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Rising Unemployment or Strong Job Growth: What Is the October Story?

Understanding the economy is often like putting together a jigsaw puzzle. You try to put together the pieces in a way where they fit together and give…

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Understanding the economy is often like putting together a jigsaw puzzle. You try to put together the pieces in a way where they fit together and give a clear picture. Unfortunately, the data do not always cooperate with this effort. That is very much the case with the October jobs report released yesterday. On the one hand, we can look to the 150,000 job growth reported in the establishment survey and say that we had another month of very solid, albeit slowing, job growth. The figure is especially impressive when we add in the roughly 30,000 workers who were not counted because of the UAW strike. These workers will show up in the November data, now that the strike has ended. However, we get a very different picture from the household survey. This showed another 0.1 percentage point rise in the unemployment rate to 3.9 percent. While this is still very low by historical measures, it is an increase of 0.5 percentage points from the April level. Furthermore, the household survey showed an actual drop in employment, with the number of people reporting that they are employed down by 348,000 from the September level. This divergence continues a pattern since April. Over the last six months, the establishment survey showed a gain of 1,234,000 jobs. The household survey showed an increase in the number of people employed of just 191,000. The two surveys are often out-of-line, that has been especially the case in the pandemic recovery. Many of us were very troubled by the discrepancy that was reported last year. In the eleven months from January 2022 to December, 2022 the establishment survey showed the economy created 4,430,000 jobs. The household survey showed employment had increased by just 2,120,000, creating a gap of more than 2,300,000 jobs. This gap was hugely reduced when the Bureau of Labor Statistics (BLS) introduced new population controls in January, based on Census data, which added 954,000 to the employment figure. Job growth in the establishment survey was also revised down by around 300,000 in the annual benchmarking to state unemployment insurance filings. That still left a substantial gap, but considerably less than had previously been reported. (Some of this gap is due to differences in definitions. There was a fall in self-employment in 2022. This would lower employment in the household survey, but it would not show up in the establishment data.) When the surveys do diverge, to my view it is always better to go with the establishment survey. It has a much larger sample and far higher response rate. It surveys 651,000 establishments every month. By contrast the household survey only covers 60,000 households. The response rate to the household survey has fallen sharply over the last three decades and it is now just over 70 percent. This raises serious issues of non-response bias, since there is reason to believe that people who are not employed are less likely to respond to the survey. The response rate to the establishment survey has also fallen somewhat. The advance report, which is the basis for the employment report for the month, only has a response rate around 65 percent. However, BLS continues to collect responses for two subsequent months. The response rate by the third month is over 93 percent. Given its size and high response rate, at least by the third month, the establishment survey should be a much more reliable gage of the labor market. We can also look to try to reconcile what we see in these surveys with other data on the economy. We saw truly extraordinary productivity growth in the second and third quarters, 3.6 percent and 4.7 percent, respectively. The productivity data are highly erratic, and also subject to large revisions, but it is definitional that if employment grew less than reported in the establishment survey, productivity growth would have been even higher than reported. We also have other labor market surveys, notably the Job Openings and Labor Turnover Survey (JOLTS). This survey measures job openings listed by companies, as well as hiring, firing, and quits. The JOLTS data have shown some weakening over the last nine months, but this is consistent with the sort of slowing in job growth we have seen in the establishment data. It is not consistent with the virtual halting of employment growth implied by the household data. Private measures, like the Indeed data on new hires and listings, is also consistent with gradual slowing in a still strong labor market, rather than the grim story in the household data. The household survey also regularly gives us anomalies that clearly did not actually happen in the economy. In the October report, the data on employment rates for college educated workers implied that the number of college-educate people in the country increased by 1.1 million from September to October.[1] The Biden administration has tried to push policies that will make it easier for people to go to college, but I doubt that it will be taking credit for this one-month jump in the number of college grads. What Does the Establishment Survey Tell Us? If we can largely dismiss the grim picture from the household survey, we then have to ask what does the establishment survey tell us about the state of the economy? It is generally a good story, but there are some grounds for concern. The rate of employment growth is clearly slowing, but 180,000 new jobs is hardly cause for concern. The Fed had been raising interest rates with the goal of slowing the rate of job growth. The argument is that with unemployment below 4.0 percent, there are not very many people still looking to be employed, and the number of new entrants to the labor market is not over 200,000 a month. Therefore, if we had continued to see the rapid job growth of 2022 and the first half of 2023, we would see substantial upward pressure on wages, which would be inflationary.[2] From this standpoint, the slower rate of job growth is just what the Fed was looking for, and should be the basis for it easing up on interest rates, or at least not raising them further. In this vein, the establishment data also showed that the rate of growth of the hourly wage has slowed sharply. The annual rate over the last three months is just 3.2 percent. With inflation slowing to rates below 3.0 percent, this will still allow for real wage growth, but should not cause concerns about inflationary pressure in the economy. Wage growth by this measure averaged 3.4 percent in 2018-2019, when inflation was at the Fed’s 2.0 percent target. All of this looks very good from the standpoint of a sustainable recovery. Strong job growth, combined with modest growth in real wages, should allow for consumption growth to remain healthy. And, consumption is by far the largest component of GDP. However, there is some basis for concern in the establishment survey. The job growth for October was heavily concentrated in a small number of sectors. Health care added 58,400 jobs, and the larger category health care and social assistance added 77,200 jobs, more than half of the employment growth reported for the month. (It’s still 43 percent of job growth if we adjust for the UAW strike.) The government sector, mostly state and local governments, added 51,000 jobs in October. This doesn’t leave much room for job growth in other sectors. Retail, which accounts for almost 10.0 percent of payroll employment, added just 700 jobs. Restaurants, which have added an average of 31,000 jobs a month over the last year, lost 7,500 jobs in October. The transportation and warehousing sector, which is responsible for moving stuff around, lost 12,100 jobs, mostly in the category of warehousing and storage. And, the financial sector lost 2,000 jobs, driven by a drop in credit intermediation (e.g. mortgage issuance) of 10,000 jobs. These are all somewhat worrying signs, since a recovery that is driven by a small number of sectors may not have long to live. In keeping with this concern, the one-month employment diffusion index, which measures the percentage of industries adding workers, fell from 61.4 in September to 52.0, the lowest level since the lockdowns. So, there is some ground for concern. However, we can find some positives looking by industry. Construction, which is historically the most cyclically sensitive sector, along with manufacturing, added a healthy 23,000 jobs in October. And manufacturing employment would have been pretty much flat, had it not been for the impact of the UAW strike. Also, the information sector lost 9,000 jobs in October, primarily due to a decline in employment of 5,400 in the motion picture industry. This is largely due to the ongoing strike by the Screen Actors Guild, which has caused most movie production to grind to a halt. Presumably this strike will end at some point and we will see a jump in employment in the sector. Overall Picture: Things Look Good, but We Need to Worry I suppose we should always be worried about the possibility of bad events on the horizon. For example, it is certainly possible to envision scenarios in which the wars in Ukraine and the Middle East expand in ways that have large economic impacts, in addition to an enormous human toll. High long-term interest rates have both put a huge cramp on the housing market (existing home sales are down more than 30 percent) and have created the basis for more of the financial instability that we saw with the collapse of Silicon Valley Bank. A Fed rate cut, or even a signal that one is on the horizon, could be a huge help here. But for now, most aspects of the economy are looking pretty good. There have been few times in the last half-century where we could tell a better story about the state of the economy. [1] The September data showed an employment-to-population ratio for college grads of 71.9 percent, with employment of 62,907,000. This implies a population of college grads of 87,492,000. The October data showed the employment-to-population ratio had fallen to 71.3 percent, but the number of employed college grads had increased to 63,172,000. That implies a total population of college grads of 88,600,000, a gain of more than 1.1 million from September. [2] There are two arguments on wages and inflation that should be distinguished. One is that rapid wage growth caused the jump in inflation we saw in 2021 and 2022. This can be easily dismissed, since prices outpaced wages, at least through the first half of 2022. However, there is a second argument that needs to be taken seriously. If we sustain a rapid rate of wage growth going forward (wages had been growing at more than a 6.0 percent annual rate at the start of 2022), it will lead to inflation. Wages can outpace prices in line with productivity growth, and we can have some period where wages rise at the expense of profits, reversing some of the increase in the profit share since the pandemic and in prior years. However, wages cannot persistently outpace profits by an amount in excess of productivity growth, without leading to serious problems with inflation. The post Rising Unemployment or Strong Job Growth: What Is the October Story? appeared first on Center for Economic and Policy Research.

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Chinese migration to US is nothing new – but the reasons for recent surge at Southern border are

A gloomier economic outlook in China and tightening state control have combined with the influence of social media in encouraging migration.

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Chinese migrants wait for a boat after having walked across the Darien Gap from Colombia to Panama. AP Photo/Natacha Pisarenko

The brief closure of the Darien Gap – a perilous 66-mile jungle journey linking South American and Central America – in February 2024 temporarily halted one of the Western Hemisphere’s busiest migration routes. It also highlighted its importance to a small but growing group of people that depend on that pass to make it to the U.S.: Chinese migrants.

While a record 2.5 million migrants were detained at the United States’ southwestern land border in 2023, only about 37,000 were from China.

I’m a scholar of migration and China. What I find most remarkable in these figures is the speed with which the number of Chinese migrants is growing. Nearly 10 times as many Chinese migrants crossed the southern border in 2023 as in 2022. In December 2023 alone, U.S. Border Patrol officials reported encounters with about 6,000 Chinese migrants, in contrast to the 900 they reported a year earlier in December 2022.

The dramatic uptick is the result of a confluence of factors that range from a slowing Chinese economy and tightening political control by President Xi Jinping to the easy access to online information on Chinese social media about how to make the trip.

Middle-class migrants

Journalists reporting from the border have generalized that Chinese migrants come largely from the self-employed middle class. They are not rich enough to use education or work opportunities as a means of entry, but they can afford to fly across the world.

According to a report from Reuters, in many cases those attempting to make the crossing are small-business owners who saw irreparable damage to their primary or sole source of income due to China’s “zero COVID” policies. The migrants are women, men and, in some cases, children accompanying parents from all over China.

Chinese nationals have long made the journey to the United States seeking economic opportunity or political freedom. Based on recent media interviews with migrants coming by way of South America and the U.S.’s southern border, the increase in numbers seems driven by two factors.

First, the most common path for immigration for Chinese nationals is through a student visa or H1-B visa for skilled workers. But travel restrictions during the early months of the pandemic temporarily stalled migration from China. Immigrant visas are out of reach for many Chinese nationals without family or vocation-based preferences, and tourist visas require a personal interview with a U.S. consulate to gauge the likelihood of the traveler returning to China.

Social media tutorials

Second, with the legal routes for immigration difficult to follow, social media accounts have outlined alternatives for Chinese who feel an urgent need to emigrate. Accounts on Douyin, the TikTok clone available in mainland China, document locations open for visa-free travel by Chinese passport holders. On TikTok itself, migrants could find information on where to cross the border, as well as information about transportation and smugglers, commonly known as “snakeheads,” who are experienced with bringing migrants on the journey north.

With virtual private networks, immigrants can also gather information from U.S. apps such as X, YouTube, Facebook and other sites that are otherwise blocked by Chinese censors.

Inspired by social media posts that both offer practical guides and celebrate the journey, thousands of Chinese migrants have been flying to Ecuador, which allows visa-free travel for Chinese citizens, and then making their way over land to the U.S.-Mexican border.

This journey involves trekking through the Darien Gap, which despite its notoriety as a dangerous crossing has become an increasingly common route for migrants from Venezuela, Colombia and all over the world.

In addition to information about crossing the Darien Gap, these social media posts highlight the best places to cross the border. This has led to a large share of Chinese asylum seekers following the same path to Mexico’s Baja California to cross the border near San Diego.

Chinese migration to US is nothing new

The rapid increase in numbers and the ease of accessing information via social media on their smartphones are new innovations. But there is a longer history of Chinese migration to the U.S. over the southern border – and at the hands of smugglers.

From 1882 to 1943, the United States banned all immigration by male Chinese laborers and most Chinese women. A combination of economic competition and racist concerns about Chinese culture and assimilability ensured that the Chinese would be the first ethnic group to enter the United States illegally.

With legal options for arrival eliminated, some Chinese migrants took advantage of the relative ease of movement between the U.S. and Mexico during those years. While some migrants adopted Mexican names and spoke enough Spanish to pass as migrant workers, others used borrowed identities or paperwork from Chinese people with a right of entry, like U.S.-born citizens. Similarly to what we are seeing today, it was middle- and working-class Chinese who more frequently turned to illegal means. Those with money and education were able to circumvent the law by arriving as students or members of the merchant class, both exceptions to the exclusion law.

Though these Chinese exclusion laws officially ended in 1943, restrictions on migration from Asia continued until Congress revised U.S. immigration law in the Hart-Celler Act in 1965. New priorities for immigrant visas that stressed vocational skills as well as family reunification, alongside then Chinese leader Deng Xiaoping’s policies of “reform and opening,” helped many Chinese migrants make their way legally to the U.S. in the 1980s and 1990s.

Even after the restrictive immigration laws ended, Chinese migrants without the education or family connections often needed for U.S. visas continued to take dangerous routes with the help of “snakeheads.”

One notorious incident occurred in 1993, when a ship called the Golden Venture ran aground near New York, resulting in the drowning deaths of 10 Chinese migrants and the arrest and conviction of the snakeheads attempting to smuggle hundreds of Chinese migrants into the United States.

Existing tensions

Though there is plenty of precedent for Chinese migrants arriving without documentation, Chinese asylum seekers have better odds of success than many of the other migrants making the dangerous journey north.

An estimated 55% of Chinese asylum seekers are successful in making their claims, often citing political oppression and lack of religious freedom in China as motivations. By contrast, only 29% of Venezuelans seeking asylum in the U.S. have their claim granted, and the number is even lower for Colombians, at 19%.

The new halt on the migratory highway from the south has affected thousands of new migrants seeking refuge in the U.S. But the mix of push factors from their home country and encouragement on social media means that Chinese migrants will continue to seek routes to America.

And with both migration and the perceived threat from China likely to be features of the upcoming U.S. election, there is a risk that increased Chinese migration could become politicized, leaning further into existing tensions between Washington and Beijing.

Meredith Oyen does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Is the National Guard a solution to school violence?

School board members in one Massachusetts district have called for the National Guard to address student misbehavior. Does their request have merit? A…

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Every now and then, an elected official will suggest bringing in the National Guard to deal with violence that seems out of control.

A city council member in Washington suggested doing so in 2023 to combat the city’s rising violence. So did a Pennsylvania representative concerned about violence in Philadelphia in 2022.

In February 2024, officials in Massachusetts requested the National Guard be deployed to a more unexpected location – to a high school.

Brockton High School has been struggling with student fights, drug use and disrespect toward staff. One school staffer said she was trampled by a crowd rushing to see a fight. Many teachers call in sick to work each day, leaving the school understaffed.

As a researcher who studies school discipline, I know Brockton’s situation is part of a national trend of principals and teachers who have been struggling to deal with perceived increases in student misbehavior since the pandemic.

A review of how the National Guard has been deployed to schools in the past shows the guard can provide service to schools in cases of exceptional need. Yet, doing so does not always end well.

How have schools used the National Guard before?

In 1957, the National Guard blocked nine Black students’ attempts to desegregate Central High School in Little Rock, Arkansas. While the governor claimed this was for safety, the National Guard effectively delayed desegregation of the school – as did the mobs of white individuals outside. Ironically, weeks later, the National Guard and the U.S. Army would enforce integration and the safety of the “Little Rock Nine” on orders from President Dwight Eisenhower.

Three men from the mob around Little Rock’s Central High School are driven from the area at bayonet-point by soldiers of the 101st Airborne Division on Sept. 25, 1957. The presence of the troops permitted the nine Black students to enter the school with only minor background incidents. Bettmann via Getty Images

One of the most tragic cases of the National Guard in an educational setting came in 1970 at Kent State University. The National Guard was brought to campus to respond to protests over American involvement in the Vietnam War. The guardsmen fatally shot four students.

In 2012, then-Sen. Barbara Boxer, a Democrat from California, proposed funding to use the National Guard to provide school security in the wake of the Sandy Hook school shooting. The bill was not passed.

More recently, the National Guard filled teacher shortages in New Mexico’s K-12 schools during the quarantines and sickness of the pandemic. While the idea did not catch on nationally, teachers and school personnel in New Mexico generally reported positive experiences.

Can the National Guard address school discipline?

The National Guard’s mission includes responding to domestic emergencies. Members of the guard are part-time service members who maintain civilian lives. Some are students themselves in colleges and universities. Does this mission and training position the National Guard to respond to incidents of student misbehavior and school violence?

On the one hand, New Mexico’s pandemic experience shows the National Guard could be a stopgap to staffing shortages in unusual circumstances. Similarly, the guards’ eventual role in ensuring student safety during school desegregation in Arkansas demonstrates their potential to address exceptional cases in schools, such as racially motivated mob violence. And, of course, many schools have had military personnel teaching and mentoring through Junior ROTC programs for years.

Those seeking to bring the National Guard to Brockton High School have made similar arguments. They note that staffing shortages have contributed to behavior problems.

One school board member stated: “I know that the first thought that comes to mind when you hear ‘National Guard’ is uniform and arms, and that’s not the case. They’re people like us. They’re educated. They’re trained, and we just need their assistance right now. … We need more staff to support our staff and help the students learn (and) have a safe environment.”

Yet, there are reasons to question whether calls for the National Guard are the best way to address school misconduct and behavior. First, the National Guard is a temporary measure that does little to address the underlying causes of student misbehavior and school violence.

Research has shown that students benefit from effective teaching, meaningful and sustained relationships with school personnel and positive school environments. Such educative and supportive environments have been linked to safer schools. National Guard members are not trained as educators or counselors and, as a temporary measure, would not remain in the school to establish durable relationships with students.

What is more, a military presence – particularly if uniformed or armed – may make students feel less welcome at school or escalate situations.

Schools have already seen an increase in militarization. For example, school police departments have gone so far as to acquire grenade launchers and mine-resistant armored vehicles.

Research has found that school police make students more likely to be suspended and to be arrested. Similarly, while a National Guard presence may address misbehavior temporarily, their presence could similarly result in students experiencing punitive or exclusionary responses to behavior.

Students deserve a solution other than the guard

School violence and disruptions are serious problems that can harm students. Unfortunately, schools and educators have increasingly viewed student misbehavior as a problem to be dealt with through suspensions and police involvement.

A number of people – from the NAACP to the local mayor and other members of the school board – have criticized Brockton’s request for the National Guard. Governor Maura Healey has said she will not deploy the guard to the school.

However, the case of Brockton High School points to real needs. Educators there, like in other schools nationally, are facing a tough situation and perceive a lack of support and resources.

Many schools need more teachers and staff. Students need access to mentors and counselors. With these resources, schools can better ensure educators are able to do their jobs without military intervention.

F. Chris Curran has received funding from the US Department of Justice, the Bureau of Justice Assistance, and the American Civil Liberties Union for work on school safety and discipline.

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Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”

Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…

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Rand Paul Teases Senate GOP Leader Run - Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86. 

So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip. 

Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...

...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each. 

Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse. 

Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:   

In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”

Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act

Rand Paul amid his 10 1/2 hour filibuster in 2015

Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."   

Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support: 

In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience. 

That may be his strongest endorsement yet. 

Tyler Durden Sun, 03/10/2024 - 20:25

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