STATE RACES, RED TO BLUE | Heidi's Picks

Sunday, November 1—As Election Day (Tuesday) approaches, the Battleground States are getting special attention. See two takes on a Biden or Trump victory in these states.  (More recently: CNN's guess on the likely range in the Electoral College vote and the American Prospect's "Unsanitized" roundup.)

The following summary of key down-ballot state races was sent to me by Heidi Fiske, who asked me to post it on her behalf, as I have done before:

Nothing is more important than winning the Presidency and taking back the Senate.

But those races are attracting huge sums of money. Not so the state races, which both require and attract less money. 

We will realize in January just how important these overlooked races are, because that’s when governors, state AGs, state Secretaries of State, state judges and state legislatures will determine the district lines that will hold for a decade, through 2030, based on this year's foreshortened census. 

The Democratic Legislative Campaign Committee (DLCC), the Democratic body that concerns itself with state races, says that if the 48 state legislative candidates in the links below are elected, they will flip 10 chambers in seven critical states from Red to Blue. Of these seats, 34 are in chambers that will rule on district lines for one-third of all House seats (144 of 435).

• Heidi's Picks incorporates recommendations of the DLCC, Future Now, and some other individuals and groups.
• Arizona, 5 legislative candidates
• Iowa, 4 legislative candidates
• Michigan, 4 legislative candidates
• Minnesota, 2 legislative candidates
• North Carolina, 11 legislative  + Attorney General + Secretary of State + 2 Supreme Court candidates  [NC’s superb governor is not included only because he is well-funded and almost certain to win]
• Pennsylvania, 13 legislative candidates [PA’s outstanding Attorney General is not included only because he is considered sure to win]
• Texas, 9 legislative + 4 Supreme Court

JOB NUMBERS | May Unemployment 13.3% (16.3%?)

June 5, 2020—Total nonfarm payroll employment rose 2.5 million in May, and the unemployment rate declined to 13.3 percent, the U.S. Bureau of Labor Statistics reported this morning.

However, the BLS includes a note by BLS Commissioner Beach noting that some misclassification occurred, making the unemployment number as reported 3 percentage points lower than it would otherwise have been:

If the workers who were recorded as employed but absent from work due to "other reasons" (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis). Additional information is available online at www.bls.gov/cps/employment-situation-covid19-faq-may-2020.pdf.

(June 6 —See WaPo story, 11 am.)

The principal unemployment rate (U-3) is lower than many economists expected. The BLS warned in a May correction that because its survey is a sample of households during a specific period, unemployment claims data will not necessarily match up to the unemployment numbers. However, the BLS also reports different unemployment rates using a range of definitions.  U-6 is the broadest definition, taking into account those marginally attached to the labor force, including total employed part time for economic reasons. This rate was 20.7 percent, more in line with economists' expectations.

Forecasts had been for as high as 25 percent. The unemployment rate was 25 percent (or a smidgeon above) at its peak in the Great Depression. This rate occurred in the early months of 1933. Most economic observers dismiss the idea that we are in a Depression, because they expect the economy to recover quickly as soon as coronavirus cases level off or a vaccine is developed that would allow the public to resume a normal life.

But the following are examples of people who have gone on record as fearing that the May 2020 unemployment number announced this morning could be as high as 25 percent:

• Fed Chairman Jay Powell.
• Treasury Secretary Steve Mnuchin.
• Goldman Sachs.
• Forbes Magazine's Chuck Jones.

One of the backdrops to this was a 48 percent increase in bankruptcies in May.

Consensus: 20 percent. Most commentators, if they gave a projected unemployment number, were close to CNN's Anneken Tappe, who thought the rate will be most likely about 20 percent. Which is bad enough, and off the April chart.

To understand what is happening, behind the unemployment number itself, look at U-6 as well as U-3. U-6 is 20.7 percent. It includes people who are not in the unemployment numbers because they are marginally attached to the labor force or are employed part time for economic reasons.

Measure	Apr.   2019	Feb. 2020	Mar. 2020	Apr. 2020	May 2020
U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)	3.6	3.5	4.4	14.7	13.3
U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force	7.3	7.0	8.7	22.8	20.7

The number that is ordinarily reported is U-3. In 1933, that was the only number available. But U-6 provides details (insofar as any sample of 50,000 households in the U.S. economy can provide details) of people who are neither employed nor unemployed, an interesting group of potential workers.

The level of U-6 unemployment is important to look at because of the number of Americans who are on the Payroll Protection Plan and other special programs that are keeping workers off the unemployment rolls.

(Hat tip to Dr. Jurgen Brauer, Geoffrey Hilton and Dr. Farid Heydarpour for their assistance with this post!)

Creating U.S. Jobs - Six Avenues

What are the real choices before Washington this fall?

The number one issue before the nation is economic recovery. Unemployment rates have been too high for too long. Here are a few ideas about what we can expect and hope for during the next few months:

1. Don't Depend on an Out-of-Ammo Fed. Federal Reserve Chairman Bernanke wants to appear to be doing everything he can. However, there is little more the Fed/FOMC can do to help the economy since December 16, 2008 when the Federal Funds rate was lowered to the Zero Bound. Quantitative Easing hasn't made much difference. How much can the Fed spend buying long-term Treasury bonds to lower long-term interest rates, even if it sells short-term Treasurys at the same time? How much difference does it make for the Fed to buy up long-term bonds if the Treasury is selling new ones at the next window?

2.  Implement Dodd-Frank to Help Address the Liquidity Trap. The economy would turn around if the Fed's easy-money policies led to more bank lending. But bankers are still worried about their balance sheets. Lax oversight by bank regulators has been replaced by close questioning. Bad loans are still not all recognized and new categories of potentially bad loans have opened up, e.g., the sovereign debt of the PIIGS countries, whose debts are freezing bank liquidity despite  of banks EU rescue programs. Speeding up implementation of Dodd-Frank financial reforms would improve confidence in and among U.S. banks.

3. Pass the President's Second Jobs Program. Another $450 billion for job creation may not be sufficient. However, it is necessary and a CNN poll and others show, by wide margin, that the U.S. public wants this program implemented.

4. Encourage Entrepreneurship. Creating jobs is not just about getting existing firms to hire more workers. It's about encouraging people to start up new businesses. Incubators help. Entrepreneurship can be taught - it's like a language. Governments at all levels can do big and small things to make it easier for people to create businesses.

5. Modify Fuel Prices to Encourage Green Jobs. Federal subsidies of alternative energy and energy efficiency didn't work as well as hoped because prices for fossil fuels don't reflect their full costs (and also because many states and localities did not have staff ready in 2009 to respond to stimulus programs offering money for green jobs). Subsidies for fossil fuels need to be ended and a tax on gasoline or carbon should be imposed. Tom Friedman had a good op-ed on this topic today ("Is It Weird Enough Yet?"). The last Congress rejected cap-and-trade and a carbon tax, but the pressure to find money to pay for Medicare and Social Security, as well as more evidence on global warming, might bring these proposals back to debate and action.

6. Most of All, Reform the Tax Code to Encourage Job Creation. If U.S. payroll tax rates are lowered significantly, as President Obama has suggested, this will have a dual benefit, encouraging employers to hire and putting money in the hands of middle-class consumers, who will spend it. This could be paid for by raising the top tax for those earning, say, $500,000 or more, and gradually raising the cap on the payroll tax (as Sen. Bernie Sanders, I-VT, has proposed). This would return the income tax to a semblance of progressivity and would tax those best able to bear the burden and least likely to spend new money.

George Magnus in the Financial Times describes the world's predicament as a "once-in-a-generation crisis of capitalism", bequeathed by the excesses of the 1980s-2008 period. The stakes couldn't be higher.