November employment figures are out. Time to re-evaluate this assessment from a year ago in Political Calculations that California was in recession.
Going by these [household survey based labor market] measures, it would appear that recession has arrived in California, which is partially borne out by state level GDP data from the U.S. Bureau of Economic Analysis. [text as accessed on 12/27/2017]
The release provides an opportunity to revisit this question (the 2018Q2 state GDP figures are discussed here). It’s (still) unlikely that a recession occurred.
According to my work with Ryan LeCloux, the growth elasticity of real GDP with respect to NFP employment is about 0.85 (statistically significant), so we can be reasonably certain that GDP is still trending up.
It is true that there are two local minima in civilian employment November 2017 and March 2018, but just barely, and given the imprecision of the household survey at the state level, I thought it unwise to rely too much on these observations, and still do (particularly since the employment series is now rising again in the current vintage).
Why did Political Calculations’ Ironman think a recession was in the offing? In part he attributed it to the negative employment effects from the rising minimum wage. To me, this is just another example of ideology trumping data. I see no discernable economy-wide impact from minimum wage increases in California.
Figure 2: Nonfarm payroll employment in California, in thousands, s.a. (blue), CPI-deflated CA minimum wage (red), both on log scale. Blue arrow at timing of Political Calculations recession conjecture. Source: BLS and author’s calculations.
Political Calculations did say something vague about the Cali minimum wage going up but utterly failed to provide the actual history of when this minimum wage increased and by how much:
https://www.dir.ca.gov/iwc/MinimumWageHistory.htm
Gee these increases have been going on for a while. And only now does he speculate it MIGHT have a negative effect which he really cannot document.
Political Calculations needs to take lessons on this from someone other than CoRev.
“Last year was a very good one for the state’s economy. The 3.3 percent gain in economic output in 2016 was more than double that of the nation as a whole and one of the highest of any state. However, California stumbled during the first half of 2017. California’s increase was an anemic six tenths of one percent in the first quarter compared to the same period of 2016, and 2.1 percent in the second quarter, well below the national rate and ranking 35th in the nation.”
From Political Calculations. He also shows the Cali employment to population ratio. Like economic output, Cali’s performance had been doing BETTER than the rest of the nation even as it raised the real minimum wage since 2014 as you point out. OK – Cali’s growth in early 2017 was not in excess of 3%. He thinks this means a recession? One quarter of positive growth that is not in excess of 3% is a sure sign of a recession???
Political Calculations should not go into forecasting the weather – especially during a New York City winter. He’s go barking insane if he did. Or maybe he is already barking insane!
This is weird. Is Treas. Sec. Mnuchin calling the CEOs of the megabanks in on the hope of actually CREATING a financial crisis?
https://twitter.com/stevenmnuchin1/status/1076958380361543681
I guess the crisis over the government shut down and the chaos in our foreign policy made Mnuchin feeling left out so he has decided that financial markets must be in panic too. Who is running this government? And why do I want to rewatch One Flew Over the Cuckoo’s Nest?!
Trump spends Christmas eve on the Twitter trashing the FED:
https://www.thestreet.com/politics/trump-continues-trash-talking-federal-reserve-over-twitter-14819895
“The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch – he can’t putt!”
OK – I do not golf so I’ll pass on the line about putting. But Trump thinks his trade war is necessary? Trump endorses a “strong dollar”? WTF is advising this moron? Oh yea – Lawrence Kudlow. Got it!
I noted the first part of this interview with Kevin Hassett:
https://www.msnbc.com/ali-velshi/watch/hassett-shutdown-won-t-have-a-significant-effect-longterm-1404493891819
Hassett had to kiss Trump’s rear end of course by supporting THE WALL which he claimed would cost a mere $5 billion but no – it was pointed out that the true cost would be much higher. His reply? He had to admit he had no clue what he was talking about!
Greg Mankiw listened to the rest of this nonsense including the part where Hassett seemed to claimed government workers do nothing:
http://gregmankiw.blogspot.com/2018/12/how-government-shutdown-affects-gdp.html
“CEA chair Kevin Hassett (around minute 4:00) dismisses the adverse impact of the government shutdown on real GDP. It seems to me that he is more wrong than right. Kevin appears to be assuming that government workers don’t produce anything of value when they are at work, or that they will make up all the undone work when they return, so making them stay at home has no significant economic impact. If that were really the case, we should give them all shorter work weeks, so they can enjoy more leisure.”
Mankiw disagrees with Hassett’s little claim here. No wonder Trump comes across as such an economic moron. Look at the fools who he has chosen to be his “economic advisers”.
No snug and toasty holiday music?? Not even a traditional classical piece?? Eeeeeeewwwwp. Poor showing by Menzie. ; )
https://www.youtube.com/watch?v=_-0jNi2L11I