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  • Spending, Income Both Rise in November

    Personal income and spending both rose in November, according to the Commerce Department . Income rose by 0.6 percent, exceeding expectations. Real Disposable Income rose 0.8 percent after dropping 0.1 percent in October. Real Consumer Spending rose by 0.6 percent. Take a look at the monthly change: Here are the toplines from the Bureau of Economic Analysis : Personal income increased 0.6 percent in November after increasing 0.1 percent in October. Wages and salaries increased 0.6 percent in November after decreasing 0.3 percent in October. The October decrease reflected work interruptions caused by Hurricane Sandy, which reduced wages and salaries by 0.3 percent. Real consumer spending, spending adjusted for price changes, increased 0.6 percent in November after falling 0.2 percent in October. Spending on durable goods increased 2.9 percent in November after falling 0.9 percent in October. Read the BEA's full report here .

  • Next Punch: Where the Jobs Are Coming

    It stands to reason, with Baby Boomers reaching retirement age, that we will be seeing unprecedented growth in the need for health care services in the coming years. NextPunch nicely illustrates the growth of health care in this new infographic. The theme of the graphic is jobs, as NextPunch's Vladik Richter projects where we will see job growth over the coming 8 years. As Richter notes, much of the growth happens to be in low-paying jobs. Take a look ( click here for the full size version at NextPunch): Hat tip Barry Ritholtz .

  • Reconsidering the Approach to Measuring Poverty

    Following the release of the Census Bureau 's report on poverty in the U.S. last week, the Brookings Institution 's Center on Children and Families held a thought-provoking and informative discussion among economists and non-profit leaders about poverty and the poverty rate. Video of the discussion is now available online, here . We were struck by Cornell University professor Richard Burkhauser 's comments on the poverty rate. Burkhauser argues that the Census bureau's approach to measuring poverty is not a reliable, complete measure of poverty in America. And there is some good news hidden in the poverty rate: This leads us to some other work put out by Brookings recently: a working paper by Bruce Meyer of the University of Chicago and NBER, and James X. Sullivan of the University of Notre Dame. Meyer and Sullivan look beyond the poverty rate as measured by the Census Bureau and they introduce other key factors in assessing the state of the poorest Americans. One key measure they would like to see used is consumption: Consumption provides a measure of household well-being that is theoretically superior to income given that households face expected and unexpected variation in income and that consumption may differ from income because households may borrow and save. Moreover, the evidence suggests consumption is better reported than income for families with few resources. Thus, there are reasons to think poverty measured using consumption may give us a different picture of who is poor and how poverty changes over time. In this paper we have examined how our understanding of how and why poverty has changed over the past five decades differs when we use more theoretically based concepts that are better measured. Consumption based poverty measures and improved income measures—ones that account for taxes and noncash benefits and reflect consensus estimates of bias in price indices— provide a different set of facts to explain. Official poverty statistics suggest that poverty has increased over the past forty years. This claim is inconsistent with our results which show substantial improvements in income based poverty over the past forty years and even larger improvements in consumption based poverty, especially in the last decade. These poverty results are corroborated by other indicators of well-being for those with low income such as increases in car ownership and evidence of improved living conditions including larger living units that are more likely to have air conditioning and other features. While the deficiencies in the official poverty measure have been the subject of much previous research, most poverty scholars still rely on the official measure as the definitive measure of trends in poverty and draw important conclusions based upon it. Here is a look at the trend-line of some other measures of the rate of poverty, compared to the official measure: Read Dimensions of Progress: Poverty from the Great Society to the Great Recession here .

  • Census Bureau: Overall U.S. Poverty Rate Little Changes From 2010 to 2011

    After climbing over the first three years of the Great Recession, the overall poverty rate flattened out in 2011, according to the Census Bureau 's annual report on income, poverty and health insurance coverage. There is a lot in the report, but the poverty figures stood out as we had become accustomed to seeing them rise. Here's a look at the trend: From the report: • The 2011 poverty rates for most demographic groups examined were not statistically different from their 2010 rates. Poverty rates were lower in 2011 than in 2010 for six groups: Hispanics, males, the foreign-born, noncitizens, people living in the South, and people living inside metropolitan statistical areas but outside principal cities. Poverty rates went up between 2010 and 2011 for naturalized citizens. • For most groups, the number of people in poverty either decreased or did not show a statistically significant change. The number of people in poverty decreased for noncitizens, people living in the South, and people living inside metropolitan statistical areas but outside principal cities between 2010 and 2011. The number of naturalized citizens in poverty increased. • The poverty rate in 2011 for children under age 18 was 21.9 percent. The poverty rate for people aged 18 to 64 was 13.7 percent, while the rate for people aged 65 and older was 8.7 percent. None of the rates for these age groups were statistically different from their 2010 estimates. The report, as Sabrina Tavernise writes about more extensively in the New York Times , also shows a decline in household median income and an increase in income inequality from 2010 to 2011. Read the full report here .

  • Low Wage Recovery and the Loss of Mid-wage Occupations

    In the middle of the political convention season, there is a lot of talk about jobs. Or lack of jobs, to be more accurate. But the National Employment Law Project wants us to focus more on the types of jobs that were lost. In short, America’s good jobs deficit continues. Policymakers have understandably been focused on the urgent goal of getting U.S. employment back to where it was before the recession (we are still missing nearly 10 million jobs), but our findings underscore that job quality is rapidly emerging as a second front in the struggling recovery. In what follows, we analyze data from the Current Population Survey (CPS), the main government survey providing information on wages and occupations for U.S. workers (see Appendix for details on data and methods). Specifically, we examine employment trends in 366 detailed occupations. We formed three equal groups, each representing a third of U.S. employment in 2008: lower-wage occupations with median hourly wages from $7.69 to $13.83; mid-wage occupations with median hourly wages from $13.84 to $21.13; and higher-wage occupations with median hourly wages from $21.14 to $54.55 (all in 2012 dollars). We then tracked net employment changes in these three groups over time, as shown in Figure 1. The red bars show net losses in employment during the recession (2008 Q1 to 2010 Q1). The orange bars show net growth in employment during the recovery (2010 Q1 to 2012 Q1). The pattern is striking. During the Great Recession, employment losses occurred across the board, but were concentrated in mid-wage occupations. By contrast, in the recovery to date, employment growth has been concentrated in lower-wage occupations, which grew 2.7 times as fast as mid-wage and higher-wage occupations: Read the full report here . ( hat tip Jim Puzzanghera, LA Times )

  • The Economics of Bank Robberies

    It turns out that bank robberies are a bad idea--and not just from a moral perspective. It turns out that the takings are not so great. British researchers Barry Reilly , Neil Rickman and Robert Witt were fortunate enough to get access to some rarely released data from the British Bankers' Association. And they used that data to get at the real economics of bank robberies, for the robbers and for the banks. They published their findings in Significance Magazine (we learned of their work through Flowing Data ). From the authors: The return on an average bank robbery is, frankly, rubbish. It is not unimaginable wealth. It is a very modest £12 706.60 per person per raid. Indeed, it is so low that it is not worth the banks' while to spend as little as £4500 per cashier position at every branch on rising screens to deter them. A single bank raid, even a successful one, is not going to keep our would-be robber in a life of luxury. It is not going to keep him long in a life of any kind. Given that the average UK wage for those in full-time employment is around £26 000, it will give him a modest lifestyle for no more than 6 months. If he decides to make a career of it, and robs two banks a year to make a sub-average income, his chances of eventually getting caught will increase: at 0.8 probability per raid, after three raids or a year and a half his odds of remaining at large are 0.8×0.8×0.8=0.512; after four raids he is more likely than not to be inside. As a profitable occupation, bank robbery leaves a lot to be desired. It is worth noting that the criminals themselves seem to have learnt this. Robbing banks is no longer what you could call the crime of choice. Bank robberies and attempted bank robberies have been decreasing, in both the USA and the UK; in the UK, robberies from security vans are on the increase. Security vans offer more attractive pickings. Our framework provides a way of thinking about this, partly by allowing us to look at the expected value of committing a robbery, but also because it effectively introduces a competing product into the robbers' "product space" and asks them to think about which will generate more proceeds. The lesson of which would seem to be: successful criminals study econometrics. Statistics can help in all walks of life. Read Robbing Banks: Crime does pay -- but not very much , and take a look at the authors' formula for determining the costs of robbing a bank (per participant) here .

  • Putting the Help in 'How can I help you?'

    There is some evidence to suggest that retailers that pay their low-level workers more, end up profiting more down the road. Freakonomics host/co-author Stephen Dubner reports on that finding, and provides other interesting insights into what pays off for retailers in this conversation with Marketplace 's Kai Ryssdal :

  • Profits Rise, but Wages Remain Stagnant

    With all the focus on unemployment, a lot of us have lost sight of the fact that those workers with jobs have not seen their wages rise significantly, if at all, over the last few years. The Boston Globe 's Jay Fitzgerald reports on the findings of a new study by Northeastern University's Center for Labor Market Studies that shows worker salaries have not moved up along with corporate profits. Corporate profits have increased by 93 percent before taxes from the fourth quarter of 2008 through the fourth quarter of 2011, rising to a record $1.9 trillion, according to Northeastern data. The Dow Jones industrial average has risen by 35 percent in the same time period, pushing above the 12,000 mark for the first time since 2008. And labor productivity, ultimately measured by the growth of the economy amid current labor market conditions, has increased by about 8 percent over the same three-year period. But mean weekly wages have risen only 0.4 percent over the past three years, to $796, or by $3, and weekly wages have actually fallen by 0.1 percent over the past year, or by $1 a week, according to Northeastern data. To Northeastern’s Sum, it all adds up to the slowest postrecession wage and salary recovery since the Great Depression - and the largest postrecession accumulation of corporate profits over the same period. It all ties back to jobs - or lack of them - and the subsequent pressures that are keeping labor market wages from rising, Sum said. “The bargaining power of workers has simply deteriorated,’’ said Gary Burtless, an economist at the Brookings Institute, a liberal-leaning think tank in Washington, D.C. “The supply-and-demand equation is off. Workers have no leverage to ask for higher salaries.’’ Some sectors like technology are seeing employment and wage gains, according to recent data from PayScale Inc., which tracks national employee compensation trends. But in many others, economists say, companies aren’t hiring more workers because consumer demand and the economy are still too fragile to justify long-term hiring commitments. Other firms are worried about major government policy changes - such as to the tax code or to the health care sector - that could disrupt their labor costs and bottom lines. It would seem that if unemployment rate drops at a quicker rate we should see wages rise again. But as Fitzgerald reports there are other factors at play. What would you look to, beyond unemployment, as key factors? Read the full article here .

  • SF Fed Economic Letter: Wage Rigidity and Wage Growth

    In a new Economic Letter , San Francisco Fed economists Mary Daly , Bart Hobjin , and Brian Lucking take a look at wage growth. Wage growth has been strong compared to the overall rate of recovery and growth of GDP in the US. So what is to explain this growth? Daly, Hobjin, and Lucking provide one quick answer: One reason real wage growth has been so solid is that inflation has been low, with the personal consumption expenditures price index increasing at an average annual rate of 1.8% since the start of 2008. Low inflation means that employers cannot reduce real wages simply by letting inflation erode the value of worker pay. Instead, if they want to reduce real labor costs, they must cut the actual dollar value of wages. Employers generally avoid doing so because cuts to nominal wages can reduce morale and prompt resistance even in difficult economic times (Kahneman, Knetsch, and Thaler 1986). The inability or unwillingness of employers to reduce nominal pay is known as downward wage rigidity. When economic conditions are poor, this rigidity can disrupt normal labor market functioning, especially in a low-inflation environment. If wages are downwardly rigid, workers may receive false signals about the value of remaining in a particular occupation or industry. For example, consider construction workers who are less productive now than they were five years ago because of the bursting of the housing bubble. If their wages fell, they might seek jobs in other industries. Because of downward wage rigidity, they may stay in construction instead. On the labor demand side, employers that can’t cut wages may delay expanding payrolls as conditions improve. Either way, downward nominal wage rigidities can result in misallocation of resources in the economy. Read Why Has Wage Growth Stayed Strong? here .

  • BCG's Hal Sirkin on the Rise and Recovery of Manufacturing in the US

    Add Boston Consulting Group's Hal Sirkin to the list of industry experts who believe that reports of the death of US manufacturing have been, as Twain might put it, "an exaggeration." With the decline of the dollar and the rise of wages in China, "It's now becoming more effective to produce in the U.S. than it is to produce in a lot of different countries," says Sirkin. Sirkin recently discussed the state of manufacturing in the US with the Knowledge@Wharton editor in chief Mukul Pandya .

  • Pew Report on Young Workers: 'Young, Underemployed and Optimistic Coming of Age, Slowly, in a Tough Economy'

    If you hear young adults complaining about how tough it is to find fulfilling, long term employment, you may be tempted to think they are just feeling sorry for themselves. After all, times are tough on everyone, right? Well, yes and no. Times may be tough across all age groups, and yet most Americans, and most economists, agree that young workers have it particularly bad these days. According to a new report from the Pew Research Center , "There seems to be a near consensus among the public that today’s young adults face greater challenges than their parents did in reaching some of the most basic economic benchmarks." The report shares some details on how young adults have reacted to the economic downturn: Many young adults have felt the impact of the recession and sluggish recovery in tangible ways. Fully half (49%) of those ages 18 to 34 say that because of economic conditions over the past few years, they have taken a job they didn’t really want just to pay the bills. More than a third (35%) say they have gone back to school because of the bad economy. And one-in-four (24%) say they have taken an unpaid job to gain work experience. For some, tough economic times have had an impact on their personal life as well. Roughly a quarter of adults ages 18 to 34 (24%) say that, due to economic conditions, they have moved back in with their parents in recent years after living on their own. Among those ages 25 to 29, the share moving back home rises to 34%. Most adults under age 25 are enrolled in school at least part time (46% are full-time students). By age 25, the majority are out of school, but jobs and housing can be hard to come by, and many “boomerang” back home. And yet, they remain largely optimistic about their future. Take a look: Read the full report here .

  • David Cay Johnston Sums Up Pay Data in One Word: "Awful"

    As we've highlighted in the past, the US hasn't just been shedding jobs. Median wages have gone down as well. David Cay Johnston illustrates this in his Reuters column today: Johnston writes: In 2010 total wages and salaries came to $6,009,831,055,912.11. That's a bit more than $6 trillion. Adjusted for inflation, that is less than each of the previous four years and almost identical to 2005, when the U.S. population was 4.2 percent smaller. While median pay -- the halfway point on the salary ladder declined, average pay rose because of continuing increases at the top. Average pay was $39,959 last year, up $46 -- or less than a buck a week -- compared with 2009. Average pay peaked in 2007 at $40,764, which is $15 a week more than average weekly wage income in 2010. The number of workers making $1 million or more rose to almost 94,000 from 78,000 in 2009. However, that was still below some earlier years, including 2007, when more than 110,000 workers made more than $1 million each. At the very top, the number of workers making more than $50 million rose in 2010 to 81, up from 72 the year before. But average pay in this group declined $4.5 million to $79.6 million. Read First look at US pay data, it’s awful here .

  • The Role of the Minimum Wage, A Mankiw Assignment

    Greg Mankiw poses an interesting question to his students, and the rest of us readers, on his blog. Essentially, we are being asked to evaluate the policy change to increase the minimum wage after 2007. And he shares the following data. Between 2007 and 2010... The percentage of all hourly-paid workers paid at or below the minimum wage rose from 2.3 to 6.0 percent. The percentage of part-time workers paid at or below the minimum wage rose from 5 to 14 percent. The percentage of teenage workers paid at or below the minimum wage rose from 7 to 25 percent. Read the assignment here . Antonio Fatás took a stab at the assignment. Fatás, a former student of Mankiw, is now a professor of economics at INSEAD . He points to a key characteristic of the period Mankiw isolates: Not only we have seen an increase in the minimum wage but also a deep recession. It is possible that some wages have fallen and old employees have been replaced by new ones who are now paid a lower wage - right at the level of the minimum wage. This would also cause an increase in the number of workers paid the minimum wage. But, of course, there is a potential second effect of a recession going in the opposite direction: it can be that during recessions those who lose their jobs are workers that are being paid lower wages and, as a result, you might see the percentage then decreasing as opposed to increasing. He plots out the variables in play: Fatás: As we can see this percentage has been decreasing since 1979. In that downward trend we also see three spikes: around 1991, around 1997 and 2008-10. The shape of this line, including the spikes correlate very well with the minimum wage (in green). It is measured in real terms (1996 dollars) and the scale is on the right hand side of my chart (the scale does not start at zero to see some meaningful variation). The real minimum wage has also been decreasing since 1979. A decrease that has been interrupted with increases in 1991, 1997 and 2007-09. These three increases coincide with the spikes in the blue line, the % of workers being paid the minimum wage. So the mechanical explanation is very visible in the chart, as you raise the minimum wage you see more workers being paid that rate. Read Minimum Wage and Unemployment for the full answer. Click here .

  • WSJ Forecasting Survey: Another Decade of Stagnant Income

    The first decade of the twenty-first century brought declining incomes for American workers. And it doesn't look like we'll see a rebound any time soon. Economists surveyed for the Wall Street Journal 's forecasting survey predict that the US median income, adjusted for inflation, will not reach 2000 levels again until at least 2021. Phil Izzo reports on the findings in this WSJ video:

  • Intuit Small Business Empoyment Index Shows Jobs Growth in September

    The Intuit Small Business Employment Index brings some much-desired good news on the small business front. The index shows job growth in nearly every region. The total jobs gained in small businesses for the month of September were not large--50,000--but wages and hours are also ticking up. Get the details in this infographic from Intuit's small business blog : via: Small Business Employment, Compensation, Hours Worked All Up in September 2011 [INFOGRAPHIC] (Hat tip Barry Ritholz )
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