Suppose that we were to give workers some bargaining power by raising minimum wages,A sticky wage idea if there ever was one. Then a quick search and we find Krugman claiming::
So sticky wages are an important part of both old and new Keynesian analysis, not because wage cuts would help us, but simply to make sense of what we see.
| Top Employment Gains per Presidential Terms (000s) | ||||
|---|---|---|---|---|
| Rank | Term | Private | Public | Total Non-Farm |
| 1 | Clinton 1 | 10,885 | 692 | 11,577 |
| 2 | Clinton 2 | 10,070 | 1,242 | 11,312 |
| 3 | Reagan 2 | 9,357 | 1,438 | 10,795 |
| Obama 21 | 5,869 | 21 | 5,890 | |
| Pace2 | 10,835 | 39 | 10,874 | |
| 126 Months into 2nd Term 2Current Pace for Obama's 2nd Term | ||||
Chicago will not survive a grey bar and the resulting default will drive up municipal interest costs nationwide. This is egads! cubed. HT to Mish for the Chicago alert.
- Used long-term debt to finance everyday expenses and maintenance;
- Used long-term debt to finance judgments and settlements, including police brutality cases, and retroactive wage increases and pension contributions for its unionized employees;
- Restructured the city’s existing debt to extend the maturities on its bonds far out into the future in order to avoid having to pay the debt as it was coming due;
- Borrowed more money than it needed in order to make payments on the bonds its was issuing to avoid debt service expenses, essentially using debt to pay debt; and
- Possibly used the city’s portfolio of interest rate derivatives as an ATM.
 |
| Oil Imports as share of GDP |
SOMC: Prior to the financial panic in the fall of 2008, when the Fed wished to raise interest rates it sold securities to drain aggregate reserves from the banking system. Banks pushed the federal funds rate higher as they bid harder among themselves for increasingly scarce reserves. The Fed then paid zero interest on reserves. Banks economized on reserve demand. And the Fed managed the federal funds rate by varying the scarcity of aggregate bank reserves within a relatively small range, well under $50 billion.Marvin Goodfriend is explaining how a currency banker can set rates with market activities. Sell to drain money, buy to fill money. But it misses a key point, earning are remitted back to Treasury so the banker simply chases its tell. Its efforts will merely cause shifts in portfolio leaving the balance unchanged. I think the Fed figured this out all the way through the Greenspan era. The other half of the error is that Treasury does not pay for losses, so with a balanced sheet, the Fed really has no effecto going the other direction.
LA Times: Gov. Jerry Brown, standing on a patch of brown grass in the Sierra Nevada that is usually covered with several feet of snow, on Wednesday announced the first mandatory water restrictions in California history.Economists suggest a better pricing system.
"It's a different world," he said. "We have to act differently."
Brown was on hand Wednesday as state officials took stock of historically abysmal levels of snowpack in the Sierra Nevada amid the state's grinding drought.
Brown ordered the California Water Resources Control Board to implement mandatory restrictions to reduce water usage by 25%. The water savings are expected to amount to 1.5 million acre-feet of water over the next nine months.
True, but decompose the hiring data. All of employment growth came from service jobs in the last ADP report, none from manufacturing. And the great bulk of those service jobs were in healthcare. Who hires those workers? Of the total growth in consumer spending, 3/4 of it came from paying for health care services according to the BEA 4th quarter update. So all of consumer spending growth was mainly taxes to subsidize the 4% who gained Obamacare coverage. That result has another name, recession.The ACA established minimum standards on the health insurance provided under employer-sponsored plans. Some requirements increased the cost of providing health coverage for larger employers (those with 50 or more full-time equivalent workers). Employers that did not previously offer a plan are now required to offer one or to pay a sizeable financial penalty. Employers that offer parsimonious plans or plans that require heavy premium contributions from employees also face financial penalties.These mandates and penalties have aroused opposition because of the fear that higher employer costs will curb hiring or induce some employers to create part-time rather than full-time jobs. While the fear is understandable, it is not clear whether the higher cost associated with improved insurance would be borne exclusively or even substantially by employers. Except in the case of minimum-wage workers there is considerable evidence that most employer costs associated with health insurance are passed along to workers in the form of lower money wages. Because workers place high value on the insurance benefits they receive, there is good reason to expect the additional cost of health benefits will be borne mainly by workers rather than employers.
ISM: The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. "The March PMI® registered 51.5 percent, a decrease of 1.4 percentage points from February’s reading of 52.9 percent. The New Orders Index registered 51.8 percent, a decrease of 0.7 percentage point from the reading of 52.5 percent in February. The Production Index registered 53.8 percent, 0.1 percentage point above the February reading of 53.7 percent. The Employment Index registered 50 percent, 1.4 percentage points below the February reading of 51.4 percent, reflecting unchanged employment levels from February. Inventories of raw materials registered 51.5 percent, a decrease of 1 percentage point from the February reading of 52.5 percent. The Prices Index registered 39 percent, 4 percentage points above the February reading of 35 percent, indicating lower raw materials prices for the fifth consecutive month. Comments from the panel refer to continuing challenges from the West Coast port issue, lower oil prices having both positive and negative impacts depending upon the industry, residual effects of the harsh winter, higher costs of healthcare premiums, and challenges associated with the stronger dollar on international business."
Calculated Risk watches these reports and says the expectation was for 250k jobs. All of these jobs were service sector. Here is the key point.ADP: Private sector employment increased by 189,000 jobs from February to March according to the March ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
Bloomberg: The national medical bill may be back to growing faster than gross domestic product. After five years of historically slow growth, new data show U.S. health-care spending accelerated significantly in 2014.
The analysis, from the Altarum Institute research group and based on preliminary government data, shows health spending increasing by 5 percent last year, compared to 3.6 percent in 2013. If confirmed by the final tally, health-care spending during 2014 would mark the biggest jump since before the recession.
