For Jobless, Little Hope of Restoring Better Days

Many jobs were cut in the economic downturn. Though jobs are increasing slowly, and unemployment decreasing, a lot of impacted sectors will take an even slower pace to fully recover. As health care and enery-related jobs have boomed, other specific job types that endured mass cuts like the housing-related market has yet to show decent recoveries. Construction workers are among the biggest sufferers, stung by a housing collapse that led to the loss of two million jobs. Since the recovery began, the industry has added just 47,000 jobs. But good news to the business sector, skilled professions like accounting and management consulting are recruiting more!

http://www.nytimes.com/2011/12/02/business/for-jobless-little-hope-of-full-recovery-study-says.html?_r=1&scp=4&sq=job%20cuts&st=cse

- Xiao Wei Thian

Airlines brace for heavy Europe crisis impact

Airlines industry have always not been doing so well for its soaring costs and now troubled even by European debt crisis. As an industry itself, not many airlines survived but ones that going for the lower-end markets. The Europe's crisis and the continous failure of politicians to come to a solution, the Airline sector says it will face over $8 billion in losses next year.

European Airlines will likely be outperformed by Asian carriers which are seen to have rising demands if the crisis drags on.

http://news.yahoo.com/airlines-brace-heavy-europe-crisis-impact-145356631.html

-Xiao Wei Thian

Pay gap in UK widening faster than any other European OECD country

OECD reported on the new findings of pay gaps that UK’s income inequality, though still lower than US’s, is growing faster than any other countries in OECD, Income inequality is an indication of inadequate social policies the country has to offer to the poorer sectors. UK’s gap is influenced by top-end in which money earned by the country's highest-earning 1 per cent equated to 14.3 per cent of total UK income in 2005, doubling from 7.1 per cent of the total in 1970. The pay gap is a better indicator than income inequality gap that the agents in the investigation are in working class. The top-paying working class earned large sums of money in the midst of financial crisis while the bottom-paying working class took the hit severely, Income inequality is like a snowball on hilltop, and once it gets rolling, it is hardly stoppable without governmental support.
http://www.dailymail.co.uk/money/news/article-2070119/Pay-gap-UK-widening-faster-OECD-country.html


- Xiao Wei Thian

Mortgage Delinquencies Decline

The number of mortgage delinquencies should be
able to decline significantly by the end of next year if the U.S. economy does
not suffer from any more setbacks. The rate of mortgage delinquency is the
ratio of borrowers 60 or more days behind their payments. They could possibly tick
to about 6 percent through the first quarter of 2012. The slowly refining job
market and steadying housing market are contributing to cut this rate.

http://news.yahoo.com/2012-mortgage-delinquencies-seen-dropping-sharply-050638824.html

Global Crisis in Europe

Europe must act quickly in order to defuse a
debt crisis that is threatening the global economy. U.S. Treasury Secretary
Timothy Geithner visited the European leaders on the eve of a summit that could
possibly yield a plan for resolving the crisis. One of the reasons being that
the United States is very vulnerable to any financial contagion that might
erupt in Europe. If the banks with European government debt cut off its
lending, then the global economy will definitely suffer.

http://news.yahoo.com/us-prods-europe-crisis-publicly-privately-080240485.html

President Obama, Champion of the Middle Class

President Barack Obame recently gave a speech where he portrayed himself as a champion of the middle class in order to benefit him in his re-election in 2012. In his speech, he stated that extended payroll cuts were vital to economic recovery. In addition, he also vowed to punish the individuals in the Wall Street fraud. President Obama furthermore pushed the fact that wealthier Americans should pay higher taxes. This speech was a part of a strategy to put the blame on the Republicans for hindering President Obama's efforts to bo

http://news.yahoo.com/obama-hits-republicans-wall-street-populist-speech-013621548.html

Executive Compensation

In this NPR interview, it has become clear that it's not only CEOs who make the "big bucks." Some of the reasons historically given for the continuously rising trend of executive compensation don't apply very neatly to college presidents--such as performance pay, percentage of profits, and even firm size. Colleges don't experience billions in revenue every year. What justification is there to pay a college president in excess of $1 million annually? What would university presidents in say, 1900 say?

Women in the Labor Force

After decades of gains in women's labor force participation in the United States, it seems like a peak has been reached. Unemployed women are not finding employment again as quickly as men are. There is postulation that it is due to the rising cost of health care and high layoffs in government, where women are prevalent. Have the gains to women in the workplace due to education and family planning truly peaked? What more can women do to make themselves equally represented in the job market?

Willingness to Pay for Water

In 1931, Los Angeles was willing to pay $8.70 per acre foot of water, about $114.00 in 2011 dollars. Though this was more than the going price for water at the time, households now are willing to pay an average of $40 dollars per month and that number is only rising, particularly as people's standard of living rises and the population increases. As southern Californians continue to thrive in arid conditions, how high will their willingness to pay for water go?

“The Dash for Cash”

This article talks about the problem of European banks running out of money. Many large European banks are currently being forced to stop lending and sell everything they can. This problem may cause a credit crunch in the future or even bank runs and failures. Investors are starting to lose confidence in buying unsecured bonds, so the banks are running out of money. The effects of these problems are discussed in the article, and the potential consequences seem quite disastrous.

http://www.economist.com/node/21541019

“Obama takes populist economic message to the heartland”

This article describes President Obama’s current campaigning efforts to talk about his plans to fix America’s major problem with income inequality. Obama says that the average income of the top 1% of the population has grown by 250% over the last couple decades while the income of most other Americans has stayed pretty much the same. This kind of inequality has not been seen since the Great Depression and Obama claims that economic inequality is “the defining issue of our time” He says that the Republican belief in “trickle-down economics” has never worked. The article says that while many voters agree that economic inequality is a significant problem, a lot of voters lack the confidence that either the Republicans or Democrats know how to deal with it.

http://www.latimes.com/news/nationworld/nation/la-na-obama-kansas-20111207,0,7888559.story

“The Magic of Diasporas”

This article discusses the benefits of rich countries opening their doors to immigrants. The author argues that immigrant diasporas can provide a spark to the economy for several reasons. Having immigrants in your country can make it easier to do business in foreign countries because of establishing contacts, fostering trust, providing a knowledge of local culture, and speeding up the flow of information. Diasporas also are positive because they spread ideas across countries and often these immigrants send money back to their home country, benefiting both the country they moved to and the country they came from. The author also argues that the claim that immigrants are a drain on the welfare system is usually untrue and other arguments against immigration lack evidence.

http://www.economist.com/node/21538742

Central banks may need to burst bubbles: Bernanke

Is monetary policy an effective way to maintain the healthy of the U.S economic system? There is always a hot debate among economists. Recently, the Federal Reserve Chairman Ben Bernanke emphasis the importance of monetary policy during a conference at the Boston Federal Reserve Bank on October 18th, saying that "the possibility that monetary policy could be used directly to supported financial sustainable goals, at least on margin, should not be ruled out," Matter fact, monetary policy is a tool for the government to adjust the interest rate in order to maintain the stability of the economic system. By conducting either the expansionary monetary policy or contractionary monetary policy, the Fed is able to monitor the interest rate in the market and make an adjustment if they think that the interest rate is at an abnormal level.

Source: http://www.reuters.com/article/2011/10/18/us-usa-fed-bernanke-idUSTRE79H5IR20111018

Obama promises he'll fight to help the middle class

President Barack Obama has positioned himself as the champion of the middle class. In an attempt to align himself with Roosevelt, who 101 years go, had outline his agenda of "new nationalism," calling for progressive reforms and an active federal government committed to reining in the power of concentrated wealth. Obama acknowledged the hardship many Americans face and called this a "make or break moment for the middle class."

source: http://www.freep.com/article/20111207/NEWS07/112070328/Obama-promises-he-ll-fight-to-help-the-middle-class

U.S. jobless rate drops to 2-1/2 year low

In the article, "U.S. jobless rate drops to 2-1/2 year low," the author mentions that U.S. unemployment rate dropped to 2.5 years low since March 2009. This is a sign that U.S. is walking out from the economy crash in 2009. According to the graph we discussed in class, there is a dramatic rise in unemployment rate during the great depression. The unemployment rate did go back to the average after the great depression. We now see a similar pattern for the unemployment rate. The unemployment rate has dropped since 2009 which means the economy is continuing to head in the right direction. For further information, please visit: http://www.reuters.com/article/2011/12/03/us-usa-economy-idUSTRE7AL14I20111203

NY ups tax on rich, cuts for middle-class

In the article, "NY ups tax on rich, cuts for middle-class," the author mentions that New York is raising tax to 8.82% for those who earn more than $2 million while cutting tax to 6.45% for those who earn $40,000 to $150,000 per year. This remain me about the diagram, "Falling inequality: Share of income earned by top 1%", we discussed in class on 11/29. In the diagram, it mentions that U.S. experienced a falling inequality from 1930s to 1940s and a rising inequality in 1980s. The falling inequality in 1930s to 1940s was due to high school movement and the great depression. The policy that NY is waiting for approved by houses of the legislatures might bring a falling in inequality for the country. Since rich people are paying more tax while middle class are paying less. This might be a good sign for slow down income inequality. For more information: http://www.reuters.com/article/2011/12/07/us-newyorkstate-taxes-idUSTRE7B523L20111207

Employed Women, Dropping Out of the Labor Force

A recently jobs report coverage has shown an interesting point that the unemployment rate fell due to a decline in the number of women labor forces in the labor market. Normally, people might assume that the reason why someone give up to look for a job in the job market is because those people have lost a job for a certain years and thus lost an incentive to keep looking for a new job . Yet, according to the figure studying the women who dropped out of the labor force in November by their status in October shows a different trend. It revealed that over 58% of women who are employed before they quit their jobs. It means that women are quitting their job intentionally. It might further verify that women have a better performance than men in the recent decade.

Source: http://economix.blogs.nytimes.com/2011/12/06/employed-women-dropping-out-of-the-labor-force/?scp=1&sq=women's%20labor%20force&st=cse

Corruption and Rapid Economic Growth

We recently learned of the Kuznets curve, a theory stating that as a country in its infancy develops, the gap in income inequality widens. However, the curve also suggests that at a particular point, the economy begins to correct for this through various reforms. In effect, we can graph this using a U-shaped curve with level of inequality on the Y-axis and level of development on the X-axis.

But what would determine the point in which the graph becomes downward sloping? Vivek Dehejia provides his opinion on what happens in this graph. He believes that corruption is inevitably linked to rapid economic growth. So as the country develops and the income gap is widening, there is also corruption occurring in the economy. He states that eventually, the government has to intervene and help to redistribute the wealth gained in this period of time. He then takes this knowledge and applies it to various developing nations and states that they must find a way to “share the fruits of development more equitably and to curtail corruption”. I agree that is it essential for a growing economy to monitor the influence of corruption. We know that severe income disparity can hinder a country’s growth rate as they do not invest in the sufficient public institutions as the minority elite ruling class will not have incentive to provide these services/rights to the rest of the country. We know that the United States flourished, while other countries, such as Barbados, with better initial factor endowments were unable to keep up with pressing issues such as corruption and income equality. I do believe Dehejia to be right in his assertion that the two will come hand in hand if measures aren’t specifically taken to prevent them.

Source: http://www.nytimes.com/2011/04/14/opinion/14iht-eddehejia14.html?

A case supporting NGDP targeting

Bruce Bartlett of the New York Times argues that the Federal Reserve must do what it can to stimulate our economy, especially after President Obama’s jobs package had been rejected. We learned in class that there are two methods of stimulating an economy, government expenditures (ex: the New Deal) and monetary policy (ex: the Federal Reserve purchasing bonds). Bartlett believes that with government expenditure no longer a viable option, we must now direct our attention to fiscal stimulus. He provides many links to arguments for and against NGDP targeting. In analyzing their arguments, he notes that a main counter-argument to fiscal stimulus is the risk of inflation. However, Bartlett notes that we currently have a problem with deflation, not inflation. With the risk of inflation “As low as it had been in the 1950’s”, Bartlett believes that the Fed intervene and help us try to stimulate our economy.

I also found that the author of our prescribed Econ 121 book, Paul Krugman has been advocating more stimulus as well. He notes that the prior stimulus package only attributed to 1.5% of GDP or less.

Sources: http://economix.blogs.nytimes.com/2011/11/08/can-the-fed-stimulate-growth-or-only-inflation/?scp=7&sq=less%20stimulus&st=cse

http://krugman.blogs.nytimes.com/2011/09/05/on-the-inadequacy-of-the-stimulus/

A case against NGDP targeting

On October 14^th, Goldman Sachs proposed that the Federal Reserve aim to increase our GDP growth rate by 4.5% by increasing our money supply (by some calculated amount). As we learned in class, increasing the money supply will lower interest rates and allow more people to borrow money for business investments. However, Amity Shlaes of Bloomberg argues that this will be ineffective since the 4.5% growth rate is in nominal terms and does not account for inflation. She suggests that 3.5% of the growth will be due towards inflation and 1% of the growth due to the NGDP targeting. She also claims (contradicting what we have learned in class) that interest rates will actually increase after the NGDP targeting due to our expectations about inflation after the measure is enacted.

Source: http://www.bloomberg.com/news/2011-11-02/goldman-idea-could-let-inflation-out-of-the-bottle-amity-shlaes.html

Tackling Income Inequality

I have recently read an article written by Laura D'Andrea Tyson who is a professor at the Hass School of Business at the UC Berkeley talked about the main factors that driven the imbalance of wealth distribution in the U.S. and ways to tackle this problem. The recent demonstration "Occupy Wall Street" had already raised the public awareness of the income inequality issue in the United States. Matter fact, the income inequality has already been strengthened and become a long term trend during the last two decades. Laura had pointed out several reasons why the income inequality is exaggerating which includes the increases in business size and complexity; a growing premium for highly specialized skills; change in the forms of executive compensation and increasing size of the financial sectors etc. She believe that certain adjustment about the tax code has to be changed in order to tackle this problem. Otherwise, the situation can be even worsen in the future.

Source: http://economix.blogs.nytimes.com/2011/11/18/tackling-income-inequality/?scp=2&sq=income%20inequality&st=cse

Quantitative Easing Explained

First off, take this YouTube video with a grain of salt. It’s more of an animated appeal to anti-Bernanke and anti-Fed fans, but is hilariously scripted, targeted to the layman, has over 5 million views, with over 18,000 likes as opposed to 800 dislikes. It discusses the issue of Quantitative Easing (QE1), its false pretenses and high risk, and the implications of the second round referred to as QE2. Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank buys financial assets to inject a pre-determined quantity of money into the economy. This is distinguished from the more usual policy of buying or selling government bonds to keep market interest rates at a specified target value.

In this animation, a conversation ensues explaining the inefficiencies of the Fed and the risky devaluation of the U.S. dollar through QE if the price level is underestimated. We read Bernanke’s article about how the faulty, tightened monetary policy of the Fed during the Great Depression contributed to the prolonging of failing economy. Today, it is arguable that the extremely loose monetary policy associated with QE1, QE2, and a potential QE3 (knock on wood) could backfire, increasing the price level, and cause dangerous double-digit inflation in the attempt of avoiding the deflation that every economist has feared since the mishandling of the Fed during the Great Depression.

http://www.youtube.com/watch?v=PTUY16CkS-k

How FDR's New Deal and the U.S. Government Prolonged the Depression

In this article, Lee Ohanian, a UCLA economics professor, and Harold Cole, an UPenn economics professor, argue that FDR’s New Deal actually prolonged the depression. In class we discussed how adherence to the Gold Standard prolonged the depression for a number of reasons. Once it was abandoned, and exchange rates functioned as a float based on supply and demand, poising the economy for a recovery. We then then learned how FDR’s New Deal helped speed the recovery by including a social safety net through Social Security and stabilizing the financial system through FDIC and the SEC. On the other hand, Ohanian argues that other aspects of the New Deal actually “violated the most basic economic principles by suppressing competition, and setting prices and wages in many sectors well above their normal levels.” For example, it was anti-free market legislation like the National Industrial Recovery Act (NIRA) that was designed to eliminate “excessive competition.” The resulting codes, however, called for an artificial increase in prices and wages that restricted output and reduced productive capacity. Although those that had a job benefited by the 25% surplus in wages, the codes “significantly depressed production and employment, as the growth in wage costs far exceeded productivity growth.” Many other statistics are given in the article, offering a cohesive counterargument to the popular support for the success of the New Deal.

http://online.wsj.com/article/SB123353276749137485.html

200 Countries, 200 Years, 4 minutes

Watch this extremely interesting video by the famous Hans Rosling, a Swedish Public Health professor. He uses Gapminder, software that he helped design, to model multiple variable statistics over time. Throughout our entire class we have seen data with respect to time using natural logs. In this video, a transparent graph is shown in front of Hosling, labeling the life expectancy on the x-axis and wealth on the y-axis. Instead of incorporating another axis to represent time, the data is shown using a high speed replay to show the divergence and projected convergence concerning wealth and health of 200 countries over the past 200 years. The data is CGI'd into the air where Rosling can pluck and grasp at points as he highlights the significance of specific points in history.

http://www.economist.com/node/21013525

$8 Trillion Internet

In the last 5 years, the internet accounted for 21% of GDP growth in the world's largest economies. The internet as a sector is larger than these countries' industries in agriculture or energy. It makes up 3.4% of GDP in large, developed economies. Internet activities is defined as private consumption, private investment, public expenditure, and trade. The US leads in the online industry, claiming 30% of global Internet revenue. Sweden leads in the Internet's contribution to GDP at 6.3% of its economy online.

http://www.theatlantic.com/business/archive/2011/11/the-8-trillion-internet-mckinseys-bold-attempt-to-measure-the-e-conomy/247963/

Tough Times for Millennials

Census data suggests that Millennials are the youngest generation to face such economic downturn. Unemployment rates for recent college graduates are 2 to 3 times higher than that of older workers. Graduates' starting income has decreased by 7 percent for every 1 % increase in the UE rate. Students stay in school longer and delay marriage as they work to pay off their debt. This has doubled the under-35 poverty levels in the past 40 years. With more schooling, the supply of skilled labor has greatly increased while the demand has remained about the same. This results in a tough job market and increasing unemployment.

http://www.theatlantic.com/business/archive/2011/11/no-country-for-young-men-or-young-women/248124/

Income Inequality on the Rise

Inequality continues to increase in the developed world. The technology age has aided skilled workers in commanding greater wages. The average income of the top 10% is 9 times greater than the bottom 10%. Inequality in American has increased 25% in the last 30 years. Action is necessary in order to stop the rising inequality. Report suggests implementing social and tax policies that would increase taxes for higher waged workers while providing support for the bottom tiers of the labor force.

http://www.washingtonpost.com/business/economy/oecd-report-cites-rising-income-inequality/2011/12/05/gIQAWrwZXO_story.html?hpid=z5

Income Inequality in the United States

Income inequality in the U.S. is now greater than it has been since the 1920s. The incomes of earners at the 99.99^th percentile of the income distribution have soared over the last three decades from less than $2 million in the late 1970s to about $10 million in 2009. However, pay has slowed for the affluent and the rich, as a group, have become poorer. The question is, will hard times for the rich benefit the middle class and the poor, given that the huge recent increase in top incomes coincided with slowed income growth for almost every other group? With the Senate’s passage of financial regulation in May 2010, Obama’s health care bill, and Congress’ bill to tighten Wall Street’s rules and shrink its profit margins, the U.S. has been trying to stimulate economic growth while reducing income inequality at the same time. The success depends hugely on execution, specifically in the case of the Federal Reserve.

http://topics.nytimes.com/top/reference/timestopics/subjects/i/income/income_inequality/index.html