"The report said worry about an economic slowdown was the main driver of companies' layoff intentions."
I sometimes wonder if these sorts of economic projections end up being self-fulfilling prophecies. If everyone tightens up spending because they expect a recession, that essentially guarantees there will be one.
It's not just projections or worries. Companies have real hard data, such as sales pipeline, inventories, orders etc. If your sales pipeline is down, inventory is stocking up, and your warehouse is idle compared to a year before, it is a manager's job to lay off employees.
I think their point is that all of that hard data may be a result of self-fulfilling prophecies of other companies cutting back their business because there's a general sense that a recession might be coming.
I mean, if you're running a burger joint and fewer people are coming in to buy burgers, why would you continue to order the same amount of beef each week?
I get that the real world more complicated than this, as forecasting can be done for months out, but businesses can't magically fix the economy by continuing to spend the way they have been because it isn't sustainable.
The problem being pointed out is that fewer people aren't coming in to buy burgers yet, but because the store managers heard rumors of a recession, they preemptively fire employees and order less meat, which puts fewer dollars in their employees pockets, which means less spending power per person on average which means people actually do spend less, even though there wasn't actually anything wrong in the first place.
That's exactly right. Recessions are not behavioral patterns. They happen when borrowers can no longer borrow more to pay the interest on their existing debts.
This could leave you flat-footed when the economy picks back up or you realize it was a 'blip', so it's not an easy/clear decision to make because you see one or two numbers going down.
It's a stupid fucking mentality pervasive amongst the American corporate MBA set. It treats people as disposable and is usually not in the company's best interests. It's a short term boost to a company with long lasting and often disastrous implications down the track.
True but there's also a lot of unknowns and variables in any business and mangers have to guess sometimes. In that sense mood and atmosphere can matter if you're on the fence.
I feel awful for those people whose lives have just been disrupted so. I’m particularly empathetic because, as a foster parent, I know very well what may happen to some of those families.
I've never been a manager or had any role in laying someone off. But I've been laid off myself and know plenty people who get laid off and suffer the consequences, some quite severe.
So I sometimes wonder, how do these managers who lay off people sleep at night? I mean they are just doing their job so that THEY themselves don't get laid off. And next I wonder, who are these rich rich people who want more money so that they hire people to lay off other people?
I've had to lay off a decent number of people over the course of my career. The way I have always justified it is that I'm keeping the company healthy, and allowing far more people to keep their jobs in doing so. I'm sure there are cases where restructuring was done to the detriment of the business. I don't believe I've personally participated in any of those.
That is part of the reason I took those jobs. Someone was going to do it, and I felt that I could do it in a way that kept the business healthy and was as respectful and careful about the humans impacted as possible (ensuring severance, having 1-1 conversations with every impacted person on my team, etc).
For context I was an executive brought in to restructure software companies after they were purchased or tucked in by the LBO side of a PE firm.
A lot of these morale problems happen after layoffs as well. If the layoffs are deep enough it makes sense to move the entire company to a different city and completely reboot. In those situations I've seen as much as 90% of the company churn in the course of the year. Once the dust settles it's basically a new company and can feel like a high growth startup.
There's more to a job than pay rate. If the best employees leave because of a recession-time temporary pay cut, maybe the company culture was rotten and the company deserves to go down!
Because the work isn't needed. They arguably should pay workers more so workers can weather a future layoff or furlough, not pay people to come to work and do nothing.
True in some cases. But we've also seen plenty of public companies who are profitable but still lay off people for improved cash flow/stock price, which means more bonus for the few at top.
Laying people off is almost never fun. I say almost because sometimes there are people who make everyone around them absolutely miserable for no reason, and in times like that you get to feel like the good guy or gal. Most times though it's a gut wrenching, horrible thing to have to do. You make friends, despite warning yourself to keep a professional distance, you try to limit the fallout when you can, and you know that you're probably next. A lot of times you don't sleep well at night. Sometimes you're tempted to warn people. At the end of the day you're still human. Aside from sociopaths who don't have the ability to feel empathy, it's hard for most people and some people give these hard decisions as the reason sociopaths are often in roles where hard decisions that impact people, it's a benefit for them.
Businesses aren't infinite sources of money. Money should be spent paying people to do useful work, not paying them to produce products no one wants. Rich people spend money, supporting jobs. Layoffs aren't the problem here, inequality of income is the problem. A person's number of hours worked per lifetime is not the important variable, income per lifetime is.
Regarding the yield curve tweet, I'm pretty well acquainted with that whole theory since I listen to The Indicator from Planet Money podcast, and it's a favorite topic of theirs. I was going to note that it generally signals a recession when it's inverted for a whole quarter, but then I read the Tweet.
And it's about how the lower than usual rates it's currently at matter for what it says, which makes sense.
Then I noticed it was Paul Krugman making the observations.
Any prior points I had no longer seem worth adding now. ;)
This has long been empirically observed (see https://en.wikipedia.org/wiki/Paradox_of_thrift), but different schools of economic thought have different opinions about whether it's sufficient to result in a vicious cycle.
The escape from the paradox of thrift is to create things now that will be valuable in the future (durable goods, or education), or to lend money to people who need things now (aka investing). (Or give money away for that's but that's economically equivalent to lending, in a general sense.)
The actual reason is debt payments not being met due to erroneous growth assumptions, which then cascade down the system. There are always people calling a peak or bottom, but at the end of the day, if your revenue projections aren't met, then you're going to have to cut costs. Whenever there is money sloshing around looking for return, the bets get riskier and riskier (i.e. assumptions about revenues get fantastical), and at some point that's not going to reflect reality. Perhaps it's due to job losses due to automation, or a weather event, or a war, etc.
Yes, but the government can. The 2008 crisis didn't happen in deposit banking, but it was effectively a "bank run" in the same sense you're talking about -- all the assets banks could normally use to draw on to meet obligations froze up, and they ran out of money.
And the government stepped in, becoming a lender of last resort. And it worked (not well, maybe, but it worked).
Saying "the economy is powered by belief" isn't quite right. Finance is powered by belief and trust. But at the end of the day the "economy" is all the people out there able to work, and they aren't susceptible to bank runs.
I think the absolutely titanic levels of quantitative easing that came and went in the last crisis can only be viewed as an unequivocal vote of confidence in our financial system. Consumers and investors got scared and shut down their buying, but we printed out way back to heaven and no one batted an eye. Fiat currency belongs in the pantheon of history's greatest inventions alongside fire, the wheel and electricity.
Can't tell if you guys are being facetious or not. The fiat model parallels the currency debasement in ancient Rome pretty well, and it'll probably have similar results.
No it doesn't. Besides the fundamental economic rules of supply and demand, there is absolutely nothing we can learn from looking at ancient Rome that is relevant to the modern world. And honestly, you look really foolish trying to draw a parallel between such a primitive society and anything post-industrial.
Obviously we don't have the alternative universe where President McCain opted to do nothing for comparison. But looking at the economic boom we're living in 10 years out, it's difficult to make an argument that the government's handling of the housing crisis was poor. I have a hard time coming up with an outcome more ideal than what we got.
2008->2018 was a much nicer decade than 1928->1938.
Hindsight is ridiculously useless at understanding the automation wave we’re experiencing right now. There is a fragmentation of the economy; as someone eloquently put it, your life is either dictated by algorithms, or you’re the one writing them. So for many, the economy is rosy; for the majority, not so much.
The government is powered by belief too. When a critical mass of people start saying "This is not my government, and I'm not subject to its authority", it ceases to be the government. This last happened (unsuccessfully) in the U.S. in 1861, but is a regular occurrence in many other parts of the world.
The effect of 2009's QE was to couple the full faith & credit of the financial system with the full faith & credit of the government, effectively backstopping the financial industry with the trust that the government had built up over 230 years. This worked, but it was not free. The cost was an erosion of that trust in government, which you see in movements like Occupy Wall Street, the Tea Party, Black Lives Matter, the alt-right, Trump, sovereign citizens, and Democratic Socialism.
As long as things are good, the government (and the financial system) can continue to build up that trust that they spent down in the financial crisis, and we'll have weathered the storm with no problems. Things are still not good for many people. And so the risk is that if there is another crisis in the next few years, while that trust is depleted, the whole society will come crashing down, like Syria or Venezuela. Not just a financial crisis, but a political crisis as well, because the two of them are now coupled in peoples' minds.
Erm... not quite. in the Insolvency vs Illiquidity stakes, 2008 was all about Insolvency.
That's why the government stepped in and bought the mortgages from the banks - if the banks had had to account for the losses on those loans it would have brought down the entire system.
The banks are secured by the govt which happens to be the biggest debtor to the banks.
Problem being the govt is really the people and when it comes down to it the people are on the hook for their own debts regardless of how it gets paid.
AND we bail out the corporations who spend too much.
Not really. The government has the authority to print money. They can ensure banks never run out of cash. But it may cause inflation if they overdo it.
I suppose inflation is paying for it, but I get the feelings that the semantics around whether inflation is "paying" for things have changed recently (or maybe I've been hearing too many ardent MMT evangelists).
The ability to print money was outsourced to the Federal Reserve, while regulated by the govt it is not the govt.
When we "borrow" money from the Fed it is at interest. We have created a debt based system where everything is a borrow.
Fiat currencies are based on the value of the peoples ability to create value. When the people owe the banks more value than they can generate they are bankrupt. When the people and the govt ( the people ) owe money to the banks to the point they cannot generate enough value to cover the debts what will happen ?
Printing money was alway the job of private banking in the US. Bank notes were used in the 19th century but sucked because podunk bank’s note wasn’t accepted in NYC...the federal reserve fixed that by centralizing all bank note creation to a consortium of reserve banks.
1. Applications for membership by State banks --
Any bank incorporated by special law of any State, operating under the Code of Law for the District of Columbia, or organized under the general laws of any State or of the United States, including Morris Plan banks and other incorporated banking institutions engaged in similar business, desiring to become a member of the Federal Reserve System, may make application to the Board of Governors of the Federal Reserve System, under such rules and regulations as it may prescribe, for the right to subscribe to the stock of the Federal reserve bank organized within the district in which the applying bank is located.
I'm not sure how your quote is relevant to the statement that the Federal Reserve is part of the US government. The Federal Reserve is "independent within the government" [1] not separate from the government. There's a whole page on the Federal Reserve website's FAQ section dedicated to explaining this. Your quote seems to be about how commercial or State banks apply to become a part of the Federal reserve system.
Any natural born citizen can become a member of Congress (provided they are over 30 iirc). Does it follow then that Congress is not a part of the government because any persom can become a part of it.
A formerly private citizen now sits in the white house. Does it follow that the executive branch is not part of the government?
I cannot comprehend why the fact that non-government entities can joint a government entity makes you think the latter ceases to be part of the government.
> Any natural born citizen can become a member of Congress (provided they are over 30 iirc)
Tangentially, both the age and natural born citizen requirements are wrong; the minimum for a member of Congress are the requirements for the House, where you must be a citizen for at least 7 years, 25 years old, and an inhabitant of the State you represent.
For the Senate, the age requirement is 30 and the citizenship requirement is 9 years.
Let's get down to brass tacks. There are 0 realities in which the fed could go off and say, buy a yacht for every board member or invest in Russian spy operations - whatever the law says, they are considered by the US and operate as effectively a branch of the US government.
If you have any recorded evidence to support the argument the Fed is not in practice operated as branch of the US Government I'd be very interested ion reading it
> If you have any recorded evidence to support the argument the Fed is not in practice operated as branch of the US Government I'd be very interested ion reading it
Pedantically, it's an independent executive agency [0], not a branch (that term refers to the Executive, Legislature, and Judiciary); like other such agencies it has a governing board appointed by the President and confirmed by the Senate.
> The Federal Reserve System is not "owned" by anyone. Although parts of the Federal Reserve System share some characteristics with private-sector entities, the Federal Reserve was established to serve the public interest.
> Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.
> That is like saying any corporation publicly traded yet regulated by the govt is now part of the govt.
Why does it have to be publicly traded? Corporations are exercises of government power by which people (who may themselves be corporations) are revocably delegated special powers created by government. They are, in a very real sense, aspects of the chartering government.
To the extent that they are permitted to serve basically unconstrained private purposes, that's not because they aren't part of the government, but because of what the hosting society believes about the proper application of government power.
No. Again I'm really not sure why you insist on saying so given the fact that the Federal Reserve saw fit to dedicate a whole FAQ section to say otherwise.
Publicly traded companies area still owned by private people and organizations. The publicly traded nature subjects them to additional oversight, but they're still private enterprises.
Where can I buy stake in the Federal reserve? What was it's stock price history?
We can't because nobody "owns" the federal reserve, just like nobody "owns" the FBI or the Navy.
A corporation with employees becomes a member of the Federal Reserve. The job is to generate money from nothing, and get paid for it.
So as a federal reserve bank you create money, charge for doing so and then you change hats from federal reserve to local private bank and loan that money to the private sector charging profits for doing so.
You charge fees coming and going get salaries for both jobs and have no exposure for doing so.
Bonus if your bank fails you are insured by the people who are borrowing money from you.
Yes, banks can join the federal reserve system and other banks can be FDIC insured. But how do you go from that to "the Federal reserve is not part of the government". It's the central bank of the United States. Its chairman is appointed by the government. All profits are paid back to the United States. Is about as independent from the government as the FBI. Saying that the Federal reserve system is not part of the government is as non-sensical as saying the FBI is not part of the government because similar degrees of independence from the executive branch exist. I get that the fact that government agencies can be independent from the executive branch is difficult to wrap one's head around but that sort of independence is not the same as "not part of the government".
> The Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress.
It says right there that it is a government agency. Independent, yes, but ultimately accountable to the government. It's leadership is appointed by the government.
Now... lets say a company was allowed to buy shares in the govt and be able to act as a govt agency while remaining a private company.
So they contract themselves to do some work, pay themselves for setting up the contract, switch hats then do the work. Bonus if they don't do the job right they simply aren't liable.
Sure... But what you describe is not how the Federal Reserve works. The Federal Reserve is accountable to Congress. If they do their job poorly, leadership can be removed. The Federal Reserve is not a private company.
They don't "buy shares in the government". I'm not even sure what that even means. Nobody can buy shares in the government because the government isn't a company. I guess you might be referring to government bonds. But those aren't shares, they're contracts to get paid a greater amount when the bond reaches maturity. The whole concept of "shares of the government" is just not valid because nobody owns the government. At least not in the US, there are some monarchies where all government assets are owned by the royal family.
Nobody ends up on the hook. The Fed is a large enough entity that it can step in and prevent the tragedy of the commons that occurs when individual banks start failing and people start making bank runs.
This is how the federal government made money off the bailouts. Well this and basically looting Fannie Mae and Freddie Mac.
I don't think that if you picked the average person of the street that they'd know about FDIC.
First, too many people don't have a lot of 'cash' savings. Second, as long as most people's debit and credit cards continued to work, they probably would not notice bank receivership.
Most folks: don't have savings, have a chunk of money tied up in their retirement savings, and another chunk tied up in property/residence.
The FDIC couldn’t handle a run on every bank. If people thought there would be a massive run, they’d rush to withdraw their money despite the FDIC. So it’s really both: belief in the FDIC’s ability to handle small runs gives people the belief that there won’t be big ones.
Inflation begins (IMHO) when there's a lot of money in circulation: too much cash chasing too few resources, bidding up prices.
In a bank run, people are taking home bills because they want them to be "safe" in case the bank goes under (never mind FDIC, which most people probably do not understand).
Money sitting under the proverbial or literal mattress is not in circulation, and not going to cause the bidding-up of prices.
It wouldn’t immediately cause inflation, but eventually they would start spending that money under their mattress, causing the amount of money in circulation to increase.
wouldn't that happen anyways? if people have money on banks, they're still going to use it eventually.
the thing that changes if the money is under mattresses is that the banks stop having money to lend and invest. I don't know if that creates inflation or not?
There won't be inflation in that circumstance. The whole point would be to counter deflation with just enough money to bring about normal productivity before things really go south and nobody works at all.
In the long run, the injection would need to be unwound when things are back to normal though, or else there might be inflationary phenomena in one form or the other.
It's a tricky maneuver to execute because you're doing it on the broad economy, not specific sections.
I'm curious how people envision a bank run looking in the era of digital banking. You already can't get much cash from a bank in good times because hardly anyone uses cash anymore for large purchases. Presumably Venmo, Visa et al will work just fine.
You can walk into a bank and ask for all the cash in your account, if its over a certain dollar amount they'll ask you to fill out an IRS form, otherwise there is nothing barring getting cash from a bank.
You have to call ahead for "large sums" because banks don't hold that much cash on-site, so you have to wait for the next delivery of cash so they can get it for you. And the definition of "large sum" for your local bank branch is probably smaller than you think.
But while people are waiting for their cash, if they can still use digital banking, then they will probably stop worrying about it before their cash is actually delivered.
If your pulling out more than $50k, its advisable to call the bank branch and give them a heads up, as they'll shuffle money to the branch on your behalf.
Countries that implement "austerity measures" often find themselves in this sort of cycle too. In most countries the government is a significant employer and its spending a significant portion of GDP. Significantly cutting that is going to have a negative impact.
"The report said worry about an economic slowdown was the main driver of companies' layoff intentions."
Has anyone seen this happen in practice? Any HNer who is management have to lay people off because their executives say “we have no problem getting capital right now but we think it might become more difficult in the future.”
Not really. The only time I saw something like this was as a contractor at a certain Fortune 500 company. As each fiscal year was approaching the end and budgets were running close, they'd quickly lay off all the contractors. They'd then be aggressively hiring contractors once they were in the new fiscal year.
I never quite understood that one. Feels like the churn would be more costly than keeping those contractors onboard for a month.
Part of the deal with contractors is they're not supposed to be working there for years at a time, otherwise they're employees. Those layoffs might be justification for cycling people out to avoid having to convert them.
Adobe used to lay people off pretty much every winter to make their Q4 numbers look better, then hire many of the same folks back a few months later. It sucked. From what I've heard they don't do this is as much now that their business is subscription-driven.
I've seen full-time employees laid off at one point, given severance, told not to look "too hard" for a new job, companies reported numbers, and hired back the same people in the same roles a few months later.
There are so many contradicting predictions all the time. You could for example say that it's because everyone thinks that the robots that are to steal everyone's job are around the corner, so everyone is preparing for it.
> The stock market finds the 'correct' price for stocks, by aggregating conflicting beliefs and predictions of traders.
10-20 years ago, maybe. It's now driven largely by semi-autonomous algorithms monitoring swings/trends. I'd argue that it finds a 'simulated' price rather than a 'correct' price. The stock market is much less susceptible to emotional speculation than it used to be, for better or for worse.
A quick google yields multiple articles claiming various percentages for algorithmic vs meatspace trading. Investopedia claims that as early as 2010, upwards of 60 percent of all trading was done by algorithm. That number has risen since as computation has become cheaper. Source: https://www.investopedia.com/terms/a/algorithmictrading.asp
But won't these algorithms be based upon the whatever the meatspace traders were feeling? We've added indirection, but I don't know if it's in any way better.
Yes, but in a very different way, with a very different dynamic. While before, it was as OP said in that it's based on an aggregation of speculative sentiment from traders, it's now a pebble in pond ripple effect, where a panic of a few can trigger a runaway snowball effect MUCH faster than organic trading (algorithmic trading happens on the order of milliseconds).
Also, I didn't say it was better. IMO it's probably just as volatile/dangerous. It's just harder to predict as it's not as rooted in actual emotion/speculation.
At one point that was it, but now the algorithms are based also on what other algorithms are "feeling".
You don't need to be the smartest person in the room to be good at trading, you just need to know what everyone else in the room is thinking. Algorithms are part of the room now, so they try to predict what other algorithms are thinking.
Didn't people blame algorithms for the 1987 market crash? Are you sure they reduce volatility? I suspect they just compress it all into short spans of time -- i.e. they just move it around.
This definitely happens in the VC world. VCs are absolutely herd mentality and when one of them jumps at a shadow, they all jump and you get a bunch of blog posts talking about bubbles and how they're moving back to enterprise... Meanwhile nothing has changed other than VC perception but it will have a very real impact on early stage (especially seed and Series A) funding opportunities.
That's how the economy works. Everybody watches each other and makes adjustments. And with the financial sector being so big there are also a lot of feedback loops.
I think our current deficit spending is dumb, but I don't actually see a problem mathematically with this. Assuming we only pay 2% interest on that debt, that's 0.076% of GDP to service the debt from this year. If the new GDP growth is taxed at just 10%, then we have 0.29% of GDP in new taxes. So that's a 4x ROI correct? (of course, the assumption here is that there is no better way to spend that money and that the deficit spending is fully responsible for the GDP growth to begin with...) So theoretically it's not going to break the bank even though many people like me think it's unnecessary
Where does this come from? the 10-year bond rate was closer to 3% for most of 2018 [1].
==So that's a 4x ROI correct==
You can't calculate ROI with an I. In this case, that is the 3.9% of GDP mentioned. Going forward, we may gain more tax revenue than we would pay in debt servicing each year, but that ignores the initial investment we made.
In reality, you would need to show that the present value of your annual tax revenues (0.29% of GDP - 0.076% of GDP) is larger than the 3.9% of GDP invested initially.
It doesn't matter, 2% or 3% is just splitting hairs. I also apparently underestimated the percent of US GDP going to federal taxes; it's around 19%, not 10%. So there is still more a lot more new tax money coming in than is necessary to service the new debt.
"3.9% of GDP invested initially"
How is this investing 3.9% of GDP? It costs 0$ in investment for the government to issue new bonds. The only way federal debt costs the country is in the interest spent on servicing it. As long as the tax base increases faster than the interest spent on servicing debt (and also accounting for population growth) there is no economic problem with increasing the federal debt.
And again, I am not arguing that the things we are spending the government money on are rational. I think we could do a lot better by cutting military spending and increasing funding for non-military research and infrastructure without deficit spending (which is certainly possible). But technically the current deficit spending is not unsustainable
Nobody said it was unsustainable. The point is that if you have to borrow almost 4% of your GDP to generate growth of only 3% of GDP, your underlying economy is not performing strongly enough to support itself. That we can’t escape deficit-fueled growth in a supposedly “booming economy” is a scary sign for future economic hiccups.
I think that assumption makes sense if you don't think of the system as a closed loop.
What if the increase in GDP happened only because you borrowed money and spent it? What if you don't spend an equivalent amount next year, and that increase in GDP went away?
In this case, you want the money borrowed to be paid off completely by the taxation on increased gdp.
Which would be 1.03 * 3.8%=3.914% of gdp (deficit to be paid back next year) to equal 0.19 * 2.9%=0.551% (tax collection on increased GDP) of gdp, which it is very far from.
Add the fact that the increased GDP is normally as welfare/income of poor people, which is taxed less.
This of course leads to main question. Is the growth sustainable? If the govt borrowing+spending go away tomorrow, would the GDP not contract? If yes, Then this growth was unsustainable and was debt fueled.
One where expenses <= income. Yes, you can move forward with debt, but that debt accumulates over time and if you stay in that state indefinitely eventually you'll go bankrupt. Ergo, an average of break even is the minimum to be sustainable.
It's artificially lowered because the Federal Reserve is manipulating interest rates, rather than allowing them to fluctuate based on the conditions in the market.
Interest is basically the adjustment made to value having money now vs having money in the future (how much would I have to pay you next year in order for you to not ask me to pay you now). An interest rate of 0% means $100 now vs some arbitrary point in the future are of equal use to you, which is irrational. Obviously getting $100 now is better than getting $100 in 5 years.
In fairness, interest rates aren't that low. I'm not sure if interest rates equal to inflation would be the same thing as interest of 0% in a 0 inflation world. I'm not an economist.
This isn't a particularly contrived analysis. Year-over-year quarterly financial statistics are extremely common, especially in company analysis since many filings are quarterly.
I feel like saying in a decade also attempts to lay a bunch of things at the current administrations feet by implying it's worse than anything that happened during the previous adminstration.
For the record, my honest opinion is that both of these (and other, yet, previous) administrations share fault.
This sort of headline writing is for cowards and weasels.
How many of these jobs are full-time versus part time? It's ridiculous that the only numbers reported on are these aggregate stats, when we live in a time where many people cannot make ends meet working two or more part-time jobs.
Meanwhile, the laborforce participation of 63% remains lower than 2014. I remember a time, when there was a different president, that this number was constantly referenced as evidence of a poor recovery. If the labor market is so robust why aren't people joining the workforce?
I would expect percentage of employed over age of 18 to be declining simply because the number of people retiring (or unable to work due to age) is greater than # of entering labor force.
When you look at the numbers you will see that it isn't so simple and other factors clearly come into play (social security disability is likely one factor).
For example, Georgia is the second youngest state with only 9.6% of the population over 65 years-old, but they have a below average laborforce participation rate of 62.8% [1]. Pennsylvania, with 15.6% of the population over 65 is the second oldest, but has a 62.9% participation rate.
Iowa is the 4th oldest state and has the 6th highest participation rate (68.8). North Dakota is 5th oldest and 3rd highest rate (69.3%). South Dakota is 8th oldest and 7th in LFPR (68.7%).
> If the labor market is so robust why aren't people joining the workforce?
Because they don't need to work. They're not applying for unemployment and they're not taking jobs. So, logically, they're using their time on non-work-related activity. They're having fun, or otherwise doing stuff that they would rather do than work.
The media has this terrible tendency to promote work as the primary marker of life success, which is a valid opinion, for sure, but it's not a universal one. Some people step out of the workforce because they can, and good for them. I expect the wealthier our society becomes, the more people will have this opportunity.
"It's a sign of health," he says from the comfort of his yacht, taking a slow sip of champagne between big spoonfuls of Beluga caviar all while watching the city burn. "Just look at all those construction and health-care jobs being created."
Your link shows it bottoming out in 2009-2011 after the housing crash, well below the 1992 ratio. And then a steady and mostly linear climb from late 2011 to the end of the data.
After that early 90s recession there's a steady rise to the dotcom burst around 2000, which bottoms around 03 and starts to rise again until the housing crash. Seems like a pattern. Progress until the financiers manage to tank the economy, repeat.
It was below 1992 recession levels 2009-2018!! For 9 years we did worse than the worst point in the previous ~25 years. Due to the magic of government cooked books, nobody knew ...
And yet, markets are nearly at all time highs. I'd like to see a breakdown of who's buying stocks/equities.
EDIT: I know earnings are high, but much of our growth over the last 20 years has been during 2-4% GDP deficit. I don't think that's been priced into the markets. Markets may be assuming that the deficit party will continue.
Regardless of whether the economy is or is not where it should be right now, the phenomena that the market is at its all-time high is extremely common. Its weekly peak is more likely to be an all-time high than not, because its objective is to grow. This is true, whether its growing at 0.5% or 5%. Its only slightly more interesting than, for example, my age being at an all-time high. So in that sense, its a pretty useless metric (but sounds good!).
Per capita or velocity are much more useful metrics.
I have a theory (it's a totally unproven one, I hasten to add).
There's been a huge move into passively managed index funds over the last 10 years, with many smart investors touting them as a better long term bet than actively managed funds.
Passively managed funds don't look at what's coming down the road, they invest to fixed formula.
So where an active fund might predict a fall and get out of equities, all the passively managed money stays put.
Self-fulfilling prophesy as markets are fundamentally about confidence, this shows confidence in the equities markets, despite issues like those in the article.
I invest in index funds that follow the S&P 500 according to a formula. The data shows that they tend to outperform managed funds in the long term. With so many people following the same strategy it will be interesting to see if that stays true long term, but the problem is the same as it ever was.
How do you identify an active fund manager that will outperform the market over a long time period?
Do they still outperform the market when you also price in their fees?
That's exactly what I think's happening, what you're doing is what a lot of people are doing.
what will be interesting is, say there's a genuine market rout (e.g. what happened with Lehmans), which should depress stocks definitely in the sector, but also in the wider market.
If all the money from the passively managed funds just stays put, will the stocks basically not take much of a hit?
Of course if it gets bad enough for companies to go broke, that could go wrong for the passively managed crowd as they'll stay in there till the end, most likely.
> If all the money from the passively managed funds just stays put, will the stocks basically not take much of a hit?
The stocks will still take a hit, as we saw in the case of 2008 almost everyone loses money in a market-wide drop. Many active traders went bankrupt as well, the S&P500 lost 50% of its value but didn't go to 0.
> Of course if it gets bad enough for companies to go broke, that could go wrong for the passively managed crowd as they'll stay in there till the end, most likely.
It depends on how quickly the drop happens. S&P500 index funds will sell stocks as they exit the top 500 (this is a simplification of the actual mechanism), so if the drop is gradual then it's not so bad. If the drop is sudden then there is a bigger problem, but the sudden drop is a problem for everyone, active or passive unless you're doing HFT.
so the difference I thought there might be now, as compared to 2008 is the percentage of funds that are passively managed. If a proportionately smaller percentage of stockholders are selling then it seems possible/likely that any price swing will be smaller.
One example of this "stock markets not reacting to external events" that seems to fit the trend is, to me , the robustness of the FTSE100 since the Brexit vote.
It's clear that companies are taking a financial hit in several places and will continue to do so (perhaps precipitously if it ends in no deal) however the FTSE100 is current around 1000 points higher than it was a year ago.
That could be because a large percentage of the funds in those stocks are passively managed and therefore don't react particularly to those external events.
I suspected your hypothesis was correct, that as the percentage of passive funds grows the pricing information of each stock would decrease. Then the question becomes, where are we in terms of what percentage trades are done as a passive investment vs an active investment.
It also makes a note that a lot of active investors allocate funds into a weighted index basket to better match index returns, so it could be that both active and passive funds are contributing to the same price insensitivity.
Real life doesn't work like that.
Not everyone can put money into a magic ETF that guarentees returns. The passive index funds are piggy backing off the work of active investors.
Thought experiment: If everyone put money into an index fund that guarantees returns, what is the difference between that and a Ponzi scheme?
> If everyone put money into an index fund that guarantees returns, what is the difference between that and a Ponzi scheme?
No index fund guarantees returns, so the question is a non-sequitur.
With regard to the question of how does the fund keep value -- the fund holds the equities that are in the index. The equity prices rise and fall with the market, which is hopefully based on the fundamental discounted future value of all cash flows from the company.
Simple. The fundamentals. If the guaranteed return is less than or equal to the earnings per share, then the game can continue indefinitely.
Index funds don't have gains because people keep believing the price will increase. They have them because the market as a whole gains in the long run. Index funds lose value during market downturns.
Anyhow, no index fund offers guaranteed returns. These days I only see that from crypto ponzis.
At no point did the parent comment say the returns were guaranteed, only that they were generally better than actively-managed funds (mostly due to fees).
The unemployment rate is the lowest it has been in 50 years. That stat isn't perfect but it is still that the number of people with jobs is about as high as it has ever been.
Trouble with the unemployment numbers is that it does not account for employment quality. There is a very high number of people who are underemployed or those who have stopped participating in the job market.
Right, it's rarely this low and unemployment goes up very, very quickly. I didn't do any hard analysis, but it seems to go down at an average of about 0.5 point per month, while it goes up at like 3.0-3.5 points per month.
When unemployment goes up 0.3 points in a month, often continues at that rate for months, sometimes for up to a year. So 4 months of poor performance can undo two years of employment gains, but the poor performance can go on for a year.
Totally wrong! The employment population ratio age 25-54, just climbed out of a sewer where it has wallowed BELOW the lowest gross employment ratio since the recession bottom in 1992! Unemployment has been HORRIBLE since Bush left office!
You read too many Clinton-era Arkansas lies. Clinton's racist "discouraged workers" unemployment stats - that only racists quote - says that poor people and minorities don't matter and a lack of jobs for them is their own dang fault, due to a lack of internsl motivation! signed - another Democrat.
It's interesting how there's so much "information" about how well the employment rate was over the last 10 years, but everyone knows people who became/are unemployed (or part time only employed). Somehow every just assumes it's a localized situation to them, despite the ubiquity across observers. Part of it is the misinformation, but is that the only factor in the strength in the mischaracterized narrative? This still puzzles me.
Assuming the unemployment rate is > 0%, shouldn't you know someone who's unemployed, just by the logic that there are unemployed people, and you know people?
You wouldn’t have to know people, but yes there’s a good chance of it. For example, consider if the unemployment rate is 1/300,000,000 (ie. One person in the US is unemployed). Then only the people that know that one person would know an unemployed person. However, the percentage is high enough that everyone should expect to know a couple unemployed people. If the rate is 3% and everyone knows 200 people well enough to know their employment status, then you should expect to know 6 unemployed people.
The market was also posting all time highs in 2012, 2013, 2014...
If you want a simple proxy, looking at the S&P 500 P/E ratio is a slightly better metric[0].
It's still not the same as explaining the mechanism through which the next recession will occur, but then again if you could explain it a priori, you'd be a billionaire.
That's what left wing economists have been saying for ages. Cutting taxes for the rich does not create more jobs. Cutting welfare programs for the poorest destroys jobs. Trump did both:
According to them, cutting taxes can create some short-term growth spurs (like what we have been seeing) but is not sustainable. In 2022-2023 we'll see what state the US economy is in and who was right. Maybe Trump is the financial genius who will finally make Reaganomics work after so many neo-liberal failed attempts. But I wouldn't bet on it.
The layoffs are almost all lead by the retail sector, which is undergoing a shift due to digital disruption from the likes of Amazon.
There is no evidence the tax breaks have created (many) jobs...but there is even less evidence that it has "destroyed" jobs. If you can point me to a peer reviewed study that says that, and not a Vox article, I'll gladly read it. But I skim FRED sometimes and have never seen such claims from a legitimate economist.
In fact a lot of these jobs were reabsorbed elsewhere in other sectors, that's actually a sign of a fairly healthy economy. Which is actually pretty astonishing given the weakness in Asia at the moment; but as someone I've read (can't remember the author) pointed out the US has never imported a recession, even during the currency crisis of the early 90s and all the problems that Japan has had with growth since the early 90s.
>The layoffs are almost all lead by the retail sector, which is undergoing a shift due to digital disruption from the likes of Amazon.
Except YoY retail layoffs have shrunk by 20%.
And that's a very strange burden of proof to lay down for trickle down economics, considering that tax cuts for the wealthy are repeatedly claimed to generate jobs. Are you saying the job generation claim is a red herring? Would you equally defend me not paying any taxes since it "doesn't hurt anything", or do I need to be super-rich first to get the tax-cut apologizing?
Why picking on Vox here? Vox is, if anything, decidedly pro-market for a left wing publication. Branding himself a "neoliberal shill" is one of Yglesias's core schticks, even.
In fact I'll go farther: Vox's economics coverage is as good as any you can find on the internet outside of academic sources. They're deep, wonky and very broad. Obviously that comes with some policy preferences, but if you're avoiding them because they don't match your personal politics I think you're missing out.
I did not say that tax cuts destroyed jobs. I said that cutting welfare programs, that Trump has decided to do, will destroy jobs. This idea is prevalent among Keynesian and Marxian economists as you can easily find out for yourself by reading Wikipedia. Whether they are right or not, well, we will see about that in two to three years.
And the most layoffs in any quarter since 2015. So there are two different statistics being given. The article could have probably done more to make that clear.
It could be an apple vendor who lowers their price, same difference here. The label doesn't matter.
But here in the US, they definitely act like a bully eager to punish people for earning money because half the country views wealth as a sin. They do it to the extent of coming up with absurd new tax schemes.
> Sen. Ron Wyden, D-Oregon, announced on Tuesday that he is working on a mark-to-market system that would tax unrealized capital gains on assets owned by “millionaires and billionaires.”
But I thought they were all atheists, which is it?
==absurd new tax schemes.==
As opposed to the old scheme of cutting taxes for the richest among us and telling the rest it will trickle down to them? How many times of that not working before we are allowed to try something new?
> But I thought they were all atheists, which is it?
Don't be ridiculous, you understand what I wrote.
> trickle down etc
They still pay more than you or I, by rate and nominally, unless most of their income is in long-term capital gains. And this isn't what people target when they talk about a "90%" (or whatever number) income tax rate on the wealthiest.
I would prefer we dismantle our massive war-spending problem before we even start touching taxes. It's such a stupid debate, and I refuse to engage in it beyond that point.
Garbage in garbage out... post a vapid factoid article that's spun to make a specific number look bad, with little context, and what else is there to say?
The headline jobs number was above expectations, and the previous two months were revised up slightly. The headline unemployment rate was unchanged at 3.8%.
This was a solid jobs report, and was probably boosted by some bounce back from the poor weather in February.
What's with the HN editor's obsession with posting "bad economy" reports lately? It certainly conflicts with their boosting SV unicorn IPOs.
I sometimes wonder if these sorts of economic projections end up being self-fulfilling prophecies. If everyone tightens up spending because they expect a recession, that essentially guarantees there will be one.