Job growth has slowed sharply; the question is why
stayathomemacro.substack.com
stayathomemacro.substack.com
https://paulkrugman.substack.com/p/its-beginning-to-smell-a-...
He's obviously got a political angle, but doesn't let that completely color his economic analysis.
But he’s terrible if you want criticisms of left-side ideas, or if you want to hear about right-side policies that are working well.
To me, that’s of very limited utility.
Judging policy solely by the their promoter would normally be wrong (book by its cover, eh?), but these days there's been some consistency in the quality (and lack of same) by various groups so challenging them out of the gate isn't unreasonable.
MMT is left-side, and he's highly critical of it. Not a fan of rent control, a favourite of many left-leaning folks.
What right-side policies—especially perhaps ones that are being pursed by Trump / Project 2025—are working well?
Krugman does a decent job of not letting his opinions about the political aspects color his analysis too much.
Things like
"Contrary to what many people believe, tariffs don’t necessarily lead to high unemployment. America had a high average tariff even before Smoot-Hawley — 15.8 percent in 1929 — but the unemployment rate in 1929 was under 3 percent."
He doesn't like the tariffs, he (and pretty much any serious economists) think they're bad, but he tries to be clear about why they're bad rather than just waving his hands at everything.
This is also why capitalism and democracy become progressively more clearly opposed the farther the status quo environment you are working in gets from feudalism or absolute monarchy, under which both seem to be changes in the same direction.
You mean linked? Capitalism is what lets the people make economic decisions, democracy is what lets people make political decisions. I think you mean communisms where people can't make economic decisions is what's oppose democracy.
No, I meant exactly what I said.
> Capitalism is what lets the people make economic decisions
No, it isn't. Capitalism is the organization of power around a narrow elite defined by the ownership of the non-financial means of production, the feature for which it was named. It was (at least initially) progress in the direction of democracy from control of the same thing being in even narrower hands than the early mercantile class defined by ownership of land under systems like feudalism, to be sure.
But, still, ultimately it conflicts with the equal distribution of power defining democracy.
They are rationalized as consistent by pretending that economic and political power are different things, rather than different applications of the same, undivided, power.
He definitely lets his political angle completely color his economic analysis. Now that Trump is back in the White House we are of course doomed, same as the last time he was in the White House, same as the next time.
If you've got a political angle that is closer to Krugman's than say Trump's maybe this is fine? I mean as long as you're OK with an economic analyst who doesn't have the slightest idea how banks work. If that's the kind of writing you're looking for, Krugman is a very good choice.
I think this needs some context. Remember that in 2016 we didn't know how Trumps rhetoric works and how seriously he will push his agendas. Now we know about TACO and how he was held back by the adults in the room. How would you feel about the future if you thought the POTUS will annex Greenland and Canada, and impose tariffs of 100-200% globally?
I would keep the exact same asset allocation that I have now.
Politics, people, policy, platforms, party, positions, and partisanship are adjacent, but remain distinct.
The politics angle is unavoidable because Krugman is commenting on the impact that the economic policies of the current US administration is having on the US economy.
This is the same US administration that fires staticians for reporting numbers that render bare the impact of their own economic policies, which they are actively trying to censor.
We live in a day and age where in the US reporting facts leads to political persecution. Of course mentioning stagflation, as Krugman does, is deemed political.
Personally, I would feel like a discussion about economics that completely avoids politics would be missing something, and I would enjoy it a lot less.
It's interesting as far as people I know looking for jobs, they're supply ... and having a hard time finding jobs. Reduced supply you'd hope you'd get a job.
Granted the article addresses this both in the types of jobs and:
>The stability of the unemployment rate masks effects of the low-hiring, low-firing labor market.
I do wonder, if this continues and a sense of economic slowdown or worse continues, would lowering a rate really fire up hiring? I know small businesses who can't eat /dance around tariffs like big companies, some are seriously terrified / facing hard decisions, others fine.
The ICE crackdowns are both directly removing large numbers of nonwhite people from the labor pool, and indirectly scaring much larger numbers of them away from it, lest they be the next ones sent to the camps.
Aside from that, though? No, I think talking about reduced labor supply is anti-labor propaganda at best.
But funny enough, we can't just ship 100k software developers from the bay to the central valley and it just work.
That's it, really. All the "hiring" money is being spent on building data centers, at least in the US tech field. Better hope AGI is really around the corner, or that's a lot of money chasing nothing that could have been put to productive use.
But you could pitch a startup idea to replace those workers with agricultural robotics and collect some of that sweet AI venture capital!
It turns out it's a hard problem because computer vision is hard, and we've had a lot of agtech investment already.
The author goes for an OR between reasons but I really don't see it like that, its an AND, all jumbled together and pushing the economy down.
My read is not that it is to cause harm / break things down per sé, but instead to deglobalize. At various times, the left and the right have made globalization the bogeyman and something to fight, so this idea has been in the ether.
For many reasons (economic, geopolitics, peace), globalization is a great thing.
Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
I realize that not all countries are big or diverse enough to accomplish this, and that's a reason why loose confederations like the EU exist. The US started much closer to that itself.
One of the biggest reasons is lobbying, for the US to be self sufficient in energy, for instance, it would have to invest heavily in renewable energy (like china is doing) but the oil lobby is never going to let that happen.
So with the government so captured by interests that don’t care about the long term stability of the country itself, it’s very difficult to effect these large changes.
Doesn't this apply to globalization as well? Saying "learn to code" to people who lose their jobs due to globalization is not great execution either and sets the stage for backlash.
> Doesn't this apply to globalization as well? Saying "learn to code" to people who lose their jobs due to globalization is not great execution either and sets the stage for backlash.
Globalization, or more loosely, more and more people or societies trading with each other over greater distances and competing at who does something best, has been a steady trend over the centuries and a force for good.
While an individual could get caught off guard one morning when their job is gone, when you zoom out the megatrends are slow but forceful and you can foresee a lot of the big picture. It is also easy to conflate "globalization" caused my job loss with "automation" caused my job loss.
The current deglobalization efforts, by contrast, have been haphazard, incompetent, rushed.
I don't think it's true that there's no other goal than to cause harm, at least with the tariffs.
By the same token, though, while I think deglobalization is something that people around Trump would say they're shooting for, it's not really something Trump cares about in that sense.
No; I think Trump's primary goal with the tariffs is to flex his power and enjoy the feeling; he doesn't really care what the effect is on everyone else. With the ICE crackdowns, he definitely wants to hurt everyone nonwhite in America.
That seems to be the main way people are profiting from this admin, insider trading. I doubt we’ll ever figure out who they were.
If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization:
I would hope they would care to actually evaluate if it is working / the impact, and not fire government workers when they report one thing that didn't sound good.
If you're not bound by any results you don't like then you can't know if you're even winning.
Granted ... that might not matter as I suspect market manipulation and bribes is the only real measurement with this administration.
And even then, tarrifs right off the bat are the wrong approach. It takes time, a lot of time, to reorganize supply chains and spin up manufacturing. It also requires a ton of capital. It requires a slow roll, local incentives, subsidies, and long term planning.
It wouldn't be feasible to expect it to happen over the course of a single presidential term. If I'm a big company and I've got the cash reserves, I'm better off laying off a bunch of people and buckling down for the next 4 years rather than spending a bunch of capital to bring supply chain to the USA.
Why?
It's hard to square that with "less consumption", though...
Is it? I’m not sure of the truth, but it’s not hard to imagine that wealth inequality drives up the price of housing via the mechanism you describe, and increased housing prices drive down overall consumption as the non-wealthy struggle to afford basic necessities.
Plus the fact that in last 5 years assets have gone up so much means there's just a lot of wealth being invested.
How much does a bottle of water cost?
- Supermarket? - Festival? - In a drought, when you're standing in line behind a thirsty billionaire?
People with a large relative net worths, drive asset prices up, like bids in an auction - even if they aren't the final bidder.
> Increasing wealth inequality, drives prices inflation
How does increasing wealth inequality drive price increases?
i'm not the person you asked, and i'm just spit-balling, but here's a way: wealth inequality means there's a group that has substantially more wealth than normal, let's call that group A, and the complimentary group of people who don't have substantially more wealth than normal, let's call them B. A's wealth ultimately comes from B-- you know, you got workers who make you more money than you pay them, you extract rent from them, they buy your stuff.
past a certain point of inequality, A controls so much wealth that they could exert power over the market to squeeze B even more-- wages lag further behind productivity, rents go up, goods cost more. this is inflation, yeah?
The greater the number of people who cannot afford buying a home, the greater the number of people whose only option is to rent.
The more people enter the rental market, the higher rental prices get.
It would be very interesting to have statistics on how many people share apartments/rent rooms. I'd bet those numbers would be spiking.
When poor people receive money, they tend to put it to circulate in the economy, by spending it. When super-rich people receive money, it goes mostly to tax havens, removing it from circulation. Business lose scale, as there is less consumers, raising unitary prices.
One would indeed expect removing currency from the economy to be deflationary, but in GPs example we didn't just remove currency, we removed demand too. If less people have money to buy a car, less cars are produced. When you are making 1k instead of 1m cars, you no longer benefit as much from scale and must raise your prices, which only the rich can afford.
Now why might this happen instead of prices dropping to the point the now-poorer people can afford them? Maybe the cost of inputs can't go much lower, or maybe other less-stratified markets are picking up the slack, so demand shifts there. Or maybe the rich have enough money they don't care about the higher prices. Or some combination of all of the above.
Economies are complicated beasts, it's rarely as simple as X leads to Y. Instead you have the whole alphabet pulling in different directions and the forces that win out may be quite unintuitive.
the issue is that the GP's premise ("When super-rich people receive money, it goes mostly to tax havens, removing it from circulation.") is invalid.
> Doesn't the lack of liquidity in an economy cause deflationary behavior?
Which seems to accept the given premise.
But ok, let's look at yours:
> the issue is that the GP's premise ("When super-rich people receive money, it goes mostly to tax havens, removing it from circulation.") is invalid.
Is it? I thought it was well understood at this point that the best place to stimulate the economy was from the bottom, because every dollar put in goes directly back into circulation, creating demand, while the wealthy and middle class will save some portion of it. Certainly I don't think the money in my savings account is doing much to create the kind of demand that would stimulate job growth, and while one might argue that the stocks in my 401k are doing something the idea that it's driving more growth than buying a car is... Dubious.
But if you have data please share.
> Is it?
Yes, it is an inaccurate belief. The super-rich don't take most of the money (did the person mean money or did they mean wealth?) they receive, remove it from the economic system, and stash it unproductively in a tax haven.
FWIW I do agree that if we give Jeff Bezos or Elon Musk more money, it's not headed straight for an account in the Caymans, but I also don't think the exact destination of said money is core to the point.
Most of the wealth of the top 1% (to pick an arbitrary "small group of people") is not sitting as cash in the bank; it is concentrated in financial and business assets: equities & mutual funds, private businesses, real estate, bonds and other fixed-income investments, alternative assets.
In the US, over half of all publicly traded stocks and mutual fund shared are held by the top 1%, meaning their wealth is overwhelmingly tied to ownership of productive assets rather than wages or savings accounts (and is therefore illiquid).
I can help with that: it doesn't. If I buy stock, it doesn't create demand for... Anything. Unless it was stock bought from the company itself it doesn't give the company any more funds to work with. It doesn't help the company produce more, nor does it create demand that would encourage them to do so.
1) Many of the super wealthy have the shares because they created the company and get awarded stock each year as compensation. Of the 10 richest people on the planet (in order: Musk, Ellison, Zuckerberg, Bezos, Page, Huang, Brin, Balmer, Arnault & Family) 8 or 9 of them were the primary founder or co-founder.
2) Even if they didn't, then it is worth knowing that trading shares benefits the economy in several interconnected ways; some direct, some more subtle: Efficient Capital Allocation, Liquidity and Confidence, Price discovery, Risk transfer, Wealth effects, Global capital flow. Or in short: Trading shares doesn’t just “move money around” — it helps connect savers with businesses, keeps capital moving toward productive uses, and makes the whole investment process safer and more flexible.
That causes inflation, as we seen by the covid stimmy checks.
A restaurant is limited by the amount of food a person can eat in a meal. So this hypothetical restaurant can sell a $20 meal to 100 people (with $20 expendable income to spend,) and thus will generate $2,000 revenue for that meal service.
However, if fewer and fewer people have $20 expendable income, then obviously it becomes harder and harder for that restaurant to generate that same $2,000. Especially as the cost of bills, ingredients, and employee wages increase, for example.
So they are left with a dilemma of: 1) Raise prices knowing that there will be fewer customers with enough expendable income to buy the expensive food, or 2) Lower prices and hope that more customers will offset the lower prices (this usually does not happen.)
Also it's important to point out that 1 person with a lot of money won't come in and order 100 people's worth of meals. The human stomach doesn't scale in that way.
This example is obviously oversimplified for the sake of showing the point
Increasing wealth inequality means fewer owners of more assets and market share, which means there's less competition and more monopoly pricing that cause higher inflation.
This begs the question of how many rich people there actually are, though.
1) Is this a wrong way to think ?
2) Isn't this what progressive taxation is supposed to do (or *should* do if folks like Musk, et al, actually earned 'income') ?
That's a fantastic question that I don't think I've heard before, but I have a practical answer to.
Most of the wealth of the top 1% (to pick an arbitrary "small group of people") is not sitting as cash in the bank; it is concentrated in financial and business assets: equities & mutual funds, private businesses, real estate, bonds and other fixed-income investments, alternative assets.
In the US, over half of all publicly traded stocks and mutual fund shared are held by the top 1%, meaning their wealth is overwhelmingly tied to ownership of productive assets rather than wages or savings accounts.
So as a tax authority you have to balance getting cash (to run the government) against reducing the productive capacity of the economy (by asking businesses to reduce their capital).
Each year, a business needs to grow faster than it did the previous year.
If business owners get wealthy more rapidly than workers, then eventually the business will not be able to maintain increasing rates of growth, as its profit velocity exceeds the wage velocity of households. Think of a car fuel pump: you can accelerate all you want, at least your until the engine explodes, but if your fuel pump can’t pump more than 50mph of fuel, uour acceleration will crater into the negative and then flatline at 50mph when you hit that threshold — unless your efficiency gearbox has another upshift in it.
The only solutions that maintains profit growth velocity in that scenario is for the business to decrease wage velocity relative to profits velocity, and to decrease labor dollars per product. Namely, wage stagnation (which leads to wealth inequity), enshittification (which reduces customer brand investment), and layoffs (which decreases customer spending).
If, instead, businesses ensured that wage velocity matched profit velocity, then households wouldn’t have increasing wealth inequity and would be able to continue funding the growth velocity through spending. Businesses are prohibited from this by their fiduciary duty to shareholders.
AI is a last ditch attempt to discard 95% of the human creative labor force in all industries rather than face the rapid deceleration of profit growth going negative market-wide as household spending power (after inflation) continues to decrease. If AI succeeds, the eventual crash of growth velocity is delayed a few years until AI saturates the market. If AI fails, the market crashes, as investors can no longer expect positive growth acceleration from the market as a whole.
For any economic system where business profit growth acceleration exceeds wage growth acceleration, the eventual collapse of business is assured unless a miracle of productivity delays it. That’s why AI workers can get paid a quarter billion dollars: pocket change, compared to the wage inequality reckoning. That’s also why economists can’t explain inflation: they’re not yet willing to confront profit growth vs wage growth acceleration inequity as a primary cause of inflation.
Job growth has decelerated rapidly because otherwise profit growth decelerates rapidly. If this seems like killing the golden goose, that feeling typically correlates with a lack of faith in AI providing the necessary efficiency factor to permit sustaining profit growth after the one-time, profit-accelerating, inflation-spiking layoffs.
It is very reasonable for an investor or a worker wanting the business they have hitched their financial wellbeing to to do very well, which means growing profit. It gives the business more strength and stability.
The US Government writes checks that always cash, and unlike you and me, they don't have to have anything in the bank account behind it. This is the _sole and only_ cause of inflation. _Its the literal definition_ and is well documented.
There's two sides to personal finance: what you earn and what you spend. earning more, on a wholistic countrywide scale, simply isn't possible anymore (if the last 50 years has taught us anything).
The answer lies in allowing the economy to make life more cost effective (removing regulations that force housing costs to be high, making more land available for living, thus driving down it's costs, etc.). The answer lies in controlling costs and spending, both in the personal life and for government.
"The employment statistics are broadly consistent with the reduction in immigrant labor supply. Job growth has slowed more this year in industries that have a higher fraction of unauthorized immigrants like construction and restaurants, according to analysis by Jed Kolko at the Petersen Institute."
...I feel like the article answers its own question pretty well. I guess the headline is there for SEO/"engagement".
Any Intelligent
American Indvidual
'Ad Ideas
Looks like now they slam on the brakes, and first cut new projects and now trying to build new approach.
And looks like, tip point was when president Trump demonstrated tables with new import tariffs.
What I mean, even when Apple, TSMC and other tech giants already said about huge investments, but they first stopped many already running projects and will spend at least few months before start new jobs (to be exact, on big projects, from budget decision to start hire, usually spend ~1-2 months).
What worsened things, some infrastructure giants are not in good shape (Intel, IBM, Ford), so, probably their tops will spend additional time to negotiate with investors new terms.