Practice Good Theory

To solve the problem of unemployment in the U.S., the government must end statist intervention. Lot's can be done (more accurately, undone). Here are some modest proposals -- not completely free-market ideas for the Federal government, but transitional steps. Abolish the Federal minimum wage rate of $7.25 per hour. With exquisitely bad timing, Congress increased this at the peak of the housing bubble in 2007, from the previous minimum of $5.15 per hour . At some level the rate becomes academic; so, lowering it enough would be almost as good as abolishing it. Here's an even more modest proposal: every 6 months, this minimum wage will be reduced by another 50 cents if the youth (16-19 years) unemployment rate has not fallen by at least 1% during the previous 6 months. An, even more modest: a multi-year moratorium from the minimum wage. Many states have minimum-wages higher than the federal rate. Lowering the Federal rate will increase the wage-differential between such sta...

It is very popular to blame government and politicians for our problems. This poster does so: A tiny kernel of truth: Yes, almost every country has many people who are ideologically close to me. There are millions of Iranians who are not radical Islamists. There are thousands of Iranians who are well-educated, widely-read, and truly cosmopolitan, yearning for much greater freedom. Ideologically, this minority of Iranians even hold better ideas than the average American. Left to their devices they would elect a better government than the average American would. The graphic asks the reader to focus on this concrete truth (this tiny minority), and draws its appeal from that truth. The world over, true lovers of freedom are brethren in spirit. They are closer to each other than to most of their fellow countrymen. Don't generalize: Do not generalize this to all Iranians. The government of Iran is not like North Korea. If elections were free, the religious politicians may...

One of my favorite jobs-related graphs comes from JOLTS "(Job Openings and Labor Turnover Summary"). It shows how dynamic the economy really is, underneath the net numbers. Net New Jobs (monthly): First some background. Every month, the government reports how many net new jobs were created. The last month, they reported about 250 K net new jobs. In a month like January, there is a huge seasonality adjustment in these numbers. Still, if we were to average 250K per month, it would be good news. How about if we added 50,000 jobs each month? While it would be better than zero, it would end up raising the unemployment rate. Level to keep the unemployment rate from rising: Here's a back-of-envelope calculation. The U.S. has 300 million people, but only 155 million are working or want work. (Children, retirees, college-goers, housewives, and a few bums account for the rest). The population growth rate is about 0.85% per year . If we ignore age-distributions etc., the labo...

In October I posted some GDP graphs from the excellent Calculated Risk blog. In summary,  "Real Personal Income"  was still 5% below the pre-recession peak when ignoring "transfer payments".  Additionaly, in four years of recession, the population has grown, and the numbers look worse on a per-capita basis. In this post, I switch my focus to unemployment. Unemployment rate has bottomed:   Here is a graph ( sharper original on Calculated Risk ), comparing the rise of unemployment (downward in the graph) in past recessions, and how soon the rate recovered to its pre-recession level. Post WW-II,  the unemployment rate has never turned so weak nor has it remained weak for so long. Based on historical patterns, it is optimistic to think unemployment will return to its recent pre-recession low (about 5%) any time in the next 2 years. Participation rate falling: One problem with the unemployment rate is that it under-counts dejected workers who have gi...