One Word Could Be Worth a Million Jobs
One Word Could Be Worth a Million Jobs
Supporting a strong job market is a big part of the U.S. Federal Reserve's mandate. Fed officials, though, interpret...
Supporting a strong job market is a big part of the U.S. Federal Reserve's mandate. Fed officials, though, interpret that goal differently than most observers do. For the economy's sake, Congress should step in to resolve the discrepancy.
Specifically, the Federal Reserve Act instructs the central bank to promote "maximum employment" and "stable prices." Most people understand these instructions as meaning the Fed should seek to generate as much demand for workers as possible without causing an unduly large increase in prices.
The website of the Fed's Board of Governors, however, makes a slight modification to the jobs mandate: "maximum sustainable employment." Innocuous as it may seem, that one word can make a big difference.
How? Well, suppose inflation is running below the Fed's 2 percent target and the unemployment rate is at 5 percent, which officials consider to be its long-run level (pretty much the current situation). They can choose between two monetary policies, which are expected to result in the following paths for the unemployment rate:
Most observers would opt for the second policy. It's more aggressive, so it will get inflation back to target sooner. Even better, the unemployment rate is the same or lower every year, and by a significant amount: One percentage point is worth more than a million jobs.
The word "sustainable," however, means that the Fed views any deviation from the long-run unemployment rate -- up or down -- as undesirable. When officials speak of the economy “overheating” or “running hot” in the absence of inflationary pressures, this is what I think they have in mind. So they would see unemployment as running too low under policy 2.
Some Fed officials worry that “overheating” could trigger a recession. (I don’t understand the precise economic mechanism, but let’s leave that aside.) They think policy 2 might generate the following path for the unemployment rate:
Policy 2: Possible Recession Outcome
In 2019 and 2020, the economy falls into recession. From the Fed’s perspective, this unemployment path is terrible, because the rate is either too low or too high for the next four years.
It's easy to imagine, though, that many people would be willing to trade the risk of recessionary pain in 2019 and 2020 for the near-term gain of 2017 and 2018. They might even believe there's some chance that policy 2 will generate an outstanding outcome -- if, for example, the long-run unemployment rate is actually lower than the Fed thinks it is. Here's how that would look:
This interpretational divide was on full display last month, when Fed officials met with representatives of the pro-employment activist group Fed Up. The activists largely assumed that the central bank was contemplating near-term interest-rate increases to keep inflation in check. But most of the officials downplayed inflation, invoking instead the need to keep the economy from running too hot (which some said could lead to a recession).
I find it hard to believe that the Fed's approach is consistent with Congress's intent as expressed in the Federal Reserve Act. That said, it's really up to legislators to provide an unequivocal answer, which could matter a lot for the economy over the next few years.
By Narayana Kocherlakota
Source
No hike: Fed keeps benchmark rate near zero
WASHINGTON--Not yet. Citing global economic weakness and financial market turmoil, the Federal Reserve agreed Thursday...
WASHINGTON--Not yet.
Citing global economic weakness and financial market turmoil, the Federal Reserve agreed Thursday to keep its benchmark interest rate near zero despite the rapidly improving U.S. labor market.
But Fed policymakers' forecast indicates they still expect to bump up the federal funds rate this year for the first time in nearly a decade, with meetings scheduled for October and December. Their projections, however, show they expect to raise it even more gradually over the long-term than they previously signaled.
Richmond Fed chief Jeffrey Lacker was the lone dissenter.
The decision capped the most dramatic run-up to a Fed meeting in recent memory, with economists split on whether the central bank would raise its key rate, which has been near zero since the 2008 financial crisis and affects borrowing costs for consumers and businesses across the economy.
"An argument can be made for a rise in interest rates at this time," Fed Chair Janet Yellen said at a news conference.But she added, "We want to take more time to evaluate the likely impact on the United States" from the overseas slowdown and market gyrations.
She said Fed policymakers also want to see if further improvement in the labor market "will bolster our confidence that inflation will move back" to the Fed's annual 2% target over the medium term..
In a statement after a two-day meeting, the Fed said, "Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near-term."
Fed policymakers now expect just one rate hike this year that would push the funds rate to 0.375% from the current 0.125%, according to their median forecast. They also expect a slower rise that would leave the rate at 2.625% by the end of 2017 and a longer-run normal rate of 3.5%, down from their previous estimate of 3.75%.
The central bank said "the labor market continued to improve, with solid job gains and declining unemployment." It said consumer spending and business investment have advanced moderately while the housing market "has improved further." But amid the overseas troubles, it said exports have been "soft."
With the U.S. economy rebounding more strongly in the second quarter after a slowdown early in the year, the Fed raised its median forecast for economic growth this year to 2.1% from 1.9% in June. But after the recent global and market troubles, it lowered its projection for 2016 to 2.3% from 2.5% in June.
And with the 5.1% unemployment rate already below the Fed's previous year-end forecast, it now expects the jobless rate to be 4.8% by the end of 2016, below its June forecast of 5.1%.
Yet the central bank also expects a more modest rise in inflation, providing it more leeway to nudge up rates gently. It slightly lowered its inflation forecast to 1.7% in 2016 and 1.9% in 2017, leaving it below its 2% annual target even in two years.
Supporting the case for a Fed move was a 5.1% unemployment rate that's already at the central bank's long-run target, average monthly job gains of 212,000 this year and healthy economic growth of 3.7% at an annual rate in the second quarter. "The economy has been performing well and we expect it to continue to do so," Yellen said.
Waiting too long to act might force the Fed to hoist rates more rapidly when currently meager inflation eventually heats up, a move that could destabilize markets. Yellen said that could be "disruptive to the real economy." "I don't think it's good policy to have to slam on the brakes," she said
Yellen said she continues to expect tepid inflation to pick up as low oil prices and a strong dollar stabilize, but she said it will take "a bit more time" for those effects to dissipate.Some economists say the 5.1% unemployment rate already heralds a coming surge in wages and prices as employers compete for fewer available workers.
But annual pay growth has been stuck near a sluggish 2% pace, possibly reflecting an excess labor supply that includes part-time workers who prefer full-time jobs and discouraged Americans resuming job searches after years on the sidelines. If that's the case, the Fed may want to keep rates low longer to stimulate the economy so more of those workers can find full-time jobs.
Yellen told reporters the unemployment rate likely "understates the degree of slack in the labor market."
Meanwhile, recent news of China's economic slowdown, and the resulting turmoil in global and U.S. stocks, prompted Fed officials to temper expectations for a rate hike this week.
"The outlook abroad appears to have become more uncertain of late and heightened concerns about growth in China and other emerging market economies have led to notable volatility in financial markets," Yellen said.
She added, "We don't want to respond to market turbulence," but the volatility is prompting the Fed to investigate its cause in the global economy.While U.S. exports to China comprise less than 1% of the nation's gross domestic product, Chinese trade with other countries could have stronger ripple effects on the U.S. economy.
Before the release of the Fed's statement to reporters, a coalition of worker advocacy groups called Fed Up gathered outside holding signs such as, "Whose recovery?" and chanting, "Don't raise the interest rates!"
"The Fed should not make a decision to slow down the economy without hearing from the people it will affect," said Ady Barkan, the head of the group.
Source: USA Today
Elevated Level of Part-Time Employment: Post-Recession Norm?
Wall Street Journal - November 12, 2014, by Nick Timiraos - Nearly 7 million Americans are stuck in part-time jobs that...
Wall Street Journal - November 12, 2014, by Nick Timiraos - Nearly 7 million Americans are stuck in part-time jobs that they don’t want.
The unemployment rate has fallen sharply over the past year, but that improvement is masking a still-bleak picture for millions of workers who say they can’t find full-time jobs.
Martina Morgan is deciding which bills to skip after her hours fell at Ikea in Renton, Wash. Sandra Sok says she’s been unable to consistently get full-time hours after she transferred to a Wal-Mart in Arizona from one in Colorado.
In Chicago, Jessica Davis is frustrated by her schedule dwindling to 23 hours a week at a McDonald’s even though her location has been hiring. “How can you not get people more hours but you hire more employees?” the 26-year-old Ms. Davis said.
The situation of these so-called involuntary part-time workers—those who would prefer to work more than 34 hours a week—has economists puzzling over whether a higher level of part-time employment might be a permanent legacy of the great recession. If so, it could force more workers to choose between underemployment or working multiple jobs to make ends meet, leading to less income growth and weaker discretionary spending.
Employers added some 3.3 million full-time workers over the past year, but the number of full-time workers in the U.S. is still around 2 million shy of the level before the recession began in 2007. Meanwhile, the ranks of workers who are part time for economic reasons has fallen by 740,000 this year to around 4.5% of the civilian workforce. That is down from a high of 5.9% in 2010 but remains well above the 2.7% average in the decade preceding the recession.
“There’s just less full-time jobs available than there used to be,” said Michelle Girard, chief economist at RBS Securities Inc.
The slow decline in part-time work is particularly acute when broken out by industries. For the retail and hospitality sectors, the number of involuntary part-time workers in October was nearly double its prerecession level. For construction, mining and manufacturing work, by contrast, the share of such part-time labor was just 9% above its pre-recession level.
Other data show that the ability of part-time service workers to find full-time work has been much slower during the current recovery. In goods-producing industries, around two-thirds of involuntary part-time workers in July 2013 had found full-time employment by July 2014, up from 60% in 2009, according to a study by the Federal Reserve Bank of Atlanta. But for service-sector workers, the rate has seen little improvement. Around 48% of involuntary part-time workers in July 2013 had found full-time work one year later, up from around 46% in 2009.
An important question for policy makers now is whether the elevated level of involuntary part-time work is due to cyclical factors, meaning it will fall as the economy heals, or to structural changes that have made employers more inclined to rely on a larger contingent workforce and avoid converting part-time workers to full-time positions.
On one side are economists like Ms. Girard, who say greater economic uncertainty and rising labor costs—from increases in the minimum wage, regulations or health-care expenses stemming from the Affordable Care Act—explain higher levels of part-time work. “There is a structural element to this at the very least,” she said.
The health-care law requires employers with 50 or more full-time equivalent workers to offer affordable insurance to employees working 30 or more hours a week or face fines. “Companies are just more inclined to hire part-time workers, not necessarily because of the health-care law, but for business reasons that make it a more attractive option,” Ms. Girard said.
Anecdotal reports have suggested employers have cut hours to prepare for the implementation of the health-care law, but that hasn’t been borne out by economic data.
An analysis by Bowen Garrett of the Urban Institute and Robert Kaestner at the University of Illinois at Chicago found a small increase in part-time work this year, but the increase occurred for part-time jobs with between 30 and 34 hours—above the 30-hour threshold that would be affected by the health-care law.
Other economists say higher levels of involuntary part-time work are mostly cyclical. Businesses don’t appear to be paying part-time workers more than full-time workers; that would be one clear sign of a shift in hiring preferences.
Elevated levels of involuntary part-time work in service jobs may reflect how low-wage employers ramped up hiring earlier in the recovery. More recently, the sector has absorbed those returning to work after long unemployment spells.
Part-time work in service jobs is “a stepping stone for the unemployed and for people out of the labor force,” said Adam Ozimek, an economist at Moody’s Analytics. Labor markets are “improving in just the way you would expect.”
Labor advocates, meanwhile, say technological changes in how businesses schedule employees are at fault. Software allows employers to schedule and cancel shifts rapidly based on business conditions.
Carrie Gleason, the director of the Fair Workweek Initiative at the Center for Popular Democracy, a labor advocacy group, said that could explain why more part-time workers say they want full-time work. “There’s now this persistent uncertainty in the jobs that hourly workers have today,” she said.
“I need to spend some time with my kids,” said Ms. Morgan, 32. “Two jobs? It’s too much.”
Ikea employees are guaranteed a minimum amount of hours every week. Those that can work “during peak times when our customers are in our stores have the opportunity to obtain more hours,” said Mona Liss, a company spokeswoman. The company in June also announced it would raise the average minimum hourly wage in its U.S. stores next year by 17%.
Meanwhile, the structural-cyclical debate has important implications for the Federal Reserve. If the changes are structural, wages might begin to rise sooner than expected, putting more pressure on the Fed to raise interest rates. If they’re cyclical, it would suggest that Fed policy can remain accommodative.
Fed Chairwoman Janet Yellen routinely highlights the elevated level of part-time work as a key measure of labor slack. “There are still ... too many who are working part-time but would prefer full-time work,” she said at a press conference in September.
Business surveys conducted by the Atlanta Fed have shown there are more part-time workers because “business conditions don’t justify converting them to full time,” said John Robertson, senior economist at the bank. But other businesses have said their reliance on a larger part-time workforce stemmed from the higher costs of hiring full-time workers.
“It would be wrong to say it’s all cyclical, and it would be wrong to say it’s all structural,” Mr. Robertson said. “We’re somewhere in the middle.”
Ulyses Coatl illustrates how any improvement might unfold. He worked for two years as a stylist at a Levi’s apparel store in lower Manhattan but quit his job in September because the hours had become too unpredictable. His schedule varied from as many as 34 hours a week to four hours, but had averaged around 18 hours in recent weeks, he said.
A Levi’s spokeswoman said the company is “always looking at ways to improve retail productivity, including store labor models and processes” that conform to “industry best practices.”
Wal-Mart says the majority of its workforce is full time, and the share of part-time workers has stayed about the same over the past decade. A spokeswoman said store employees can view all of the open shifts in their store, and that there are full-time positions available in the store at which Ms. Sok works.
Source
REPORT: Milwaukee School Discipline Guidelines Disproportionately Target Black and Latinx Students
REPORT: Milwaukee School Discipline Guidelines Disproportionately Target Black and Latinx Students
Despite costing millions of dollars, punitive student discipline strategies implemented by the Milwaukee Police...
Despite costing millions of dollars, punitive student discipline strategies implemented by the Milwaukee Police Department(MPD) over the last decade have failed to improve school safety in the city and have taken a disproportionate toll on students of color, according to a new report from The Center for Popular Democracy and Leaders Igniting Transformation (LIT).
Read the full article here.
Castro moves to stop VP fire from the left
Castro moves to stop VP fire from the left
Targeted by progressive activists hoping to kill his chances of being Hillary Clinton’s running mate, Julián Castro is...
Targeted by progressive activists hoping to kill his chances of being Hillary Clinton’s running mate, Julián Castro is set this week to announce changes to a hot-button Housing and Urban Development program to sell bad mortgages on its books.
The changes, which HUD officials will brief stakeholders and activists on during a conference call on Monday, could be made public as early as Tuesday — depending on when department lawyers give the green light to publishing them in the Federal Register.
But they won’t take effect before the next auction of HUD mortgages, scheduled for May 18.
Castro’s actions could potentially defuse an issue that activists have been using to question his progressive credentials — and he’ll be doing it at the moment the running mate search has begun to get serious at Clinton campaign headquarters.
Among the changes, according to people with knowledge of what’s coming: The Federal Housing Authority will put out a new plan requiring investors to offer principal reduction for all occupied loans, start a new requirement that all loan modifications be fixed for at least five years and limit any subsequent increase to 1 percent per year, and create a “walk-away prohibition” to block any purchaser of single-family mortgages from abandoning lower-value properties in the hopes of preventing neighborhood blight.
HUD officials say that the timing isn’t a response to the activist pressure or the presidential campaign calendar.
“It has always been our goal to get the policy right, regardless of arbitrary deadlines, and we expect to announce those changes this week,” said HUD press secretary Cameron French.
But the changes come after two years of calls by activists — joined last September by Sen. Elizabeth Warren (D-Mass.) — for major reforms to the Distressed Asset Stabilization Program. Their calculations — numbers that HUD says are way off — allege that during Castro’s tenure, 98 percent of problematic mortgages the department has sold went to Wall Street firms that they say were responsible for the housing crisis in the first place.
With the backdrop of a Democratic Party recalibrated by Bernie Sanders’ surprisingly strong candidacy, activists were preparing a full offensive against Castro this week, looking to leverage his political ambitions against him to extract major concessions.
Last Thursday, activists sent an ultimatum letter to HUD titled, “Seeking swift changes to HUD's DASP program,” and demanding response within 24 hours. They had set up a national day of action for Tuesday, with protests scheduled at HUD offices in New York, Philadelphia, Los Angeles and San Francisco, along with a news conference at Newark City Hall — which remains on for now, pending whether they feel HUD has gone far enough in what the agency tells stakeholders on Monday afternoon.
“I would say we’re cautiously optimistic, but we don’t know, and what we need to see is a plan that will lead to substantially more mortgages not getting into the hands of bad actors and saving more homes from foreclosure,” said Amy Schur, campaign director for the Alliance of Californians for Community Empowerment, on Sunday afternoon. “Unless we see that, it’s going to be a problem.”
Schur has been in touch with HUD regularly over the course of the past two years, and in recent weeks when the conversations stepped up after the activists fired a warning shot against Castro by launching a public effort built around the website DontSellOurHomestoWallStreet.org.
That first attack on Castro in early April prompted a number of leaders to rush to his defense — some because they felt the criticisms were unfair, others because they were eager to protect the future of arguably the most promising Latino rising star in the Democratic Party.
“Some of y’all may have seen recently concerns that were voiced about DASP,” Castro said last week in an appearance at a National Association of Realtors event teasing the changes.
“We’re improving that and have been working to do that to ensure that folks are able to stay in their homes longer because they’re offered principal reduction in certain instances,” Castro said, “that we get better outcomes for neighborhoods by making sure that folks who secure those loans aren’t able to just walk away from those properties and by instituting something that we refer to [as] ‘payment shock protection’ to make sure that once payments are modified that they don’t just jump up a couple years later.”
Other members of the coalition and signatories on the ultimatum letter are American Family Voices, the Center for Popular Democracy Action, Daily Kos, Democracy for America, MoveOn.org Civic Action, New York Communities for Change, Other 98% Action, Presente.org, RootsAction.org, the Rootstrikers Project at Demand Progress and the Working Families Party.
Schur said that she and others are hoping that HUD will include some method of incentivizing mortgage sales through early bidding or favorable rates to nonprofits and neighborhood groups, rather than the Wall Street firms that have bought many of the mortgages. They feel that large financial institutions don’t care about the effect on neighborhoods from letting properties go vacant or decline, or of overwhelming homeowners with liabilities — though many argue that the reason these institutions buy so many of the mortgages is that they are the only ones that have the capital and management capability to handle the purchases.
“Where we would like to be with HUD is partnering to roll out a positive program in our cities across the country,” Schur said. “We’d rather be doing that than protesting. But if the changes are insufficient and this program is going to continue to be almost a wholesale giveaway to speculators, we’re going to have to keep the pressure up. We’re not going to have a choice.”
HUD officials point out that the May 18 auction isn’t for the DASP program and call the complaints surrounding that unfair. It is for different mortgages, called an “aged loan sale,” scheduled before these reforms were far along. No DASP auction has been set yet for 2016, and reconsideration of the program, according to French, has been underway since the most recent DASP auction, at the end of last year.
“Since 2014, FHA has made changes to the DASP program before every sale. FHA has been working on the latest round of changes to the DASP program for months, and, in our desire to be as comprehensive as possible, we’ve engaged a broad group of stakeholders on the potential reforms that would make the most impact for distressed homeowners,” French said.
Activists had been growing frustrated with the pace and substance of the conversations with HUD, and HUD officials have been losing patience with them as well, feeling that the activists are out for attention and landing on Castro simply because his name is in the running mate mix.
And, well aware that this is a critical political moment for Castro, activists warn that they’re ready to keep after him until the Democratic convention in July, and beyond that if he is Clinton’s pick.
“We would all love for the secretary to really come through in a big way, but housing activists and folks in our neighborhoods are not going to stop when our neighborhoods are being sold off to Wall Street. There has to be a major, major change,” said Jonathan Westin, director of New York Communities for Change. “Folks are completely ready to keep pushing.”
By Edward-Isaac Dovere
Source
Protesters roll loudly through Senate office buildings, 155 arrested
Protesters roll loudly through Senate office buildings, 155 arrested
The chants of vocal activists echoed through the hallways of Senate office buildings Wednesday, as hundreds staged sit-...
The chants of vocal activists echoed through the hallways of Senate office buildings Wednesday, as hundreds staged sit-ins to protest the Republican health care plan that's already on shaky ground.
Clashing with the shouting was the sound of two-way radios from a larger-than-normal police presence to arrest those refusing to heed warnings to stop.
Read the full article here.
Meet One of the Sexual Assault Survivors Who Confronted Jeff Flake & Triggered FBI Kavanaugh Probe
Meet One of the Sexual Assault Survivors Who Confronted Jeff Flake & Triggered FBI Kavanaugh Probe
Republican Senator Jeff Flake of Arizona was on his way to cast his vote, shortly after announcing his intentions to...
Republican Senator Jeff Flake of Arizona was on his way to cast his vote, shortly after announcing his intentions to confirm Trump’s Supreme Court nominee Brett Kavanaugh, when he was confronted in an elevator by two women who are sexual assault survivors. The women held open the elevator door, telling Flake, through their tears, that he was dismissing their pain. Soon after, Flake surprised his colleagues on the Senate Judiciary Committee by advancing Kavanaugh’s nomination but asking for an FBIinvestigation before the full Senate vote. President Trump has now ordered an FBIinvestigation into Kavanaugh. We speak with Ana María Archila, one of the women credited with helping to delay Kavanaugh’s confirmation.
Watch the video here.
Three honored by Jefferson Awards for public service
Three honored by Jefferson Awards for public service
Barkan, who was diagnosed with amyotrophic lateral sclerosis in 2016, started two programs at the Center for Popular...
Barkan, who was diagnosed with amyotrophic lateral sclerosis in 2016, started two programs at the Center for Popular Democracy, a national advocacy group that promotes progressive political groups. The programs include “Fed Up,” a pro-worker policy group, and “Local Progress,” a network of progressive politicians. For one of his projects, “Be a Hero,” Barkan traveled across a country in a wheelchair-accessible RV to campaign for political candidates who will “stand for” families so that “health care benefits [families have] paid for [will be] there for them when they most need it,” according to the campaign’s website.
Read the full article here.
Nina Tassler, Denise Di Novi Launch New Studio PatMa Productions
Nina Tassler, Denise Di Novi Launch New Studio PatMa Productions
The studio has already set up partnerships with a number of organizations promoting diversity, inclusion, and human...
The studio has already set up partnerships with a number of organizations promoting diversity, inclusion, and human rights, among them the Geena Davis Institute on Gender in Media, the Center for Popular Democracy, and Planned Parenthood.
Read the full article here.
Where Trump’s Policies Sow Fear, New Campaign Argues, "Corporate Backers of Hate" Stand to Profit
Where Trump’s Policies Sow Fear, New Campaign Argues, "Corporate Backers of Hate" Stand to Profit
Last month, immigrant and workers’ rights groups, led by the Center for Popular Democracy and Make the Road New York,...
Last month, immigrant and workers’ rights groups, led by the Center for Popular Democracy and Make the Road New York, launched the “Corporate Backers of Hate” campaign. The groups are targeting nine corporations that, activists argue, stand to profit off of policies pushed by President Donald Trump. These include several companies whose CEOs sit on the president’s Business Council.
“We are launching this campaign today because we know the extent to which President Trump is able to implement his anti-immigrant, anti-worker agenda actually depends heavily on how much collaboration he is able to muster,” said Ana Maria Archila, co-executive director of the Center for Popular Democracy, during a press conference. “On immigration, for instance, the White House will rely on the work of private companies to provide the funding, software, and manpower to ramp up deportations, to build detention facilities, and to build a border wall.”
Read the full article here.
29 days ago
29 days ago