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  • Consumer Price Index On The Rise

    The Consumer Price Index for All Urban Consumers rose 0.2% in March, according to the Bureau of Labor Statistics . 0.2 doesn't look so big, but the news comes after two straight months of 0.1% growth.The CPI-U has grown in ten of the last eleven months. The all items index has grown 1.5% over the last 12 months. From the Bureau of Labor Statistics release: Increases in the shelter and food indexes accounted for most of the seasonally adjusted all items increase. The food index increased 0.4 percent in March, with several major grocery store food groups increasing notably. The energy index, in contrast, declined slightly in March as decreases in the gasoline and fuel oil indexes more than offset increases in the indexes for electricity and natural gas. The index for all items less food and energy also rose 0.2 percent in March. Besides the 0.3 percent increase in the shelter index, the indexes for medical care, for apparel, for used cars and trucks, and for airline fares also increased. The indexes for household furnishings and operations and for recreation both declined in March. The all items index increased 1.5 percent over the last 12 months; this compares to a 1.1 percent increase for the 12 months ending February. The index for all items less food and energy has increased 1.7 percent over the last 12 months, as has the food index. The energy index has risen slightly over the span, advancing 0.4 percent. Here's a look at the CPI for All Urban Consumers over the last year: Read the full release here .
  • Pew Research Center: Pay Gap Has 'Narrowed But Persisted'

    That pesky pay gap. For Equal Pay Day, the Pew Research Center 's Eileen Patten put together some key statistics about the gender pay gap. Clearly, there has been some progress. The gap has narrowed, but is still significant.
  • Women and the Negotiating for Better Pay

    It is no coincidence that the Obama administration chose today to announce new executive actions designed aimed at narrowing the pay gap between women and men . Today is Equal Pay Day, marking the day when the average American woman's income matches that of the average man's for the previous year. The average woman had to work into the fourth month of 2014 to match what the average man's salary for 2013. Of course, there are many many factors involved in pay disparity. In a piece for NPR, Ashley Milne-Tyte focuses on salary negotiation:
  • CPI Continues Steady Rise

    The Consumer Price Index for All Urban Consumers rose 0.1% in January, according to the Bureau of Labor Statistics . The CPI-U has grown in eight of the last nine months (in October it came in at 0.0). The all items index has grown 1.6% over the last 12 months. From the Bureau of Labor Statistics release: Increases in the indexes for household energy accounted for most of the all items increase. The electricity index posted its largest increase since March 2010, and the indexes for natural gas and fuel oil also rose sharply. These increases more than offset a decline in the gasoline index, resulting in a 0.6 percent increase in the energy index. The index for all items less food and energy also rose 0.1 percent in January. A 0.3 percent increase in the shelter index was the major contributor to the rise, but the indexes for medical care, recreation, personal care, and tobacco also increased. In contrast, the indexes for airline fares, used cars and trucks, new vehicles, and apparel all declined in January. The food index rose slightly in January. The index for food at home rose 0.1 percent, with major grocery store food groups mixed. The all items index increased 1.6 percent over the last 12 months; this compares to a 1.5 percent increase for the 12 months ending December. The index for all items less food and energy has also risen 1.6 percent over the last 12 months. The energy index has risen 2.1 percent over the span, and the food index has increased 1.1 percent. Here's a look at the CPI for All Urban Consumers over the last year: Read the full release here .
  • James Surowiecki on 'Deadbeat Governments'

    A lot of city and state governments have a pension problem. Before we come to the conclusion that pensions simply aren't viable, James Surowiecki wants us to look more closely at the decisions politicians made--and the payments they did not make--that got them, or their hometowns, into this predicament. From the New Yorker's Financial Page : How did states and cities get into this jam? By following Mark Twain’s famous dictum: Never put off till tomorrow what you can do the day after tomorrow. In principle, providing for pensions isn’t difficult: governments set aside money every year to fund them, just as workers contribute a percentage of their salary every year. But that means raising taxes or spending less on things that voters like, so politicians often just let pension contributions slide, passing the bill on to future taxpayers. Politicians are adept at rationalizing such irresponsible behavior. When markets are up and pension funds are flush, they say that there’s no need to add money. When times are bad and tax revenue drops, they say that they can’t afford contributions. Illinois, for instance, has been shortchanging its pension fund forever. “The politicians in Illinois are deadbeats,” Alicia Munnell, the director of the Center for Retirement Research, at Boston College, told me. “They just did not pay their bills, and, lo and behold, they’re finding that they can’t make up for all those years of not doing what they were supposed to do.” Governments also got in the habit of promising workers higher pensions in the future so that they would accept lower wages in the present. To make matters worse, whenever pension funds looked especially robust public employees lobbied for higher pensions, and politicians were all too willing to grant them. In 1999, at the height of the tech bubble, California retroactively increased benefits for every government employee by twenty-five to fifty per cent. This was terrible policy. As Munnell says, “You have to put aside the excess return you earn in good times to cover your costs when the bad times hit.” But lots of states did similar things. Even more egregious, Detroit’s pension fund routinely sent bonus payments to retirees whenever it had a good year. This weakened the fund and increased the burden on taxpayers, but, since pension accounting is eye-glazingly dull, few complained.; Everyone pushed off the day of reckoning, with no real thought for the taxpayers who would eventually have to foot the bill. Now that that day has arrived, you can see why governments want to claw back some of the benefits that were handed out. But this would be unjust: state and city employees worked for those benefits—teaching kids, policing the streets, and so on—and they often did so for lower wages than they would have accepted with no promise of a pension. Governments should live up to their obligations, but we can’t let them make irresponsible promises again. The temptation to defer expenditure is intrinsically hard for politicians to resist. We need reforms to control costs and to insure that governments actually pay their bills. Read the full article here .
  • CPI Keeps Slowly Increasing

    The Consumer Price Index for All Urban Consumers rose 0.2% in September, according to the Bureau of Labor Statistics . It was the fifth month in a row with an increase in CPI, though the year-over-year growth was the smallest increase since April. From the Bureau of Labor Statistics release: The energy index rose 0.8 percent in September and accounted for about half of the seasonally adjusted all items increase. All the major energy component indexes rose in September. The food index was unchanged, with declines in the indexes for fruits and vegetables and for nonalcoholic beverages offsetting increases in other indexes. The index for all items less food and energy rose 0.1 percent in September, the same increase as in August. The shelter and medical care indexes also advanced and accounted for most of this increase. The indexes for new vehicles and for airline fares rose as well, while the apparel and recreation indexes declined. The all items index increased 1.2 percent over the last 12 months; this was the smallest 12-month increase since April. The index for all items less food and energy has risen 1.7 percent over the last year with the shelter and medical care indexes both up 2.4 percent. The food index has risen 1.4 percent, while the energy index has declined 3.1 percent. Here's a look at the CPI for All Urban Consumers over the last year: Read the full release here .
  • St Louis Fed Economic Lowdown: Circular Flow

    While we wait for Washington to get moving again, it is a good time to get back to the basics. The latest video in the Federal Reserve Bank of St Louis 's Economic Lowdown series focuses on economic flow. The circular flow model, to be specific. Scott Wolla , economic education specialist at the St. Louis Fed, follows a few dollars as they work their way from consumer to business and back to the household. Take a look:
  • Wage Gap By State

    The Atlantic 's Jordan Weissman was not satisfied with the stock way of talking about the age gap between women and men in the U.S. He wanted to see a little more geographic specificity. So he turned to a report from the Center for American Progress and pulled out this: Weissman writes: So what does this tell us? Before getting to that, we need to talk a little bit about the raw wage gap as a statistic. Because it has problems. Enough problems that my editor Derek Thompson and I strongly diverge on whether it's even a useful measure. (I think it is, he thinks it isn't.) When someone says women earn 84 cents on the dollar compared to men in New York or 70 cents on the dollar compared to men in Utah, they're comparing all female workers and all male workers at once. As a result, you sort of end up comparing apples and oranges, or in this case, software engineers and elementary school teachers. As a rule, women tend to work in lower-paying careers. They also tend to work fewer hours, thanks largely to family obligations, and often take breaks in their career to take care of children, both of which bring down their pay. When you compare women and men who work in the same kinds of jobs for similar hours and similar years, most (though not all) of the gap disappears. So the graph up above isn't really showing us the states where women face the most discrimination, in the sense of not being paid equally for equal work.* All of that said, I do think that on a very basic level, it shows us the states where women are having the most luck matching up financially with men, whether it's because public policy gives them a leg up in the labor force, or because the local mix of industries happens to favor women (I don't think it's an accident that hospitality-heavy Florida has a relatively small gap). Though it's not an airtight relationship, for instance, states where women hold a greater percentage of management jobs seem to have a smaller pay gap. Read The States Where Women Make the Most (and Least) Compared to Men here .
  • Mercer: Pay for U.S. Workers to Continue to Rise, But Slowly

    Most of us will have to wait a bit longer for pay raises, according to Mercer researchers. In a recent Mercer survey, most employers reported that they are expecting to provide modest pay increases this year and next to top performers, as they see a need to retain top talent. Here is an infographic with the topline data from the report: (access the full size graphic here .)
  • Consumers 'Pulling Back' and Dimming Economic Prospects

    School is back in session and the sunny days of summer are falling behind us. And some of the economic data is making economists and business writers sound like the students who have had to wake up to the reality of the classroom. The Washington Post 's Jim Tankersley lays out some more concerns about the coming months. Like Nouriel Roubini , he fears we are in for a "rough autumn." And that has a lot to do with the declining economic strength of American workers: Tankersley writes: One of economists’ biggest concerns is that U.S. consumers could be pulling back. The Reuters/University of Michigan Consumer Sentiment Index fell last month. IHS Global Insight predicts that annual growth in back-to-school retail sales will slow this year compared with last year. Rising gas prices would compound the problem by diverting buying power to the pump and away from other sectors. The price of West Texas crude rose to nearly $110 a barrel at the end of last week, its highest level in more than a year. Analysts attribute much of the increase to striking oil production workers in Libya, and they warn that an escalating war in Syria could bring higher prices still. The reverse was true earlier this year. Prices were relatively low, less than $90 a barrel, which helped to offset the effects of payroll and income tax increases that stemmed from the year-end “fiscal cliff” deal. Now, the higher cost of fuel is colliding with the grim reality that incomes are not rising very fast for many American workers. With 11.5 million people looking for work and unable to find a job, there is little incentive for employers to bump up paychecks, especially for lower-skilled workers. Sure enough, Wells Fargo economists reported last week that since the recession ended, job growth has been stronger than normal in low-wage jobs, and those wages are falling. Read For workers and the economy, autumn could be scary here .
  • The Growth of Restaurant Jobs Against Unemployment

    We'll have a new jobs report at the end of this week. Of late, the employment picture has been getting a bit brighter with just about every report. But, as Dean Baker points out on his blog for the Center for Economic and Policy Research (CEPR) , a lot of the new jobs are the kind of jobs that don't provide a lot of income and long term security. Namely hotel and restaurant workers. Baker graphed the growth of restaurant workers against unemployment. Some analysts have picked up on the latter point to argue there has been a fundamental change in the economy. They claim we are moving to an economy that produces high-paying jobs for highly skilled people (e.g. doctors, lawyers, financial engineers) and bad jobs for everyone else. I have beaten up on this one elsewhere . (The trick for doctors and lawyers is protectionism not skills.) However there is no dispute that bad jobs seem to be growing rapidly as a share of employment at present. The question is why. An alternative explanation to the "it just happens" view is that the weak economy itself is responsible for the proliferation of bad jobs. In other words, because the economy is not generating decent jobs in any reasonable number, workers are forced to take bad jobs. In that story the proliferation of bad jobs is the direct result of a weak economy. I did a very crude test of this story. I regressed the rise in the share of hotel and restuarant employment from 2007 to the first half of 2013, across states, against their unemployment rate in July of 2013. Here's the picture. While far from conclusive, this looks like pretty good support for the bad labor markets lead to bad jobs story. (For regression fans, the coefficient of the unemployment rate variable was 0.0013 with a t-statistic of 4.65, which is significant at the 1 percent level.) There are of course other reasons than the lack of good jobs that could cause the share of restaurant employment to grow more in states with high unemployment. Read Labor Economics 101: Few Jobs Means Bad Jobs here .
  • St Louis Fed: The Basics of the Labor Market

    The Federal Reserve Bank of St Louis has an appropriate video lesson for Labor Day. Scott Wolla , economic education specialist at the St. Louis Fed, walks us through the labor market--how it works, the laws of supply and demand, and how wages are set. Take a look:
  • Babysitting Wages Continue to Rise

    Most U.S. workers are waiting for the recovery to speed up enough that wages begin to grow again. But what if I were to tell you that there is a sector that continues to see real growth? A sector where workers are able to charge more and more because their work is valued and always seems in demand. Is that something that would interest you? It may even be work you have done before. Babysitting. The Boston Globe 's Megan Woolhouse writes that the average rate for babysitting is $12/hour--well above minimum wage, and the average hourly wages in a lot of service sector jobs. As high rates cramp date nights, several factors are influencing the economics of baby-sitting. Internet services such as Craigslist have created greater transparency, allowing sitters to see what their competition charges and raise rates to what the market can bear. Busy two-earner families are not only increasing demand for sitters, but their higher incomes make them more willing to pay higher rates for older, more experienced sitters. That trend coincides with a weak job market that is making college students and even recent graduates willing to take such work. Finally, with so many teens busy with after-school activities from SAT prep classes to high school sports to community service, their time is more valuable, meaning they want higher pay to put aside these pursuits. Economists call this phenomenon “opportunity cost.” “You’d be hard pressed to find [another] profession where you see any wage growth,” said Erica Groshen, commissioner of US Bureau of Labor Statistics, which tracks employment, wages, and other job-market data. Read In era of stalled wages, baby sitters surging ahead here .
  • Justin Fox Calls for a Greater Focus on How Wages Are Set

    At the Harvard Business Review Blog , Justin Fox argues "it's becoming clear that pay levels aren't set by the market." Or at least not entirely. And the impact of some of the "customs" of lower pay may be having a negative economic effect. Fox: For decades, most discussions of pay levels and income disparity in the U.S. have been accompanied by a pronounced economic fatalism. Pay is set by the market and the labor market has gone global, the reasoning goes — and when a Chinese or Mexican worker can do what an American can for less, wages have to go down. In explaining what's happened to autoworkers, say, that story makes some sense (although it doesn't explain why German autoworkers have for the most part kept their high pay and their jobs while Americans haven't ). But McDonald's burger-flippers and Walmart checkout clerks can't be replaced by overseas workers. Instead, both companies were able to build low pay into their business models from the beginning — McDonald's because so much of its workforce was made up of living-at-home teenagers who did not in fact have to pay for heat, Walmart because of its roots in small Southern towns where wages were low and "living wage" laws unheard of. Now McDonald's is increasingly staffed by grownups (teens have gone from from 45% of its workforce in the 1990s to 33% recently ), while Walmart is trying to conquer the big cities of the North. Both companies have been understandably loath to depart from their low-pay traditions, so conflict and criticism are pretty much inevitable. Which is an extremely healthy development. That's because it's becoming clear that pay levels aren't entirely set by the market. They are also affected by custom, by the balance of power between workers and employers, and by government regulation. Early economists understood that wage setting was "fundamentally a social decision," Jonathan Schlefer wrote on last year , but their 20th century successors became fixated on the idea of a "natural law" that kept pay in line with productivity. And this idea that wages are set by inexorable economic forces came to dominate popular discourse as well. Since 1980, though, overall pay and productivity trends have sharply diverged in the U.S. . And since the 1990s, research on the impact of minimum wage laws has demonstrated that there clearly is some distance between the textbook versions of how wages are set and how it happens in reality. It's not that minimum wage laws work miracles , but they also don't have nearly the downward effect on employment levels that a pure supply-demand model would predict. Not to mention that decades of research at the organizational and individual level have shown the link between pay and on-the-job performance to be extremely tenuous . Read The Case for Paying People More here .
  • The Stickiness of Wages

    In a new Economic Letter , San Francisco Fed economists Mary Daly , Bart Hobjin , and Timothy Ni take a look at wage rigidity. In what may seem counter-intuitive, wage growth did not slow much during the Great Recession, even as unemployment climbed rapidly. And now wages are not rising much during the economic recovery and dropping unemployment. Apparently, this has happened in other recent recessions, though the extent to which wages have been slow to respond to overall economic change seems greater. Figure 1 clearly shows downward nominal wage rigidity in the distribution of wage changes among U.S. workers in 2006 and 2011. The data cover all workers and measure how their wages compared with their previous year’s wages, if they were employed. We use 2006 as an example of a typical wage change distribution and compare those numbers with the post-recession wage changes for 2011. The distribution of wage changes in 2006 and 2011 both spike at zero, suggesting that the wages of many workers did not change from year to year. In both years, the distribution is larger to the right of zero, that is, for wage increases, than to the left of zero, for wage cuts. Consistent with downward nominal rigidity, this suggests that a large fraction of wage cuts employers wanted to carry out were not actually made. Instead, those workers were swept into the zero-change group. What is more interesting in this figure is how 2006 and 2011 data differ. First, the fraction of workers whose wages were frozen jumped from 12% of the workforce in 2006 to 16% in 2011. Second, despite the severity of the Great Recession, very few workers experienced wage cuts. These numbers edged up only slightly from 2006 to 2011. Finally, and perhaps most interestingly, the percentage of workers who received wage increases dropped notably in 2011 compared with 2006. This compression of wage increases resulted in a larger spike at zero. Read The Path of Wage Growth and Unemployment here .