Tag: economy

Why the stock market is plunging — and what it means politically

Posted on by Lone Candle

“Fears have ticked up since Friday because the unemployment rate has risen enough in the past year to trigger a statistical threshold, known as the Sahm rule, that has historically been a sign that we’re in the early stages of recession.
But the U.S. economy actually still looks fine: Joblessness is at 4.3 percent, which is only bad by comparison to 3.4 percent, where it stood in early 2023. A higher percentage of people in their prime working years are employed than at any point since 2001, and the unemployment rate — which measures the number of people looking to be employed against the total number of people participating in the labor force — has risen largely because more people are seeking work, including immigrants.

U.S. GDP grew at a 2.8 percent pace in the second quarter of the year, which is faster than would be expected, especially given how high interest rates are. (Recessions are associated with an economy that is contracting, not expanding.)

Claudia Sahm, the creator of the Sahm rule, said that she doesn’t think we’re in a recession and that this time her rule might not hold.

But one thing seems clear: The economy is now slowing. The question is how much and how fast.”

https://www.politico.com/news/2024/08/05/how-to-make-sense-of-market-turbulence-00172647

California’s Minimum Wage Law Has Led Some Employers To Cut Hours and Hike Prices

Posted on by Lone Candle

“Last September, California Governor Gavin Newsom (D) signed a bill mandating a $20 minimum wage for fast food workers. The new wage is among the highest in the county, surpassing even Washington, D.C.’s $17.50 minimum wage. While supporters touted the wage increase as a way to help struggling Californians, detractors warned that restaurant owners would respond by laying off workers, cutting their hours, or speeding up the already starting shift to automation.
The law went into effect in April, meaning that it’s likely too early to tell what the ultimate effects of the law will be. However, a recent report from the Associated Press detailed concerns from several California fast food restaurant owners who say they’ve been forced to reduce hours and hike food prices.

“We kind of just cut where we can,” Lawrence Cheng, whose family owns several Wendy’s franchises told the A.P. “I schedule one less person, and then I come in for that time that I didn’t schedule and I work that hour.”

Juancarlos Chacon, who owns nine Jersey Mikes locations in Los Angeles told the A.P. that he’s resorted to reducing staff, cutting his part-time workers by about 20 employees. He’s also had to raise prices. A turkey sub, for example, that used to be under $10 now costs $11.15. As a result, the amount customers spend, he says, has been falling.

“I’ve been in the business for 25 years and two different brands and I never had to increase the amount of pricing that I did this past time in April,” he told the A.P.”

https://reason.com/2024/07/10/californias-minimum-wage-law-has-led-some-employers-to-cut-hours-and-hike-prices/

RUSSIAN Economy Starts to Break as Inflation Soars & Shortage of Workers Damages Future Growth

Posted on by Lone Candle

RUSSIAN Economy Starts to Break as Inflation Soars & Shortage of Workers Damages Future Growth

https://www.youtube.com/watch?v=uKKoA8rqGUc

How much can we actually control inflation?

Posted on by Lone Candle

“The Fed hiked interest rates around the same time that the supply chain got back up and running, which makes it hard to assign credit. But there’s an even more fundamental issue here. “Anything in macroeconomics is very hard to empirically test,” says Vox senior correspondent Dylan Matthews. “You can’t run experiments with the Fed.”
Ultimately, Matthews says that inflation — and our economy as a whole — is still so hard to understand because of the nature of money. “Money feels like this very hard thing, but money is also a psychological idea. Money is this idea that we can put numbers on what we owe to each other, even as we understand that these numbers are kind of made up.”

Inflation, in a sense, is a psychological phenomenon. “So understanding inflation, I think, is ultimately about understanding people and how they relate to each other. And that’s the ultimate mystery.””

https://www.vox.com/unexplainable/356769/inflation-pandemic-economy-federal-reserve-interest-rates

What if quitting your terrible job would help the economy?

Posted on by Lone Candle

“One strange thing about the American unemployment insurance (UI) system — which provides weekly payments to jobless people who meet certain criteria — is that it’s not insurance against being unemployed. More accurately, it’s insurance against losing a job “through no fault of your own,” which makes UI more like “getting laid off insurance.”
Aside from a few exceptions in some states for things like escaping domestic violence or hostile workplaces, voluntarily leaving your job disqualifies you from receiving unemployment benefits. Allowing people who quit to receive those payments would be “contrary to one of the fundamental tenets of the UI program. The idea is that we want to incentivize people to work,” said Doug Holmes, president of Strategic Services on Unemployment & Workers’ Compensation (UWC), an association that has represented the interests of businesses in matters of UI reform since 1933.

So the point of the American UI system is not to make it easier to quit a job. But a few economists are now beginning to ask: Should it be?”

…

“Boosting UI generosity doesn’t affect overall employment rates one way or the other. Instead of loafing around in subsidized unemployment, more generous benefits can support people to quit their jobs in search of better ones, which benefits workers through higher wages and better job satisfaction, and the economy through enhanced productivity as people find better uses for their skills.

Put simply, more quitting can be good for the economy. If UI made it easier for more workers to quit their jobs, people would still look for work and the economy could be better off overall. The real losers would be lousy jobs, which would struggle to retain workers with a greater cushion to quit and go looking elsewhere.”

…

“In theory, working a job and buying that carton of eggs are both voluntary transactions. If you don’t like your job, you’re as free to find another as you are to choose a different, cheaper carton of eggs. In practice, especially for lower-wage workers who face relentless economic pressure and lots of debt, adding a job search on top of full-time work just isn’t feasible.

As a result, people trapped in jobs aren’t able to send signals to the labor market that their work sucks and leaves them too drained to find something better. Let this kind of labor market evolve over the course of decades or centuries and you can wind up with an economy full of jobs that make too many people miserable. Without enough freedom to quit, the core logic aligning labor markets with people’s preferences is flying partially blind.”

https://www.vox.com/future-perfect/356461/unemployment-benefits-insurance-quitting-capitalism-economy

Trump Said Tariffs Would Reduce the Trade Deficit. Instead, It Grew.

Posted on by Lone Candle

“During former President Donald Trump’s term in office, he promised that higher tariffs on American imports would reduce the country’s large trade deficit.
At the time, many economists disputed that notion. Tariffs might marginally reduce the import side of the trade ledger, but they also reduce economic output (and therefore exports), so the net effect on the trade deficit was likely to be minuscule, they warned.

No matter. In 2017, the White House’s official Trade Policy Agenda highlighted how America’s manufacturing trade deficit had grown from $317 billion in 2000 to $648 billion in 2016. That was evidence, the document claimed, that greater levels of trade had triggered “a period of slowed GDP growth, weak employment growth, and sharp net loss of manufacturing employment in the United States.”

You know what happened next. Tariffs were raised. Then more tariffs were added. President Joe Biden took over and left Trump’s higher tariffs in place. American businesses and consumers paid the cost of those higher taxes. The average tariff rate on imports to the United States has climbed from 1.5 percent to over 3 percent, and annual tariff revenue has nearly tripled.

So what happened to the trade deficit? It didn’t fall.

In 2017, the last full year before Trump’s tariffs were imposed, America’s overall trade deficit was $517 billion. By 2023, it had grown to $785 billion, according to new Census Bureau data.

The story is the same when you look at the manufacturing trade deficit, the narrower category that the Trump administration had highlighted in that 2017 report. It climbed to over $1 trillion by 2021, nearly 60 percent higher than the 2016 figure that was cited by the White House as evidence that free trade was a failure.

Rather than reducing the manufacturing trade deficit, the higher tariffs likely led to its sharp increase, writes Ed Gresser, a former assistant U.S. Trade Representative. “Manufacturers import goods so as to turn them into other goods, and are big tariff payers,” writes Gresser in a post for the Progressive Policy Institute, where he now works as vice president for trade policy. “So the tariffs raised the costs of industries like automobiles, machinery, and toolmaking; they faced a bit more challenges competing against imports and succeeding as exporters; and the overall goods/services deficit grew more concentrated in manufacturing.””

https://reason.com/2024/06/19/trump-said-tariffs-would-reduce-the-trade-deficit-instead-it-grew/