Getting Trendy

The economy is all about trends and tendencies. We have to watch data over longer periods in order to identify where it is headed because short term or one-off bumps and leaps can mislead us easily.

In that context we should pay attention to today’s news that new claims for unemployment assistance dripped 15,000 to 358,000. Not only is that a good week-to-week improvement it helps bring the four week moving average down to 366,250, which is the lowest it has been since 2008.

Couple this news with last week’s employment report and all the anecdotal information we are receiving about hiring, and there is no doubting that the economy has entered a new and more optimistic phase.

Thing are looking up.

But.

Given the depth of the crisis we need to pause a moment and dwell on another trend: continuing claims rose 64,200. There is a dramatic bifurcation taking place in the unemployment roles. The short term unemployed are getting back to work much more easily, and fewer are being added to the rolls. Yet the longer term unemployed are having greater difficulty finding work, and many are simply leaving the workforce. It is easy to overplay the drop in workforce participation which has shrunk markedly through the crisis, but it is something we need to watch carefully. We need to make more effort to ameliorate the effects of long term unemployment via re-training and other measures. This will stop the erosion of skills that prevents the long term unemployed from returning to work.

That and we need to stop vilifying them as being lazy, unskilled, and living off our largesse. Only right wing economists and way out right wing politicians believe that the unemployed are naturally indolent who need to accept their fate and take low wages in order to get the job market back humming again.

Speaking of which Charles Murray’s new book ‘Coming Apart, and the Culture Myth’, has received far too much attention. Its central premise is that our long term problems are due to a drop in social values. Were our workers only to become good church goers, to stay happily married, and to keep away from temptation, our economy would hum once more, just like it did – in Murray’s mind anyway – way back when.

This repulsive and shallow analysis is simply a regurgitation of late Victorian and early Edwardian upper class twaddle. It recalls the dusty years of a fading empire when the elite realizes that its formula is no longer working. Since elites have a hard time coming to terms with the illusions upon which they imagine their success to be built – they routinely mistake the causes of success, and imagine their superiority is based upon exceptional values or work ethic rather than good luck – they then begin to preach to the unwashed. Murray has fallen down the same hole. It is naive and counter productive to think that social values will magically transform our economy, allow us to compete with global competitors, and re-balance our debts all with one deft sweep of the arms. It will be harder work than that. Work that begins with getting working wages to grow and not languish in the gutter.

That and eliminating an economic theory that argues all unemployed workers must value leisure more than work, and thus all the unemployed must be voluntarily so. There are a few economists I can think of who I wish, for a while, could test that stupid theory empirically. Now that would be a trend in the right direction too.