With another round of weak economic data and the specter of prolonged growth at the anemic pace of 2.1 percent per year, one would think that proposals to raise economic growth would be of central importance. The beginning of the 2016 White House race has delivered some proposals — candidates Rubio, Paul, Perry, Huckabee, Cruz and Christie have all discussed tax reform ideas as a central part of growing more rapidly — and candidates Bush and Christie have laid out specific growth targets.
March was the worst month for economic growth since the Great Recession. While official Gross Domestic Product (GDP) figures are computed and released quarterly, the private firm Macroeconomic Advisers produces a monthly estimate of GDP.
This past Friday’s jobs report featured good headline numbers — 295,000 jobs and a 5.5 percent unemployment rate — but was otherwise unsatisfying. In a sharp setback from the strong January report, February featured flat inflation-adjusted average hourly earnings (“no wage growth” in english) and a repeat of past experiences in having the unemployment rate fall for the wrong reason — people leaving the labor market. To my surprise, some of the coverage focused on the job number.
How much has the labor market healed? Recall that the January employment report showed real strength across the board — payroll jobs were up 257,000, average hourly earnings were up by 0.5 percent – and up 2.2 percent on a year-over-year basis — the labor force participation rate rose and unemployment settled at 5.7 percent.
This Friday will feature the second monthly employment report for 2015 and news reports indicate that the White House is planning to celebrate the news. How safe is the plan to celebrate?
Last Friday, Governor Rick Scott of Florida visited the American Action Forum and spent a few minutes in our studio sharing his Big Ideas on our Little Stool. He talked about his major economic policy initiative for 2015, the White House’s approach to ISIS and fighting terror, and… his favorite Florida theme park. Watch and RT here. Tweet, tweet – and stay tuned for the next installment of “Big Ideas on a Little Stool” – America’s biggest leaders sharing their big ideas with AAF.
American Action Forum (AAF) research finds that the labor market costs of raising the minimum wage far outweigh any budgetary benefits. Some argue that increasing the federal minimum wage would be an effective way to reduce dependence on federal government safety net programs such as the Earned Income Tax Credit (EITC) or Temporary Assistance for Needy Families (TANF). The evidence suggests, however, that the fiscal savings are minimal when compared to the labor market consequences. While other research finds that raising the minimum wage to $10.10 per hour would reduce safety net spending by $7.6 billion, AAF finds that it would also reduce job creation by 2.2 million jobs per year. For those who are unable to find work, this means a loss of $19.8 billion in earnings per year.
The Wall Street Journal featured an optimistic view of the outlook for consumer spending during the holidays. Recent data from the Bureau of Economic Analysis shows that the personal saving rate has held steady at roughly five percent during 2014, in contrast to a previously-reported rise to as high as 5.6 percent earlier in the year. The steady saving rate, the argument goes, combined with lower unemployment and faster — though still tepid — wage increases portends a financially healthy household sector that will open its pocketbook during the crucial end-of-the-year sales season.
The New York Times was out with its review of the ACA to date yesterday. I think a fair reading of the article suggests that we, the readers, are supposed to answer: “On balance, yes.” I’m not so sure.
Among the numerous putative causes of last week’s equity market convulsions is the potential for European deflation. Deflation is the persistent widespread decline in prices (as opposed to a drop in the price of a particular product or service).