Baum on Money: Wages Didn't Stagnate?
Happy Friday, all. It may be the end of the week, but it's only the start of your morning reading.
Hints on jobs
Gallup is out with its employment numbers for October, including the U.S. payroll to population employment rate (P2P), which rose 0.5 percentage point to 43.8 percent. (Conceptually, P2P is similar to the Bureau of Labor Statistics employment population ratio.) That's the good news. The bad news is that P2P is down almost 2 percentage points from a year ago, a more reliable measure for the unadjusted data series. Gallup conducts a monthly survey of 30,000 individuals; the BLS, a survey of 60,000 households. The two series don't match, but they track one another. The message from Gallup's various employment measures: "The U.S. jobs market continues to show no signs of catching up to the pre-recession trajectory outlined in official 2007-2008 BLS data." The jobs report at 8:30 a.m. should confirm that message.
Speaking with one voice
Bloomberg's Josh Zumbrun digs through 25 years of records of Federal Reserve meetings to examine the history of dissent. "Dissents that averaged 21 a year in the 1986-1993 period dwindled to five annually in 1994-1997, then to zero for a decade," he writes. Alan Greenspan pretty much made decisions for the committee. Ben Bernanke's style is less dictatorial, striving to reach concession through discussion. Almost all the votes during the 2008 financial crisis were unanimous. Zumbrun has lots of juicy details, including Governor Daniel Tarullo's vote against Narayana Kocherlakota's appointment to become president of the Minneapolis Fed. Former Richmond Fed President Al Broaddus squeaked through by a 4-3 vote. OK, I said it was juicy, but we're talking Fed here.
Challenging conventional wisdom
It's widely accepted that lower- and middle-class incomes have stagnated over last few decades. Not so, says the Manhattan Institute's Scott Winship. Lower and middle income households "are at least 30 percent richer today than their counterparts from 35 years ago." In the first two parts of this multi-part series, Winship argues that 1) safety-net programs should be included in income measures; and 2) comparing business cycle peaks, logical is it may seem, often produces skewed results. (Example: the 1973 peak followed a period of price controls, which artificially depressed inflation.) In this third essay, Winship says that over the long run, there has been an "improvement in living standards, driven in part by greater work and higher wages among women," along with "continued gains in male earnings, declining family size, lower taxes, and more federal and employer benefits." Don't expect to see those data reported in the mainstream media.
Jack Lew talks tough to bankers
Bloomberg's Cheyenne Hopkins and Jesse Hamilton give us the inside scoop on a meeting last month between Treasury Secretary Jack Lew and Wall Street bankers on the Volcker Rule, which would prohibit banks from proprietary trading. Lew told the attendees that he wanted regulators to "err on the side of making it tougher." Initially the rule would have exempted trades that were hedges against other positions. The revised rule would limit hedging. The line between speculating and hedging isn't always well defined. While regulators are dithering over the Volcker Rule, remember that banks didn't get themselves into trouble because of prop trading. Rather, it was bad loans. Nothing like writing hundreds of pages of regulations to fix a non-problem.
Lessons from a pencil
Don Boudreaux of Café Hayek unearths a 10-minute video of Milton Friedman discussing Leonard Read's classic 1958 essay, "I, Pencil." Friedman uses a pencil, hardly an example of technological innovation, to explain how a free market works and what the price mechanism is. It's a nice reminder at a time when the federal government has decided it knows what sort of health insurance is best suited to every individual.
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)