Echoes of my fiscal stimulus thoughts

Echoing my previous thoughts on fiscal stimulus, carpenters and construction workers is the following:
Tom Allen, an unemployed construction worker in Searchlight, conceded that building solar panels may create a few construction jobs, but said: “It’s a temporary solution; it’s a couple of hundred jobs for however long it takes to complete the job, and then they may hire a 10 or 15 people for the permanent jobs.”

Or, from the same article:
Kirstin Peart, a tileworker who lost her job in Las Vegas about 18 months ago and came out to Searchlight to find work in the mines, said she doesn’t know anybody who has found employment in the renewable energy industry. “The solar places don’t hire anybody from Nevada,” she said. “It’s all people from California, Arizona--there’s very few from Nevada. But there’s so many people in Nevada [who] need the jobs. The unemployment rate is horrible right now. People are hurting bad.”

Thus, targeting industries (e.g. infrastructure construction or green industries) to take on workers affected by the recession (i.e. construction workers) is not a permanent solution and can never be one.

Thus, it should not be a surprise that the stimulus did not create jobs (or sustain job creation):

There are many studies of the stimulus, but finally there is one which goes behind the numbers to see what really happened. And it’s not an entirely pretty story. My colleagues Garett Jones and Daniel Rothschild conducted extensive field research (interviewing 85 organizations receiving stimulus funds, in five regions), asking simple questions such as whether the hired project workers already had had jobs. There are lots of relevant details in the paper but here is one punchline

:

…hiring people from unemployment was more the exception than the rule in our interviews.

In a related paper by the same authors (read them both), here is more:

Hiring isn’t the same as net job creation. In our survey, just 42.1 percent of the workers hired at ARRA-receiving organizations after January 31, 2009, were unemployed at the time they were hired (Appendix C). More were hired directly from other organizations (47.3 percent of post-ARRA workers), while a handful came from school (6.5%) or from outside the labor force (4.1%)(Figure 2).

BLS research on worker flows using CPS

I was pointed to the following research from the BLS on measuring worker flows using the monthly CPS. Researchers have been doing this for a while now, with the main focus on the outgoing rotation groups. The matching process is not perfect but I have to believe that the folks at BLS have access to better matching keys than outside researchers.

It bothers me that this was kind of buried in the BLS website and that the matched micro data is not available for download. What if I were interested in transition rates by race, educational attainment, and age groups? Or geographic region?

Some thoughts on the labor market during this recession

My takeaway from reading Elsby, Hobijn and Sahul’s The Labor Market and the Great Recession was that this recession really isn’t that much different from the previous recessions. This had been my conclusion looking at JOLTS data (here and here). Yet what is an inescapable fact is that this recession has been deeper than the other recent recessions, so worker flows are not the whole story.

The story of structural change is somehow linked. If as many believe, that this is the case and also believe that most of the jobs are now coming from services such as government, health and education then why is there also a nagging feeling in other quarters that fiscal stimulus policies can work in the way that it used to when the economy was dominated by pro-cyclical industries? When the economy was dominated by pro-cyclical industries such as manufacturing and construction, an increase in aggregate demand made sense in that putting more income into the pocket would allow people to spend more on stuff. In order to make more stuff, companies would have to hire more people. This story is also true with “supply-side” policies such as tax cuts. The debate continues as to its relative efficiency.

But if an economy is now largely a structural one, where industries create jobs slowly and are largely in the services sector, and other industries lose jobs quickly and are in the manufacturing sector, the obvious question is how can more incomes (either via a fiscal stimulus or tax cut) be expected to create more jobs? Do Americans go out and consume more health and government services? What do these sectors produce and how do they respond to demand shocks either through increased government spending or tax cuts?

The irony from this is that if the government is the largest growing sector then shouldn’t the stimulus (be it tax cuts or spending) be targeted unto itself?

Thoughts about fiscal stimulus

1. Is swinging hammers and framing houses the same as heavy construction such as road building and bridge repairs? In this case there appears to be an implicit assumption that all construction workers are substitutable within different segments of the industry:

Twenty percent of the people in the country who are doing construction are unemployed, and we're not trying to do something about that, when we have a major demand problem? It just doesn't make any sense.

We have infrastructure in this country -- I mean you can argue whether we need a new high speed rail system or whether we don't need a new high speed rail system. But I don't know what the argument is for letting bridges collapse. I don't know what the argument is.
...
I mean, and you know, you can say airports aren't that important or whatever. But it is symbolic of an approach to infrastructure that probably never made any sense, and certainly doesn't make any sense when you can borrow money at 2.8 percent and you've got 20 percent of the construction workers unemployed.

When we were at Yellowstone this summer we came across some road building activity. With all the heavy equipment lined up along the roadway my thought was, “What do guys who cut lumber and nail them together think about going to work doing road building? Is this even possible?” Perhaps it is, and it’s certainly worth investigating (i.e. googling).

2. We recently put an addition to our house at $150K. This put about 3 or 4 guys to work (not even full time) for about 2 months. (Perhaps if we count the plumber and electrician’s time then it may come up to full time.) We should have qualified for some subsidy/fiscal stimulus money for this project. (Hey, Obama, it’s not too late - we could use a kitchen remodel!)

But did this really achieve anything? So MR has got this just about right:

For all the talk of a “large stimulus,” you don’t hear much about a “longer stimulus.”

The problem with a “too small” stimulus is that you get an initial economic boost, but when the stimulus expires the economy slumps back down, as indeed happened in mid 2011. Ideally a stimulus employs some idle labor, stops it from depreciating, and tides those workers over until they can look for other jobs in fundamentally better economic conditions. Those last few words are important. If conditions are not improving soon, the ability of the stimulus to “buy time” for those workers isn’t worth much. The workers get laid off from the government projects and their reemployment prospects are no better than to begin with. We end up having spent a lot of money to postpone our adjustment problems, rather than achieving takeoff.

The other thing that is not mentioned is that the housing bubble cause a misallocation of real resources into the construction sector (specifically home building) and do we really want to sustain this artificially high level of investment?

Checklist vacation

1. Make a (long) list of all the things you can do.
2. Strategize on how to check off all the items in the limited time that you have on vacation.
3. Make the vacation competitive, E.g. assign points for different kinds of wildlife spotted. The closer you get to the wildlife, the higher the number of points you get.

Assume that wildlife spottings are a random walk. Whenever someone reports seeing a moose at location X, immediately go to location X to see if it is still there. If possible return to the location daily to see if said wildlife is there.

I guess this is what it means to “Work hard, play hard”. Pretty much sums up our time at GTNP and YNP.

Post offices in Yellowstone

We came across 3 post offices in Yellowstone while we were there - the Lake Hotel, Mammoth Hot Springs, and Old Faithful. With all the problems (see link for proposal to slow down first class mail delivery) that the USPS has been having I was a little surprised. Perhaps these are only for the summer - except for Mammoth which seems to have a permanent ‘settlement’ - but could it not be served by the post office in Gardiner (which is about 5 miles away)? I realize that the cost savings aren't that substantial nor are they on the following list of post offices that could be closed but perhaps the problem is that instead of focusing on the cost side they might also want to focus on the revenue side.

Would it have been more useful if these post offices could have sold Internet access instead of stamps?

Related or not

Related or not?
Colorado shaken by its biggest quake in decades (on Monday August 22, 2011)
A 5.3 magnitude earthquake, the biggest in the state in some four decades, shook Colorado late on Monday in an area of the United States where quakes are rare, the U.S. Geological Survey said on Tuesday.

The quake struck at 11:46 p.m. Monday night 180 miles south of Denver and 20 miles northwest of Raton, New Mexico, at a depth of 2.5 miles.

Quake rocks Washington, felt on East Coast (on Tuesday August 23, 2011)
A 5.9 magnitude earthquake centered in Virginia forced evacuations of all the memorials and monuments on the National Mall in Washington and rattled nerves from South Carolina to Martha's Vineyard, the Massachusetts island where President Barack Obama is vacationing.

East Coasters turn to Twitter During Virginia Earthquake (on Tuesday August 23, 2011)
Tweets began pouring in from D.C. nearly thirty seconds before we felt the quake at our headquarters in New York City or, for that matter, before any reports about the quake emerged from the media. It's not yet clear how far the earthquake spread.

Did you feel that? Cell networks clogged by calls (on Tuesday August 23, 2011) and tweets!
The earthquake that shook the East Coast is also causing connection problems for cell phone customers.

Verizon Wireless, AT&T and Sprint say their networks were congested as the quake sent people scrambling for the phones.

"There were tremors and everyone decided to call and say, `Did you feel it?' " Verizon Wireless spokesman Tom Pica said. "It's a congestion situation."

The tablet shakeout

This news item was not surprising to hear. What was surprising was that it took so long to happen:

The sudden demise of Hewlett-Packard Co's WebOS TouchPad after just seven weeks on shelves was a reminder of how tech giants have failed so far to take a bite out of Apple Inc's iPad.

The TouchPad joins Dell Streak 5 in the tablet graveyard and weak sales for many offerings suggest others are bound to follow.

"The non-iPad tablets just won't sell at retail. That's the clear message from events over the past few days," said Mark Gerber, an analyst at Boston research and investment firm Detwiler Fenton.

Other tablets that have failed to click with consumers include Asustek Computer Eee Pad Transformer and the Xoom from Motorola Mobility, which Google Inc plans to buy.

It was ridiculous from the start to imagine that the flock of imitators could challenge Apple on quality at the same price. Any reasonable person could have seen that imitators need to challenge on price and price alone. At $99, HP’s tablet is now selling like crazy.

My experience with the imitators have been underwhelming. Fortunately, I decided to go for a knockoff like the Coby Kyros instead of the wannabes like HP and Del..

Working in Yellowstone?

We encountered many students working at YNP and GTNP while we were there. I was also surprised to see many foreign students - including Malaysians (!) at GTNP at the cafeteria in Colter Bay. There were also many of them at the gift shops and I wondered if they came from their country or whether they were already in the US studying at colleges and were working at the park during the summer. It’s a shame that I didn’t find out about these opportunities while I was a student. I would probably have enjoyed it a lot - especially if Xanterra or GTLC were providing lodging.

Unfortunately, these idyllic thoughts were punctured by a recent news item I came across:

Hundreds of foreign students on a State Department cultural exchange visa program walked off their factory jobs in protest on Wednesday.

The J-1 visa program brings foreign students to the country to work for two months and learn English, and was designed in part to fill seasonal tourism jobs at resorts and seaside towns. The 400 students employed at a Pennsylvania factory that packages Hershey's candies told The New York Times that even though they make $8.35 an hour, their rent and program fees are deducted from their paychecks, leaving them with less money than they spent to get the visas and travel to the country in the first place.

Some of the students were assigned night shifts, and said they were pressured to work faster and faster on the factory lines.

Hershey's said they didn't hire the students when the Times asked:

A spokesman for Hershey's, Kirk Saville, said the chocolate company did not directly operate the Palmyra packing plant, which is managed by a company called Exel. A spokeswoman for Exel said it had found the student workers through another staffing company.

Last December, the AP revealed that federal immigration officials were investigating two human-trafficking abuse cases related to J-1 visas. Strip clubs openly solicited J-1 visa holders in job listings, and some foreign students told the AP they were forced into sexual slavery when their passports were confiscated by a ring of criminals. About 150,000 J-1 visas were given out in 2008. Businesses save about 8 percent by using a foreign worker because of Social Security and other taxes they do not have to pay.

The NYT article goes further to state that the State Department has a program in place for bringing in “cultural exchange students” from abroad:

Each summer, the State Department brings many thousands of foreign students to the United States on the international work-travel program, with visas that are known as J-1. Over the years, the program has successfully given university students from distant countries a chance to be immersed in everyday America and to make lasting friends.

But in recent years, the program has drawn complaints from students about low wages and unexpectedly difficult work conditions. It appears, however, that the walkout at the Palmyra plant is the first time that foreign students have engaged in a strike to protest their employment.
…
The students said they mainly placed blame on the organization that manages the J-1 visa program for the State Department, the Council for Educational Travel, U.S.A., which is based in California.

There is a dissonance between the current high unemployment rate and the fact that this program is allowed to exist in light of it. I can understand it when the economy is good and jobs openings such as seasonal work are hard to fill but ...

YNP and GTNP

At YNP we stayed at Grant Village and Mammoth Hot Springs. The rooms at Grant were motel style, slightly below your average Best Western with small bathrooms and shower. Even though the rooms looked like they were recently repainted and upgraded to meet building codes (i.e. sprinkler systems) the furniture and carpet could use an upgrade. Made good use of the coffee maker though. At Mammoth Hot Springs, we had a room (nicer than at Grant) but with shared baths which turned out to be less of a pain than I had expected. But then we were only there 2 nights instead of 3 nights.

We ate at the dining room at Grant and the Lake House (which was cheaper than the dining room). Both were pretty nice, the latter being more downscale in terms of decor and price. Be prepared to pay Washington DC prices for meals though (as well as kids meals - i.e. $5 for buttered pasta). We also went for lunch at the Lake Lodge which was pretty expensive as well. At Mammoth we mostly ate at the dining room which was another upscale restaurant since the kids didn’t find anything acceptable at the grill. I had breakfast there though which was pretty good.

At GTNP we stayed at the Jackson Lake Lodge in one of the cottages. This was more spacious than at YNP and we ate mostly at the grill (which the kids now found acceptable since it had a decent children’s menu) and occasionally at the dining room which had a great view of the mountains.

Internet access was available at Jackson Lake Lodge in the lobby which can get pretty crowded. I was able to get data service at Mammoth (but not Grant) and Jackson Lake Lodge using my Palm Pre/Verizon as a mobile hotspot. The speeds were decent. It’s unfortunate that there is now internet service at YNP though I detected some wireless networks at Mammoth. I’m assuming that we could have had better access at Old Faithful instead of Grant but we were not able to get rooms there for the dates we wanted.

The altitude at YNP affected me more than I expected. I was constantly falling asleep in the car (good thing I wasn’t driving!) though things were better at GTNP. I definitely experienced some shortness of breath when we walked a little ways up Mount Washburn (Dunraven Pass).

Vacation

Was at Yellowstone National Park (YNP) and Grand Teton National Park (GTNP) the past couple of weeks with limited internet access.

The park names beg the obvious question:
For Yellowstone:
The park is located at the headwaters of the Yellowstone River, from which it takes its historical name. Near the end of the 18th century, French trappers named the river "Roche Jaune," which is probably a translation of the Minnetaree name "Mi tsi a-da-zi" (Rock Yellow River).[10] Later, American trappers rendered the French name in English as "Yellow Stone." Although it is commonly believed that the river was named for the yellow rocks seen in the Grand Canyon of the Yellowstone, the Native American name source is not clear.[11]

While for Grand Teton National Park:
Grand Teton National Park is named for Grand Teton which is the tallest mountain in the Teton Range.

Following the link for Grand Teton:
Grand Teton's name was first recorded as Mount Hayden by the Washburn-Langford-Doane Expedition of 1870. But by 1931, the name Grand Teton Peak was in such common usage that it was recognized by the USGS Board on Geographic Names. Another shift in usage led the Board to shorten the name on maps to Grand Teton in 1970.[4]

The origin of the current name is controversial. The most common explanation is that "Grand Teton" means "large teat" in French, named by either French-Canadian or Iroquois members of an expedition led by Donald McKenzie of the North West Company.[5] However, other historians disagree, and claim that the mountain was named after the Teton Sioux tribe of Native Americans.[6]

After reading this the bad one-liners keep on coming:
Check out those grand tetons!
Are those grand tetons for real?
Can I take a closer look at those grand tetons of yours?

And so on.

The new S&P

Enjoyed this (emphasis mine):

S&P and other credit-rating agencies slapped AAA ratings on a slew of non-prime mortgage deals, long after their true value had become clear to many analysts--perhaps because they're paid by the banks whose deals they're rating, giving them an apparent incentive to offer favorable assessments. "It could be structured by cows and we would rate it," one S&P analyst wrote to another in 2007.
…
And S&P hasn't just missed the mark in sizing up the viability of toxic mortgage assets. As Nate Silver of the New York Times noted Monday, the agency's assessments of the likelihood of various countries defaulting on their debt in recent years also appear shaky. Silver, a respected statistical analyst, called S&P's ratings "substandard and porous."

And Nate Silver’s post which was referenced above (he may be skating a little closer to the edge than I would have liked, but nevertheless, point taken):
What factors is S.&P. looking at when it rates sovereign debt? A country’s debt-to-G.D.P. ratio? Its inflation rate? The size of its annual deficits?

S.&P. does look at each of these factors. But it also places very heavy emphasis on subjective views about a country’s political environment. In fact, these political factors are at least as important as economic variables in determining their ratings.

For instance, the S.&P. ratings have an extremely strong relationship with a measure of political risk known as the Corruption Perceptions Index, which is published annually by Transparency International. These ratings have been the subject of much criticism because they are highly subjective, relying on a composite of surveys conducted among “experts” at international organizations who may have spent little time in most of the countries and who may instead base their judgments on cultural stereotypes.

I don’t know whether or not S.&P. looks at these ratings. But the fact that the two sets of ratings are so closely related is troublesome. It suggests that S.&P. is making a lot of judgment calls about countries they have no particular knowledge about.
…
S.&P.’s bond ratings from five years ago would have told you almost nothing about the risk of a default today. They had no insight about the threats in European markets, nor about which countries in Europe were relatively more likely to default. (Norway, which remains among the most solvent countries in the world, had a AAA rating in 2006, but so did Ireland and Spain.)

What’s a scientist?

The NYT reports (ht: MR):
When asked to name a scientist, Americans are stumped. In one recent survey, the top choice, at 47 percent, was Einstein, who has been dead since 1955, and the next, at 23 percent, was “I don’t know.” In another survey, only 4 percent of respondents could name a living scientist.

I admit I was stumped for a few minutes as well. Perhaps the respondents were afraid to ask: What’s considered a scientist?

Does Brian Greene count? Craig Venter? Steven Chu? Steven Hawking? Terence Tao?