Category: Economic Growth

Wisconsin May Have a Robustly Redundant Labor Market

From Nathan Wiese’s description, below, Wisconsin is described in as what I call a “robustly redundant labor market” in my book Openness to Creative Destruction: Sustaining Innovative Dynamism.

(p. A1) ROSENDALE, Wis.—Nathan Wiese, a third-generation dairy farmer who is struggling to get by, says even if he has to close his family’s farm, he feels confident he could hire on as a truck driver and take home more money.

“If you want a job, you can get a job,” said Mr. Wiese, who voted for Donald Trump in 2016 and plans to do so again. “I could probably get one in one day.”

. . .

. . . in an era of severe worker shortages, people losing jobs when a plant or a farm closes are quickly getting scooped up by others. This provides a safety net in the broader economy by keeping incomes and consumer spending strong.

For the full story, see:

Shayndi Raice and Jon Hilsenrath. “In Wisconsin, Demand for Workers Buffers a Slowdown.” The Wall Street Journal (Friday, November 29, 2019): A1 & A9.

(Note: ellipses added.]

(Note: the online version of the story has the date Nov. 28, 2019, and has the title “How a Strong Job Market Has Proved the Experts Wrong.”)

My book, mentioned at the top, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Economists Surprised by Strength of Economy

(p. B3) There are a lot of good things to say, and few bad things to say, about the November [2019] employment numbers that were published Friday morning.

Employers added 266,000 jobs, a blockbuster number even after accounting for the one-time boost of about 41,000 striking General Motors workers who returned to the job.

. . .

Still, there is a bigger lesson contained in the data, one that is important beyond any one month’s tally of the job numbers: that the American economy is capable of cranking at a higher level than conventional wisdom held as recently as a few years ago. As the economy continues to grow well above what once seemed like its potential, without inflation or other clear signs of overheating, it’s clearer that the old view of its potential was an extremely costly mistake.

The mainstream view of the economics profession — held by leaders of the Federal Reserve, the Congressional Budget Office, private forecasters and many in academia — was that the United States economy was at, or close to, full employment.

. . .

People often say that this expansion, now in its 11th year, is growing long in the tooth, or that we are late in the economic cycle. And maybe that’s right. But the biggest lesson when you contrast where the labor market stands at the end of 2019, versus where smart people thought it would stand just a few years ago, is that there’s a lot we don’t know about just what is possible and how strong the United States economy can get.

For the full story, see:

Neil Irwin. “In Hindsight, Economy Is Stronger Than It Looks.” The New York Times (Saturday, December 7, 2019): B3.

(Note: ellipses, and bracketed year, added.]

(Note: the online version of the story has the date Dec. 6, 2019, and has the title “How a Strong Job Market Has Proved the Experts Wrong.”)

Improved Stoves, Pushed by Social Entrepreneurs, Do Not Improve Health or Environment

(p. 80) Laboratory studies suggest that improved cooking stoves can reduce indoor air pollution, improve health, and decrease greenhouse gas emissions in developing countries. We provide evidence, from a large-scale randomized trial in India, on the benefits of a common, laboratory-validated stove with a four-year follow-up. While smoke inhalation initially falls, this effect disappears by year two. We find no changes across health outcomes or greenhouse gas emissions. Households used the stoves irregularly and inappropriately, failed to maintain them, and usage declined over time. This study underscores the need to test environmental technologies in real-world settings where behavior may undermine potential impacts.

Source:

Hanna, Rema, Esther Duflo, and Michael Greenstone. “Up in Smoke: The Influence of Household Behavior on the Long-Run Impact of Improved Cooking Stoves.” American Economic Journal: Economic Policy 8, no. 1 (Feb. 2016): 80-114.

With Work Ethic, but Not Much Education, “You Can Come Out Here and Still Make Six Figures”

(p. B1) When Mike Wilkinson moved to Midland, Tex., in 2017, he hoped the world’s largest oil field would change his life. His marriage was in tatters. He owed tens of thousands in credit card debt. His morale was broken.

He soon began working as a “hot shot” truck driver, carrying loads for drillers who need pipes or drums in a hurry. The United States is the world’s largest producer of oil, surpassing Saudi Arabia and Russia, and demand for “hot shots” has soared.

The epicenter of the oil boom is the Permian Basin in Texas and New Mexico, a massive layer cake of shale that’s cracked open with a blasting technique known as fracking. The country’s growing energy dominance has created tens of thousands of jobs in this part of the Southwest in recent years, many for people like Wilkinson looking for fresh starts.

. . .

(p. B4) There are now 55,000 people now work in the Permian. Mr. Wilkinson says he’s found a certain camaraderie with other transplants: “They are either escaping debt or family issues or poverty.

. . .

“I have to make money, and this is the best way I can make money,” he said. “If you’re not educated and have a good work ethic, you can come out here and still make six figures.”

For the full story, see:

Clifford Krauss. “Boom Times and Fresh Starts.” The New York Times (Thursday, Sept. 19, 2019): B1 & B4.

(Note: ellipses added.)

(Note: the online version of the story has the date Sept. 10, 2019, and has the title “‘This Is the Most Lonesome Job’: Ride With a ‘Hot Shot’ Trucker in Oil-Rich Texas.” The online version highlights photographs by Tamir Kalifa. The online and print versions have significant differences in wording and ordering. Where there are differences, the passages quoted above, follow the print version.)

Median Income Rising More Under Trump Than Under Bush and Obama

Source of graph: online version of the WSJ article quoted and cited below.

(p. A17) President Trump’s critics can’t deny that the economy is doing well, so instead they insist all the benefits have gone to the rich and large corporations. “America’s middle class is under attack,” Sen. Elizabeth Warren asserted in her presidential campaign announcement last December.

The latest data from the Census Bureau monthly surveys tell a different story. Real median household income—the amount earned by those in the very middle—hit $65,084 (in 2019 dollars) for the 12 months ending in July. That’s the highest level ever and a gain of $4,144, or 6.8%, since Mr. Trump took office. By comparison, during 7½ years under President Obama—starting from the end of the recession in June 2009 through January 2017—the median household income rose by only about $1,000.

These statistics were published by two former census income-research specialists with 50 years experience who now run Sentier Research, a nonpartisan research group.

For the full commentary, see:

Stephen Moore. “Trump’s Middle-Class Economic Progress.” The Wall Street Journal (Monday, Sept. 30, 2019): A17.

(Note: the online version of the commentary has the date Sept. 29, 2019, and has the same title as the print version.)

World Child Mortality Cut in Half

(p. A1) Two decades ago, nearly 10 million children did not live to see a 5th birthday.

By 2017, that number — about 1 in every 16 children — was nearly cut in half, even as the world’s population increased by more than a billion people.

. . .

From 2000 to 2017, all but one of the 97 low-to-middle-income countries that account for the vast majority of deaths of young children lowered their child mortality rates, according to a report released Tuesday [Sept. 17, 2019] by the Bill and Melinda Gates Foundation, along with a research team at the Institute for Health Metrics and Evaluation at the University of Washington, led by Stephen Lim, the institute’s senior director of science and engineering.

For the full story, see:

Alicia Parlapiano, Josh Katz, and Margot Sanger-Katz. “Fewer of the World’s Children Are Dying, but Many Remain at Risk.” The New York Times (Wednesday, Sept. 18, 2019): A1 & A12.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the story has the date Sept. 17, 2019, and has the title “Almost Everywhere,Fewer Children Are Dying.” In the last paragraph quoted above, the wording follows the online version, and not the print version. The order of the authors’ names in the online version is: Josh Katz, Alicia Parlapiano and Margot Sanger-Katz.)

Low-Skilled Workers Benefit from Economic Growth

(p. A2) For years, falling wages and high unemployment seemed proof that low-wage workers needed an entirely new set of skills to succeed in an economy shaped by technological change and globalization.

It turns out what they needed most was time. As the economic expansion reaches a record age and unemployment remains near generation lows, the fortunes of low-skilled workers have turned up markedly. What looked like a permanent setback may be mostly cyclical. Continue reading “Low-Skilled Workers Benefit from Economic Growth”

Boston Brahmins Invested in Western Industrialization

(p. A13) One of history’s ironies is that, even though New England birthed the abolition movement, many of Boston’s most prominent families offered less than total support for freeing the slaves. Their prosperity required a steady supply of cotton to feed New England’s growing textile industry. Even after slavery ended in 1865, wealthy Bostonians were reluctant to abandon their traditional business. Henry Lee Higginson, 30 years old and freshly discharged from the Union Army, bought with his partners a 5,000-acre plantation in Georgia with the goal of turning a profit by growing cotton. But the 60 former slaves living on the plantation thought the wages and terms offered to be grossly inadequate; the land they had worked in chains for generations, they believed, should belong to them. The enterprise soon collapsed.

As similar episodes played out across the South, Boston’s business elites looked for new places to invest their money. “They began to reenvision American capitalist development, not in modifying and salvaging the arrangements of earlier decades but in a far more ambitious program of continental industrialization,” Noam Maggor writes in “Brahmin Capitalism.” “They retreated from cotton and moved into a host of groundbreaking ventures in the Great American West—mining, stockyards, and railroads.”

. . .

Especially representative of the Bostonians’ transformative influence was Higginson’s next enterprise. Far removed from Georgian cotton, his interests landed on a copper mine in northern Michigan’s remote Keweenaw Peninsula. Copper had been discovered there 20 years earlier, but extraction had been small-scale and labor intensive; the high cost per unit meant that mining was profitable only for veins that contained at least 40% copper. In a short time, high-yield mines in the area began to show signs of depletion. But with Higginson’s capital—alongside investments from other Brahmins—large-scale copper extraction could take place as a continuous operation, making mining profitable on belts that contained only 2%-4% copper. In this way, Higginson’s Eastern capital transformed Western mining and launched a career that would make him one of Boston’s leading financiers.

For the full review, see:

John Steele Gordon. “BOOKSHELF; Enterprising Bostonians; Contrary to stereotype, the Brahmins of New England crisscrossed the continent and took bold risks in search of higher yields.” The Wall Street Journal (Monday, June 26, 2017): A13.

(Note: ellipsis added.)

(Note: the online version of the review has the date June 25, 2017, and has the same title as the print version.)

The book under review is:

Maggor, Noam. Brahmin Capitalism: Frontiers of Wealth and Populism in America’s First Gilded Age. Cambridge, MA: Harvard University Press, 2017.

Bill Gates Spending $400 Million to Develop Expensive High-Tech Toilets for Poor Countries

(p. B1) BEIJING — Bill Gates believes the world needs better toilets.

Specifically, toilets that improve hygiene, don’t have to connect to sewage systems at all and can break down human waste into fertilizer.

So on Tuesday in Beijing, Mr. Gates held the Reinvented Toilet Expo, a chance for companies to showcase their takes on the simple bathroom fixture. Companies showed toilets that could separate urine from other waste for more efficient treatment, that recycled water for hand washing and that sported solar roofs.

It’s no laughing matter. About 4.5 billion people — more than half the world’s population — live without access to safe sanitation. Globally, Mr. Gates told attendees, unsafe sanitation costs an estimated $223 billion a year in the form of higher health costs and lost productivity and wages.

The reinvented toilets on display are a culmination of seven years of research and $200 million given by the Bill and Melinda Gates Foundation, which the former software tycoon runs with his wife, since 2011. On Tuesday [Nov. 6, 2018], Mr. Gates pledged to give $200 million more in an effort get companies to see human waste as a big business.

. . .

(p. B5) . . . China’s toilet revolution has led to excesses — a problem that critics say could plague the Gates effort as well.

To win favor with Beijing, local officials have tried to outgun one another with newfangled latrines, many equipped with flat-screen televisions, Wi-Fi and facial-recognition toilet paper dispensers. (Thieves have been known to make off with entire rolls.) There were even refrigerators, microwave ovens and couches, prompting China’s tourism chief at the time to instruct officials in January to rein in their “five-star toilets” and avoid kitsch and luxury.

Though the products on display on Tuesday were nowhere as flashy, Mr. Gates has drawn criticism for giving thousands of dollars to universities in developed countries to create high-tech toilets that will take years to pay off — if they ever do.

“Sometimes doubling down is necessary, but you’ve got to be reflective,” said Jason Kass, the founder of Toilets for People, a Vermont-based social business that provides off-grid toilets. “Has any of the approaches done in the last five years created any sustainable lasting, positive impact vis-à-vis sanitation? And the answer, as far as I can see, is no.”

. . .

Mr. Gates acknowledged that some reinvented toilets, in small volumes, could cost as much as $10,000, but added, “That will pretty quickly come down.”

“The hard part will be getting it from $2,000 to $500,” he said. “I’d say we are more confident today that it was a good bet than where we started, but we are still not there.”

For the full story, see:

Sui-Lee Wee. “Bill Gates Wants to Build A Better Toilet.” The New York Times (Friday, Nov. 9, 2018): B1 & B5.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story has the date Nov. 6, 2018, and has the title “In China, Bill Gates Encourages the World to Build a Better Toilet.”)

Economists Surprised by Inflation-Less Boom

(p. A13) The labor market the United States is experiencing right now wasn’t supposed to be possible.

Not that long ago, the overwhelming consensus among economists would have been that you couldn’t have a 3.6 percent unemployment rate without also seeing the rate of job creation slowing (where are new workers going to come from with so few out of work, after all?) and having an inflation surge (a worker shortage should mean employers bidding up wages, right?).

And yet that is what has happened, with the April employment numbers putting an exclamation point on the trend. The jobless rate receded to its lowest level in five decades. Employers also added 263,000 jobs; the job creation estimates of previous months were revised up; and average hourly earnings continued to rise at a steady rate — up 3.2 percent over the last year.

. . .

. . . beyond the assigning of credit or blame, there’s a bigger lesson in the job market’s remarkably strong performance: about the limits of knowledge when it comes to something as complex as the $20 trillion U.S. economy.

. . .

The results of the last few years make you wonder whether we’ve been too pessimistic about just how hot the United States economy can run without inflation or other negative effects.

There are even early signs that the tight labor market may be contributing to, or at least coinciding with, a surge in worker productivity, which if sustained would fuel higher wages and living standards over time. That further supports the case for the Fed and other policymakers to let the expansion rip rather than trying to hold it back.

For the full commentary, see:

Neil Irwin. “An Economic Boom That Might Be Changing the Rules.” The New York Times (Saturday, May 4, 2019): A13.

(Note: ellipses added.)

(Note: the online version of the commentary has the date May 3, 2019, and has the title “The Economy That Wasn’t Supposed to Happen: Booming Jobs, Low Inflation.”)

“Longest Streak of Job Creation in Modern Times”

(p. A1) The unemployment rate fell to its lowest level in half a century last month, capping the longest streak of job creation in modern times and dispelling recession fears that haunted Wall Street at the start of the year.

The Labor Department reported Friday [May 3, 2019] that employers added 263,000 jobs in April, well above what analysts had forecast. The unemployment rate sank to 3.6 percent.

Employment has grown for more than 100 months in a row, and the economy has created more than 20 million jobs since the Great Recession ended in 2009. Much of that upturn occurred before President Trump was elected, but the obvious strength of the economy now enables him and fellow Republicans to make it their central argument in the 2020 campaign.

For the full story, see:

Nelson D. Schwartz. “U.S. Jobless Rate Hits 50-Year Low As Wages Expand.” The New York Times (Saturday, May 4, 2019): A1 & A13.

(Note: bracketed date added.)

(Note: the online version of the story has the date May 3, 2019, and has the title “Job Growth Underscores Economy’s Vigor; Unemployment at Half-Century Low.”)