Fantastical Finance: CPEG’s Bill Barclay Responds to Sun-Times’ Condescending Editorial

Note: This response is authored by CPEG’s Bill Barclay in response to a February 16th Editorial in the Chicago Sun-Times regarding the potential for a “LaSalle Street Tax”, a very small tax on the trading of financial assets. You can download a full Q&A on the Lasalle Street Tax here.

First they ignore you, then they laugh at you, then they fight you…

…and then you win.

- Gandhi

The gathering momentum behind the LaSalle Street Tax (LST) is moving us through Gandhi’s stages faster than we expected. The most recent evidence that this momentum can no longer be ignored comes from the Sun Times February 16th editorial, which endorses such a tax in principle. While attacking the proposed level of the LST, the editorial says “a very small Chicago tax might make sense.”

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First Edition of Quarterly CPEG Notes

Click below to read CPEG Notes, a new series of quarterly analyses of current economic reality by the Chicago Political Economy Group. This publication, which has evolved out of CPEG’s regular Commentary on the Monthly BLS report, is directed at scholars, students, activists, journalists, policymakers and all others interested in economic trends, theory and issues confronting the world economy.

CPEGNotes2.15

Commentary on the November 2014 BLS Jobs Report

The headlines are euphoric: “Big Job Gains and Rising Pay in Latest U.S. Data” (NYT 12/6/2014) and indeed the 321,000 payroll jobs increase, 9-cent increase in average hourly wages and 0.1 hour increase in weekly hours last month exceeded expectations and is reminiscent of the 300-400 thousand monthly job growth and rising wages of the late 90’s tech boom bubble economy glory days. These November payroll (Establishment Survey) numbers are good, the kind of monthly job growth that could eventually dig us out of the Lesser Depression hole if they consistently continue for another couple of years (eyeballing from Figure 2 below). This would get us back to the Emp/Pop ratio of 2007 assuming that major Labor Force population age cohorts (16-24, 25-54, 55 and over) were the same share of the overall population in November 2007 when the Lesser Depression started as they were in November 2014 (see Figure 2 explanation). We would still be far below post-war Emp/Pop ratios without taking demographic changes into account (Figure 1 below) but, with increased productivity and more redistribution of income among the cohorts (more wishful thinking), “sort of” where we were in Nov. 2007. Of course expansions out of every past post-war recession have led to a recovery of demographically adjusted employment losses within at most 4 years (see Figure 2) and this would require 7 years of continuous expansion with the most robust job growth in the last couple of years, but at least we would get back to where we were (on a demographically adjusted basis) 9 years after the start of the Lesser Depression.

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Commentary on the October 2014 BLS Jobs Report

On Nov 7th, three days after the 2014 midterm elections, the BLS released its Employment Situation Report for Oct 2014. The numbers are simple and not dramatically different from those that CPEG has analyzed for the past several months.

Overview

First, about 214,000 new jobs were created, continuing the string of net private job creation to 56 months, a new record.

Second, leisure and hospitality, health care and social assistance, retail trade and temporary help services – in that order – accounted for almost 3 of every 5 new jobs in October. Over the past year these four job categories accounted for almost half of all new jobs.

Third, the unemployment rate dropped slightly to 5.8%.

Fourth, the labor force participation rate remains very low at 62.8% although the employment/population ratio has risen by 1% over the past year.

Fifth, looking over the longer time span, the “Obama economy” has, to date generated more than 4.5 million new jobs vs the “Bush economy” new job creation of 1.5 million.

Sixth, although not part of the jobs report analysis, federal deficit is below 2% of GDP – lower than the 40 year average.

Few of the voters in the 2014 elections could have told you any of the foregoing – and some would have vehemently denied at least the last two points.

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Commentary on the September 2014 BLS Jobs Report

In its September 2014 Jobs Report, the Bureau of Labor Statistics once again documented the persistent and pernicious effects of the Lesser Depression, which began to take shape when financial services firm Lehman Brothers collapsed and filed for bankruptcy in September 2008.

Exactly six years on, labor force participation continues to decrease, dropping to 62.7 percent last month, the lowest level recorded since 1978. Nonetheless, the BLS boasts the official unemployment rate declined from 6.1 percent in August to last month’s 5.9 percent, with employment increasing by 248,000 jobs. Retail trade added 35,300 jobs; health care brought on 23,000, with 7,000 Americans going into home health care services; state governments added 22,000 jobs; and, notching another monthly increase, leisure and hospitality added another 33,000 jobs. Curiously, performing arts and spectator sports showed up with 7,200 jobs. However, when it comes to jobs that produce tradable goods, the paltry numbers more clearly illustrate the US economy’s weaknesses. For instance, last month, job losses were noted in computer and electronic products, semiconductors and electronic components, paper and paper products. Overall, manufacturing only added 4,000 jobs across the country. In September 2014, just as it has since the onset of the Lesser Depression, the US economy remained torpid.

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