Friday, April 21, 2017

Minimum Wage Increases: Plenty in 2017, But Fewer On the Way

On January 1 we saw a lot of states raising their lowest legal pay even further from the $7.25 federal bottom.  According to Karl Russell’s “A Higher Minimum Wage in 2017” (The New York Times, January 5), 29 states and the District of Columbia have compensation floors higher than the national, with concentrations on the Northeast and the West Coast, and 19 boosted them more, effective the beginning of the year.  Seven, with annual increases tied to inflation, lifted theirs 10 cents an hour or less, but in five – Arizona, Washington, Maine, Massachusetts, and Colorado – it jumped 99 cents or beyond.  The District’s, higher than any state at $11.50, did not change, but the top six, Massachusetts, Washington, California, Connecticut, Arizona, and Vermont, each went up 40 cents or more and are now at least $10.

However, the pace is heading for a slowdown.  Except for those indexing their minimum wages to inflation, only ten states have voted for future increases.  Of those, only California and New York, along with the District of Columbia, have committed to reaching $15 per hour.     
    
Will there be many more this year?  Three pieces published since then suggest it is unlikely.  The first, also in the New York Times, Noam Scheiber’s January 10th “Higher Minimum Wage May Have Losers,” noteworthy for appearing in a news outlet consistently in favor of raising it in the past, cited two studies, one at New York University showing that increasing minimum pay had the effect of making fewer working hours available, and one from Harvard Business School and Mathematica Policy Research concluding that such wage boosts were often followed by restaurants, especially ones rated low on the Yelp website, closing.  In this area, where controlled experiments of course cannot be conducted, all research results are controversial and unreplicable, but each study does become a data point.

The same conclusion was put forth by Forbes columnist Tim Worstall, in “Surprise, San Diego’s Minimum Wage Rise Appears To Be Killing Restaurant Jobs” (April 12th).  This author, previously and now against higher pay floors, wrote that “roughly… 50% of people in restaurants get the minimum wage and some 50% of the people who get it work in restaurants,” and cited a report that, after San Diego increased their minimum ahead of the rest of California to $11.50, 3,900 food service positions were either “lost, or never created in the first place.”  Worstall’s best point here is that higher mandated levels effect not only jobs that end but ones that would otherwise have started and didn’t.  Measuring those, though, is not easy. 

“Has the Movement to Raise the Minimum Wage Reached Its Limit?”  That question was explored by Scott Calvert and Eric Morath in The Wall Street Journal on April 6th.  They named Baltimore mayor Catherine Pugh’s veto of a proposition that would raise the minimum to $15 by 2022, which matched the end of a similar effort made in Maryland’s Montgomery County, even though it borders the already-$15-approving District of Columbia.  Pugh, though a Democrat, said that although higher pay was good, she also wished for her “city to survive” – and who should know better?  Another point here is that providing a date by which a large minimum wage increase will take effect, especially if years in the future, gives automation companies a deadline by which they can make available robots and other machines costing less than that per hour.  It also affects longer-range business plans such as opening factories, one example of which Calvert and Morath gave. 


As I have written before, my bias is in the direction of more jobs.  It remains simple economics that requiring employers to pay more than they would otherwise need to do means they will offer fewer of them.  As these authors have shown, that not only manifests itself in jobs that are discontinued, but in those that were never created in the first place.  It is too early to get much data on this year’s minimum wage increases, but it will come in – expect more here as it does.  

Friday, April 14, 2017

Five Observations on Trump, or Why We Aren’t Heading to Authoritarianism

Donald J. Trump’s surprising election to president – and again, if you don’t agree with that assessment, you should have quintupled some of your money by betting on him – scared a lot of us, and rightfully so.  Although we still need to wonder if he will push North Korea or even China too far and get us all nuked, the threat of an American totalitarian state that concerned many, including me, has faded dramatically.  Why?  To see that, consider the following.

First, a solid wall of opposition, with The New York Times and Washington Post in the middle, has formed.  These front-line publications have been emitting a steady stream of anti-Trump editorials and opinion pieces.  Many of these items are essentially pointless, decrying him for being himself or bemoaning his lack of interest in liberal-appeal issues such as climate change, but others critique his actions from his own stated standpoints, or from what they consider reasonable presidential behavior.  The writings’ overall effect is to show that nationally-respected commentators are watching, documenting, and freely disapproving of what he does.  There was nothing similar at all in 1933 Germany.

Second, Trump is consistently coming off not as evil but as incompetent.  He, as expected, shows no inclination or even ability to negotiate with his political opposition.  He is not assembling any sort of authoritarian government, or even a full government at all, with the number of appointments he has made being far smaller than that from even his most anti-bureaucracy predecessors. 

Third, as shown by his failure to repeal Obamacare, our federal checks and balances are still working effectively.  In the House and Senate he has enough opposition within his own party, let alone from Democrats, to stop him from dictating anything which would consolidate power into the executive branch.  The addition of Neil Gorsuch means only that the Supreme Court is ideologically similar to what it was before the vacancy he filled materialized, when it was hardly a source of fascist legal interpretations.

Fourth, Trump is lacking in solid allies.  Although he has done some things which should please true conservatives, such as approving the Keystone pipeline, his previous hostility toward them has made those in Congress at most temporarily on his side.  Among constituents, though surveys show he has lost only a small percentage of his supporters, he is gaining even fewer.  It is possible that, during his first term, he will reach a point where he will be able to rely on nobody, with the Goering, Himmler, and Goebbels equivalents nowhere to be seen.


Fifth, with all that said, the outcome of Trump’s time in office is still very much unknown.  We know remarkably little about which ideological segment will benefit most from his failures in the 2018 and 2020 elections.  His current scandals, especially given a Republican-dominated legislature, do not project to be nearly sufficient for impeachment, yet the Predictwise site gives him a 49% chance of being out of office before 2020, and, at sportsbook.ag, you can win $10 for every $18.50 you wager that he will complete four full years.  The latter site gives the same odds for a Republican or a Democrat to win the next presidential contest, with the most likely individual winner, after Trump, being Democrat Elizabeth Warren, at 8 to 1 against.  That’s all we know – stay tuned, as that could change suddenly… and unpredictably.                  

Friday, April 7, 2017

AJSN (American Job Shortage Number): We’re Now 17.2 Million Positions Short, After Good Federal Employment Report

This morning the headline jobs number came in much worse than expected.  Far from a projection of 180,000, there were only 98,000 net new nonfarm positions created in March.  But don’t let that fool you.

Almost everything else improved, starting with stunning drops in the official unemployment rates.  The one you hear about the most, seasonally adjusted, did not stay at 4.7% as some expected but fell to 4.5%.  The unadjusted figure, higher since in March fewer people are working than in an average month, plunged even more, from 4.9% to 4.6%. 

The other results were consistently favorable.  The count of long-term unemployed, or people officially jobless and out for 27 weeks or longer, was off 100,000 to 1.7 million.  The tally of those working part-time for economic reasons, or unsuccessfully seeking full-time work while maintaining shorter-hours employment, also dropped 100,000, reaching 5.6 million.  Average private nonfarm wages were up a nickel an hour to $26.14, nothing trivial when inflation is less.  While the labor force participation rate stayed at a strong-by-recent-standards 63.0%, the employment to population ratio, helped by lower joblessness, ticked up 0.1% to 60.1%. 

The American Job Shortage Number or AJSN, which shows latent demand for work, or how many more American positions could be filled if getting one were known to be easy and routine, dropped a surprising 647,000, with the categories of marginal attachment adding 105,000 to the effect of reduced official joblessness, as follows:


 Compared with a year before, an important evaluation since the AJSN is not seasonally adjusted, the metric is down 584,000, with lower unemployment partially offset by a substantial increase in the count of those reporting interest in work but not having looked for it for at least a year. 


The net new jobs disappointment, and its failure to match those needed for population increase, notwithstanding, March was clearly a positive month.  With room to spare in February’s 235,000 gain, the data gives no signs of a correction, and already excellent figures such as the unemployment rates are still improving.  The share of latent demand coming from official joblessness is now only 38%, meaning that there is too much unfulfilled general interest in work for the economy to be as robust as that 4.5% would indicate.  Yet the turtle, once again, did take a step forward.        

Friday, March 31, 2017

Higher Views: What’s Happening and Not Happening with the United States and Employment

Already this year we’ve had remarkably headline-grabbing commentary on the direction of not only American jobs, but the country in general.  What have people been saying and how much value does it have?

On January 11th, Salon shouted out “Sorry, Trump voters:  Those factory jobs aren’t coming back – because they don’t exist anymore.”  Author Conor Lynch made good points toward his correct thesis about those nostalgia-inducing positions, that since the Great Recession year of 2009 manufacturing output has increased 20% while employment is only up 5%, with “automation technologies, not foreign workers” the culprit in 80% of those lost opportunities.  That is the problem we face, and is another reason why efforts to vilify immigrants are inappropriate.

Noteworthy observations punctuated “Lifelong learning,” published January 14th in The Economist.  The column started with a shaky assumption, that “education fails to keep pace with technology,” and described “working lives” as “lengthy,” which they would be if people got what they wanted, but then laid down a law that workers “must” add new skills with time.  The unbilled author proposed an offset to the trend toward narrow college majors and courses of study, that “those with specialised training tend to withdraw from the labour force earlier than those with general education – perhaps because they are less adaptable.”  That, at least generally true, would make as good a subject for a book as for an article.

The same is true for a piece in the February 6th New York Times, in which Patricia Cohen discussed something I have mentioned in the past but have seldom seen elsewhere.  “The Economic Growth That Experts Can’t Count” said that, although American gross domestic product is growing more slowly, to it “a delectable $20 meal that would wow Julia Child is equal to a rubbery, tasteless one that costs the same amount,” and that “digital dark matter” such as Wikipedia which demonstrably increases productivity is likewise not included.  Indeed, ordinary Americans have advantages even the most affluent did not have only ten years ago, some of which Cohen documented.  They are not creating jobs as they once did, and Wikipedia employs far fewer people than would a Library of Congress-sized institute in each city, but they are real.

Is less than 17 years enough time to say that “This Century Is Broken”?  David Brooks posed that question in the February 21st New York Times.  He said that from 1951 to 2000 there were “no world wars, no Great Depressions, fewer civil wars, fewer plagues,” and asserted that slow economic growth was the core problem of the years since then.  Brooks cited increased numbers of men aged 25 to 55 out of the labor force, a group with 57% getting government disability, and “about half” taking pain medication daily, those two depressing statistics related, one way or another, to the work shortage.  It is too early to say anything comprehensive about 2001 through 2100, but in some ways we clearly are, indeed, off to a bad start.      

Along with Brooks, Robert J. Samuelson (“Have Americans gone complacent?,” February 28, The Washington Post) reacted last month to a new Tyler Cowen book, The Complacent Class.  In it, Cowen argued that our country is, as Brooks put it, “decelerating, detaching, losing hope, getting sadder.”  As symptoms, Cowen named lower entrepreneurism rates and less tendency to move for jobs;  the last is easily explained by work opportunities being increasingly temporary, but the first, especially Brooks’s interpretation that “millennials may be the least entrepreneurial generation in American history,” fueled both by Cowen’s telling us that the percentage of those under 30 owning businesses is down 65% in about 30 years and that generation having a sky-high underemployment rate, is worthy of concern.  Samuelson’s observation that we “increasingly cluster with people ‘like us’” is nothing new, and neither is his thought that what Cowen called “complacency” was really “entitlement” (I would call it “justified fear”).  However, Brooks’s question, “where is the social movement that is thinking about the fundamentals of this century’s bad start and envisions an alternate path?” is a good one.  I project that such a crusade will take shape within a few years.


Another good one, “The Big Question for the U.S. Economy:  How Much Room Is There to Grow?” was posed by Neil Irwin in the February 24th New York Times.  There is still plenty of “economic slack,” in the forms of underused factories (the rate much the same as it was five years ago), unoccupied business property (down only from 17.6% to 15.8% since 2011), and of course potential employees who aren’t working (see the latest AJSN at http://worksnewage.blogspot.com/2017/03/february-almost-every-jobs-number.html).  Because of this extra capacity, Irwin called for fewer interest rate increases, to “create a virtuous cycle” by attempting “to run the economy a little hot.”  That is the strategy with the most merit, and would get more of our 17.9 million surplus workers into jobs.  That, not fine-tuning, is what we need now as ever.         

Friday, March 24, 2017

Driverless Cars Tootle, Or Rather Speed, Into 2017 – Part 2

We continue with some old business, in “Tesla’s Self-Driving System Cleared in Deadly Crash” (Neal E. Boudette, The New York Times, January 19).  The federal government concluded that that company’s “autopilot” feature, despite being overnamed and being engaged in a fatal May collision, did not need to be recalled.  It has been modified to shut off once the driver ignores three warnings to put their hands on the steering wheel, and two competitive systems, from General Motors and Audi, will monitor driver’s eyes (!) for the same purpose.

“Are General Motors and Lyft About to Crush All Self-Driving Rivals?”  John Rosevear posted this question on February 19th in The Motley Fool.  GM is planning on making “thousands” of driverless Bolts next year for Lyft’s ridesharing, which the latter company apparently and rather reasonably considers critical not only to their prosperity but to their survival.  In an area this fast-moving they can’t be sure, so the short answer to Rosevear’s query is “no.”  Meanwhile, per Yahoo Tech three days later, competitor Uber is now testing its self-driving cars in Arizona, where the governor took a ride in one and praised it. 

In the February 23rd New York Times, John R. Quain raised the issue of product standardization between driverless vehicle manufacturers.  True, we will need that, but it’s too early to try to establish such conventions.  We don’t know which self-driving technologies will win out on merit and in the market, which are two different things.  It will be later in the process, maybe two years from now, before official standards are agreed upon and put into place.

The consortia and partnerships are well under way, and so are the legal cases.  Per The New York Times (“A Lawsuit Against Uber Highlights the Rush to Conquer Driverless Cars,” February 24), Google’s Waymo driverless vehicle organization has brought an action against Uber for allegedly stealing trade secrets.  With top technicians getting high seven-figure bonuses to change companies, and nondisclosure agreements insufficient to clearly define the thin and permeable line between personal knowledge and proprietary information, this was neither the first nor the last.  The same goes for such ploys as, attributed to Uber executive Anthony Levandowski, trying to pay off “distracted” employee’s girlfriends to break up with them, and, as did Uber’s Otto division, filming videos of legally unapproved self-driving trucks.  It’s an exciting high-stakes game out there – don’t be surprised to see many more of these sorts of things.

On March 8, we learned from Fox Business that “Uber Self-Driving Cars Are Coming Back to California Roads.”  They were barred from them in December, but now have a permit to test there again, if for only two units, to become the 26th company allowed.  That state has also proposed that cars without steering wheels be testable there (USA Today, March 10th). 

My latest “why didn’t I think of that” moment came from John R. Quain’s March 9 New York Times “Cars Will Talk to One Another.  Exactly How is Less Certain.”  Since driverless vehicles will be receiving a lot of electronic information, it only makes sense for them to broadcast it to others nearby.  Per Quain, they can relay news of “disabled cars and vehicles that are braking hard ahead, as well as slippery road conditions.”  And more.  They may not be able to stop stupid human drivers from trying to beat trains to intersections, but can at least tell them they are there.  Two great advantages this communication will have – and I am almost certain it will be built into all American cars within ten years – is that it works even in areas without cellular service, and does not require infrastructure improvements.  Perhaps it could also issue warnings about people cruising, in the left lane, at two-thirds of the speed limit. 

This month’s most massive transaction was, as reported in The Wall Street Journal on March 13th (“Intel Joins Silicon Valley’s Race to Make Best ‘Server on Wheels,’” Ted Greenwald), was Intel buying Israeli car-camera company Mobileye for $15.3 billion.  The two together will form only part of a driverless-vehicle consortium, but, with Intel’s chips, it’s a powerful combination.  Intel’s estimate of “autonomous-driving systems, services and data” reaching $70 billion by 2030 strikes me as conservative, and, just maybe, if enough others share Intel CEO Brian Krzanich’s view that “what’s under the hood” will soon refer to computing features, millennials may find more interest in driving.


We finish with “The 5 Biggest Challenges to the Driverless Car Revolution,” or at least how Justin Loiseau saw them in his March 11th Motley Fool piece:  pricing, consumer understanding, “safety/security issues,” regulation, and technology.  It’s way too early to worry about the first.  The second is also premature, as we don’t know exact capabilities yet.  The third is more a matter of perception, as driverless vehicles should start cutting highway deaths as soon as next year.  The outlooks for the last two, though, are clearly positive.  The bad news for investors, to which The Motley Fool caters, is that we can’t yet tell the Fords and Chevrolets from the Stutz’s and Hupmobiles.  But driverless cars are the McCoy, the real deal, the genuine article; if you have an appetite for risk, you should place some bets somewhere.        

Friday, March 17, 2017

Driverless Cars Tootle, Or Rather Speed, Into 2017 – Part 1

The current year is shaping up as a critical one for self-driving vehicles.  A great deal has happened already.

One large choice, or “metadecision,” as we could call it, is how much of the burden of getting driverless vehicles information on what’s around them should be borne by the roadways.  In “States Wire Up Roads as Cars Get Smarter” (The Wall Street Journal, January 2), author Paul Page described signs recently installed in the Washington area warning drivers of upcoming problems, such as in the story a sudden thunderstorm, of which they may not yet be aware.  Such things are valuable both for our current meatmobiles and for self-driving cars and trucks, but, as Page mentioned and probably understated, the amount of money “needed to wire the nation’s more than 4 million miles of paved roads and 250,000 intersections” would be in the billions of dollars.  For a variety of reasons, including lower cost and more flexible technology improvement implementation, I expect that the vehicles will need to be the smart ones, and industry consensus on that should be reached within two years.

The same publication, a week later, issued Stephen Wilmot’s “How the Auto Makers Can Survive the Self-Driving Car.”  This piece was directed toward investors, who would do better to disregard two things it contains: the assertion that “electric cars are starting to take off” (which they have been doing for 50 years, and look no stronger now with recent sales crashing to almost nothing in states which have replaced their subsidies with registration charges in lieu of fuel taxes), and the idea that driverless taxi services, since rides in them will cost less, will cause huge drops in car sales, even starting “this decade.”  Wilmot also pointed out, though, that concentrated auto purchases by whatever companies win the self-driving taxi battle will “undermine the stable system of car dealerships that has controlled the industry for decades” (good riddance, as I see it), and that those who choose not to buy cars, who will be almost exclusively in urbanized areas, will instead purchase “mobility as a service,” which could take the form of agreements with these corporations to obtain transportation in different ways to cover different needs.  Companies could, for example, deploy automated taxis for trips to airports, but deliver customer-driven Jeeps for summer-home weekends – look for such agreements to be commonplace by the middle of the next decade.

We learned, also from Paul Page in The Wall Street Journal, that one of the last things the Obama administration did was to start a federal point of contact for driverless-vehicle regulation (“U.S. Sets Up an Advisory Panel on Self-Driving Cars,” January 11).  The 25-person committee was designed to include top executives from General Motors, Amazon, Uber, Alphabet, and FedEx, so can hardly be accused of being anti-business.  Creation of that panel, even though we don’t yet know what regulations will be ongoing, was a positive step.

Driverless technology has also moved along this year.  “Waymo’s self-driving cars need less driver intervention” (Ryan Randazzo, Arizona Republic, January 13) documented how Google’s driverless autos, which have been tested in Arizona for several months, now need human intervention only every 5,000 miles, and, by using GPS and radar, can assess their environments for 200 yards in each direction.  Still, new problems continue to appear.  In “These Drivers Are Not Crazy – They’re Just Doing the ‘Pittsburgh Left’” (The Wall Street Journal, January 20), James R. Hagerty described that city’s motorists’ custom of letting others turn left in front of them.  While technically illegal it is commonplace there, and is often authorized by drivers waving or blinking lights.  The same practice is also frequent in Boston, and other American areas, such as New Jersey and California with multiple consecutive lane-changes, have their own deviations.  Either laws against these maneuvers will end up being enforced, driverless vehicles will need to anticipate them in some places but not in others, or that light-clash or hand-wave will be officially mandated – something will work.

Given that most people have never seen one in action, it is no surprise that we have “consumers still confused about self-driving cars” (AFP Relax News, January 18).  This early in their implementation, it is not disturbing at all that 72% to 81% of Korean, German, Japanese, and American survey respondents said they didn’t yet trust the things.  More telling, however, is the 68% of people in our country who “said they’d change their opinion once such cars have proven they’re safe.”  Those in one industry, though, understand them much better.  In “Self-driving Cars a Sure Bet – Just Ask Insurance Companies” (Newsmax, January 17), Lee Gruenfeld called their implementation “a slam-dunk certainty,” and cited an insurance executive as saying “the self-driving car is going to eat us alive” and that his or her company had planned on “automobile-related revenues being down by 50 percent at the end of ten years.”  We can take that to the bank, since, as Gruenfeld put it, “if you know any actuaries, you know that these are serious people not given to flights of fancy.”  We may not achieve great oil-consumption savings, as he suggested, but the almost certain precipitous drop in highway deaths is reason enough to agree.

Given that, we can take the idea of making driverless vehicles illegal in my state, to save jobs, as humorous.  Yet, in David Curry’s “Really?  A 50-year ban to self-driving cars in New York?” (Transport, January 17), we learn that the Upstate Transportation Association is trying to do just that.  They have about as much chance of success as this week’s 26 inches of snow has of melting this weekend – and that is a good thing. 


More on this topic next week.

Friday, March 10, 2017

February: Almost Every Jobs Number Improved, Including the AJSN Showing Latent Demand Down to 17.9 Million

This morning’s Bureau of Labor Statistics employment data was superb. 

All 9 of what I consider the front-line BLS statistics were positive.  Nonfarm payroll employment went up 235,000, about 100,000 more than our population increase absorbed.  Seasonally adjusted unemployment was down 0.1% to 4.7%, and the unadjusted one fell 0.2% to 4.9%.  The total number of officially jobless Americans was off 100,000 to 7.5 million, including 1.8 million out for 27 weeks or longer, also down 100,000.  The count of those working part-time for economic reasons, or seeking full-time work while holding on to part-time labor, now 5.7 million, dropped the same amount.  The two measures showing how common it actually is for people to have jobs, the labor force participation rate and the employment-population ratio, after gaining a large 0.2% apiece last month, were each up another 0.1% to reach 63.0% and 60.0% respectively.  Average nonfarm payroll earnings, which had done well recently, were given another positive adjustment, and might have been due for a correction, were up a well-over-inflation 6 cents per hour to $26.09.

The American Job Shortage Number or AJSN, which shows in one non-seasonally-adjusted figure how many more positions could be quickly filled if getting one were as easy as getting a pizza, also improved, as the counts of people in most statuses of marginal attachment improved as well.  Overall, the AJSN fell 448,000, as follows:




Compared with a year before the AJSN is almost 300,000 lower, with almost exactly that amount due to a drop in official unemployment.  Otherwise, the largest changes were in those reporting they wanted to work but did not search for it in the previous year, down 269,000 for a latent demand reduction of 215,200, and in those who fall through the cracks, the non-civilian, institutionalized, and unaccounted for, up almost 1.5 million since February 2016 and thus expectable to absorb about 150,000 more positions. 


There is no doubt about the strength of this data.  February was the best month in years, with its advance unusually broad-based.  The AJSN went along with that, with its large improvement completely meaningful as similar numbers of people usually work in January and February.  The only bad news is that another interest rate hike is now almost certain – however, if it is small, the economy can take it.  As for the turtle, he took another step forward – and even stretched in the process.