December 4, 2022

Employment and Retail Sales Record Recent Gains

The number of Americans seeking unemployment benefits dropped 12,000 last week to a seasonally adjusted 334,000, a decline that suggests steady job gains will endure.

The less volatile four-week average decreased 7,250 to 345,250, the Labor Department said on Thursday. Both figures are roughly 7,000 higher than a month ago, which were the lowest in five years.

Applications, a proxy for layoffs, have fallen 6.5 percent since January, suggesting that employers were cutting fewer jobs.

At the same time, hiring has been steady. Employers added 175,000 jobs in May, the department said last week. That nearly matched the monthly average for the previous year. The unemployment rate rose to 7.6 percent because more Americans were confident they could find work and began searching for a job.

Separately, the Commerce Department said that retail sales increased 0.6 percent last month, showing that consumers remained resilient despite higher taxes and could drive faster growth later this year.

“The retail sales result is a plus, no question,” said Jennifer Lee, an economist at BMO Capital Markets. “And the improving trend in jobless claims is supportive for future spending.”

About 4.5 million people received unemployment benefits in the week that ended May 25, the latest data available. That is 130,000 fewer than the previous week. The number of people receiving benefits fell 29 percent in the last year. Some of those recipients probably found jobs, but many probably used all the benefits available to them.

The economy grew at a solid annual rate of 2.4 percent in the first three months of the year. Consumer spending rose at the fastest pace in more than two years.

The Commerce Department also reported that businesses increased their stockpiles in April but their sales fell for a second straight month, constrained by a decline in orders to American factories.

Stockpiles rose 0.3 percent in April from March, after a decline of 0.1 percent in March from February.

Sales slipped 0.1 percent in April, after a sharp 1.2 percent drop in March. The figures represent the first back-to-back sales declines in nearly a year, although the weakness was concentrated in manufacturing.

More restocking bolsters economic growth because it means companies are ordering more manufactured goods. In April, retailers increased restocking 0.4 percent to lead all categories. Manufacturing and wholesale stockpiles grew 0.2 percent.

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Today’s Economist: Casey B. Mulligan: The New Subsidy for Layoffs


Casey B. Mulligan is an economics professor at the University of Chicago. He is the author of “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.”

A major provision of the American Recovery and Reinvestment Act helps predict what will happen in the insurance market next year.

Today’s Economist

Perspectives from expert contributors.

Employees and employers often take steps to avoid layoffs, like working hard to encourage customers and clients to continue buying the goods and services provided by the business.

Sometimes layoffs are not avoided by such efforts, which is why many employers also take steps to ease the burden of a layoff on employees and their families and to minimize disputes between them and the employer. Many businesses voluntarily offer cash severance pay, which is intended to replace the usual paycheck for several weeks or months after the layoff, depending on the length of time that the employee had been with the company. (During the time of unemployment, the former employee can many times collect both the severance pay and state unemployment insurance benefits.)

Employers may also offer to help laid-off workers continue with their health insurance during the unemployment spell. (Indeed, a laid-off worker who intended to spend some severance pay on health insurance premiums would save money on taxes if the former employer were paying those premiums, even if it meant lower severance.) Severance pay and health insurance costs for former employees are significant expenses that employers presumably take into account when they decide the number and timing of their layoffs.

During 2009 and 2010, the American Recovery and Reinvestment Act had the federal government pay some costs of layoffs, especially with its premium-assistance program, which paid 65 percent of the premiums that a laid-off employee would pay to stay on the former employer’s health plan. People who could join a spouse’s employer health plan and people without health insurance on their previous job were ineligible for the program.

Economists understand this premium assistance to be a subsidy to layoffs, making them cheaper and less of a burden. Employers saw it this way, too, according to an Urban Institute study.

“Some large‐firm interviewees reported that before A.R.R.A. they provided some amount of free or reduced cost Cobra coverage for laid‐off workers, based upon the prior duration of employment,” the study found, referring to the Consolidated Omnibus Budget Reconciliation Act, which allows workers who have lost their jobs to purchase coverage. ”Several of these companies reported that they reduced or dropped this prior benefit in reaction to A.R.R.A.”

Although we will learn more when (and if) the United States Treasury releases its final report on the premium-assistance program, it appears that program participation was high. An interim report indicated that perhaps two million households and even more individuals had their health insurance subsidized within nine or 10 months of starting the program.

The law’s premium assistance program ended in 2010, but significant amounts of premium assistance are coming next year as a part of the Affordable Care Act. For families with income between 100 and 250 percent of the poverty line, the Affordable Care Act is even more generous than the Recovery Act, because it helps them pay for both health insurance premiums and out-of-pocket costs like co-payments and deductibles. Also, health insurance is more expensive now than it was in 2009, which makes a percentage subsidy that much more valuable.

Moreover, unlike the Recovery Act’s program, next year’s program welcomes people out of work even if they left work by quitting, retiring or being fired for cause. It also welcomes people who have the possibility of joining a spouse’s plan and people who had no health insurance on their prior job.

Thus, we are about to begin a federal program that subsidizes layoffs to a degree that we have not seen before. Nevertheless, economic and budget forecasts by the Congressional Budget Office and others have yet to consider the effects of the layoff subsidy on the size of the program and the number of layoffs that will occur.

The C.B.O. has concluded that 800,000 people will take early retirements or quit as a consequence of the Affordable Care Act, not from its premium assistance, but based on the assumption that the unsubsidized nongroup health insurance market will operate better. The C.B.O. still needs to estimate how many people will be laid off as a consequence of the new subsidy to layoffs.

Over all, the C.B.O. predicts that 11 million people will receive premium assistance in 2015 (and even fewer in 2014), the vast majority of whom would be employed or dependents of an employed person. Yet the Recovery Act’s experience suggests that three million or four million people will receive premium assistance through unemployment alone, not to mention the millions more that receive it while working.

Be prepared for some unpleasant surprises over the next year or two, both as to the amount that the labor market is depressed and the unanticipated federal spending that will be needed to provide the benefits promised by the Affordable Care Act.

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Layoffs and Cutbacks at ‘PBS NewsHour’

Because of declines in support from corporate sponsors, the show’s producer, MacNeil/Lehrer Productions, will close the two offices it has outside of the Washington area — in Denver and San Francisco — and lay off most of the employees there. The company, which is based in Arlington, Va., will also eliminate several of what it calls “noncritical production positions” at its main office.

The cuts were described in an internal memorandum on Monday from Linda Winslow, the executive producer of the “NewsHour,” and Boisfeuillet Jones Jr., the chief executive of MacNeil/Lehrer Productions. They said the reorganization, coming at a time of tightened purse strings for public media, would “improve the long-term sustainability of the ‘NewsHour.’ ”

Some other savings will be achieved by leaving positions unfilled and by streamlining technical operations.

Reaction to the plan was mixed, both among “NewsHour” staff members and viewers on social media Web sites. Many expressed sadness about the layoffs and concern about the quality of news coverage, while others suggested the “NewsHour” producers were right to trim excess spending.

Earlier this year, public television employees who were not authorized to speak publicly told The New York Times that the production company was facing a shortfall of up to $7 million, a quarter of its $28 million overall budget, in the fiscal year that ends this month. The company’s budget outlook for the next fiscal year is unknown.  But a spokeswoman for the “NewsHour” acknowledged that the reorganization, which will take place over several months starting in July, would help balance the budget.

The spokeswoman said that about 10 employees, of 100 in all, would be affected.

Ms. Winslow and Mr. Jones said in their memo that the cuts were a result of, among other things, “a steady drop in corporate revenue.”

The shuttering of the offices in Denver and San Francisco will end an era for the “NewsHour,” which long ago also had offices in New York, Chicago, Los Angeles and elsewhere. To make up for the loss of reporting staff outside the Washington area, “along with sending our own teams in the field, we anticipate building new relationships with a variety of locally based freelance video journalists around the country,” Ms. Winslow and Mr. Jones wrote. “Under no circumstances do we intend to abandon the minidocumentary reports that have become so critical to our broadcast. The ‘NewsHour’ remains committed to delivering the same kind of in-depth reporting our viewers and supporters expect from us.”

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Jobless Applications Fall to Lowest Since 2008

The Labor Department said on Thursday that the less volatile four-week average of new jobless claims dropped 6,250, to 336,750. That is the fewest since November 2007, a month before the recession began.

Weekly jobless claims applications have fallen about 9 percent since November and are now at a level consistent with a healthy economy. The last time jobless claims were lower was in January 2008, when they were 321,000.

Economists were largely encouraged by the decline.

“This is a very positive trend and we should embrace it,” Jennifer Lee, an economist at BMO Capital Markets, said in an e-mail to clients.

The job market has also improved over the last six months. Net job gains have averaged of 208,000 a month from November through April. That is up from only 138,000 a month in the previous six months.

New jobless claims are in effect a proxy for layoffs, and much of the job growth has come from fewer layoffs — not increased hiring. Layoffs fell in January to the lowest level on records dating back 12 years, though they have risen moderately since then. Overall hiring remains far below prerecession levels and unemployment remained high at 7.5 percent in April.

For hiring to increase enough to rapidly lower the unemployment rate, companies must gain more confidence in the economy. But some employers have held off adding new workers in recent months, possibly because of concerns about the impact of federal spending cuts and tax increases.

Dean Maki, an economist at Barclays Capital, said the decline in new jobless claims suggested that companies were not too worried about the fiscal drag of spending cuts and tax increases. He noted that employers were responding to the government’s actions by reducing hiring and cutting back on their employees’ hours — not laying off workers. That means they anticipate the weakness will be temporary.

About 4.9 million people collected unemployment aid in the week that ended April 20, the most recent period for which figures are available. That is about 90,000 fewer than the previous week.

Separately, the Commerce Department said Thursday that wholesale inventories rose 0.4 percent in March compared with February, when they had fallen 0.3 percent.

Sales in March dropped 1.6 percent, the biggest setback since March 2009, when the country was in recession. Sales had risen 1.5 percent in February.

Inventory rebuilding can be a positive for economic growth because it means stronger production at the nation’s factories. The March increase left inventories at $503.1 billion, up 4.7 percent from a year ago and 30.7 percent above the recession low.

But increased restocking at a time of falling sales can signal trouble for the economy. The falling demand could lead businesses to reverse course and cut their stockpiles. Those cutbacks would damp factory production and economic growth.

The buildup of inventories in March was largely a result of a 0.5 percent increase in restocking of durable goods. These are items that are expected to last at least three years.

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Greece Reaches New Deal With Lenders

ATHENS — After nearly two weeks of tense negotiations, Greece and its troika of foreign creditors said Monday that they had clinched an agreement on economic measures it must enforce to secure the release of further crucial rescue money, including thousands of layoffs in the civil service.

“We wrapped it up; we have a deal with the troika,” Finance Minister Yannis Stournaras told reporters.

His words came a few minutes after the troika, comprising the European Commission, the European Central Bank and the International Monetary Fund, who have extended two bailouts to Greece worth €240 billion, or $310 billion, over the past three years, issued a joint statement saying Greece was on track to curb its huge debt burden, which stood at 160 percent of gross domestic product at the end of last year.

“Fiscal performance is on track to meet the program targets, and the government is committed to fully implement all agreed fiscal measures for 2013-2014 that are not yet in place,” the statement said, adding that the release of a loan installment of €2.8 billion that had been due in March “could be agreed soon by the euro area member states.”

The International Monetary Fund’s envoy to Athens, Poul Thomsen, said the release of the €2.8 billion, as well as another €7.2 billion for the recapitalization of Greek banks, could be released as early as next week

The troika’s statement added that an agreement had been reached on streamlining the Greek civil service and emphasized the importance of recapitalizing Greek banks without delay. It said Greece would probably return to growth next year.

Mr. Stournaras was even more upbeat, saying Greece aimed to achieve a primary surplus this year, which would allow it to seek more debt relief, according to an agreement with creditors.

The issue that caused negotiations to stall in mid-March was the overhaul of the bloated civil service, a contentious topic that has tested the cohesion of Greece’s fragile coalition government. An agreement was finally secured over the weekend, with the two sides agreeing that 15,000 civil service positions would be eliminated by the end of next year, including 4,000 this year, according to reports in the Greek news media. The departures are to include employees close to retirement and an estimated 2,000 who have been accused of disciplinary offenses.

The plan has prompted vehement reactions from the government’s political rivals, with Alexis Tsipras, the head of the main leftist opposition party, Syriza, describing it Sunday as “a human sacrifice” that would merely swell the ranks of the unemployed, who already account for 27 percent of the population.

According to leaked details of the deal with the troika, foreign inspectors accepted Greek demands to reduce by 15 percent a contentious property tax, which was introduced as an emergency measure in 2011 but has been extended. The two sides are also said to have agreed on allowing Greeks owing taxes and social security debts to the state to pay them off in up to 48 monthly installments.

Mr. Thomsen of the International Monetary Fund said in a speech to a conference organized by The Economist that widespread tax evasion “remains a huge problem.” He added, however, that Greece had “indeed come a long way.”

“The fiscal adjustment has been exceptional by any standard,” he said.

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Greece Resumes Talks With Creditors

The talks, part of the process by which Greece must satisfy the lenders’ conditions in order to receive additional installments of bailout money, are the sort of painstaking discussions that Cyprus will soon be undertaking as part of the Cypriot government’s newly arranged €10 billion, or $13 billion, rescue. The Athens discussions are a reminder that working through a euro zone bailout can be a long march, requiring many politically unpopular steps by recipient governments.

The Greek government is trying to secure the release of two slices of rescue funding. One is a €2.8 billion allocation that had been due in March, and is conditional on Greece’s meeting its pledge to streamline the civil service. The other is a €6 billion payout for the second quarter of this year, which will be released only if inspectors are satisfied with the overall progress of the country’s economic overhaul.

On Thursday, addressing a joint conference with the European Commission at the Athens Concert Hall on improving the use of European funding, Prime Minister Antonis Samaras of Greece pointed to the first signs of economic recovery, citing government figures showing that hiring in the private sector outpaced layoffs last month for the first time in three years.

Talks broke off in March between the government and representatives of the so-called troika of creditors: the International Monetary Fund, the European Central Bank and the European Commission.

The resumed negotiations are to focus on the public-sector overhaul, with the troika expected to renew demands for laying off thousands of civil servants. Also high on the agenda is an unpopular property tax that was introduced as an emergency levy in September 2011 and which the government now wants to replace with a levy that imposes lower charges but also taxes farmland to offset the lost revenue.

An internal dispute over the troika’s demands for the extension of the tax had shaken the fragile coalition government in Greece. But last-ditch talks on Wednesday night produced a consensus. The finance minister, Yannis Stournaras, presented the government’s revised property tax proposal to the inspectors on Thursday during a three-hour meeting that touched on “all outstanding issues,” said a ministry official, who as a matter of policy could not be identified by name.

There was no response by the foreign envoys to the ministry’s proposal, according to the official, who said fresh talks would he held “soon.”

With household incomes down by a third after three years of austerity measures, and unemployment at nearly 27 percent, another point of contention is the number of installments that cash-strapped Greeks should be allowed in paying off about €55 billion in overdue taxes, social security debts and fines imposed for nonpayment of taxes.

The continuing recapitalization of Greek banks is also expected to figure prominently in the negotiations. Troika officials are said to harbor reservations about a merger under way between two major Greek lenders, National Bank of Greece and Eurobank, which are considered too big to let fail.

Troika representatives are also pressing Athens to step up efforts to raise money by selling state-owned assets. Notwithstanding the sale this week of diplomatic properties in London, Brussels, Belgrade and Nicosia, for a total of €41.1 million, the Greek government has little progress to report on the privatization front.

The aim is for this round of talks to conclude by April 14, before the next summit meeting of euro zone finance ministers.

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Rise Reported in Factories and Consumer Confidence

Manufacturing grew in February at the fastest pace in 20 months, according to a report from the Institute for Supply Management. And a survey from the University of Michigan showed that consumer sentiment rose last month to its highest level since November.

Other data showed strength in job growth and the housing market. Americans spent a bit more in January compared with December, despite a sharp drop in income that partly reflected higher taxes.

“Consumers are spending, confidence is rising and manufacturing activity is accelerating,” Joel Naroff, president of Naroff Economic Advisors, said in a note to clients. “Just about all of today’s reports point to an economy on the rise.”

Businesses and consumers appear to be shrugging off changes in federal policy that will probably slow the still-weak economy.

In January, Congress and the White House struck a deal that raised income taxes on the nation’s top earners but also allowed a temporary cut in Social Security taxes to expire.

Across-the-board spending cuts were set to begin Friday. The cuts could reduce government purchases and lead to temporary layoffs of government employees and contractors. The reductions were expected to shave about a half-percentage point from economic growth this year.

The economic data Friday was mostly positive.

The Institute for Supply Management said its index of factory activity rose last month to 54.2, the highest since June 2011, from 53.1 in January. Any reading above 50 indicates growth. The report showed a jump in new orders, higher production and more hiring at factories. Manufacturing has grown for three consecutive months, indicating that factories could help the economy after slumping through most of 2012.

Separately, the Thomson Reuters/University of Michigan consumer sentiment index rose to 77.6, the second consecutive monthly increase, from 73.8 at the end of January. The rebound suggests that some people have begun to adjust to smaller paychecks stemming from the restoration of the full Social Security tax.

The Commerce Department reported that consumers increased spending 0.2 percent in January from December but cut back on big purchases like cars and appliances. Income plunged 3.6 percent, though it followed a jump in December driven by dividends and bonuses that were paid early to avoid higher income taxes.

In a separate report, the Commerce Department said that spending on construction projects fell in January by 2.1 percent, the largest amount in 18 months. But the decline followed a nearly 10 percent increase in construction spending in 2012, the first annual gain in five years.

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Media Decoder Blog: The Breakfast Meeting: A Loss at DreamWorks Animation, and a Cute Interspecies Rescue Was Fake

DreamWorks Animation reported an $82.7 million loss in the fourth quarter after taking an $87 million write-down related to the flop “Rise of the Guardians,” Brooks Barnes reports. DreamWorks shares dropped 1.3 percent in regular trading and less than 1 percent in after-hours trading. Jeffrey Katzenberg, the company’s chief executive, said there would be layoffs of around 350 of the company’s 2,000 employees.

An adorable and widely disseminated YouTube clip that appeared to show a pig rescuing a goat struggling in water was, in fact, carefully staged, Dave Itzkoff reports. The video was shared on Twitter by Time magazine and Ellen DeGeneres; broadcast on NBC’s “Today” show and its “Nightly News” program, ABC’s “Good Morning America” and Fox News. (Brian Williams, anchor of NBC’s “Nightly News,” said “we have no way of knowing it’s real” when the video aired.) The video was staged for “Nathan for You,” a show that will debut on Comedy Central on Thursday. Nathan Fielder, the show’s host, said that the media attention was completely unexpected. “If we were trying to pull an elaborate hoax on the news, I think we could have pushed further,” he said.

Twitter hashtags tied to TV shows saturate many broadcasts, allowing stars and producers instant feedback. Shows are now working to close the feedback loop and incorporate those instant responses on the air, Brian Stelter reports. For instance, “American Idol” will start using Twitter to poll its audience on Wednesday and will incorporate the results into a “fan meter”; the show’s producers hope it will engage younger viewers and encourage people to watch live so that their Tweets are added to real-time results. The most successful way to combine social media and television appears to involve true interactivity rather than “talking to” an audience, said Mark Ghuneim, a co-founder of Trendrr, a company that tracks online chatter about TV shows.

Bounce TV, a network that features programming developed for African-American audiences, is hiring new ad-sales employees and opening a New York office after selling commercial time to blue-chip marketers like General Motors, McDonald’s and Johnson Johnson, Stuart Elliott writes. Bounce TV reaches 77 million American television homes and 86 percent of African-American television homes, Jonathan Katz, its chief operating officer, said. The moves also come after Nielsen began to measure viewership and issue ratings for the network.

ABC News is shoring up its political coverage with a few high-profile hires, Dylan Byers reports on Politico. ABC News’s president, Ben Sherwood, has been courting political reporters from The Washington Post, The New York Times and other outlets to strengthen the network’s Washington bureau after several departures. The network announced the hiring of New York Times political reporters Jeff Zeleny and Susan Saulny this week, which may be an indication that it plans to change the nightly news broadcast’s focus from human interest pieces to more political fare. ABC News’s political coverage already has a strong online presence, through its partnership with Yahoo News, Mr. Byers writes.

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DealBook: Commerzbank Chief Gives Up Bonus Amid Lackluster Results

Commerzbank's chief, Martin Blessing, did receive an increase in his base pay.Boris Roessler/European Pressphoto AgencyCommerzbank’s chief, Martin Blessing, did receive an increase in his base pay.

FRANKFURT — The chief executive of Commerzbank, one of Germany’s largest banks, on Friday became the latest in a series European bank leaders to recognize that collecting a big bonus might appear unseemly while banks struggle with layoffs and financial losses.

The chief, Martin Blessing, said Friday he would not take a bonus for 2012, after the bank reported a net loss of 716 million euros, or $959 million, in the fourth quarter. Other Commerzbank executives will also take steep cuts in their bonus pay, the bank said.

However, Mr. Blessing still collected a substantial raise for last year because his salary was no longer restrained by the terms of a government bailout in 2008. His base pay increased to 1.3 million euros, or $1.7 million, from 500,000 euros, the limit set by the government and then voluntarily extended by the bank.

Commerzbank, which is still 25 percent owned by German taxpayers, continues to struggle with bad investments made before the beginning of the financial crisis. The bank has said it would cut 4,000 to 6,000 jobs by the end of 2016.

Other bank chief executives have made similar gestures to give up bonuses. Antony P. Jenkins, the new chief executive of Barclays, said this month that he would forgo his bonus, which would have been £2.75 million on top of his £1.1 million salary. The British bank has struggled to rebuild its reputation after recent missteps.

Stephen Hester, the chief executive of the Royal Bank of Scotland, refused a bonus of £963,000, or $1.5 million, for 2011. But he will receive up to £7 million for 2012, including pension contributions and long-term investment deferrals, in addition to his £1.2 million salary, according to recent testimony.

Commerzbank had disclosed this month that it would have a quarterly loss, but offered more details about its earnings on Friday. Net profit for 2012 fell to 6 million euros from 638 million euros a year earlier, as the bank booked losses related to the sale of a unit and a recalculation of its tax liabilities.

Without those one-time items, net profit from the year would have been 990 million euros, the bank said.

Commerzbank said it increased the amount it set aside to cover bad loans in 2012 to almost 1.7 billion euros, from 1.4 billion euros in 2011. Most of the increase came from loans made to the shipping industry, which is in the midst of a severe downturn. Hundreds of ships are anchored idly in ports around the world because they lack customers, creating a severe burden for Commerzbank and other European lenders.

Mark Scott contributed reporting from London.

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Economix Blog: Comparing Jobs in Recessions and Recoveries

Source: Bureau of Labor Statistics. Source: Bureau of Labor Statistics.



Dollars to doughnuts.

For the 28th straight month, the country added jobs: 157,000 nonfarm payroll jobs in January, to be more precise.

But employment still has a long way to go before returning to its prerecession level.

The chart above shows economic job changes in this last recession and recovery compared with other recent ones; the red line represents the current cycle. Since the downturn began in December 2007, the economy has had a net decline of about 2.3 percent in its nonfarm payroll jobs. And that does not account for the fact that the working-age population has continued to grow, meaning that if the economy were healthy we should have more jobs today than we had before the recession.

Getting the economy to 5 percent unemployment within two years — a return to the rate that prevailed when the recession began — would require job growth of closer to 284,984 a month.

There are now 12.3 million workers looking for work who cannot find it. The tally of those who are underemployed — that is, adding in those workers who are part-time but want to be employed full-time, and workers who want to work but are not looking — is an even larger 21.4 million.

As bad as all these figures are, it’s worth remembering that job markets in the decade after a financial crisis are always terrible. In fact, layoffs were far worse and lasted much longer in the aftermath of the financial crises that struck, for example, Finland and Sweden in 1991 and Spain in 1977, not to mention the United States during the Great Depression.

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