Public opinion of public sector unions

Two pieces of data from Gallup:

Republican governors' war on public sector unions may come back to bite them politically, especially when it comes to the Independent vote.

Countervailing power

Many commentators on the right have made the argument that public sector workers should not be allowed to unionize because they can use their political power to elect the very officials who they negotiate with over compensation. For example Daniel DiSalvo writes:

When it comes to advancing their interests, public-sector unions have significant advantages over traditional unions. For one thing, using the political process, they can exert far greater influence over their members' employers — that is, government — than private-sector unions can. Through their extensive political activity, these government-workers' unions help elect the very politicians who will act as "management" in their contract negotiations — in effect handpicking those who will sit across the bargaining table from them, in a way that workers in a private corporation (like, say, American Airlines or the Washington Post Company) cannot. Such power led Victor Gotbaum, the leader of District Council 37 of the AFSCME in New York City, to brag in 1975: "We have the ability, in a sense, to elect our own boss."

This is a fair enough criticism, but it applies equally to business groups that support political campaigns and then cash in favors when their man or woman takes office. For example, road builders contributed $128,000 to Scott Walker's campaign. One of Walker's first acts as governor was then to cancel plans to use stimulus money to build high-speed rail and petition the Obama administration to redirect the $800 million of federal money to road projects. Wisconsin Manufacturers and Commerce, one of Wisconsin's biggest business lobbying groups, spent $950,000 to help elect Walker. Danged if Walker and the Republican legislature didn't pass a big tax cut for manufacturers as soon as they took office.

Government - federal, state or local - is not a neutral forum where disinterested public servants allocate resources in the public interest. It is an arena where organized interest groups compete to wrest public resources from each other by bribing and threatening self-interested politicians. When the competing interest groups are numerous and diverse, we can reasonably hope that each group checks and balances the others and something approximating the public interest can emerge. This is John Kenneth Galbraith's idea of "countervailing power."

Critics of the public sector unions decry the attempts of unions to work the political system to feather their nests while ignoring the efforts of business interests to do exactly the same thing. Here's a proposal: let's have a system of public financing of campaigns at the state and federal level so that public officials are less dependent on organized interest groups and are therefore more likely to act in what they perceive to be the public interest. Let AFSCME continue to bargain on behalf of workers, but reduce its power to choose the people on the other side of the bargaining table. And reduce the ability of government contractors to choose the people to whom they submit bids, reduce the ability of developers to choose the people voting on zoning variances that affect them, reduce the ability of business groups to choose the people voting on their tax rates,... But if you're not willing to take that step to curtail the lobbying power of business, then leave labor alone.

Captain and Tennille - Love Will Keep Us Together

The 1970s were a dark time in American history. And it wasn't just Nixon and the oil crises.

Captain and Tennille Muskrat Love

Miracle on Ice Highlights

George Will on Tea Parties and unions

In January, George Will says that those rambunctious Tea Partiers are the standard bearers of a great American tradition of disharmony:

The tone of today's politics was anticipated and is vindicated by a book published 30 years ago. The late Samuel Huntington's "American Politics: The Promise of Disharmony" (1981) clarifies why it is a mistake to be alarmed by today's political excitements and extravagances, a mistake refuted by America's past...

The American Creed's values are liberal, as that term was understood until liberalism succumbed to 20th-century statism. The values, expressing the 18th century's preoccupation with defending liberty against government, are, Huntington said, "individualistic, democratic, egalitarian, and hence basically anti-government and anti-authority." The various values "unite in imposing limits on power and on the institutions of government. The essence of constitutionalism is the restraint of governmental power through fundamental law."...

America is an inherently "disharmonic society" because the ideals of its creed are always imperfectly realized, and always endangered. Government is necessary but, Huntington says, "the distinctive aspect of the American Creed is its anti-government character. Opposition to power and suspicion of government as the most dangerous embodiment of power are the central themes of American political thought."...

"It has been our fate as a nation," wrote historian Richard Hofstadter, "not to have ideologies but to be one." It is an excellent fate, even if — actually, (BEG ITAL)because(END ITAL) — the creed periodically, as now, makes America intensely disharmonic.

In February, George Will says those union demonstrators in Wisconsin are just a bunch of rabble whipped up by outside agitators:

Hitherto, when this university town and seat of state government applauded itself as "the Athens of the Midwest," the sobriquet suggested kinship with the cultural glories of ancient Greece. Now, however, Madison resembles contemporary Athens.

This capital has been convulsed by government employees sowing disorder in order to repeal an election. A minority of the minority of Wisconsin residents who work for government (300,000 of them) are resisting changes to benefits that most of Wisconsin's 5.6 million residents resent financing...

A few days after President Barack Obama submitted a budget that would increase the federal deficit, he tried to sabotage Wisconsin's progress toward solvency. The Washington Post: "The president's political machine worked in close coordination . . . with state and national union officials to mobilize thousands of protesters to gather in Madison and to plan similar demonstrations in other state capitals." Walker notes that in the 1990s, Wisconsin was a trend-setter regarding school choice and welfare reform. Obama, he thinks, may be worried that Wisconsin might again be a harbinger.

But he's so erudite, he's convincing even when he's completely contradicting himself!

Charles Woodson supports Wisconsin unions

Green Bay Packers cornerback Charles Woodson today became the most prominent member of the Super Bowl-winning team to come out in support of the public employees in Wisconsin currently protesting against Gov. Scott Walker's proposal to strip many of the them of their collective bargaining rights:

"Last week I was proud when many of my current and former teammates announced their support for the working families fighting for their rights in Wisconsin. Today I am honored to join with them.

Thousands of dedicated Wisconsin public workers provide vital services for Wisconsin citizens. They are the teachers, nurses and child care workers who take care of us and our families. These hard working people are under an unprecedented attack to take away their basic rights to have a voice and collectively bargain at work.

It is an honor for me to play for the Super Bowl Champion Green Bay Packers and be a part of the Green Bay and Wisconsin communities. I am also honored as a member of the NFL Players Association to stand together with working families of Wisconsin and organized labor in their fight against this attempt to hurt them by targeting unions. I hope those leading the attack will sit down with Wisconsin's public workers and discuss the problems Wisconsin faces, so that together they can truly move Wisconsin forward."

The cost of higher education

My former colleagues Bob Archibald and David Feldman recently wrote a book on the costs of higher education. David Leonhardt interviews them, asking why college tuition has risen so fast in recent years.

Archibald answers that "The biggest reason that these services have experienced prices that rise more rapidly than prices in general is that increasing productivity in many services is very difficult." This is essentially the "Baumol effect" - rising productivity in the goods-producing sector pushes wages up there; wages have to rise in the service sector to match the rise in wages elsewhere, but there since productivity gains are hard to come by the effect is to increase prices instead.

Feldman says that what technological improvements do occur in education result not in lower costs but in more sophisticated instruction techniques. In this sense higher education is like medicine, where much of the technological improvement comes in the form of more sophisticated medical procedures.

I don't disagree with Archibald and Feldman, but I think that the ultimate source of higher costs is even more straightforward. Over the last forty years or so the value of a higher education - the wage premium offered workers with college degrees versus high school graduates - has increased. At the same time, financial aid - both from government and from university endowments - has increased dramatically as our society has made a commitment to make higher education accessible to a wider segment of the population. Both of these phenomena have increased demand for education. Since productivity has not risen at the same pace, prices have increased.

It's also apparent to anyone who has worked in higher education (at least at private colleges and universities) that a large amount of the money flooding into this sector has not gone toward providing more or better education. Rather, it has been used to provide increasingly luxurious amenities for the students - dorm "suites", state-of-the-art athletic centers, student union buildings, and so on. With financial aid freely available for so many students, colleges no longer need to compete on price. Instead we compete on amenities, since there's nothing like a really cool athletic center to convince an eighteen year old to choose you instead of the institution down the road. This creates its own cost dynamic - colleges are engaged in an arms race over amenities, and to the extent that they are unable to finance everything from fund raising some of the costs are passed on to the students.

Filibustering with their feet

Democrats in Wisconsin's State Assembly have fled the state to deny Republicans a quorum. I have no special insight, only to note that this is the moral equivalent of the filibustering tactics that Republicans in the US Senate used to such great effect in 2009-10. Hope it works.

Gainful employment

Suppose there was a government program designed to help provide people with low incomes the skills they needed to get good jobs and become independent. Suppose it was demonstrated that this program was a failure - the intended beneficiaries left the program without marketable skills, heavily in debt, and more dependent on government than ever. You would think that the Republicans in Congress would vote to defund this program, wouldn't you? Especially at a time when we are facing, to hear them tell it, a potentially catastrophic fiscal crisis. Well, you would be wrong.

The program I'm talking about is government financial aid in the form of Pell grants and subsidized loans for students attending for-profit colleges. According to Department of Education data, a quarter of students who get loans from the government and graduate from for-profit colleges default on their loans within three years. This compares to 10.8 percent for public colleges and universities and 7.6 percent for private not-for-profit institutions. The Department of Education has proposed a rule - the "gainful employment" rule - that would deny financial aid to students at colleges with high default rates or debt-to-income ratios after graduating.

Today Congress passed an amendment by a vote of 289 to 136 to prevent the Department of Education from enforcing this rule. The amendment would also prevent the DOE from enforcing a new rule that requires for-profit colleges to provide information about student outcomes to the DOE. The argument: the proposed rules is a "job killer"; the rule lets "government bureaucrats" decide on students' education. Of course if the program were called "job training" Republicans would be demanding deep cuts because taxpayer money should not be spent on government programs that have proven to be ineffective.

Ah, but there's another bedrock Republican principle at work here. An entrenched private business interest with a powerful Washington lobbying presence has a financial interest in continuing this government program, and so the money must be made to keep flowing. Republicans, it turns out, are not motivated by concern that taxpayers be spared the burden of funding wasteful expenditures. No, their motivation is to make sure that powerful business interests that contribute to their campaigns continue to generate profits. I am shocked, shocked!

Adventures in high theory - mystery solved

The correct analogy, I believe, is not to trees outside my window blocking the sun, but to grass on the golf course. The golf course manager needs to devote scarce mowing resources to trimming the grass on the greens and on the fairway. Each type of grass grows at different speeds. How much of his time should be devoted to the trimming of each type of grass, and what is the optimal height of each? Answer: on the saddle path, both types of grass are at their optimal height and the percentage of time devoted to cutting each type is constant. Off the saddle path, he devotes 100% of his time to the grass that is most in excess of its desired height. At least I think that's the meaning of this equation:

Go Red, Beat State

The Marxist revolutionary's dream come true: students, workers, intellectuals join forces in Madison, Wisconsin to protest the new governor's assault on the union movement. Newly elected Republican governor Scott Walker proposes vastly scaling back, in some cases eliminating, the collective bargaining rights of Wisconsin state employees including faculty and students at public universities. The pretense is the state's budget crisis. But if that was the only issue, the direct solution would be to negotiate cuts in salary and/or benefits with the public employee unions. Instead, the governor wants to eliminate some workers' (for example faculty's) collective bargaining rights entirely, while reducing the rights of others. Under the proposed law teaching assistants, for example, would no longer be able to bargain over health benefits or "just cause" protections against arbitrary discipline. How does preventing teaching assistants from demanding protection against arbitrary discipline solve the state's budget problems?

Meanwhile, Professors Joined Coal Protest in Kentucky Governor's Office. My brother claims he's in this picture, but I don't see him.

Sing with me everybody: There's somethin' happenin' here, what it is ain't exactly clear...

Adventures in high theory

Sometimes an economist, in analyzing an esoteric question with a highly mathematical model, will stumble upon a result that turns out to have applications to a wide range of practical policy issues. Sometimes it's the opposite.

From Ricardo Reis, "When Should Policymakers Make Announcements?":

An interesting result that should be useful to future models of rational inattention in continuous time is that, in spite of their apparent complexity, they reduce to optimal control problems without uncertainty that are part of the standard tool kit of economists. The particular optimal control problem that arises is interesting in its own right and may be useful in other applications.[FN]

[FN] The optimal control problem in this paper can be described as follows. Imgaine a person who has the view from her window blocked by two trees, that grow exogenously at different rates. The person has a fixed amount of effort every instant that she can devote to chop down the two trees. How should she split her effort between the two trees over time, and how does their height optimally evolve?

Budget cutting

At some level all politicians, right or left, are fundamentally the same. They try to steer government funding toward favored constituencies or projects that they think are political winners. If they need to cut spending (or be seen as cutting spending) they will spare their favored projects and look for cuts elsewhere in the budget. But I do believe the Republicans take this principle to an extreme that Democrats don't match.

Exhibit A: the House Republican budget proposal. One often reads Republicans saying how these are tough, painful cuts, but we really have no choice given our fiscal difficulties. But look at the list of proposed cuts: Corporation for Public Broadcasting, Legal Services, Amtrak, Community Development, high speed rail grants, green technology grants, aid to District of Columbia, funds to implement health reform act, EPA, repeal Davis-Bacon act, no taxpayer-funded union activities by federal employees... Come on, how painful are those cuts really for a Republican Congressman?

Exhibit B: Obama Administration budget proposal. Sure, Obama wants to maintain funding for education and "investment" programs that he thinks are political winners, and he pays no political cost among his base for going after defense spending. But he's also proposing to cut home heating aid to poor people, grants to community action agencies, Great Lakes cleanup, plus imposing a salary freeze for federal employees and a freeze on overall discretionary spending. Every one of these cuts is a challenge to some element of his political base.

The Obama Administration has proposed some cuts that should irritate its Republican opponents - reduction in agriculture subsidies, defense spending cuts, and so on. I wish he'd do more, and I wish he didn't feel compelled to throw some of his own people overboard to demonstrate his sincerity. Republicans don't feel that need and don't seem to pay a political price for it.

Ronald Reagan, the Great Liberator

Then there's the matter of the Reagan Administration's policy toward South Africa. Throughout the 1980s the Reagan Administration remained a stalwart supporter of the apartheid regime. Let's listen to Father Michael Lapsley, a South African activist who lost an eye and his hands and was burned severely by a letter bomb planted by the white South African government in 1990:

I think it’s good to think about what South Africa was like inside the country as well as what was happening in the front line states at that time. During those years, there were two states of emergency. Vast numbers of people were imprisoned. It was during those years, and this is a salient point for people this country this time that torture became normative. It became a principle weapon used by the Apartheid regime against people, particularly against black children during that period. It was also a period where there were a vast number of people on death row in South Africa. Every Thursday, up to seven people at a time were executed, but it was also a time when the Apartheid regime was in the rampage in the Front Line States attacking Botswana, Lesotho, Mozambique and Zimbabwe. There were a number of massacres of refugees that took place. It was also a time of civil war in Angola. And it was the Reagan administration that was supporting the Unita bandits in Angola and fomenting war. And it was clear to the people of South Africa during those years, that whilst there were a vast number of ordinary people in the United States, particularly African-Americans who stood with us, the Reagan administration was on the side of Apartheid. It was both Reagan and Thatcher who were giving succor to the Apartheid regime and in a sense prolonging our struggle. More people had to die in South Africa because of the support that came from western governments, particularly from Washington and London at that period.

Why the support for South Africa? Because Reagan and those in his administration thought that Nelson Mandela and the African National Congress were communists. And loyalty to governments that allied with us against the communist threat, even if they were dictatorships guilty of grotesque human rights violations, was the cornerstone of Reagan's foreign policy. As Reagan told Dan Rather in an interview: "Can we abandon a country that has stood by us in every war we’ve fought, a country that’s strategically essential to the free world?" [This statement is true - over 300,000 South Africans fought with the Allies in World War II, for example. But South Africa's participation in WWII occurred over the strident objections of the Afrikaner-based National Party, which advocated neutrality. It was the National Party that dominated South African politics from the 1950s on, formalizing the system of Apartheid and withdrawing from the British Commonwealth in 1961 over the race issue.]

Opposition to the Apartheid regime grew in the United States during Reagan's time as president. When Desmond Bishop, fresh from winning the Nobel Peace Prize, visited the United States in 1984, he blasted the Reagan Administration's policies as "immoral, evil, and totally un-Christian." Black activists and white liberal allies began pushing for the United States to join an international embargo against South Africa. In 1986, after South Africa declared martial law in order to suppress anti-apartheid protests, the U.S. Congress voted overwhelmingly to impose sanctions. And Ronald Reagan? He vetoed the bill. Congress overwhelmingly overrode the veto. The sanctions put enormous economic pressure on the government of South Africa. Four years later Nelson Mandela was released from prison, and in 1994 the Apartheid government was removed in peaceful, democratic elections - elections that occurred perhaps a few years and many thousands of deaths and injuries later than they would have without the efforts of Ronald Reagan.

Maybe I'm hypersensitive, but...

Whenever I read a piece of economic analysis on the op-ed pages of the Wall Street Journal, I run across a tremendously misleading interpretation of economic data. It's consistent. It's almost as if they're TRYING to mislead us!

Here's Arthur Laffer in today's WSJ:

The results of the Reagan era? From December 1982 to June 1990, Reaganomics created over 21 million jobs—more jobs than have been added since.

That's true of course. According to the BLS, payroll employment rose by 21,061,000 in that period. And it's also true that from June 1990 to January 2011 the economy has added only 20,448,000 jobs. More jobs created in 8 years than in the next 21!

But of course you knew there was a catch. Job creation from January 1993 to December 2000 (the Clinton presidency) was 22,760,000 - more jobs created in Clinton's 8 years than in Reagan's 8 years. The reason job growth up to January 2011 has been so mediocre is, of course, the fact that in Bush II's 8 years employment rose by only 1,898,000 jobs - less than a tenth of the rate in the Reagan and Clinton years. And all of those jobs and more were wiped out in the recession that followed.

The Gipper, inspiring freedom

When I hear someone laud Ronald Reagan's commitment to freedom around the world, I think back to the four American churchwomen who were murdered by the Salvadoran national guard in 1980. Ronald Reagan, defender of liberty, had just won the election and his administration sprang to action. Let's hear the story from Robert White, U.S. ambassador to El Salvador during this period (published in Commonweal, December 2000):

Immediately following the 1980 U.S. election, members of the Reagan transition team traveled to El Salvador and spoke to key figures in the Salvadoran power structure, reassuring them that on inauguration day, January 20, 1981, military aid would flow again, free of the human-rights conditions imposed by the Carter administration. The Salvadoran military understood this as a go-ahead signal and unleashed a torrent of violence. Hundreds of ordinary Salvadorans were killed, and for the first time American citizens were targeted.

In the short period of ten weeks between the U.S. election in November and the inauguration of Ronald Reagan, in addition to the American missionary women, the Salvadoran security forces killed Marcial Serrano, a Salvadoran priest; destroyed the Catholic radio station WSAX; tortured and assassinated seven leaders of the moderate, nonviolent Democratic Revolutionary Front; killed freelance American journalist John Sullivan; and assassinated the director of the government's land reform agency, Jose Rodolfo Viera, and two American advisers from the American Institute of Free Labor Development, Michael Harmmer and Mark Pearlman.

Notwithstanding my numerous reports to the State Department making it clear that the Salvadoran military killed the churchwomen and that Garcia, Vides Casanova, and other members of the military high command were stonewalling the investigation, I received a telephone call in mid-January from the department's acting assistant secretary for interAmerican affairs, John Bushnell, saying that Secretary of State-designate Alexander Haig wanted me to file a report assuring him that the Salvadoran military were "making progress on the nuns' case." After a barbed conversation with Bushnell, I wrote a telegram that said, "I will have no part of any cover-up. All the evidence we have, and it has been reported fully, is that the Salvadoran government has made no serious effort to investigate the killings of the murdered American churchwomen."

In late January, Haig, now secretary of state, told the House Committee on Foreign Affairs, "I would like to suggest to you that some of the investigations would lead me to believe that perhaps the vehicle that the nuns were riding in may have tried to run a roadblock or may have accidentally been perceived to have been doing so, and there may have been an exchange of gunfire." This was what the Salvadoran officers had been waiting to hear - a high-ranking U.S. official who would publicly take their side even if it meant misrepresenting the facts. This confirmed what had already been communicated during the election campaign and transition period. The Salvadoran military knew that there were no "investigative reports" to justify Haig's statement. Embassy cables, photographs, and eyewitnesses unanimously testified to the gangland-style executions of the churchwomen. Haig was putting into practice the guidelines set down in a January 24, 1981 meeting of Reagan's National Security Council:

"Our support for the [Salvadoran] government has been highly conditional with military assistance expressly turned on and off to press the military to control violence from within itself and from the Right and to meet specific concerns such as the investigation of the murders of the four American churchwomen. This has strained our relationship with the all-important military leadership and raised doubts as to the firmness and reliability of our commitment to support the government. Such doubts urgently need to be resolved."

Translated into plain English this meant that regardless of how many civilians the Salvadoran securitv forces killed, U.S. military aid would not be affected, but would flow in ever-increasing amounts.

The Gipper

Sunday was the 100th anniversary of the birth of Ronald Reagan. I trust the Superbowl tribute ("Ronald Reagan. Inspired freedom. Changed the World.") is not the last we'll hear about the Gipper this year - apparently it is now required of every Republican commentator or candidate to slip a reference to Ronald Reagan in every public utterance.



So it's appropriate that I offer my own recollections of our 40th president. I'll start with this one: remember how he chose to deliver his first speech as the Republican nominee in 1980 at the Neshoba County fair in Philadelphia, Mississippi in August 1980. Philadelphia, Mississippi, the town where James Chaney, Andrew Goodman, and Michael Schwerner were murdered in 1964 while trying to register blacks to vote? Remember how he chose that moment - in that place, to that audience - to emphasize his support for states rights? Here's the transcript:

I believe in state's rights; I believe in people doing as much as they can for themselves at the community level and at the private level. And I believe that we've distorted the balance of our government today by giving powers that were never intended in the constitution to that federal establishment. And if I do get the job I'm looking for, I'm going to devote myself to trying to reorder those priorities and to restore to the states and local communities those functions which properly belong there.

Gosh that was a touching sentiment. What could be more true and right than to devolve power back to the states and local communities in the Deep South whose "states rights" had been trampled on ever since Brown v. Board of Education forced them to desegregate their schools and the Civil Rights Act of 1964 forced them to serve blacks at their lunch counters.

David Brooks wrote a scathing attack on the liberal partisan conspiracy mongers who dared suggest that perhaps mentioning "states rights" to a crowd of former Dixiecrats at the Neshoba County fair was code for "if I have to choose between whites and blacks, I'm with you." He notes that the tone of the speech was friendly, relaxed and full of humor (funny guys can't be racists you know). He notes that the states rights line came in the context not of race but of education (and we know that education was not a significant states rights issue in the south; and he forgot to mention that the discussion of education was in the context of lazy welfare recipients, and we know that there's no racial code attached to that). He argues that Reagan couldn't have meant what liberals thought he meant because after Philadelphia he gave a speech to the Urban League (because of course politicians can't try to get votes from blacks while simultaneously sending not-so-subtle signals of support to white racists). And he accuses people who question the use of the term "states rights" in the county where the most famous murders of the civil rights era occurred as believing in a "master conspiracy" - a conspiracy that must have involved not only Reagan but also his campaign director and, um, the Mississippi Republican party, and, um, well I guess it wouldn't have to go beyond that, but that's pretty massive right there I think you'll agree.

So anyway, the Gipper - the Great Communicator, communicating to the white voters of Mississippi exactly where he stood on the question of race.

Postscript: Reagan carried then-heavily-Democratic Mississippi, 49.4% to 48.1% over Carter. Just got himself over the top!

Mubarak's family wealth

According to Al Jazeera, Hosni Mubarak's family wealth totals $70 billion - money essentially stolen from the people of Egypt. To put this in perspective: The CIA Factbook says Egypt's GDP in 2009 was $470 billion (at PPP exchange rates). A country's capital stock is really impossible to estimate, but theory and data from developed countries suggests a capital/output ratio of around 2.5, which would imply national wealth of $1.175 trillion.* So Mubarak's family's wealth is about 6 percent of the wealth of his entire country. Imagine if Barack Obama had accumulated a fortune of $2.1 trillion during his time as president - that's what the comparable figure in the US would be.

* The rate of return on capital is capital's share of output times the output/capital ratio. With a capital/output ratio of 2.5 and a capital share of 30%, that's a 12% rate of return on capital, which is probably in the ballpark.

Drinking games I'm glad I never played

You do a shot every time someone says "the Lombardi trophy is going back home to Titletown."

Bob sez...

Bob Barbera explains what's going on with the population numbers. Every January the BLS rebenchmarks the household survey numbers, forcing an adjustment in the population, employment and unemployment numbers for January. But they don't go back and revise the previous months' data in light of this, so you can't really compare December to January. It's possible that this phenomenon is more pronounced in the year after the decennial census. So hidden in the employment report is Table C:



This table says that had the BLS gone back and revised December's data in light of their new population estimates, they would have found that household employment rose by 589,000 in January! That's on top of December's household employment increase of 297,000. These are huge numbers that suggest that the two month decline in the unemployment rate from 9.8 percent to 9.0 percent is not a fluke but a meaningful turn in the labor market (here I'm giving my own opinion, not necessarily Bob's). It may just be that the payroll numbers are, for reasons no one can explain, failing to reflect accurately the true state of the labor market. At any rate the household survey, ADP report, ISM reports, initial claims data, GDP report, not to mention retail sales, durable goods orders, etc. are all telling a different, more positive story than payroll employment.

First reaction to employment numbers

My first reaction to the BLS employment report is, I really don't know what's going on. I know that the economy is adding jobs. I suspect that employment growth is trending upward: that's what the GDP data, the ISM manufacturing and non-manufacturing data, the data on initial claims for unemployment compensation, the ADP employment survey, etc. are all saying. But the BLS numbers are telling a different story. The highlights for January:

- Payroll employment rose by 36,000 (+50,000 private sector, -14,000 government)
- Unemployment rate fell from 9.4% to 9.0%
- Number employed according to the household survey rose by 117,000
- Number unemployed fell by 622,000
- Meaning that the labor force fell by 505,000
- Yet the employment-population ratio rose from 58.3 to 58.4 percent.

Interpretation of these numbers is complicated by two factors. First, bad weather in January may have screwed up the numbers. Evidence for this is that the big job-losing sectors were construction and transportation. Second, the BLS did its "rebenchmarking" of the data which caused revisions for all payroll employment data from April 2009 to the present.

How did the employment-population ratio rise while employment was basically flat? Well, the BLS reports that the civilian noninstitutionalized population fell by 185,000. The culprit: women, who declined by 282,000. Now I did not notice 282,000 women dropping dead or being incarcerated in January. Nor do I believe that that many women retired of a sudden. So how did this happen? I don't know, but I do know that a drop in the noninstitutionalized population occurs every January (take a look at the data here). And since the labor force numbers are scaled to the census population estimates, this phenomenon ripples through the household data, or so I would think. But I've never seen any kind of explanation for this.

Calculated Risk usually does a good analysis of the data, so I'd check there later in the day.

Here's something I didn't know about Hoya basketball

I did not know that after Freddie Brown of the Georgetown Hoyas threw the ball to James Worthy of North Carolina in the final seconds of the 1982 NCAA basketball championship, he was quoted as saying "What can I say, black people all look the same to me." That is funny.

Helpful advice for Packers and Steelers fans

From the New York Times: A Home Treatment Kit for Super Bowl Suffering

Therapists in Wisconsin and Pennsylvania are prepared. Most have seen plenty of people who suffer from what could be called Football Attention Neurosis (F.A.N.), in their practices, in their living rooms, and sometimes in the mirror.

The causes of those attacks are very specific to the fan’s team, experts said. A patient with an attachment to, for instance, the Green Bay Packers may be especially symptomatic if he or she sees the team’s quarterback running unprotected with the ball, especially if that quarterback has suffered previous concussions. The same patient might also suffer heart palpitations “whenever the Packers go out to receive a punt,” said Bradley C. Riemann, director of the Obsessive-Compulsive Disorder Center and cognitive-behavioral therapy services at Rogers Hospital in Oconomowoc, Wis., who has tickets to the Super Bowl and often travels to follow the Packers.

The article provides several helpful treatment guidelines. My coping strategy is self-medication, and plenty of it.

The Packer cell

It's true, the Green Bay Packers are in our blood!

Inside Job

Last night some of the economics faculty took students to see the movie Inside Job. It's a disturbing tale of the stupidity and corruption that led to the financial crisis of 2008. I'm still trying to sort through what I think of the movie. The basic story it tells is uncontroversial, until the director, Charles Ferguson, starts to ask about the role of academic economists. Then it gets interesting. Glenn Hubbard, Frederic Mishkin, Larry Summers, Martin Feldstein and others are portrayed as little more than shills for the financial industry. (Ferguson elaborates in this article). On camera they do a lousy job of defending themselves (Summers though was not interviewed). They all cashed in, earning hundreds of thousands or even millions of dollars as consultants for the financial industry, in speaking fees, or for serving as board members of financial service companies. They published papers on topics in which they had a clear financial conflict of interest (Iceland's banking reforms for example) and failed to acknowledge those conflicts.

But are these economists corrupt? Have they been peddling the economic ideology of deregulated financial markets knowing that it is a load of crap? I don't know, but my gut tells me that's going too far. I think rather that they are the victims and perpetrators of groupthink. Having entered the world of high finance they become desensitized and sympathetic to the culture and stop questioning the worldview of those who are paying their consulting fees. They lose certain of their critical faculties - and that is a real problem, because the ability to examine issues critically is central to their identity as academics. In the end a guy like Frederic Mishkin comes off in the movie not as corrupt or malevolent, but simply clueless. He's so deep in the tank he doesn't know how deep he is. In the end my contempt for these guys is rooted not in my sense that they're corrupt but that they've made themselves lousy economists.