Jon Taplin’s Blog

This chart shows that the number of working males has dropped back to 1996 levels when there were 30 million less citizens in the U.S. A lot of angry unemployed men in an interregnum is a recipe for social unrest and fascism. Any student of the rise of Hitler to power in 1933 understands that the depression unleashed a huge number of unemployed young and middle-aged German men onto the streets only to be organized by the Nazis. Here’s Eric Hobsbawm from The Age of Extremes

“Fascism was triumphantly anti-liberal. It also provided the proof that man can, without difficulty, combine crack-brained beliefs about the world with a confident mastery of contemporary high technology…. Nevertheless, the combination of conservative values, the techniques of mass democracy, and an innovative ideology of irrationalist savagery, essentially centered in nationalism, must be explained…. Read the rest of this entry »

Brad Delong produces this chart to show that something weird is going on in our economy. Okun’s Law says that if GDP grows, unemployment falls. It ain’t happening. He suggests that productivity could climb to 8% this month. One of two things is happening. Either the great recession has forced employers to cut out layers of middle management fat they never needed (see Ford’s profit announcement) or they are pushing their existing work force to the limits and will soon need to hire a lot more personnel. I tend to believe the former explanation.

If I’m right then we are going to have to rethink “normal levels” of unemployment. We are also going to have to rethink the roll of government assistance to private and public job creation. Yesterday, President Obama released $8 Billion for High Speed rail construction and $2.25 Billion will go towards California’s Anaheim to San Francisco project. That and the news that Obama aimed to double our exports in the next five years proves that he has abandoned the dead ideas of just trying to get back to a 2004 economy.

One thing is clear, I don’t think we are going to return to a world where domestic consumer spending makes up 72% of our GDP. Increasing exports, investment and yes, government spending will be the key to our way out of the interregnum.

In this time of constant bickering between the right and the left, the movie Avatar has become the highest grossing film in history. To achieve these astonishing grosses of $1.86 Billion (besting Cameron’s own Titanic in record time), the movie has appealed across all demographics and all political profiles. This is not to say that right wing critics didn’t try to discourage their partisans as Jonah Goldberg points out.

The film has been subjected to a sustained assault from many on the right, most notably by Ross Douthat in the New York Times, as an “apologia for pantheism.”

It would be a cop-out on my part to say the huge success was due only to the gee whiz special effects and the immersive 3D environment. Read the rest of this entry »

I’ve been talking about “the New Frugality” for a while and Friday’s consumer credit stats bear out my thesis, that something profound has changed in our desire to live within our means.

Americans borrowed less for a 10th consecutive month in November with total credit and borrowing on credit cards falling by the largest amount on records going back nearly seven decades.

I don’t think we will ever return to the point where the average household will live with a debt to income ration of 160% as they did in 2006. So this will mean a transition towards an economy in which consumer spending plays a smaller part in GDP, kind of like Germany or France. Read the rest of this entry »

To give you an idea of what a musical Interregnum we’re in, look at the top selling artists of the year (including Digital sales):

1. Michael Jackson
2. Taylor Swift
3. The Beatles
4. Susan Boyle
5. Lady Gaga
6. Andrea Bocelli
7. Michael Buble

WTF? A dead guy, a second rate country pop singer, a band that was a smash 40 years ago and a granny that sings Broadway Standards. Now obviously the list of most illegally downloaded songs would look pretty different, but this actual hits in the real music economy doesn’t speak very highly of our current era of musical innovation.

My favorite Greek Philosopher, Epicurus, believed the good life was made up of three components.

• The company of good friends
• The freedom and autonomy to enjoy meaningful work
• The willingness to live an examined life with a core faith or philosophy

It appears from a Conference Board research study published yesterday, that the second element is missing in most American lives.

Americans of all ages and income brackets continue to grow increasingly unhappy at work-a long-term trend that should be a red flag to employers, according to a report released today by The Conference Board.

The report, based on a survey of 5,000 U.S. households conducted for The Conference Board by TNS, finds only 45 percent of those surveyed say they are satisfied with their jobs, down from 61.1 percent in 1987, the first year in which the survey was conducted. Read the rest of this entry »

I don’t want to rain on Wall Street’s parade, but I’m a bit suspicious of the current economic recovery boomlet. When 20% of U.S. personal income (chart above) is coming from Government transfer payments (social security, unemployment compensation, etc), you’ve got to wonder about what happens when all the government stimulus runs out at the end of the year.

I know that the stimulus was critical to our survival, but unless we start creating private sector jobs, we’re pretty much screwed. All the wonderful talk about the glories of globalization will look pretty hollow to Main Street, when only Wall Street is benefiting. Read the rest of this entry »

I still have the Obama sticker I put on my Prius in March of 2007, but this healthcare cave-in, run by Rahm Emanuel, has got me fit to be tied. A few weeks ago I wrote about how I was coming to feel that Obama was a tragic prisoner of conventional “establishment” thinking. Democrats since Jimmy Carter believed you have to “govern from the center”, even if you ran from the left. That was the great disappointment of the Clinton years as well.

Thus the terrible disconnect from Obama for many progressives over health care, banking reform, Afghanistan and the environment. We felt his victory margin was so great that he would be willing to govern as a progressive like FDR and Truman did. But unlike FDR, the “new ideas” he brought in with his cabinet appointments, were just left-overs from the Clinton years. Read the rest of this entry »

Even as the market moves lower this morning due to the crash of Dubai World (those wonderful folks Bush wanted to turn all of our port management over to) The Wall Street Journal reports that one in four home owners are underwater on their mortgage.

The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.

Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.

Why do I get the feeling that the folks in Washington and on Wall Street don’t understand that everything has changed? This is the Interregnum. The Financial Times put it well.

But though the recovery is real, so are the scars from the global recession. Some will be permanent and many will heal only very slowly. Read the rest of this entry »

Here is a scary thought. The Pareto Principle in economics says that 80% of the effects come from 20% of the causes. In practical terms it might mean that 20% of your movies at Warner Bros. would generate 80% of the revenue. Pareto himself noted that 80% of the waelth in Italy was held by 20% of the people.

This morning unemployment hit 10.2%, a 26 year high. Yesterday the Labor Department reported that productivity surged to 9.5%. The U.S. has worked hard to transform itself into a knowledge economy and companies like Google and Goldman Sachs record record revenues per worker. What if some version of the Pareto Principle begins to apply itself to employment–20% of the workers produce 80% of the GDP? Dan Greenhaus of Miller Taback & Co has the grim reality of our future.

We have argued and continue to argue that another jobless recovery is materializing and if our estimates for G.D.P. growth going forward materialize, the unemployment rate will remain at elevated levels for several years. Nearly 16 million people are unemployed right now while another 9 million are working part-time jobs because they cannot get a full-time job.

So here is the reality of life for the bottom 40% of America’s families. After they pay for food, housing and transportation they have $1200 per year to spend on “discretionary items” like clothing, medicine and doctors. Read the rest of this entry »