NYC - Manhattan Tops 2.5 Million Jobs in 4Q13

Manhattan Jobs Passed 2.5 Million in 4Q13

Manhattan jobs grew 2.4 percent between the fourth quarter of 2012 and the fourth quarter of 2013, the Bureau of Labor Statistics announced this morning.

The base of 2.5 million jobs will be a marker for Mayor Bill de Blasio.

The Manhattan (aka New York County) growth rate was among the 100 best of the 335 largest counties in the United States.

The best-performing borough in New York City was Brooklyn, with 4.5 percent growth, followed by Staten Island with 4.4 percent and the Bronx with 2.9 percent. Queens trailed with 1.5 percent growth.

The average weekly wage in Manhattan fell 3.3 percent over the year, to $2,041, trailing San Mateo, Calif., which was $2,724 in 4Q13.  San Mateo's income fell even more than Manhattan's, as did that of Washington, DC and Tulsa, Okla.

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Bank Regulation: Admati and Hellwig's Home-Run Rethink

The Bankers' New Clothes

While Thomas Piketty's book has been getting great public attention, being compared with Keynes's General Theory, the March 2014 Journal of Economic Literature includes a a review by Roger B. Myerson of the University of Chicago that points to another as of equivalent importance.

It should not be surprising that the Great Recession would call forth two such heralded books appearing within months of each other. Like the Great Depression, the crisis of 2007-2008 and its aftermath was a big, complex event requiring corresponding intellectual effort to understand and interpret.

Myerson argues that Anat Admati and Martin Hellwig have successfully made such an effort, considering why bank regulation failed. They have come up with a book that will be important and lasting. The book, The Bankers' New Clothes (Princeton and Oxford: Princeton University Press, 2013), makes some surprising arguments.

One surprise is that they recommend that no provision be made for the riskiness of assets in the Adequacy of Bank Capital (ABC) requirements. This has been a cornerstone of U.S. bank examinations and the Basel equity capital standards. American bank examiners for decades have categorized each bank's loan portfolio based on risk, and risky loans are charged against equity capital. When I worked for the FDIC as a financial economist, 20% of "substandard" loans were charged against capital, 50% of "doubtful" loans and 100% of loans were categorized as "loss".

The authors argue for two main changes in bank regulation:

• Equity-capital adequacy should be set at 20-30 percent of total assets. This gives a substantial cushion against losses and means equity holders have a higher stake in the bank.
• Banks should not be allowed to pay any dividends to stockholders if their equity is below 20 percent.

This proposal has the powerful merit of simplicity. The Dodd-Frank legislation attempted to patch back up the easily understood system created in 1933 with the Glass-Steagall legislation. Dodd-Frank has become mired in procedure as many of the provisions in the lengthy patch-up required further action by the various regulatory agencies. Bank lobbyists have been ready at every step to minimize the impact of regulatory action.

Myerson explains well why Admati and Hellwig are on the right track. I agree with him and them. The Glass-Steagall Act's simplicity contributed to its swift passage and long life. In fact the Steagall part, relating to the FDIC, is still in place. The banks in 1933 wanted deposit insurance. Carter Glass's wall between banks and investment banks was the price that the banks paid for putting the Treasury at risk for deposit insurance. But the banking industry ended up at the turn of the century taking the deposit-insurance cheese while dismantling, over nearly seven decades, the Glass half of Glass-Steagall.

It may be difficult now - to change the metaphor - getting the stray chickens back in the banking coop and the speculative foxes out. But the Admati-Hellwig solution of 20-30 percent equity capital requirements for banks offers this possibility. Myerson's review ends:

Economics professors can't do it alone. Political leadership is also needed to get the public's attention and communicate the new principles by which the public should judge its financial institutions, regulators, and politicians.

Amen.

Workplace Innovation - Obama Adopts German Apprentice Program

German Ambassador Peter Wittig (L) and
U.S. Labor Secretary Thomas E. Perez. 

In March, I wrote about the way the German government encourages employers to retain workers during a period of slow demand, by paying part of workers' salaries in a shortened work week. This skills-banking approach, called Kurzarbeit,  allows for a more rapid recovery from a slump as labor shortages are reduced on the uptick.

Another program that Germany uses to bring new workers into the labor force is a system of 1.8 million apprenticeships. This vocational training system is considered a international model and the German Embassy leads a "Skills Initiative" in the United States, convening businesses, workers and local training institutes to show how apprenticeships work.

The United States, with four times the population of Germany, has one-fifth as many apprentices. In other words, the German apprenticeship rate is 20 times that of the United States.

President Obama seeks to double the number of U.S. apprentices in the next five years. Labor Secretary Thomas Perez met yesterday with newly appointed German Ambassador Peter Wittig to discuss how this might be achieved. They are exploring what it takes to create a successful apprentice program and they are also sharing ideas on other ways to address youth and long-term unemployment. (Based on the DOL Newsletter, May 29, 2014. For further information on apprenticeships, click here. The Urban Institute is cooperating with the International Skills Standards Organization and the Department of Labor on an international seminar about apprenticeship programs.)

EC POLICY | Minimum-Wage Facts Change Opinions

The U.S. minimum wage has been
$7.25 per hour since 2009. President
Obama wants to raise it to $10.10.

Yesterday I posted some news about initiatives to promote a living wage and to calculate what such a wage is in different places.

That prompted a few comments about the impact of imposing a minimum wage. Won't that put many workers out of their jobs?

Economists’ views on this topic have changed over the years, as one would hope, in the face of research that contradicts the conventional view. The neoclassical supply-and-demand curve for labor helped guide economists in polls to agree with the idea that a minimum wage would perversely reduce the number of workers that employers would hire and therefore would increase poverty. The preferred alternative approach was a government-guaranteed minimum income.

However, David Card and Alan B. Krueger challenged this orthodoxy and have brought many of their  economist colleagues along with them. They used a higher minimum wage in New Jersey in 1992 to look at the impact of a minimum wage on fast-food chains in New Jersey compared with fast-food chains across the state line, not affected by the higher minimum wage.

They found that since all of the chains in New Jersey had to adhere to the same rise in the minimum wage, the net impact of the minimum wage on their employment was zero. However, to cover the higher cost of labor, the chains in New Jersey raised their prices by an average of 3 percent - not something that would be very noticeable or would induce consumers to travel to another state. They found similar results for California’s minimum wage increase in 1988 and the Federal minimum wage increase in 1990-91.

(For more extensive summaries of the cumulative evidence on the minimum wage, go to a recent report by the Center for Economic and Policy Research. For a summary edited by people on different sides of the issue, go to the wikipedia entry on the minimum wage.)

The debate is not over. My friend Michael Phillips in California argues that the chain-store situation differs from that of small delis. Exemptions, or delayed enforcement, for small businesses might be reasonable.

But meanwhile, the popular debate has been reframed by evidence of rising levels of income and wealth inequality in the United States, leading to a closer look at both ends of pay scales. A flood of information in the wake of the financial crisis of 2008 showing compensation out of line with executive performance have been stirring up public sentiments in the same way that they were by the Pecora Committee in 1933. These sentiments have led to the news yesterday that more than 75 percent of shares were voted against a generous Chipotle executive-compensation package.

The international front offers evidence that countries with more equal incomes are performing better. Europe’s economic stalwart, Germany, doesn't have wide disparities of earnings, and will have a minimum wage of $11.75/hour in 2015. Germany exempts from the minimum wage minors, interns, trainees, long-term unemployed people for their first six months at work and, at least for the first two years, temporary or seasonal workers.

Denmark, which has the most equal incomes of the OECD countries, has strong unions that have negotiated a minimum wage of $20/hour. It also rates as the happiest country in the world, according to the U.N. in 2013. It has a lower unemployment rate and a higher labor force participation rate than the United States.

P.S. The CityEconomist blogsite just clicked over 78,000 page views. Thank you for reading.

WW2 | D-Day+70 Data

D-Day Assault Plan.

June 6, 2014 is the 70th Anniversary of D-Day. A good time to look at D-Day Data.

The few surviving veterans from World War II are fading away with an attrition rate of about 30 percent per year. I have interviewed one survivor at length. By the 80th Anniversary there will be hardly anyone left to tell the stories, so this 70th anniversary is special.

My wife Alice and I are going to France to pay our respects at the beginning of June, in the departments of Normandy and Mayenne (just south of Normandy). My uncle Willem van Stockum is buried in Laval, Mayenne, along with his six crew-mates on a Halifax bomber that was shot down after its mission was completed on June 10, 1944. Another seven in crew from another Halifax on the same mission are buried next to them.

In preparation for our visit, I have been assembling data on D-Day and World War II in Europe. My main source is a new book targeted at young people by Rick Atkinson, D-Day: The Invasion of Normandy, 1944, published by Henry Holt. It is meant to be used in schools and is adapted from Atkinson's #1 best-selling book The Guns at Last Light. I could not find it on Goodreads' list of the 167 best books for kids about World War II, so I added it with a 5-star rating and a brief review. I have since found the listing, so Goodreads should have it twice. Something is wrong with the Goodreads indexing system because I couldn't find the book by author or title. The listing I found gives the book an average rating of 4, because one librarian objected to the poor quality of the photos and their somewhat haphazard placement. Also, the book is definitely for the older Young Adult market because the language does not make much allowance for expected vocabulary in the elementary school grades.

Deaths from WWII (Atkinson, USA)

Total 72 million people, or 28,000 people every day of the 2,174-day war. (This is also the top Wikipedia figure.)

Soviet dead 26 million - military 10.7 million, civilian 15 million
U.S. dead 419,000 - military 417,000 (out of 16 million who served), civilian 2,000
UK dead 451,000 - military 384,000 (out of 6 million who served), civilian 67,000
Canadian dead 23,000, all military (out of 1.1 million who served)
German dead 8.8 million - military 5.5 million, civilian 3.3 million
European Jews killed in Holocaust - 6 million
***
Number of American soldiers buried in Europe - 25,000
U.S. pilots killed behind enemy lines - 14,000

Deaths from WWII - Second Source (worldwar2.org.uk).
Total dead 50-70 million.

Soviet dead 26.6 million, of which 8.7 million soldiers died in World War 2.
British 700,000 military and 60,000 civilian deaths
Poland’s dead were between 5.6 and 5.8 million.
USA military dead is around 416,800 people.
German total 7.4 million, of which military dead and missing are 5.3 million.

Deaths from WWII - Third source - USA History Channel
Total dead 35-60 million (a big range, especially when Atkinson and Wikipedia go up to 72 million.)

D-Day Armada
Allied Troops landed - 156,000
Vehicles landed - 30,000
Planes - 11,000 (my uncle's plane had a crew of seven, so many more airmen were involved)
Ships and landing craft - 5,000
Parachutists - 13,000

Most Effective Bombers in European War
Britain Avro Lancaster, DeHavilland Mosquito (wooden, to avoid radar)
USA B-17 Flying Fortress, B-24 Liberator, B-29 Superfortress
Germany Heinkel III, Junkers 87 Stuka, Junkers Ju-88

Most Effective Tanks in European War
USA M4 Sherman
Soviet T-34
German Panther (partly copied from Soviets), PzKfw Mk. IV Panzer, Tiger I/II