July 19, 2019

Ross Perot’s Warning of a ‘Giant Sucking Sound’ on Nafta Echoes Today

Mr. Gore’s assertion that “we cut down on illegal immigration,” as Nafta created better jobs in Mexico, sits uneasily alongside the fact that by the end of the Clinton administration in 2000 there were 4.5 million unauthorized immigrants from Mexico living in the United States, up from two million a decade earlier.

The prediction from Clinton administration officials that Nafta could vault Mexico into the select group of developed economies — an aspiration shared on the other side of the border too — never really came to pass.

Perhaps the most resonant of Mr. Perot’s observations, however, had to do with the broader impact of trade on American workers. “If we keep shifting our manufacturing jobs across the border and around the world and deindustrializing our country, we will not be able to defend this great country, and that is a risk we will never take,” he said.

Lawrence Katz, a Harvard economist who as chief economist for the Labor Department helped prepare Mr. Gore for the debate, said Mr. Perot’s case was overstated. Not that many workers were displaced by trade at the time, the economy was creating other middle-income jobs, and those displaced had opportunities to bounce back.

What Mr. Perot said might not have been true then, but it is now, Mr. Katz said: “On substance, he was well ahead of his time.”

The “sucking sound” from Mexico was never really heard, but there certainly was one from China after it entered the World Trade Organization in 2001 — a move supported by the Clinton and Bush administrations. And the jobs the labor market is creating tend to be in the service sectors toward the bottom of the pay scale.

Article source: https://www.nytimes.com/2019/07/09/business/economy/ross-perot-nafta-trade.html?emc=rss&partner=rss

Global Recession Risks Are Up, and Central Banks Aren’t Ready

Central bank officials insist that they are prepared to act aggressively if another recession flares. The E.C.B. stands prepared to stimulate the eurozone, and the Fed is signaling that it could soon cut interest rates to try to get ahead of mounting risks in the United States.

But economists across the globe say central banks can no longer be sole saviors the next time a downturn hits. That reality is colliding with political constraints in the United States and Europe, where lawmakers may prove unable — or unwilling — to quickly roll out expensive stimulus packages.

“Fiscal policy has a much more active role to play, and it is not yet equipped to do so,” Olivier Blanchard, a former International Monetary Fund chief economist, said last month at a central banking forum in Sintra, Portugal, specifically referring to Europe.

When it comes to monetary policy, “surely there is not enough room to respond to even a run-of-the-mill recession,” he said.

Christine Lagarde, who has been nominated to succeed Mario Draghi as head of the European Central Bank and currently heads the International Monetary Fund, has warned that central banks are likely to be the main line of defense given fiscal constraints.

“High public debt and low interest rates have left many countries with limited policy room for maneuver,” Ms. Lagarde said in a June blog post. She added that in a downturn, nations would need to use their economic tools together, with “decisive monetary easing and fiscal stimulus wherever possible.”

Article source: https://www.nytimes.com/2019/07/09/business/economy/recession-world-economy-federal-reserve.html?emc=rss&partner=rss

Employee Activism Is Alive in Tech. It Stops Short of Organizing Unions.

At a corporate retreat that month in Napa, Calif., employees raised their concerns with management. They said they had been told that they would need to adopt Silicon Valley’s hard-charging, never-sleep culture or leave the company.

Mr. Bogensberger, the chief executive, presented slides warning employees not to be dramatic, which workers interpreted as a veiled reference to their complaints about overwork. Employees also said that women and minorities did not have equitable opportunities for promotion. The company spokesman said NPM had a nearly equal split of male and female employees, though it employs proportionally few minorities.

At the corporate retreat, employees met to discuss unionization, two of the current and former employees said. In March, NPM laid off the five employees, leading to the filing of a charge of unfair labor practices with the N.L.R.B. before the company settled.

“As a fairly outspoken proponent of socialism, it’s really weird and surprising to be accused of union-busting,” Laurie Voss, an NPM co-founder and chief data officer, wrote on Twitter in May. “The allegations in the complaint are not true.”

Just because many tech workers appear skeptical of unions, and so many tech companies have avoided unions, doesn’t mean they will indefinitely. Mar Hicks, a historian who has written extensively about labor in the tech sector, said the kinds of actions many workers had already taken, like the walkouts, were often precursors to unionizing. Workers eventually realize that their confrontations with management won’t deliver lasting improvements without a formal organization to back them up.

Some tech employees grasp that logic already. “I never felt I needed a union before,” said Frédéric Harper, a former NPM employee who participated in the organizing effort and N.L.R.B. case. “I reached a point where I think it’s maybe a good idea, maybe it’s needed.”

Article source: https://www.nytimes.com/2019/07/08/technology/tech-companies-union-organizing.html?emc=rss&partner=rss

Strong Jobs Report Eases Fears of Damage From Trade War

They are also worried about the trade war and its effect on global output. In a report to Congress on Friday, the Fed said it was seeing signs that uncertainty surrounding trade policy was leading companies to delay investment decisions, which could in turn slow economic growth.

At Taco Metals, a Miami-based manufacturer of equipment for the recreational marine industry, tariffs have meant higher costs for the raw materials and parts it imports from China and other countries. That has added to fears from boat builders and dealers about how long the good times can last in an industry that is highly sensitive to the broader economy.

“The tariffs just kind of forced people to think twice about is this going to continue,” said Bill Kushner, a vice president at the company. “There’s starting to be more hesitation on both the manufacturing side and the dealer side.”

As customers pull back, Mr. Kushner’s company, which employs about 150 workers in Florida and Tennessee, is doing the same. It is holding off on some equipment purchases and waiting to fill some positions.

“It’s just caused us to take a little step back and reassess some of the direction and make sure we’re not jumping the gun,” Mr. Kushner said. “It’s like, ‘Well, are we sure we’re going to need to do this, or should we try to outsource?’”

So far there is little evidence that those concerns are spreading beyond manufacturing to the broader economy. Hiring in the much larger services sector bounced back in June after unexpected weakness in May, and consumer confidence remains high. Tariffs were barely a topic of conversation at a big gathering of internet retailers in Chicago last week, said Jason Guggisberg, vice president for national accounts for Adecco, a staffing company.

“They’re very optimistic about a very great second half of this year,” he said. “They’re going to ride this economic wave as long as they can.”

Article source: https://www.nytimes.com/2019/07/05/business/economy/june-jobs-report.html?emc=rss&partner=rss

U.S. Jobs Report: Gain of 224,000 in a June Rebound

Here’s what to watch for.

There is no question that the job market has cooled. Employers have added an average of 151,000 jobs per month over the past three months, down from 233,000 in the final three months of 2018. The manufacturing sector, a major driver of growth in the first two years of President Trump’s term, is slowing down, and retailers are shedding jobs. Wage growth, though solid, is no longer accelerating.

What is less clear is whether that slowdown is anything to worry about. Tax cuts and government spending increases gave a temporary jolt to the economy last year, but the effects were always expected to fade. There has been no sign of an increase in layoffs, which have been the most reliable early sign of a downturn in the job market.

“We’re still creating jobs,” said Lindsey Piegza, chief economist at the investment bank Stifel. “We’re still putting Americans back to work on a day-to-day basis, but we’re doing so at a significantly slower clip.”

By most measures, the job market is still fundamentally strong. The unemployment rate, 3.6 percent, is at a nearly 50-year low. Employers have added jobs for 104 consecutive months, easily a record. After such a long stretch of growth, a gradual cooling is hardly surprising.

What worries economists is the possibility that the slowdown will not be so gradual.

If the economy does shift down further in the months ahead, one likely culprit will be Mr. Trump’s trade war.

Article source: https://www.nytimes.com/2019/07/05/business/economy/june-jobs-report.html?emc=rss&partner=rss

Southerners, Facing Big Odds, Believe in a Path Out of Poverty

Huntsville was one of the first racially integrated cities in the South as a result of civil rights sit-in campaigns in the early 1960s. But the legacy of Jim Crow and redlining persists in the city as it does elsewhere in the region, with concentrated pockets of poverty.

One of those can be found at the city’s office for social services and food stamps, a low-slung, blocklong building flanked by a pawnshop and a Salvation Army thrift store. On a steamy weekday, public-assistance recipients and applicants waited for a bus under a shady tree.

“You’ve got to work hard, but it can happen,” said Edward Stokes, adding that he had often found himself one paycheck away from homelessness. He had just come from signing up for a program at the city’s career center.

Why inequity and disadvantage produce such hopefulness is not as unusual as it might initially seem. In the most economically stricken areas, residents understand that “nobody is going to help you,” said Roland Bénabou, an economics and public affairs professor at Princeton University.

So the only way to retain hope and motivate your children is to “think that if you just work hard or study hard, you will make it,” he said. “Otherwise there is no hope and no incentive to work, and then for sure you’ll remain poor.”

Mr. Bénabou also noted that whether you believe people get what they deserve in terms of rewards and punishments often varies widely by country.

Article source: https://www.nytimes.com/2019/07/04/business/economy/social-mobility-south.html?emc=rss&partner=rss

Interest Rates Just Keep Falling. Economic Orthodoxy Is Falling With Them.

That is 1.75 percentage points higher than actually was the case on Wednesday.

In 2015, the budget deficit was 2.4 percent of G.D.P., a number that is on track to rise to 4.2 percent this year. Yet the 10-year bond yield is now comfortably below its average level in 2015, which was 2.14 percent.

Low interest rates worldwide are probably a factor. Global investors find Treasury bonds appealing because they offer better returns than equivalent securities in Europe or Japan, even after the recent drop in rates. The implication is that higher deficits haven’t come with the costs that economic orthodoxy predicted.

Meanwhile, the Federal Reserve has raised interest rates — albeit in fits and starts — since the end of 2015 based on its own form of economic orthodoxy. It’s the idea that as unemployment falls, eventually it will cause an outburst of inflation — so part of the job of a central bank is to raise interest rates pre-emptively to slow the economy in time to prevent unemployment from falling too far.

At the meeting in December 2015 where Fed officials first raised rates, for example, their consensus projection was that the longer-term level of the unemployment rate was 4.9 percent and that they would need to raise interest rates to 3.5 percent by now to keep the economy in balance and forestall inflation.

The actual results have undermined those assumptions. The unemployment rate has fallen to 3.6 percent. But the inflation rate has remained persistently below the 2 percent the Fed aims for. If anything, the growth rate of workers’ wages has been slowing in recent months. That’s important because higher wage growth is, in the traditional theory, the mechanism by which a tight labor market fuels overall inflation.

Moreover, the movements in bond markets the last few weeks suggest that very low inflation is likely to be the norm indefinitely, despite the low jobless rate. Prices of inflation-protected bonds versus regular bonds imply that consumer prices will rise only 1.66 percent a year over the coming decade.

And rather than raise rates to 3.5 percent, as Fed officials in 2015 envisioned, they have raised their main interest rate target to only about 2.4 percent — and now are poised to cut it in the near future as the world economy starts to creak.

Article source: https://www.nytimes.com/2019/07/04/upshot/interest-rates-falling-defying-expectations.html?emc=rss&partner=rss

Inside an Amazon Warehouse, Robots’ Ways Rub Off on Humans

The robots have raised the average picker’s productivity from around 100 items per hour to what Mr. Long and others have said is a target of around 300 or 400, though the numbers vary across teams and facilities. The robots help explain why Amazon managed to ship more items than ever during last year’s holiday season with about 20 percent fewer seasonal workers than the year before. (Amazon said another reason was that it was focused more on permanent hiring in 2018.)

Robots have also made the job far more repetitive. Unlike pickers in manual warehouses, the pickers on Staten Island have almost no relief from plucking goods off shelves, other than their breaks. A picker named Shawn Chase said he motivated himself by competing with a friend in a different part of the warehouse to see who could earn the higher productivity ranking.

“Last week I was 41st in the building,” he said. “This week I’m trying to be top 10.” The company has taken this logic even further in a handful of warehouses, The Washington Post has reported, creating video-game interfaces that allow workers to accumulate points and badges for completing these tasks.

Amazon has periodically fueled rumors that it plans to fully automate picking in the near future, even sponsoring a contest for engineers who develop robotic picking arms. But the truth is that human pickers will be around for years.

According to Russ Meller, who runs a group that designs warehouses at the engineering consulting firm Fortna, it would be hard for a robotic picking arm to navigate the shelving units that carry goods around Amazon’s warehouse. The shelves are too large a target, and the bins may be too cramped or too deep. “They really complicated it for the robot,” said Mr. Meller, whose firm has not designed warehouses for Amazon.

In effect, Amazon calculated that there was so much productivity to be gained from reducing the millions of miles its workers walk each year that it was better off finding robots well suited to moving goods all those miles, not worrying whether the system would later be compatible with robotic pickers.

The difficulty of automating pickers puts pressure on the humans to become more productive. “We try to eliminate any wasted movement,” LeVar Kellogg, a picker who trains other pickers at an Amazon facility near Chicago, told me. “If you have one second that’s adding to the process, it doesn’t seem like a lot. But if you do that 1,000 times a day, that’s when it starts adding up.”

Article source: https://www.nytimes.com/2019/07/03/business/economy/amazon-warehouse-labor-robots.html?emc=rss&partner=rss

Trump’s Feud With the Fed Is Escalating, and Has a Precedent

December 2018

“I think he put out a tweet last night specifically saying he now realizes he does not have the authority to fire.” — Mick Mulvaney, who had recently been named the acting White House chief of staff, on ABC

That fourth rate increase fueled Mr. Trump’s ire and the president privately talked about firing Mr. Powell, telling advisers that the Fed chair would “turn me into Hoover,” a reference to the Great Depression-era president.

Spring 2019

“China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing. If the Federal Reserve ever did a ‘match,’ it would be game over, we win!” — Mr. Trump, on Twitter

With his re-election campaign looming, Mr. Trump has increasingly focused on the strength of the economy and portrayed the Fed as the skunk at a garden party. Mr. Trump has repeatedly said that the economy would take off like a “rocket ship” if not for Mr. Powell and that the stock market could be 5,000 to 10,000 points higher if the Fed had done its job “properly.” He has urged the Fed to start cutting rates, saying it is putting America at a disadvantage relative to its trading partners, like China and Europe.

June 2019

“We’ll see what happens; they’re going to be making an announcement pretty soon, so we’ll see what happens.”— Mr. Trump, speaking to reporters about whether he would try to demote Mr. Powell

On the eve of a major Fed meeting, Bloomberg reported that the White House had looked into the legality of stripping Mr. Powell of his chair title and demoting him to a governor. The president himself seemed to imply that it was a possibility while talking with reporters on June 18. After the Fed’s June 19 meeting, at which the central bank signaled that rate cuts could be coming soon, Mr. Trump repeated in a television interview that he was unhappy with the Fed but said he had never suggested demoting Mr. Powell — though he said he believes he has the authority to do so.

JuLY 2019

“We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games – as they have for many years!”— Mr. Trump, in a tweet, suggesting the Fed take the same steps as China and Europe.

Mr. Trump views central banks as being in an economic arms race, suggesting that efforts taken by other countries to help their economies are directly counter to the interest of the United States. While he has long accused China of manipulating its currency to gain a leg up in global trade, the president has recently accused Europe of doing it, too. Mr. Trump has asserted that the Fed should just fight fire with fire and manipulate its currency as well.

The Past

“I was stunned. Not only was the president clearly overstepping his authority by giving an order to the Fed, but also it was disconcerting because I wasn’t planning tighter monetary policy at the time.” — Paul A. Volcker, former Fed chair, in his memoir “Keeping at It”

Other presidents have also seen the Fed as their nemesis.

By lifting rates, the central bank restrains economic growth in hopes of making it more sustainable into the future. Politicians, focused on their legacies and re-elections, do not like it when that happens on their watch.

Lyndon B. Johnson famously warred with his Fed chair, William McChesney Martin Jr. By some accounts, he pushed Mr. Martin against a wall at his Texas ranch and dressed him down over monetary policy at one contentious meeting in 1965.

Richard M. Nixon also pressured Mr. Martin’s successor, Arthur Burns, to keep rates low. The White House had its way, and many economists partly blame the Fed’s capitulation for the runaway inflation of the 1970s.

Article source: https://www.nytimes.com/2019/06/24/business/economy/federal-reserve-trump.html?emc=rss&partner=rss

Christine Lagarde Is Picked as E.C.B.’s New President. What Does the Bank Do?

On Tuesday, European officials nominated Christine Lagarde, the International Monetary Fund’s current leader, to succeed Mario Draghi as European Central Bank president. Here’s a primer on the institution Ms. Lagarde has been chosen to lead.

[After grueling negotiations, the E.U. selected its top leaders on Tuesday. See who they are.]

The European Central Bank, which has its headquarters in Frankfurt, sets monetary policy and supervises banking for the 19 countries that use the common European currency, the euro. In many ways, it operates much like the Federal Reserve in the United States, printing money, setting benchmark interest rates and encouraging people to spend or save depending on the needs of the region’s economy. A key element of its job is to maintain price stability and keep inflation in check across a swath of Europe that stretches from the Nordic nations to the Mediterranean.

If the eurozone were a country, it would have the world’s second-largest economy after the United States. Its 19 member states account for 340 million people. Membership is open, meaning that, if other European Union countries wanted to join and met the relevant criteria, they could. The current members are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.

As an economic malaise in Greece and other European countries threatened the euro’s future in 2012, Mr. Draghi said he would do “whatever it takes” to save the currency. The pronouncement established the E.C.B.’s commitment to preserving the euro, a significant moment for the bloc and for the global economy. Many people said the policy that Mr. Draghi was prepared to enact, known as Outright Monetary Transactions, effectively saved the euro without the bank ever having to employ it.

Article source: https://www.nytimes.com/2019/07/02/business/what-does-ecb-do-president.html?emc=rss&partner=rss