To extent recession recovery speed limits bind, I don't think its best described as "there are lots & lots of job openings, more than normal, but people can't match to them fast enough". It's more like it takes time for firms to expand and invest and grow and demand to reallocate
Like post Great Recession, it was not the case that there were a ton of businesses who knew demand was rocketing back and they wanted to get payrolls up to where they were but matching slowed them down.
We are not facing a reallocation challenge anywhere near what we do in a normal recovery. Even the part of this that requires new and expanding firms, the vast vast majority will be back in the sectors that just temporarily shrunk.
Critics of the UI theory of labor supply argue: why is leisure and hospitality growing fast if UI constraint matters given the low wage jobs there? The simple answer is "thats where job cuts are biggest", but I think there is a longer answer to that which is useful...
Hold demand constant, and assume you have three industries: manufacturing, restaurants, and warehouses. Manuf has avg wage of $15, warehouses $12, and restaurants $10...
Now imagine you randomly separate workers from firms, with 1% in manufacturing, 5% in warehouses, and 40% in restaurants. Demand is unchanged. Then you reduce labor supply by paying people a fixed $ amount to not work.
I want to do a quick tweet storm about an interesting new paper out on WFH at an IT services company that found productivity declined. bfi.uchicago.edu/wp-content/upl…
Before I dig in, I want to emphasize something really important about some kinds of technological change like remote work and how it will impact productivity in the long-run: it works through selection.
During the pandemic, everyone who could worked remotely. According to Gallup, over half of workers were remote full-time early in the pandemic. But that’s not how all long-run technology adoption works.
Crypto people might think that winning is determined by technical factors, things that make it work as a currency and store of value. But the success of doge and NFTs show that fun is really what matters. If you want to invent a crypto and get rich, make it fun/shocking/absurd.
It’s not a serious financial revolution. The whole thing is more like collectibles. I suspect (but maybe I’m wrong), those working in this space can’t see admit the somewhat embarrassing truth that entertainer is the core value prop. So take advantage of that.
Anyway, point is, id like to announce my forthcoming cryptocurrency CageBucks, where the quantity is tied to Nic Cage box office grosses.
I think some people think excessive caution about masking is going to gone down in history as being as important of a story about this period as the virus. They’re super excited they get to be on the right side of a mistake, and have lost all perspective
People are so thirsty to be able to both-sides again you can almost see the drool on their tweets
People who have been operating under the delusion that masks are such a costly inconvenience are not going to be viewed by history as making a symmetric error as the excessively cautious, I promise.
“Slow down, I like my community the way it is” is simply not the status quo when population is falling, vacancies are rising, the tax base is collapsing, and schools & local govt are forced to cut back
There is no policy that attacks Tucker’s main villains -globalization, big tech, and immigration- that will do anything about this trend. His indignation and outrage will simply not help these places even, and indeed especially, if policymakers listen.
I think full employment will boost real wages, but it may not. But it will certainly mean higher employment, and thus higher personal income and household income, and lower poverty. Seems good! marginalrevolution.com/marginalrevolu…
That said, I 100% agree with @tylercowen that macroeconomists should try to grapple with how labor market slack has changed in recent decades. They are behind on this
This doesn’t mean if it was good then it must be good now. But it does imply the risk of runaway inflation from getting to 3% or 4% for a few years even was not seen as significant by the like of Cowen, Mankiw, and Woodford back then.
And here is Larry in 2018. Does he sound that worried about the risk of a wage price spiral from going above target? brookings.edu/wp-content/upl… I think there is a weird new assumption of fragility we are seeing
People sometimes say the Great Recession recovery is consistent with a lot of different theories, and so we can't really update that much. But however these people thought the macroeconomy worked is wrong. economics21.org/html/open-lett…
There is simply no rescuing whatever macro worldview they had. It should be dead and buried.
Here is another example of an extremely prominent view that is now clearly and simply false. Alan Krueger in 2015 that the labor market was tight and non-participation didn't matter. econstor.eu/bitstream/1041…
He writes: "In January 2020, the unemployment rate was 3.5 percent, the lowest since 1953; it can reasonably be taken as being close to the natural rate. Put another way, output was probably very close to potential."
Except that the unemployment rate is a poor measure of slack. The evidence we have accumulated post Great Recession makes it extremely clear that participation matters, and many who were considered irrelevant, like disabled and "don't want a job" are actually relevant slack.
The good news is that the economic recovery is not quite sliding into reverse, the bad news is that it has largely stalled for the moment.
Given the lack of widespread vaccinations at this point, a slowdown in economic recovery was likely unavoidable as part of getting the virus under control.
The crisis remains a services recession. While employment goods producing sectors are down 4%, they are down 7% in private-services. Within services, leisure and hospitality remains down a drastic 23%.
Effect of immigrants on relative wages are very modest. Effect of high skilled immigrants on productivity are massive. From a welfare of natives view, u would focus on more high skilled immigrants as the #1 priority. Less low skilled is extremely minor issue.
Those who feign a hard headed economic and native welfare only view of things suspiciously prioritize decreasing low skilled.
Here, for example, is a good quote from Gordon Hanson:
Only 22% of adults use Twitter. In contrast almost every house has a TV. The idea that there is some monopoly over access to the public here is really not compelling. Maybe you spend too much time on Twitter if you think that.
“Twitter isn’t really life” but kicking some politicians off of it is the end of democracy
The other thing is banning his account does not prevent his message from being heard here. Trump doesn’t get a TV show on CBS, but CBS news broadcasts his newsworthy appearances and videos and statements.
Quick thread on the why and how of fiscal stimulus given the state of the economy. First it's important to understand the size of the damage. We have *still* lost more jobs than the worst of the Great Recession. That's a remarkable level of job loss (chart from @crampell)...
Now it's true, there are a lot of ways that this recession is a lot less damaging than the Great Recession. The housing market is fine, household and business balance sheets have been to a significant extent bailed out by massive amounts of relief. That is all very good..
We also have a lot of pent us savings, which should be released when the pandemic is over. A lot of the job loss is also temporary, a business is still there, there customers will be back, but they are at 30% staff bc of the pandemic. That all suggests fast bounceback...
140,000 jobs lost in December as the third wave of the virus causes the economy to slip into reverse
The unemployment rate is unchanged at 6.7%, but don't let that fool you. Labor force participation is down 1.8% from February. Those people are also in reality unemployed as well just not being counted.
Face to face services are taking most of the damage as usual. Leisure and hospitality declined by half a million, and is down 23.2% from February. That's just massive. Professional & business svcs for comparison is down 3.7%
From the jobs report, the BLS measure of the % working remotely due to the pandemic remains very high at 21.2%
The return to the office is happening across education groups, but the most educated are still more remote than the least educated at the peak of the pandemic. 47.4% of advanced degree holders are remove from the pandemic still.
Three occupations are still over half remote, with the highest being computer and mathematical occupations at 636%. These are down from peaks in May, but still remarkably high. While it will continue to fall, these seem most likely to stay a lot remote for the long-run.