1. Unemployment is falling very fast. Since December 2012 the unemployment rate has fallen from 7.9% to 6.3%. That’s really fast, 1.6% in 16 months. By comparison, between February 1984 and April 1987 the unemployment rate fell from 7.8% to 6.3%. That’s really slow, 1.5% in 38 months. In the Clinton boom it fell from 7.8% to 6.4% in 22 months. Tyler Cowen links to a post that predicts further fast declines in unemployment. The post says the conventional wisdom is that unemployment will level off in the low 6s. But why is this the conventional wisdom? Why won’t it keep falling?
[And don’t say the unemployment rate doesn’t measure the actual condition of the labor market. That has no bearing on whether this (highly flawed) indicator will keep falling.]
Monthly household data is erratic—in my view the next three payroll numbers will tell us a lot about the US labor market. By the fall I’ll probably have a new view of the economy, perhaps with some mea culpas. At least if we get sub-200,000 or over 275,000 payroll numbers for the next three months.
2. It’s all about the life cycle. For years I’ve been arguing that income inequality and wealth inequality data is almost meaningless, for all sorts of reasons. One is life-cycle effects. Arnold Kling has an excellent article that discusses a recent study that shows that while only 67% of Americans own homes at the moment, 89% have purchased homes by age 55. Very few Americans go through life without being homeowners.
Recall the study that showed 73% 0f Americans are in the top 20% at some point during their lives. And Dems wonder what’s wrong with Kansas! What wrong with economists who don’t understand life-cycle effects?
3. Ashok Rao has a great post skewering the attitudes of the eurozone elite. This elite used to insist the ECB not ease policy to boost recovery because they needed to focus like a laser on 1.9% inflation. Now that inflation is only 0.6% and the ECB has announced a plan to do exactly what the elite claimed to want, you get questions like this from the centrist paper Die Zeit:
Prices and wages in den crisis countries had risen far too rapidly over many years. The low rate of inflation helps companies there to regain competitiveness vis-à-vis rivals in the north. Why do you want to counter that?
The only mystery here is why the ECB official didn’t merely respond with “never reason from a price change.” I can’t believe I’ve reached the point of defending the ECB. Has it gotten that bad?
4. Lorenzo has a great post on banking instability:
Something that is very clear, is that “de-regulation” is a term empty of explanatory power. All successful six have liberalised financial markets–Australia and New Zealand, for example, were leaders in financial “de-regulation”. If someone starts trying to blame the Global Financial Crisis(GFC) on “de-regulation”, you can stop reading, they have nothing useful to say.
He also has interesting things to say on the “small is beautiful” argument for small countries.
5. In an earlier post I discussed Thomas Piketty’s claim that “all the historical data” showed that workers real wages had done poorly during the early stages of the industrial revolution. Mark Sadowski left a comment that clearly shows this is a highly contentious issue.