Friday, September 27, 2013

Jobs in America: What Obama Could Say, and Start

We’ve moved past attacking Syria, are once again shouting at each other about gun control, and are apparently heading toward some kind of partial government shutdown.  Many are dead-set against Obamacare, which has already been discussed, approved, and found constitutional.  The country’s problems look more and more intractable, with little cooperation in sight.  It seems doubtful that our president will achieve much more in his second term, which still has over three years to go – unless he changes his focus to a massive issue which has once again drifted to the back burner.    

So where can Obama go?  Here is a speech he might give:
“My fellow Americans, I come to you with a problem.  We have something which needs our attention, more than any other challenge we face.

“The last recession ended four years ago.  Unemployment is now 7.3 percent.  That is an improvement over the past few years, but is still much higher than it has been for most of our lifetimes.  More and more Americans have been leaving the labor force, choosing different lifestyles, and giving up on the possibility of supporting themselves and their families.  The American dream of work and prosperity, which has been admired worldwide as well as by our citizens, is in serious danger.  The reason is that the jobs crisis is permanent, and will not end with better economic times.  That is hard to swallow, and so is what I am telling you, right now – we do not know the best way to deal with it.     
“I could explain further about why, without major changes, we will never see five percent unemployment again, but it is time for me to talk less and lead more.  So I will take less than ten minutes to explain where we are with this 250-year historical shift, some steps we might take, and how we can go forward.

“On the jobs crisis, conservatives are wrong.  Joblessness is not confined to those less worthy or successful anymore.  Companies cannot tolerate a general lack of money being spent.  Markets will not work unless people can buy as well as sell.  Liberals are also wrong.  The problem is not inequality, it is people not having an opportunity to support themselves by working.  And businesses are not at fault – squeezing and shackling them are not answers either.  Some things both sides have suggested, such as reducing immigration, removing destructive regulations, and subsidizing housing, may be good, but are not nearly enough. 
“So what could solve the jobs crisis?  We Americans need to consider and debate at least four possibilities.  The first is a guaranteed income.  Under this plan, each United States citizen would receive a stipend to cover basic levels of food and shelter, along with guaranteed medical care.  Second is shorter working hours.  Our productivity has improved so much over the past decades that we could make 8 AM to 1 PM our new normal business hours, reduce salaries, and hire more people.  Third, we can start charging for information contributed online.  When our personal data, ideas, and creative work help companies amass fortunes, we could be paid for that.  Fourth, our corporate income tax structure needs to change to reflect how many American jobs are being created and maintained.  A restaurant chain hiring hundreds of thousands of United States workers should, other things being equal, pay much less than a high-tech company with a few hundred.

“I propose looking at these, and other, possibilities in two ways.  First, I am starting a commission, with experts conservative, liberal, and in between, to assess the technical and financial side of these ideas, and report on if and how they would work in real life.  Second, I am calling upon city mayors, county commissions, authors, newspaper writers, bloggers, radio and TV hosts, and communicators of all kinds to hold discussions, online, through other media, and in person, to brainstorm ideas and collect the views of any Americans who want to contribute them.  Citizens, you will be heard! 
“The jobs crisis is a national problem which calls for free discussion and multilateral cooperation.  I have no axe to grind about what solution, or combination of solutions, would be best.  That is for us to determine together.  The only firm position I have about the jobs crisis is that it needs to be solved in some way.  If it is not, conservatives will be damaged by companies crashing from a sheer lack of customers, and liberals will be disgusted by the poverty caused by too few work opportunities – and those are far from the worst things that could happen.  Americans, we have made it through world wars, depressions, wrenching social changes, and intense hostility elsewhere in the world – we can negotiate this great transition as well.      

“Thank you, and may God and our efforts bless the United States of America.”

Friday, September 20, 2013

Continuing the Stimulus Is Not Perfect, But Clear-Cut for Now

The big financial news this week was the decision by Ben Bernanke and the Federal Reserve to carry on with its current, or QE3 (Quantitative Easing #3), stimulus efforts.  That may not seem like such a large event, but with Bernanke saying two months before that he expected to reduce or even stop the ongoing monthly Fed purchases of $85 billion in United States Treasury bonds and mortgage-backed securities, both stock and precious metal markets treated it as a major pleasant surprise, and both jumped – the Dow Jones Industrial Average and Standard & Poor’s 500 index both reached record highs, and gold rose over $60.  Commercial interest rates, which had increased more than 1% since June, also dropped.  

Although the $85 billion amount may not last long, as the Fed will consider a reduction as soon as next month, the collective decision on the stimulus will be based at least in part on unemployment rates.  In June, Bernanke had said that if unemployment went below 7% QE3 would end, but he did not confirm that this week.  Instead, his messages were that “conditions in the job market today still are far from what all of us would like to see,” unemployment was “well above acceptable levels,” and that the Fed was “looking for overall improvement in the labor market.”   His organization also indicated that very low base interest rates would not increase until unemployment went below 6.5%, and maybe not even then. 

So what has happened in the year since QE3 started?  Much of it has been good.  Official unemployment dropped from 8.1% to 7.3%, and the AJSN, showing the number of jobs that could be quickly absorbed, fell from 22 million to just under 21 million.  Labor force participation, however, has decreased from 63.5% to 63.2%, its current level a 35-year low. 

During the past year, the stimulus has added about $1 trillion to the amount of money available.  The result of that, though, is not what many would expect.  Although its two most common measures, M1 (notes and coins in circulation, traveler’s checks and checking accounts) and M2 (all of M1, plus savings and personal money-market deposits) have indeed risen substantially, 9.1% and 6.8% respectively, inflation has not followed along.  The monthly rate has actually decreased, from a 1.7% annual basis in August 2012 to 1.5% last month, with the highest intervening figure 2.2%.  Meanwhile, the official annual economic growth estimate is now 2.0% to 2.3%, down three tenths of a percent from June’s prediction, and the Fed expects it, along with inflation, to be low for years.  The number of jobs created or saved by the current stimulus is unknown, but a USA Today editorial, which was actually against continuing QE3, credited that and the previous effort, over three years, with 6 million.  Income inequality has been reaching long-time records, with the share of national income from corporate profits reaching a 90-year high and the share of that going to workers at a 50-year low.  More and more money is pooling up in a shrinking number of places, and a spectacular story from this week claimed that the richest 400 Americans had more in net worth than the entire economy of Russia. 

So is the stimulus worthwhile?  It clearly injects a distortion, and, as the USA Today editorial pointed out, it makes bubbles more likely.  We don’t know what our largest companies would do if their cash reserves got well into the trillions, but we may find out it is nothing good.  However, QE3 is clearly healthy for the economy the way it is.  We are getting no help from Congress on such things as a public works program that could provide millions of jobs doing things ranging from highly beneficial to utterly necessary, or on reforming corporate taxation to reward companies hiring and retaining American workers.  Although the amount of press on the possibility that the jobs crisis is permanent has increased at least tenfold since Work’s New Age was released in 2011, no House or Senate bills, to my knowledge, have been introduced to mitigate it.  As long as unemployment-rate drops are offset by lower labor force participation, there is no sensible reason to think the economy is substantively improving, modest increases in housing prices notwithstanding.  Accordingly, the stimulus must continue.

Friday, September 13, 2013

Could Payments for Online Information Replace Jobs?

Three months ago I posted a review of sorts of a book that perhaps unwittingly took on the jobs crisis.  Jaron Lanier’s Who Owns the Future?, published in May, blamed both our employment situation and the Great Recession on computer networks, which made many middle-class jobs unnecessary.  I noted that he saw many of the same causes and effects, such as markets not working unless they had buyers as well as sellers, as I had in Work’s New Age.  His solution was for people to be paid for their online contributions, including data about themselves they unwittingly provided when they obtained free resources from “siren servers” such as Google and Facebook. 

Lanier’s scheme would call for the following:

-          Payment to those who provide information used by others, be it demographics, data about their own online activities helping sites make money by gathering more and more focused advertising, or ideas that others see, enjoy, implement, or otherwise benefit from.

-          Royalties lasting a long time, dependent on the number of people gaining from these online products or information.

-          Tracking of these resources through their sources to others passing them on or mashing them up, to provide these royalties to their originators.

-          Charges for products or information which are now free, to cover the above.

-          A “universal online identity,” preventing accessing sites anonymously, under government auspices.

-          Nationally provided computing resources, such as storage space and algorithmic capability, their extent to be determined and debated.

Such a setup could still be superficially similar to what we have today, with the addition of the structures to be added below the surface, and of course the payment systems.  So what are its advantages and disadvantages?

Its best point it that it recognizes the value of information.  We have read for decades about how hardware and software are declining in significance, and how data itself is all that ultimately matters, yet at the same time information is increasingly becoming free.  Such a scheme can be sustained through further technological progress, and would prevent problems such as the loss of personal data that would happen if, say, Facebook went out of business.  It is in tune with the real sources of value, in which it is clear that Twitter does not get its value from either its operating system or its several hundred employees, but from the billions of tweets provided by others. 

The disadvantages of such a payment scheme are also large.  We are used to free Google searches, free Wikipedia listings, and free LinkedIn business networking, and paying for these things, or their equivalent, would not be a popular change.  For anything beyond providing personal data, as in Lanier’s rather optimistic example of a beach sand bridge idea generating “a nice day’s earnings,” it would force anyone to be in effect an entrepreneur, which as I have shown is a course unsuitable for the majority.  Since vast numbers of people provide data about themselves free as it is, those charging for it would find few takers, as even if the largest servers got only half, a quarter, or 10% of what they have now, it would have nearly the same statistical value, which could result in such payments becoming legally mandated.   

Even if this system would work, it would raise one huge area of concern.  It would put government in charge of something new, possibly complicated, and very large.  Such a large and slow-to-change entity does best with tasks that can be explained simply, such as “guard the coast” and “deliver the mail” (“track the data” may or may not qualify”), and that is not to mention the chance of Big Brother-ish government acquisition of even more personal information.  But, as Lanier points, out, with conservatives wanting national IDs for voting and employment, and liberals wanting a universal health care program requiring the same, both sides are moving there as it is.  It could still be limited;  the best comparison, he writes, might be with social security numbers, which are permanent even if individual banks using them fail.   

So how could compensation for online data fit with another possible jobs solution, guaranteed income?  The largest disadvantage of the latter would be its cost, which at a very casual, back-of-the-envelope guess for a bare-bones no-requirements stipend would be well over $1 trillion per year, even after subtracting both the stimulus effect and the cost of then-unneeded programs such as welfare and food stamps.  A great deal of that could be harvested through extra taxation of advertising revenues collected by Google, Yahoo! and others, where money has been pooling up unproductively, making monitoring data movements unnecessary.    

Would this work?  I don’t know.  There is enough cause, though, to add online payments to the list, previously to my knowledge containing only guaranteed income and shorter work hours, of potentially permanent jobs-crisis solutions.  What more are there?

Friday, September 6, 2013

August AJSN Down 500,000 – America Now Fewer Than 21 Million Jobs Short

The new employment and unemployment data has arrived.  As other headlines will tell you, the jobless rate has improved again, to 7.3%.  August is a neutral calendar time for employment, so the seasonally adjusted data, most of what the Bureau of Labor Statistics reported this morning, differs little from the AJSN (American Job Shortage Number) results that follow. 

The number of unemployed Americans dropped last month from 12,083,000 to 11,462,000, the largest factor causing the AJSN to fall 489,000.  Those not looking for work in the past year, but saying they still wanted a job, plunged a remarkable 418,000, and the similar “discouraged” category dropped 122,000.  Yet just a hair short of two million more said they did not want employment at all.  Most of the AJSN’s partially offsetting gain was due to a larger gap between U.S. Census Bureau data and Bureau of Labor Statistics data, now up to almost 11 million in the estimate of those in armed services, institutions, or not accounted for at all. 

Here is the breakdown:

Total Latent Demand % Latent Demand Total
Unemployed 11,462,000 90 10,315,800
Discouraged 866,000 90 779,400
Family Responsibilities 215,000 30 64,500
In School or Training 233,000 50 116,500
Ill Health or Disability 145,000 10 14,500
Other 884,000 30 265,200
Did Not Search for Work In  Previous Year 3,386,000 80 2,708,800
Not Available to Work Now 563,000 30 168,900
Do Not Want a Job 83,697,000 5 4,184,850
Non-Civilian, Institutionalized, and Unaccounted For, 15+ 10,890,526 10 1,089,053
American Expatriates 6,320,000 20 1,264,000
TOTAL     20,971,503

The three major secondary BLS measures were split; those out for 27 weeks or more stayed steady at 4.3 million, those working part-time for economic reasons (want full-time work but can’t find it) dropped 334,000 to 7.9 million, and labor force participation declined once more to 63.2%.

So how good was this month’s jobs report?  Not bad.  It fits in quite consistently with recent months’, with another seasonally adjusted net increase in jobs, 169,000, above the 125,000 to 140,000 needed to cover population growth.  Once again the unemployment rate dropped – both adjusted and unadjusted are now 7.3%.  It has now been one year since the first monthly AJSN was announced, so let us start comparing AJSN data with that of the year before.  How does August 2013 stack up with August 2012?

A year ago, unemployment was 1.2 million higher, at 12,696,000.  Those not searching for work in the previous year, but still wanting it, then counted to 426,000 higher.  The numbers in all marginally attached categories, except for those discouraged (up 22,000) have decreased since.  Those not wanting a job are up over 2.4 million. 

In all, these are good times, with employment continuing to crawl forward.  With the labor force continuing to shrink, though, improvements will be overstated.  Given the political climate, the government, with its measured stimuli, may be setting the stage as well as it can, barring the national infrastructure project that may end up waiting until after the 2016 elections.  The reason unemployment is as high as it is is not that we are being misgoverned – it is due to the job shortage, which is permanent and will not end even with economic times as otherwise good as these.