Can the West’s perplexing employment miracle continue?
economist.com
economist.com
Especially since the same was true (financial experts were talking out of their ass) for the whole easier to predict zero interest rate period too!
> We know inflation should start decreasing within a year or so
Indeed
a) if the issue reoccurs, the learnings are ineffective b) if the issue is new, how can you tell how to move the knob without pissing a lot of people and losing your job.
It is a lose-lose game.
The balance sheet is used to direct effective interest rates intramarket -- not a separate knob.
The genius solution that they came up with is transfering billions of taxpayer money from the North to the South- which is not very popular among voters.
We're at 4.50–4.75, no?
That's not low, but it's not high either. https://en.m.wikipedia.org/wiki/Federal_funds_rate#Historica...
Their ability to fight inflation is tied up in market participants believing they will do what it takes to do so even in the face of harsh costs. If that reputation comes into doubt, we could end up with the worst of both worlds.
As to the soft landing scenario, sure, it might happen but based on what followed past inflation, it seems unlikely (if I'm not mistaken soft landing was only achieved once in the mid 90's and with a much lower inflation than we see now.
Rising prices are supply not meeting demand. It feels like improving productivity would be an equally powerful tool with less human cost. Granted that is a harder thing to control quarter over quarter.
Consider this analysis that intetest rates may in some cases raise prices. https://economicsfromthetopdown.com/2023/02/04/do-high-inter...
And more links along that line from the pluralistic blog. https://pluralistic.net/2023/02/04/if-i-was-a-horse/#friedma...
Does anybody else hear talk of productivity in talk of inflation?
The mainstream economists are wringing their hands over full employment and rising wages, the first time in decades that we might see the middle class grow, because production isn't sufficiently meeting demand.
We should be producing more stuff - especially housing - instead of trying to keep people from earning more.
Housing costs thus increase to suck all income.
It’s a great way to return to feudalism.
If you have a bankrupt government that can't afford interest payments, then raising interest rates will just lead to borrowing more money to pay the interest in a vicious cycle until hyperinflation sets in.
If you can limit borrowing and speed up payback of debts through any means other than raising interest rates you achieve the same effect much sooner.
No one had a normal economic life for several years. It’s a miracle that these levers have been adjusted to the point that everyone is like “well no one going to work for three years had no impact! What over-reactionaries!”
Where did this happen?
This is one of many of my associates in the service industry that had substantial employment challenges.
If you had regular job, you were eligible for unemployment there was also PUP enabled due to pandemic, so if you were self employed you could request unemployment under that. In addition there were also short periods of time where you could get extra $600/week (as it is impossible to survive for long on the usual unemployment amount)
They tend to work as contractors on a limited term contract and international maritime labor laws are unlikely to require it. Note also the country of registry for the ships may have more lax labor laws too.
(edit)
The only instance of unemployment being mentioned in international maritime labor laws I've found is https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:91:0::NO::...
> Regulation 2.6 – Seafarer compensation for the ship’s loss or foundering
> Purpose: To ensure that seafarers are compensated when a ship is lost or has foundered
> 1. Seafarers are entitled to adequate compensation in the case of injury, loss or unemployment arising from the ship’s loss or foundering.
This very specifically deals with ships sinking. Not "ok, no work everyone off."
A delicate balance: The seafarers’ employment agreement, the system of the Maritime Labour Convention, 2006 and the role of flag States - https://hal.science/hal-01470314/document also touches on unemployment (there's a single mention of it).
We were all subject to one master. But under a different punishment.
This may have been your experience but it was nowhere near mine. I think talking about “tech” as a whole is generalizing too broadly.
Nobody has a magic crystal ball for what's next.
People will be in between any of the above situation simultaneously, but between having to get fired and seeing costs go up a little at a time, I imagine most people will defer the gut punch and take the erosion of spending power.
Inflation shrinks the present value of that debt, without requiring the government to cut spending to pay it down, which would have serious economic consequences (see: austerity).
holding cash is paying something for the first time in more than a decade
Park your cash in a 5% instrument for a year and you can still afford 3-4% less stuff than you could at the beginning of the year.
That's fine for me with a mortgage, but less retirement headroom for many older people.
I personally have a hard time going out to a restaurant and getting a 2 person meal for less than say 30-40$. Car market is absolutely through the roof. Housing market, although cooling slightly, is still through the roof. Our base rent went up 15% last year. Gas is now double in my area.
So if you have 6% inflation, and the return on e.g. the 1 year t bill is 4.75%, you have -1.25% "real" interest rates, because your money at the end of your year of investment will be worth ~1.23% less than it was at the beginning of the year.
I'm not sure I completely agree that the result is actually as bad as that, since stuffing your money in the mattress would put you -5.5% in the hole by comparison, but still.
this is just about making a prediction of the future.
if you believe that inflation will decrease then your guaranteed rate of return from interest rates is great.
if you believe that inflation will increase or stay the same, then yes we have "negative interest rates"
I don't think it's reasonable to call it a "real" interest rate, because I can't buy T bills against it and it has no guarantees
If it came up red they would be telling me they were a financial genius who had unlocked the secret to riches.
I feel that people taking out variable loans at 1% and hoping it won’t go to 4% aren’t as reckless as a gambler, and in hindsight it’s pretty easy to lecture them, but I don’t take any joy in it.
I’ve seen online estimates recently 3 or 4x what you’ve stated and it wouldn’t surprise me if those were correct but we’ll never know.
Allowing ownership of houses as an investment is just wrong. (The usual response to this is that you need investors or housing won't be built. The idea no-one would pay for a house to be built is silly, but we also have not-for profit housing associations.)
(And it’s of note that dealing with renting a SFH is possibly a worse experience than renting from a complex. Large enough complexes have maintenance staff and professional management. Someone renting a SFH might well have just that unit to rent - amateur hour. Or they could be a corporation but because you’re just one unit in probably a more spread out population of properties the renter might well experience lowered services from the property management.)
I do agree the investment activity we’ve seen in simply hoarding up SFH properties for investment is deeply problematic. There are all sorts of ways to push the market back towards owner occupiers.
It’d also be nice if it was a standard thing for working people to be able to make it to public local government meetings. Those tend to be timed when working people are at work. That could help something’s, but there’s probably still be a lot of NIMBYism…
It's harder for both to purchase, but investors are also heavily leveraged and fighting investment alternatives in a higher-rate environment.
Because high interest rates can reduce demand, in a vacuum you would also see a reduction in the price of the property, making them more affordable. Of course this price is also impacted by countless other things, builder velocity being one of them, so in the real world it takes time to sort out.
The 70s, 80s, 90s had relatively stable home ownership rates despite very high interest rates. In 2016 the US reached a bottom in home ownership at 62.9 despite historically low rates.
BTW I was not referring to rich people living in their homes that they got with high interest rates, the comment was specifically towards investment property. Definitely agree that hoarding properties is out of hand.
Rent-seeking is an activity where the perpetrator creates legal barriers that result in them collecting money without providing anything of value.
Many people hate on landlords, but unless they’re also actively restricting new supply, they’re not rent-seeking as the term is defined.
But I agree with your point.
- prevent corporations from owning residential property
- tax property rental income at a substantially higher rate than income and exempt it from other deductions
- tax residential property which is empty for more than de minimis periods at an eye-watering rate (perhaps 5-6x standard property taxes).
None of this requires higher interest rates, but it will result in a transfer of wealth away from aging boomers and corporations, which apparently must be avoided at all costs.
As we have seen the asset markets have adapted to low rates by increasing assets prices. Thus an increase in interest rates to what historically has been low does not offer a great way to analyze its effect.
The question we should rather answer is by how much the assets will lose in value and what are the options of people depending on this value (retirement, disability funds etc...) and for people indebted, did they forecast and are they able to stomach an increase in interest spending of roughly an order of magnitude?
That's true regardless of the interest rate situation...
> We have gone from a zero interest rate economy to a high interest one within months.
IIUC, even the Fed's pretend "Natural Rate of Interest" is higher than current rates - meaning even they seem to believe they're still stimulating the economy somewhat with their policies.
Current interest rates are still arguably low. And AFAIK, no major central bank is even considering an interest rate - ever - that would actually be "high" or even positive in REAL terms.
Even 432 Park Avenue, the new huge luxury tower in NYC, took 3 years. A random startup takes a lot longer to get to the money.
Some investment just keep adding to society's wealth, while others have a return and then go away. The first kind is really important because it enables new investment on things that depend on it, the second one doesn't.
Well, good luck trying to attribute an specific value for a child. But for your other examples the classification is mostly straightforward.
Because one cannot talk about the recent low interest rate environment without also talking about the quantitative easing environment which pumped trillions of dollars into Banks who figured they had should do something with some of it
Much like we have records of Chinese warlords or Byzantine princes engaging in rent seeking and breaking the system to cater to their needs, so to is their plain evidence of what and why things played out they way they did.
[1] https://fred.stlouisfed.org/series/GFDEGDQ188S
[2] https://fred.stlouisfed.org/series/A091RC1Q027SBEA
[3] https://www.defense.gov/News/News-Stories/Article/Article/32...
Have you personally already purchased your first home? Without family assistance, it would be absolutely brutal and untenable for my children to enter into in this domain at present.
The people at the bottom are getting a remarkably harsh and bad deal these days, even in instances where they have been exceedingly fiscally responsible their entire life. Is this the future the youngsters deserve? My kids are still solidly upper middle class, imagine what this translates to for the lower end of socio economic status.
This seems severely suboptimal. At what point is a serious systemic correction warranted? What is the current generation supposed to tell their children? At some point people's motivation to participate in the system and play by the rules will be negatively impacted. What happens then?
https://www.npr.org/2022/07/14/1109345201/theres-a-massive-h...
Worryingly, the higher interest rates are making it more difficult to construct the housing we so desperately need in so many places.
Mom & Pop trying to get a couple of AirBnB's ain't helping either.
https://www.theatlantic.com/ideas/archive/2023/01/housing-cr...
If DINKs can't afford it, what does that tell you about the direction housing prices will go?
Elites and wealthy boomers will keep soaking up resources, then prices may become volatile in a southward direction.
In the meantime, the current generation is frozen in place, unable to progress in a rigged game.
The ones with capital will buy them, and you will be renting.
And if you look at the capital buying up houses, it's a tiny fraction of all available housing out there.
The correct answer is - just like when housing prices went up with low interest rates, they'll go down with high interest rates.
Or $1600/month? This has a nursery so they can fix the dink: https://www.redfin.com/MD/Pasadena/3500K-Lochearn-Ct-21122/u...
The home loans are unaffordable because the house prices are too high. The median house price in 1989 was around $95K ($230K adjusted for inflation). Today it's about $400K.
If the housing stock is too expensive for the population there can be many causes, and higher quality or larger size housing is just another cause. The causes of the high prices don’t matter to buyers, all they know is they can’t afford to buy. What use is it to them that the homes they can’t afford are better quality?
Improved insulation and air sealing is nice, but you’re not going to see anything close to $200k in energy savings over the building’s life vs just blasting your furnace to a comfortable temperature.
Houses certainly have increased in size though.
https://eyeonhousing.org/2021/03/age-of-housing-stock-by-sta...
I haven't, but I'm not a DINK, and have never broken six figures.
The right credit union will make a home loan with no money down, which might help your kids and their spouses. I'm currently paying $3k/month for rent. Zillow says that this could afford a $350,965 home with a 30-year 6.833% fixed rate, including 1.2% taxes at $351/month and $800/year in homeowner's insurance at $67/month, and mortgage insurance at $287/month. Not possible in this area, but possible elsewhere.
Unfortunately it is for the people who have gotten their mortgages at those lower rates. It's a ticking bomb for many of them.
If people in aggregate are suddenly unable to "afford" things, then you're not talking about inflation. People (again, in aggregate) have more money (not wealth) than they did a few years ago, which is what "inflation" means. On average, it's a rescaling, nothing changes.
Now, individuals may be hurt or helped[1] by this aggregate rescaling. But it remains a rescaling, and if you try to interpret it the way you just did you're going to get your predictions wrong every single time.
[1] FWIW: if you hold a mortage or any other large non-inflation-indexed loan, you should be cheering for inflation to dilute your debt. Most US homeowners are coming out ahead. They don't explain this well on the news networks though.
So, sure, if you want to rephrase and lament that people are unable to afford stuff because of the recent drop in supply (or increase in demand) for the products they want, that would be logically consistent. But it would be factually wrong, as in fact in aggregate[1] world GDP is doing pretty well right now.
[1] As above, specific products and markets are always moving. Something is always more expensive than it should be and there's always a glut in something else. People were complaining about eggs last week, IIRC.
The mean purchase power has a very small impact on society.
And yes, the disruption tends to pass after the inflation goes away. But none of that makes the argument specious.
Yes, and it has a different temporal behavior from the impact on the purchase power. The same person can be affected by both.
As a rule, inflation infuriates people because almost everyone jut wakes up some day and discover they are much poorer than they used to be. You can't dismiss this by pointing that their net-worth improved. (But yes, the net-worth of a lot of people improves.)
I'll certainly grant this, not the least because they get terrible information about it from media and online sources.
> almost everyone jut wakes up some day and discover they are much poorer than they used to be
Like this. This is not true. This is a lie. You need to stop saying this. People are "much poorer" post-inflation only in the sense that they were "much richer" post-pandemic, due to the huge savings boom. If you aren't willing to look at the latter, then you're not doing the analysis correctly.
At most, "some" people are "much poorer" due to asymmetric effects. But you're just wrong here if you try to extend that to "almost everyone". Please stop.
https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_the...
Can't predict really as you said. You can bound expectations though.
Best outcome is perhaps interest rates get lower and things resume as normal assuming there is no other lockdown say.
Do you mean the early 1970s when the US moved off the gold standard and there was a massive oil shock?
Or the late 1970s when inflation made an attempt for a runaway spiral?
> get lower and things resume as normal
The last few years (2008-present) have been anything but “normal”.
The Fed has been full throttle on the lowest interest rate for years and Quantitative Easing / asset purchase programs. Stocks and VCs have been juiced with cheap money causing massive distortions in many markets.
Normal would involve checking and savings accounts paying a non-trivial interest rate. It would involve actual due diligence in VC, not rubber stamping FOMO. Your “normal” probably needs some recalibration.
a) You assume that me saying "best case" if we continue as is, is a good case scenario -- from my point of view it is not. Which is what I am expressing.
We both agree here we are not in a good situation. Even if we "recover" GDP wise the buying power of the middle and lower classes is taking a serious hit.
This is one of the results of Volcker's policy (to remind he set the Fed policy in '70s) which we are following or asked to follow by some segment of the banking world today (cf. https://econreview.berkeley.edu/then-and-now-the-crisis-of-t...) Thus, my '70s reference.
b) Already economists do not consider 2008 crisis as over. But we are arguably in a continuation of that crisis. Again, this is how an economist historian is going to treat the 2000s. Normal could be before that and sure I could recalibrate my normal, but do you think we should expect magical times?
The view that Fed is using too much QE and too much free money is political and moral. I offer no opinion and definitely did not try to include it in my 3 line opinion.
Disclaimer: I do not abide in the market efficiency camp. I think history proves that markets are inefficient.
> Normal would involve checking and savings accounts paying a non-trivial interest rate.
Even now that the fed fund rate has increased, the savings rate offered is low. Why? Because the business model and flows of banks has changed. They don't need to ask for your money. They are going to get it in the U.S. even indirectly. Perhaps they still care if you are a high value individual that can give them a few millions and give them a few percentages of fees annually.
They are also now allowed to treat checking and savings the same, thus able to issue more loans. (U.S. detail.) Namely, Regulation D has changed and thus the definition of M1 money also.
[0]https://www.federalreserve.gov/boarddocs/supmanual/cch/int_d... [1] https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...
Those times are over for the foreseeable future, unless U.S. or E.U. enters an unprecedented recession that stirs the banking world fundamentally.
Job data trails rate increases by many months. So do recessions.
If the fed levels off interest rates within the next year or so, we have a very good chance of avoiding a recession. I am young/old enough to remember the last time interest rates were this high, and we were BOOMING.
If the fed pushes the gas on interest rates, it will likely push us into a mild recession.
Thanks (covid!) to millions retiring along with remote work, it would take a black swan event to really push things into the red. Note that we have a few possibilities for that setup, but so far, nothing has pushed every button as of yet.
I predict a sideways trend for the near future. A really good event unrelated to employment will pull us up, a really bad event will drag us down.
Otherwise, please share the magic crystal ball sources.
Increasing those interest rates will cause zombie business interests to go broke by increasing their borrowing costs.
This will probably look something like a meltdown in the office and retail commercial MBS for a start (I have no idea who else is out there ready to join the party once it gets started, but that's a good start).
Already sales of CMBS have fallen 85% from where they should be this year:
https://www.bloomberg.com/news/articles/2023-02-17/sales-of-...
Those interest rates also go into everyone's Discounted Cash Flow models, which affects the prices of assets across the board, once people start to adjust to the fact that higher interest rates are going to stick (until the Fed blows up the economy, which of course means the beta value in those models needs to increase).
Once the unemployment rate climbs back to 6-8% or higher then the Fed will probably cut interest rates back down to zero again due to the recession that they will have created. With more slack in the labor force then when they do that inflation will not reemerge. The recovery won't be V-shaped like the pandemic recession because businesses will be allowed to go bust without any kind of government support -- the recession may be particularly bad since the Republicans in the House will want to hang the recession on Biden (a situation which didn't happen in the 2001/2008/2020 recessions since there were Republicans in the WH and cooperative Democrats).
Not sure that's the case, I work in RV, which is a leading indicator for recession and recovery. RV volumes have been getting hammered for the last 8 months. OEM mfg numbers are down over 50% year on year. [1] Sure it's just one small segment of the overall economy, but things are getting strange out there.
[1] https://rv-pro.com/wp-content/uploads/2023/01/Shipments2.png
However volumes this year are projected to be in the low 300k range. [2] Also these projections seem to be getting revised lower every month. These are numbers the industry hasn't seen since 2014. So we're not returning to pre-COVID levels (record shipments in 500k range in 2017 and 2018).
The industry is being cut in half (at least) right now. And the drop is predicted to be long (we're already 6 months in, and the articles are saying this will last until at least the end of 2023). There's something deeper going on here. I think that something deeper is a recession.
Not saying I have all the answers. But from the angle I'm sitting at this looks a lot like the decline seen after the housing bubble and 2008 crisis.
YMMV
Right, of course. Election time.
Whether this decrease is sustainable is indeed an open question.
The lag is also easy to understand since interest rates don't immediately hit businesses borrowing cheap money short, until their loans rollover and readjust on a roughly 1-2 year schedule. The economy can also absorb the first waves of those failures and it just takes awhile for the volume to build up.
> Whoever claims to accurately predict what's going to happen in the next few years is talking out of their ass.
> We know inflation should start decreasing within a year or so,
We don't know that. In fact, it's actually a pretty commonly discussed possibility that inflation could stay high (>5%) for the next decade due to retiring baby boomers and other reasons
(Energy prices were much less affected in the US, but the economies are linked by trade)
That is assuming the Russians eventually pull out of Ukraine, are completely beaten militarily and their assets will be used to fund Ukrainian reconstruction, and it assumes that China does not increase tensions with Taiwan or, heaven forbid, actually invade.
Should the war drag on, the situation will grow completely unpredictable - eventually, governments (no matter their political orientation or prior campaign promises) will have to raise taxes to pay for Ukraine aid and especially new arms projects, which means price hikes for the masses as companies will just pass through tax increases instead of accepting lower dividends for the capitalist owner class.
> but you cannot predict how millions of people will react to suddenly not being able to afford stuff.
IMO: Riots are inevitable IMO unless politicians invest money into at least filling the gaps for the lowest rungs of the societal ladder, the French are blazing the trail here - and it's only a matter of time until at least the UK population has enough of empty supermarket shelves. In the US, it depends if Biden will be able to secure a second term.
The problem is the political implications... for one, it would send a signal to China that a land-grab against Taiwan will yield a bit of trouble but nothing too serious. That's the worst case and I seriously hope that that alone (and the economic devastation associated with TSMC blowing up their fabs to prevent them from falling into Chinese hands) is enough to keep the support going.
The other factor is that it might lead to a complete fracture of the NATO - Finland, the Baltic nations and Poland will not accept any kind of Russian success out of that war. They're all no big economic players in the EU/NATO, but a major internal dissatisfaction in NATO may entice other players in the world to play rough again as well, not just China.
Ukraine gave up their nuclear weapons and long strike weapons in exchange for a promise to not be invaded.
After Russia broke that promise who would ever make that same deal again?.
OK, fair enough. But then it starts making the argument that employment in the West is going to look more like Japan. Except places where I'm aware where there are acute labor shortages (e.g. businesses like restaurants, child care, nursing, home services like plumber, electrician, etc.) look nothing like the picture the author tried to paint with his Japan vignettes. I.e. there aren't tons of spare waiters standing around waiting to make your drink where I live. More like you're happy just to get seated in the first place because places are so understaffed.
The current and coming labor shortages in the West are not a surprise - it's simple demographics, with nearly every 1st world country having a fertility rate that is well below replacement level. I think the pandemic did cause some folks to re-evaluate their priorities, but I think even there a lot of explanations are given for people "re-evaluating their priorities", but the reality is that labor shortages are causing some people to leave the workforce because the value of their "labor at home" is now relatively much more. For example, childcare in the US in many urban areas is extremely expensive. It's expensive to the point where if one member of a couple has a relatively low earning potential, it makes more sense for them to stay at home to raise their kids, rather than putting them in childcare, because the economics of it are no longer that favorable.
In the U.S. what changed over the past 5 years is legal immigration: it was drastically cut and has not been restored.
So as citizens and existing long-term residents pursue better jobs or time at home, there are far fewer new residents eager for lower paying jobs. If you talk to businesses that have traditionally employed these newly arrived folks—food service, agriculture, construction, childcare, etc—they will be crystal clear about the impact they are seeing.
Places with desirable standards of living don’t need replacement level births. They just need the right levels of immigration. People will come, ready to work on day one.
As they pass away, there will be less need for the pointless jobs but there is no one to replace the old people who are also doing the important jobs like farming, which is not highly automated, so there is little chance Japan is on the brink of any real employment crisis. If anything more and more jobs are coming online everyday, with less people to fill them.
Sometimes I know we worry about AI taking our jobs but I’m wondering if we will be able to survive without it ?
The other end of that balance produces high inflation, as employers have to continuously raise wages to recruit from competitors, and continuously raise prices to cover increasing wage expense.
Of course, the other option that companies can take is to increase productivity by investing in automation, training etc so each worker provides more output to justify their higher cost.
My impression was that Japan had ~0 unemployment largely due to an increasingly small number of people of working age; per-employee productivity is actually pretty high in Japan.
And yeah, certainly around here a lot of stuff is just reducing hours because they can't staff at previous levels.
I deeply regret all the years working hard in a traditional job, because it brought me no closer to having a career, a family, a place to call my own, or respect. Why should I ever expect any young person to do the same, when things are much worse for them now.
Why not ask them?
The missing 10m?
Might be hard. What with them being ‘missing’.
https://www.worldometers.info/coronavirus/coronavirus-death-...
The Economist puts excess deaths at 20m
https://www.economist.com/graphic-detail/coronavirus-excess-...
Keep in mind we got some of the first ever basic human rights because there weren’t enough peasants after the black plague.
There's still the other half, but that's not nothing.
But some patterns or modus operandi have been going on for thousands of years, albeit reacting more quickly now a days due to improved forms of communication.
>At airports people are employed to straighten suitcases after they tumble onto the baggage carousel.
People need to recognise slavery and not be treated like a dog.
The 1st world has its problems, but the planet has its problems, people need to look at things with a global perspective as well as a national perspective and read between the lines.
The days of a job for life are over, the days of working in one country all your life are over. The need to retrain and remain up to date is a form of cutting the fat, a variation of survival of the fittest, but still survival of the fittest.
Becoming cynical can be healthy a healthy attribute to have. The over aching desire to get people worshipping money couldnt be more on display that ever before.
https://www.scmp.com/business/economy/article/1524064/sex-an...
People need to make sure their lives are not stolen, because when you realise whats been done to you, its hard to recover from that. And as long as people continue to get away with stealing from others in legal ways, the fraud will continue.
- how felony records, addiction to opiates, lack of citizenship paperwork, etc have made so many people undesirable hires
- how so many people have moved onto disability insurance
- how certain populations are opting to play video games, watch porn, and live at home with parents
- young women were squeezed out of the workforce during the pandemic and have yet to return in large numbers
- medical bankruptcy (a mostly US specific issue)
- inefficiency in hiring funnels (“the resume firewall”)
As economists say, there are four types of economies: developed, undeveloped, Argentina, and Japan. Not having a permanent place to be during the 9-5PM, whether that is school or work, is a badge of shame in Japanese society. If you read crime reports in Japan, they will almost always mention the persons state of employment. Even the tragedy of the commons / prisoner's dilemma is thwarted in Japan, atleast in a public context. On microeconomics, people are not making decisions that would be deemed economically optimal or even rational from an American lens.
The example with the airport and malls being overstaffed. The first part is that both the government and people would rather that people work, rather than rely on government/society, even if it means the enterprise is not operating optimally. This is one reason why, quantitatively atleast, Japan has one of the lowest productivity rates of developed countries. Everyone has to appear working diligently, regardless if they've past the point of productivity or not. For the second part, the mall, in this time and age you can order stuff online. The value proposition of retail is that people want and value human services. Especially if it for higher end products and luxury products, where the retail and customer experience is part of the purchase, which is likely the case for a mall in Japan. Even Uniqlo is a splurge for people to be honest. Furthermore, Japanese people trust humans not computers, and there is an expectation that service be 1:1 and available. Just wait into the author sees the staff ratio in the electronics store, especially in the appliance section. They are dozens of tables where they go through a step by step process with customers, explaining the appliance, delivery process, etc. Part of this is also a desire for human interaction which is relatively limited compared to America where you have no shortage of small talk with randos.
…in some social classes. What are the freeters and retirees doing? Night workers?
> This is one reason why, quantitatively atleast, Japan has one of the lowest productivity rates of developer countries. Everyone has to appear working diligently, regardless if they've past the point of productivity or not.
This has been changing, it's not as true of newer companies and startups.
Do you mean nightshift workers or mizu shobai workers? If you are talking about nightshift workers, then that's just a matter of semantics (9-5PM == full time employment, even if that means two part time jobs ).
As for mizu shobai workers, I think would it be disingenous to suggest this is somehow more honorable and respected by society and older generations/parents than saying being a certified professional. Sure, the male hosts in Shinjuku are making multiples more than a FANG employee in the states, but part of the pay is the judgement by societal at large. Yes, in some social classes being a suit-wearing office worker with a stable income is respected, and in Kabukicho circles drinking with lonely and emotionally vulnerable clients until you cough up blood is respected.
Japan's most recent revision to the visas allowed tech workers who make over 20 million yen (~$150k usd) a year to skip the regular lines at the airport, and use the line reserved for government diplomats and ambassadors. The other requirement is that you have a masters degree. Point being, there is a strong emphasis on pedigree in Japan.
https://www.japantimes.co.jp/news/2023/02/17/national/new-vi...
> retirees
Retired. But if you're talking about elderly people, Japan also has a larger percentage of the elderly working. https://www.jil.go.jp/english/jli/documents/2022/039-04.pdf
> freeters
A subset of this will wear it as a badge of honor, but another subset can't get hired. One reason for not being able to get hired is that Japanese companies want to hirer young, straight out of school, and invest in the long term. Freeters are excluded from this cohort, and also because employers feel this is a red flag.
Even from Wikipedia, the negative perception from Mass Media and society is clearly laid out, so bringing up freeters and attitudes towards them only furthers my claims. https://en.wikipedia.org/wiki/Freeter. The ones that are subsidized by their parents are referred to as "Parasite Singles" by the Japanese.
> This has been changing, it's not as true of newer companies and startups.
Not as true, but still true.
White collar workers still have to clock in and clock out.
I will believe this when people Wordpress dominance starts trending down and people stop holding meetups in every city. There are even consultancies for Squarespace. Meanwhile, less developed countries in the region such as Indonesia has an order of magnitude healthier startup ecosystem, including more unicorns. Banks and traditional industries have begun their DX (digital transformation) but it's long way to go when the most foreigner friendly bank's website goes down for a day of maintanence every month, and require strange login rules such as usernames having to have no more than 3 consecutives alphabetic or numbers. Meanwhile, passwords can't have special characters.
Yes, I meant literally night workers. They might sleep through the day but don't always, so they can look unemployed.
I don't know any fuzoku workers to ask them about it. I do know several bar owners and freelancers, so that's what I was mostly thinking about.
> Even from Wikipedia, the negative perception from Mass Media and society is clearly laid out, so bringing up freeters and attitudes towards them only furthers my claims.
Well my question was more like, what do _they_ think about each other? I agree the media judges them.
This. In many EU countries, airports are currently severely -under-staffed. So much so that in several airports scheduled flights had to be canceled. Whatever the cause for low unemployment in Western countries is, it is definitely not the abundance of 'nonsense jobs' like in Japan.
These jobs are of extremely marginal (or even sometimes slightly negative) value to the corporation in terms of profitably servicing customers, but their value in anti-competitive moat-making justifies the costs. Of course, this only works at scale if most big corporations act in unison.
As corporations find other, more effective ways to maintain their oligopolies, the reliance on this strategy diminishes... That may explain recent layoffs in the US? Maybe we've reached such point due to media monopolization and regulatory capture providing a more robust moat? The ability of free labor to compete against corporate interests is now so insignificant (odds are so bad for indie startups) that it no longer poses a threat to corporate interests, even in large numbers.
Bullshit jobs exist because mid level managers are very averse to killing projects or firing low performers, because that would shrink their fiefdom. That basically only ever happens when there is extreme pressure (e.g. layoffs).
Layoffs happen in clusters because even a few layoffs greatly increase the leverage employers have, and as soon as they have a little leverage, a layoff looks better than it would otherwise, so it's a positive feedback loop.
This is a much, much simpler and realistic explanation than "a grand conspiracy of media monopolies and regulatory capture is cheaper than hungry hungry hippoing all the engineers".
If you can raise (or borrow at 0% interest) Billions of dollars, it makes sense, and is a dirt cheap thing to do. It keeps all the people you've hired from becoming your competitors, and you might even profit from their work in the mean while.
I have heard lots of managers say "yeah, I know they're not performing well, but I don't want to reduce headcount right before budget allocation, can we manage around them?" (or something to that effect).
In my MBA course we even talked about this as a thing - that mid-level managers create fiefdoms, and the effects that has on the organisation culture. There are lots of other effects on the organisation from this, too.
It doesn't necessarily mean we are experiencing a miracle and will have higher living standards, I promise it is quite possible for a nation to banish unemployment but still have a majority of people struggling to get by.
That being said, I think we haven't seen the full effect of higher interest rates yet, we are just getting started with that.
You can always end up having a bunch of low paying jobs that don't allow for a good standard of living. Everyone will be employed but I'm sure no one will end up enjoying that.
Indeed, but this will gradually kill all but the most essential industries. "Consumers" won't have the funds to "consume" and the 21M US citizens with a net worth of $1M or more won't pick up the slack. 21M people don't purchase 15 Gameboys each when they go to the store.
If it gets bad enough, then the risk is that mutual aid networks will enable "opting out" en masse like during the depression: tents and washboards by the river.
Once things at that point, getting the opt-outs back to play the game requires big promises ala The New Deal.
> an extraordinary event manifesting divine intervention in human affairs
OR
> an extremely outstanding or unusual event, thing, or accomplishment
'miracle' from an economist:
> Something slightly unexpected happened.
They really do overuse the term shamelessly.
Efficient market theory predicts that in a free market, all labor will be utilized, irrespective of demand dips due to interest rate hikes.
With the gig economy providing a route around regulatory regimentation of the labor market and inflation having driven down the real minimum wage to below the market value of the vast majority of labor, the labor market has been able to adjust to every economic turn and produce effectively full employment.
Going even further out in a limb: I think in a sense, political gridlock has prevented the government from instituting disastrous measures that in the 1930s produced so much unnecessary unemployment, like the FDR Administration trying to fight deflation by imposing very high industry-specific minimum wages that caused the unemployment rate to exceed 20 percent.
https://www.cbp.gov/newsroom/stats/southwest-land-border-enc...
The Fed uses the term "slowing": https://www.frbsf.org/economic-research/publications/economi...
"More recent data show immigration has rebounded strongly, helping to close the shortfall in foreign-born labor and ease tight labor markets."
Most of Western cities are in a “failed state”. The US is a prime example of that. Japan, while quite functional, is also quite expensive to have kids in. I think Japan will be the Western state that fared the best out of all the Western countries. The US is definitively the worst: Being quite expensive while also quite dysfunctional, and with a bonus: high crime rate.
How can you fix low birth rates once the process is in decline? Are there any successful examples of a country that has gotten rich, or is getting rich, that has done it succesfully? Every example I've read says no, regardless of geography or culture. It seems an impossible problem to fix.
In South Korea for example, I've read they've tried a veriety of incentives, and none work. The pressure to climb into or stay in the middle class, squeezes families or would-be mothers to work more, leading inevitably to lower birth rates as wages have stagnated over the past few decades (oversimplyifing but this applies everywhere).
Plenty of countries have monthly child benefit payments, just a few examples I know of [1], [2] [3] [4]. You can easily google "child benefits [country]" to find loads more examples. There are direct government payments and/or tax breaks in many countries. Countries with decent social welfare systems usually have some form of financial support during parental leave, for both mothers and fathers too.
These efforts don't really have much of an impact to raise birth rates.
[1] https://www.citizensinformation.ie/en/social_welfare/social_...
[2] https://www.iamexpat.de/expat-info/social-security/child-ben...
[3] https://www.citizensadvice.org.uk/benefits/child-benefit/bef...
[4] https://edition.cnn.com/2022/12/03/asia/south-korea-worlds-l...
What the author describes are long term artifacts of Japanese culture. It's a service culture (dunno if that's a term) in which I mean extra levels of service are given to guests and customers. Again, sorry if "service culture" is incorrect. I highly respect JP culture.
So, I'm not sure how that pertains to jobs in the rest of the western world.
Also, the article is behind a paywall. So boo.
People in Europe feel like their boss is being unreasonable if they ask them to come in 35 hours a week. And think 4 days, or even better, 3 days is optimal.
Then since they’re not being paid a lot, they feel it’s fair to just not give a rats ass about anything they’re doing.
I think there might be some balance in between that I’d like best.
Is the notion that Bernie Sanders is somehow responsible for all of the economic stimulus given to US citizens during the pandemic?
But you are right that eventually the economy would grow enough to “soak up” the extra money and it wouldnt be so inflationary.
If only there was a way for people to emigrate to opportunity.
Certainly you can argue that Japan proves an exception to this rule, or that the current low unemployment is simply a lagging indicator of our previously dovish monetary policy that will eventually normalize. But I think that NAIRU simply needs to be refined: wage inflation occurs not during low unemployment but during times of increasing employment. That is to say, an economy may arrive at a steady state of employment at a variety of employment rates, which needn’t cause wage inflation, but when employers in aggregate are creating new jobs and attempting to fill them even if they have to raise compensation, you do get wage inflation. This also doesn’t necessarily need to be done in aggregate: you can argue that wage inflation in the technology industry during the 2010s is partially what created the localized inflation in the Bay Area during that time, while in the rest of the country without heavy tech presence, this didn’t happen.
There are of course many other wrinkles: for example, the size of the workforce has a degree of elasticity, where higher wages or lower hiring standards may draw some people not considering participating to again participate. There is also elasticity to hiring: depending on any individual employer’s demand for workers they may be more or less willing to raise compensation vs only partially meeting hiring goals. And of course there is stickiness to employment on both the employer and employed. The elasticity and stickiness of these things seems like it can have tons of factors that influence their magnitude: from culture norms (like in Japan where job hopping is less common), to employment regulations (how hard is it to hire-fire), ageism and other *isms (if a culture discriminates against X group, they may be more inclined to drop out of the labor force, but happy to rejoin it if employers need to hire so badly that discrimination gets lessened), to the size of the social safety net.
Plus, unemployment is a very coarse metric for skilled workers. Skilled workers are less likely to simply become “unemployed” and more likely to switch directly from one job to the other. During a broad hiring binge you could see large wage growth with little change in unemployment.
Anyway, I think basically economics has the tools to explain everything we are seeing already - it’s only perplexing when reasoning based on very simplified models like NAIRU.
Immigrants are good for the economy and good for workers. They are your customers! Don't be a Malthusian.
> Immigration can grow the economy overall, while putting lower end workers in a relatively worse position.
They don't really do that either! Immigrants mainly compete with each other.
High interest rates is once in a decade thing btw.
America printed 4 trillon dollars since COVID. I am not finding America at fault or anything like that. Everyone puts their interests first after all
Let's see how happy you'll be once the US turns entirely inwards and the rest of the world has to secure their global trade routes. The US will be fine. It can be largely self sufficient, despite the hysteria over our inability to manufacture things, we can redevelop the low end stuff fairly easily, and we're re-shoring the ultra-high end with even TSMC making chip plants here. It'll be a bumpy road, but all indicators are that the US is re-shoring manufacturing, developing energy independence, and turning inwards.
UK provides safe and smooth system for ultra rich to get their money out of developing nations. Even dirty money is welcomed.
USA has golden visas, who do you think they created those for?
I supported Trump on taking manufacturing back bcz it's good for developing world to protect their environment.
Americans who think it's the developing world that took your jobs. Remember the real culprits are the riches in your country and those imigrated riches.
Btw no one in their right mind thinks America's debt will ever be repaid. Again developing nations will have to foot the bill.
PS: thanks for the service sector jobs though
The corporate state that presides over this destructive capitalist economic system is ruthless and relentless. “It practices only the politics of vengeance. It uses coercion, fear, violence, police terror and mass incarceration as forms of social control while it cannibalizes the nation and the globe for profits.”
This scourge is all-consuming. Once-liberal institutions, including “the press, labor unions, political third parties, civic and church groups, public broadcasting, well-funded public universities, and a liberal wing of the Democratic Party,” have all “collapsed under sustained assault during the past forty years of corporate power.” Today, there are “no institutions left in America that can authentically be called democratic.”
It is terminal. “Short of a sudden and widespread popular revolt, the death spiral appears unstoppable, meaning the United States as we know it will no longer exist within a decade or, at most, two.”
And it is worldwide. “The malaise that infects Americans is global.” Global capitalism is responsible for all misery and the metastasizing of violent rage from many different sides, from jihadists and neofascists to far-right militias and antifa.
On the optimistic side, I'd like to think that the oligarch class in the US relents before revolution and decimation of the country and economy that is their cash cow. Certainly it would be better to reap merely some fraction of their disgustingly obscene profits than none of it, and the US is well positioned a la Zeihan in the coming global crisis years.
But yes, on the pessimistic side, the proletariat cannot be squeezed indefinitely. Too much pressure and it will explode, with disastrous consequences all around.
Overall, I'm hopeful that continually declining birth rates (though much stronger than the rest of the developed world) and the recent decimation of the labor force will continue to bolster labor power, leading to a recession in oligarchical power that will prevent the worst consequences of of their rapacious excess.
Zeihan does talk about the US going through a political reshuffling right now that will take 10-20 years. I guess on that timeframe we will find out what happens.
How does the western world grow 7% (or whatever rate needed after taxes, inflation, and profit) perpetually with stagnating birth rates, lowering carbon footprints, and shrinking real wages?
I'm not sure it can.
Wealth might be distributed unequally, but debt over all is still a zero sum thing.
I agree that many people in many countries spend too many resources on education. Especially students' time. See Bryan Caplan's book The Case Against Education. See eg https://www.reddit.com/r/slatestarcodex/comments/7t59x1/revi... for a review.
I paid 500€s/year to graduate in chemistry in Italy and have not incurred any debt.
Unfortunately, they're also becoming an "American export". E.g. Netherlands granted a study grant to all students up until 2015, when it was converted to a student loan [1]. The required amount is still lower and the terms are better than US, but the ball has started rolling. We are now waiting for the next wave of neoliberal policies to see average student debt surging.
[1] https://www.wittenborg.eu/new-dutch-student-loans-system-sta...
If the introduced change is subtle enough, only people directly affected will protest. In this case, students did protest for years, and they still do. But because the change is so subtle, it is easy to convincingly brand anyone protesting as unreasonable/reactionary/self-entitled/spoiled. E.g. "Do you complain about paying 20EUR/month for your DUO [2] loan, all while you can even skip payments with no repercussions when unemployed? An entitled lazy brat you are!".
Then, several years later, you can stage an audit on DUO to find out that it's "bleeding money". Now you have a free rein to shut it down and let the private sector to hand the student loans. All to save taxpayers' money, of course!
[1] https://en.wikipedia.org/wiki/Boiling_frog [2] https://duo.nl/particulier/international-visitor/
Your country, during that time, has incurred debt which you’ll have to pay as a form of extra taxes. The path of least resistance in this case is to not pay as individual and leave it to the rest of community (or country).
Does this explain to you why young people are leaving Italy? It’s a form of arbitrage that’s being played on a global scale.
I plain despise arguments like yours, they lead nowhere but a more unjust, poorer and more dangerous society.