeast are doing well, with the best state currently being Texas. (I'd be tempted to say that Texas is doing well because of the multiplier effects from higher oil prices, but if that's the case, then why isn't Alaska doing well too?)










HT: Economist's View

Robert Reich: ""No" to Further Offshore Drilling

The other day, in my update about how much oil the U.S. imports, I wrote:

...[S]hame on you ... if you believe either McCain or Cheney that drilling for oil offshore or up in Alaska will make a significant difference. Two reasons: "drop in the bucket" and "long-term projects," neither of which will lower your gas prices.

On the same day that I wrote the above, Robert Reich, former Secretary of Labor during the Clinton administration and currently a professor at the University of California (and a blogger), had a similar post on why the U.S. should not do further offshore drilling for oil. His first and second reasons are identical to what I wrote above, just further developed:

First, the crude oil market is global. Oil companies sell all over the world. The price of crude is established by global supply and demand. So even if 3 million additional barrels a day could be extruded from lands and seabeds of the United States (that sum is the most optimistic figure, after all exploration is done), that sum is tiny compared to 86 million barrels now produced around the world. In other words, even under the best circumstances, the price to American consumers would hardly budge.

Second, whatever impact such drilling might have would occur far in the future anyway. Oil isn't just waiting there to be pumped out of the earth. Exploration takes time. Erecting drilling equipment takes time. Getting the oil out takes time. Turning crude into various oil products takes time. According the the federal energy agency, if we opening drilling where drilling is now banned, there'd be no significant impact on domestic crude and natural gas production until 2030.

Third, oil companies already hold a significant number of leases on federal lands and offshore seabeds where they are now allowed to drill, and which they have not yet fully explored. Why then would they seek more drilling rights? Because they want more leases now, when the Bushies are still in office. Ownership of these parcels would serve to to pump up their balance sheets even if no oil is pumped.

Last but by no means least, environmental risks are still significant.

HT: Economist's View