I was recently directed to an interesting Jason Douglas tweet showing a slowdown in UK investment—perhaps due to Brexit uncertainty:

I was curious as to how this impacted Britain’s unemployment rate:

Wait; shouldn’t there be three lines? Look again, the US and UK have almost identical unemployment rates, at least since 2012.

In my view, investment shocks don’t have much impact on the unemployment rate. That’s why the recent slowdown in US investment (perhaps associated with the China trade war) has not impacted the unemployment rate in the US.

In the Keynesian model, investment is quite similar to fiscal policy. Either expansionary fiscal policy or positive “animal spirits” among investors will lead to faster growth and higher employment. But does the data support that?

In 2014, the Japanese sales tax increase did sharply slow GDP growth for a quarter, but the labor market was almost entirely unaffected. The unemployment rate kept declining at the same rate, despite Keynesian scare stories about “recession”. (In contrast, Japanese unemployment rose sharply when NGDP fell in 2008-09.)

The case of the US austerity of 2013 was even worse for the Keynesians. Both the labor market and GDP did well, despite the budget deficit falling from $1050 billion in calendar 2012 to $550 billion in calendar 2013.

The Brexit shock probably slowed UK investment, and may have slightly slowed RGDP growth. But the labor market reflects monetary policy, and as long as policy keeps NGDP growth at a decent rate, the impact of these shocks on unemployment is negligible.

Of course that’s a big if. The Fed should cut rates by at least 25 basis points at its next meeting, to assure an adequate level of NGDP growth in 2020. Better yet would be 50 basis points, as they are still falling short of their 2% inflation target. The BOJ and ECB need far more expansionary monetary policies. I’d recommend they shift to level targeting and buy whatever it takes to hit the target.

PS. This doesn’t mean a slowdown in investment is not “bad”—it is. It’s just that the problem it creates is not unemployment; rather it’s slower growth in living standards.

HT: Mike Bird

Some of my commenters believe I’m suffering from Trump Derangement Syndrome. If I only thought about things rationally, I’d see the greatness of our Dear Leader.

Maybe . . .

But as you guys sit in your mom’s basement, surfing alt-right sites and trolling the MoneyIllusion, I’d like you to briefly consider an alternative hypothesis, just for a moment. Is it possible that you are the one suffering from this disease.

BTW, this comment is not directed at some of my smarter commenters who like Trump’s tax cuts and Supreme Court nominees, favor less immigration and sanctions on China, but also see Trump’s downside. I’m talking about Trump’s hardcore fans; those who reflectively reject any accusation of dishonesty made against him.

Consider:

AFAIK, all the economists I greatly respect have a low opinion of Trump. That doesn’t mean I can’t respect an economist who likes Trump, it’s just that the guys who I think are flat out brilliant have a low opinion of him.

AFAIK, all the conservative commentators I greatly respect have a low opinion of Trump. And that’s not reverse causality; these are people who I respected before Trump came along. The George Wills, Ross Douthats, David Brooks, Jonah Goldbergs of the world all have a negative view of him. Yes, some famous conservative commentators like Sean Hannity and Lou Dobbs like him.  But these guys are not exactly the sharpest blades in the drawer.

Four of the past five GOP presidential nominees voted against him. These guys are free to speak their minds because their careers are basically over. (Romney’s protected by a safe seat in Utah.)

Republicans in DC who publicly support Trump will privately ridicule him when speaking to reporters.  Ditto for the GOP Congressional staff.

Trump’s own aides call him a moron and an idiot and a kindergartener when speaking privately to reporters.

Trump’s own tweets are written at the level of a fifth grader.

None of this means the corporate tax cut was a bad idea, or that his Supreme Court picks are bad. But when you look at all these facts, isn’t there just a tiny, tiny, possibility that I’m not the one with the Trump Derangement Syndrome? Is that a hypothesis that you are at least willing to entertain?

I mean think about it. If it really were true that YOU were the one with Trump Derangement Syndrome, you were the one taken in by his demagoguery, don’t all the stylized facts that I presented resemble what the world would look like?

I’m also not the sharpest blade in the drawer (as I’m sure you’ve noticed from my grammar), and I’m not capable of knowing my own biases.  That’s why I look at all this external data for objective clues about “reality”.

So here’s my request.  If you want to convince me that I’m suffering from TDS, explain to me why all these other brilliant people came down with this “derangement” at roughly the same time.  After all, if one intellectual suddenly thinks he’s the reincarnation of Jesus or Alexander the Great or Napoleon, all other intellectuals don’t simultaneously suffer from the same delusion.

Then explain to me how you know that YOU are correct, and these other intellectuals are wrong.  No, not what you like about Trump or why you disagree with them.  That information is worthless, as you may be biased too.  I want you to tell me why a view from 64,000 feet indicates that YOU are the one we should all be listening to, and not all these brilliant intellectuals.

I want you to explain to me why your eighth grade dropout-level taunts in the comment section are an indication of your intellectual clarity.  What makes you so smart?

One possible explanation is that these smart pundits who have a low opinion of Trump are blinded by their intelligence.  On the other hand, I’ve noticed that many Trump supporters are big fans of IQ research, and indeed oppose immigration due to fears of America being swamped with dumb people.  But IQ research says that people with high “g” tend to be good at everything—so how can high intelligence make people so wrong about Trump?

PS.  If Hunter Biden were corrupt, in what way would the corruption have shown up?  One possibility is that he would have gotten deeply involved in Ukrainian politics and business and engaged in corrupt transactions.  Or, his corruption might have taken the form of trying to influence his dad to help his paymasters in the Ukraine.  Can you guess which type of corruption is 100 times more likely than the other?

Now consider this, in each case who would you have investigate the case?  If he were doing corrupt things in the Ukraine, you’d have the Ukrainians investigate.  If he were doing corrupt things with his dad, you’d have the Justice Department investigate.

Now assume Trump didn’t actually think Biden was guilty.  Which of the two investigators could you more likely convince to put out dirt on Biden, even if not true?

Do you see where I’m going with this?  If Trump thought Biden were guilty, he would have had the US authorities investigate the case.  The corruption would have occurred here.  The fact that he asked the Ukrainians to investigate is powerful evidence that he thinks Joe Biden is innocent.  But deep down you already knew that, didn’t you?

The New York Times says that immigration has plunged over the past 12 months:

The United States population gained immigrants at the slowest pace in a decade last year, according to an analysis of new census data, a notable slowdown that experts said was quite likely linked to a more restrictive approach by the Trump administration.

The net increase of immigrants in the American population dropped to about 200,000 people in 2018, a decline of more than 70 percent from the year before, according to William Frey, chief demographer at the Brookings Institution, who conducted the analysis.

“It’s remarkable,” said David Bier, an immigration expert at the Cato Institute, of the 2018 numbers. “This is something that really hasn’t happened since the Great Recession. This should be very concerning to the administration that its policies are scaring people away.”

That might be true.  Unlike William Frey and David Bier, this is not my area of expertise.  But I’m not quite convinced, and I’d like to explain my reservations.  Before doing so, you need to understand that “immigration” is a fuzzy concept, and it’s not clear what the word means.  The net increase in people in the USA for reasons other than births and deaths, including tourists and students?  Or excluding tourists but including students?  Or excluding both?  How about illegals?  Does it include people who plan to stay but don’t yet have a green card?  Only those with green cards?  Those who become citizens?

In the past, many of the articles I’ve read on immigration refer to the number that become lawful permanent residents.  Here’s Homeland Security:

Approximately^[1] 257,000 foreign nationals obtained lawful permanent resident (LPR) status in the first quarter (Q1) of Fiscal Year (FY) 2019 (Table 1A). Of these admissions, over 140,000 adjusted status from within the United States, and 117,000 entered as new arrivals. Compared to the first quarter of FY 2018, total FY 2019 Q1 admissions decreased by two percent, new arrivals decreased by five percent, and adjustments of status remained unchanged.

These mostly include family related immigrants, but also substantial economic immigrants and a smattering of refugees, asylum seekers, lottery winners, etc. I couldn’t find similar data for FY2018, but the report suggests it didn’t change much between Q1 2018 and Q1 2019. (These are actually fiscal years, so the most recent data is actually Q4 2018.) If you go back two years, the first quarter of FY2017 (late 2016) saw 288,000 immigrants, and legal immigration has been running at an annual rate of a bit over a million for a number of years. That doesn’t seem to be changing very much.

What about illegal immigration? All the evidence suggests that illegal immigration is surging much higher in 2018, with a stronger economy and problems in Central America. So why the big drop in the Census estimate?

AFAIK, the Cato report is based on Census surveys that try to establish the percentage of American who are immigrants. Then they apply that percentage to the total population (also estimated.) Then they take the annual change in that number. That’s certainly logical, but it’s also a method where tiny errors in the levels of immigrant population would translate into large errors in the rate of change.

Here’s a simple thought experiment. Assume the total population is stable in order to simplify the analysis. Suppose the estimated immigrant share in 2016, 2017, and 2018 was 13.1%, then 13.3%, then 13.4%. And let’s suppose the first two figures are exactly right, while the third figure is slightly mis-measured. It should be 13.5%. In that case, the estimated rate of immigration in 2018 would fall in half, even as actual immigration was unchanged. A small error in levels translates into a huge error in rates of change.

If my hypothesis is correct, then there should be other years where year-to-year fluctuations make no sense. Where changes cannot be explained by immigration policy, the economy, or any other known factor. Here’s a Cato graph that shows the big drop in 2018:

This graph is exactly what I’d expect if I thought the survey method was unreliable for rates of change. The declines in 2007 and 2008 do seem related to the housing slump. But the one million decline in 2011 seems weird, as does the surge in 2010. The decline in 2016 also seems weird. And why did immigration nearly double in 2017? It’s clear that the decline in 2018 is not particularly unusual, I don’t think it’s even statistically significant, and hence there’s no reason to link it to immigration policy.

Just to be clear, I believe Trump’s immigration policy has slightly reduced legal immigration, perhaps by 10%. But that’s based on the Homeland Security data. I also suspect that total immigration is increasing, due to the surge in illegal immigration–again, based on government data.

Of course, almost no one pays attention to this blog, so the NYT story will be accepted as the truth. And maybe it is. But I’m not completely convinced.

PS. Would Trump administration policies have made people a bit more reluctant to call themselves “immigrants” in Census surveys? Trump plans to deport legal immigrants that get public benefits like food stamps:

In a move that could curb legal immigration into the U.S. and deter millions of immigrants already in the country from accessing public health, housing, and food assistance benefits, the Department of Homeland Security announced a change to the “public charge” rule on Monday.

The government already has measures in place to block people who may become dependent on government services—potential public charges—from entering the country, but DHS’s new rule would make the requirements even more stringent. Immigrants who receive food stamps, Section 8 housing assistance, Supplemental Security Income (SSI), Medicaid, and parts of Medicare could be denied green cards, visa extensions, and immigration status changes.* . . .

 It triggered a chilling effect that repelled immigrant families from public spaces and discouraged them from interacting with public services in the months since.

Why might the Census number be true? Perhaps we are still taking a million immigrants per year, but many non-citizens are leaving, because of a proposed cutoff in benefits. Thus a decline in net immigration. But are that many people actually leaving? I doubt it.

Here’s Yahoo Finance:

Trump “knows it will play well, not only with the stock markets, but with the voters here in the U.S., that he’s finally resolved this long trade war, this costly trade war for Americans,” said Brett Bruen, president of the Global Situation Room and former White House Director of Global Engagement on Yahoo Finance’s “YFiPM.”

“That’s what I think Beijing is looking at now – how can we extract some of those concessions on hard issues because Trump is so desperate on trying to secure a deal,” Bruen said.

“Beijing is going to entice him with, perhaps, some splashy superficial compromises, but at the end of the day, the substance will not favor the United States in some of these hard issues we’ve been trying to resolve,” said Bruen.

I hope they are right.  It would be wonderful to see the US forced to accept China’s position in the negotiations.

BTW.  A number of my commenters say we need to get tough with China because of their human rights abuses.  But when I mention other countries with horrific human rights abuses, some of which are Trump allies, they suddenly change their tune.  I wonder if the human rights issue is being used for ulterior motives?

PS.  I have a new post on the Eurozone over at Econlog.  But I don’t think my explanation was as effective as it might be.  Think of it this way.  Suppose the Eurozone were a club of 17 countries, each having 1 million people.  You’d still have the exact same one-size-fits-all problem.  But its small total size would mean that it would have no trouble depreciating its currency and creating eurozone-wide inflation.  That’s what I meant by large size being a curse.  The eurozone created disinflation by getting rid of many small currencies. (Not “necessarily”, but in practice, given their use of interest rates as a policy instrument.)

PPS.  People keep asking me about the fed funds market.  Rates briefly spiked.  Why should I care about overnight interest rates?

PPPS.  Here’s my euro tweet:

Theory:  It takes a heap of Harberger triangles to fill an Okun’s Gap.

Practice:  The euro.

With all the controversy over Trump’s recent phone call with the Ukrainian president, people have tended to overlook an important point. In addition to being corrupt, Trump doesn’t do his job. He seems unqualified and also disinterested.

People focus a lot on the paragraph where Trump asks the Ukrainian leader to go after Biden. But take that paragraph out and the rest of the phone call is still pretty appalling.

There are actually two problems. First, some of Trump’s comments are rambling and incoherent, like those of senile old man. More importantly, at no time in the entire call does Trump actually do his job, which is to represent the interests of the US government in its dealings with the Ukraine. A normal president would have his staff provide him with some talking points, areas where Ukrainian/US relations need to be discussed. Maybe they’d talk about what we’d like the Ukraine to do that would further our interests. Or maybe we’d talk about how we think the Ukrainian government could improve the Ukraine. Or maybe we’d ask how we could help the Ukraine be more successful. But surely we’d have some public policy goal, which reflected the foreign policy position of the administration.

But the actual phone call has none of that; it’s all weird conspiracy theories, gossip about others, and requests for personal favors. At no time does Trump do his job. Trump has always viewed the presidency as serving him rather than the country.  He sees no difference between the Justice Department and his personal attorney.

Conservatives overlook Trump’s laziness and incompetence because his administration has not been all that unsuccessful. He got two conservatives on the Supreme Court. He got a tax bill through Congress. But these facts tell us nothing about Trump’s personal “value added”. He just picks Supreme Court people from a list presented by outsiders. Congress wrote the tax bill, and Trump merely signed it. A drug-addled homeless man could have done those two things. And a drug-addled homeless man could have had a conversation with the Ukrainian president that rambled on in much the same way that Trump did:

I would like you to do us a favor though because our country has been through a lot and Ukraine knows a lot about it. I would like you to find out what happened with this whole situation with Ukraine, they say Crowdstrike… I guess you have one of your wealthy people… The server, they say Ukraine has it. There are a lot of things that went on, the whole situation. I think you’re surrounding yourself with some of the same people. I would like to have the Attorney General call you or your people and I would like you to get to the bottom of it. As you saw yesterday, that whole nonsense ended with a very poor performance by a man named Robert Mueller, an incompetent performance, but they say a lot of it started with Ukraine. Whatever you can do, it’s very important that you do it if that’s possible.

What?!?!?

Apparently Trump was making some vague references to conspiracy theories in nutty right-wing corners of the internet.

When Trump himself must actually do something, he’s extraordinarily incompetent. Behind the scenes, Trump’s advisors often tell press people that he’s like a kindergartener that must be managed all the time. Some of his supporters claimed that’s fake news, as the comments are often made anonymously. Now we know it’s true.

Even more evidence comes from the fact that his advisors were so horrified by the call that they put it in a highly secret server, which would not normally be done for this sort of phone call. That’s called “consciousness of guilt”, but not in the usual sense.  It’s his advisors being conscious of Trump’s guilt.

He’ll probably be re-elected (the Dems are stupid enough to walk away from Biden and pick a left-wing loser.)  In his second term Trump will be even more senile, and now he’ll be totally unconstrained by public opinion polls. Rudi unleashed!!  But at least it should be entertaining.  It’ll help my blog.

If you want to claim that the Trump administration has been successful, I’ll mildly disagree (Iran, China, and Korea are all policy failures).  But the claim is at least plausible.  Even if the administration has been successful, however, Trump himself remains the worst president in US history.

PS.  Some of my commenters are comical.  These are people who when watching The Godfather would interpret, “Nice family you have there, shame if something were to happen to them” as a sincere expression of goodwill.

PPS.  Here’s the NYT:

All of this was taking place at a time of flux among key national security officials. Fiona Hill, the senior director for Europe at the National Security Council, was stepping down and had turned over her duties in July before the call. Three days after the call, Mr. Trump announced that Dan Coats, the director of national intelligence, would be resigning.

And of course Bolton recently resigned.  Conventional foreign policy types won’t put up with this garbage, and thus Trump is forced to dump them and stock his administration with corrupt political hacks.