South By North Strategies, Ltd.

What Are the Economic Options?

At Grasping at Reality with Both Hands Brad DeLong asks what the Obama administration’s economic strategy is. Writes DeLong:

If the Senate won’t let us run bigger deficits, and if the Federal Reserve is not expanding but rather cutting back on its degree of monetary easing, then there are only three paths open to try to increase employment:
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Shifting government spending from things that create the most in the way of useful goods and services (and that also boost employment) to things that create the most employment (and maybe also create some useful goods and services): i.e., large government employment programs.
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Shifting private production from things that create the most in the way of useful goods and services (and that also boost employment) to things that create the most employment (and maybe also create some useful goods and services): i.e., large (but incremental and temporary) new employment tax credits.
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Using the U.S. Treasury as the world’s biggest hedge fund to take huge amounts of private-sector risk onto the government’s books, and thus create an appetite on the part of investors to finance additional risky investment even given their limited and depressed risk tolerance.

December Producer Prices

The seasonally-adjusted prices received by producers of finished goods rose by 0.2 percent in December, according to data released recently by the U.S. Bureau of Labor Statistics. That same month, the prices received by sellers of intermediate goods rose by 0.5 percent, and the prices received by sellers of crude goods advanced by one percent.

Price increases for finished goods were driven primarily by rises in consumer food prices. At the earlier stages of production, various combinations of increases in food and energy prices accounted for most of the changes in prices. When energy and food prices are excluded, producer prices for finished goods were unchanged in December. Absent energy and food costs, producer prices rose slightly for intermediate goods and rose sharply slightly for crude ones.

Over the past year, producer prices have risen. Unadjusted prices for finished goods have grown by 4.4 percent, and producer prices for intermediate and crude goods have risen by 3 percent and 12.3 percent, respectively.

The new data offer two insights into the state of the American economy. First, the findings suggest that demand for good and services remains weak, though not quite as weak as in recent months.  Second, the report indicates that inflation is not currently a threat to the larger economy.

Around the Dial – Jan. 25

Economic policy reports, blog postings, and media stories of interest:

• Calculated Risk gives a rundown on the residential housing market.
• The Atlanta Fed says to mind job creation, not discouraged workers.
• Economist’s View pulls together analyses of the bank reform plans.

January Budget Report

The newest economic and revenue report prepared by the staff of the NC General Assembly suggests that joblessness and budget shortfalls continue to trouble North Carolina.

Among the report’s findings are the following:

• As of December, state tax collections are running $30 million above target. This is due to a corporate resolution payment initiative that collected more revenue than the Department of Revenue anticipated.
• Absent that windfall collection, revenue collections would be $240 million (2.6 percent) below target.
• Sales tax collections continue to plunge but have been offset by higher rates authorized by the assembly. Net collections are running $120 million below target.
• Net withholding tax collections also are declining and are running 2 percent below target.
• An employment rebound is essential to any long-term economic and revenue recovery; unfortunately, few signs point to such growth.

Union Membership Trends: 2009

From the Center on Economic and Policy Research’s analysis of union membership trends in 2009:

The collapse of the housing bubble and corresponding decrease in private consumption and investment partially reversed small but significant membership gains by the labor movement over 2007 and 2008. As total employment in 2009 fell by several million workers, unions lost more than 770,000 members. Steep declines in manufacturing and construction accounted for nearly 60 percent of the reduction in private-sector employment over 2009. In turn, more than 60 percent of the union membership loss occurred within those two industries.
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As a result, the union membership rate in the private sector, the bulk of the U.S. economy, dropped to 7.2 percent in 2009 from 7.6 percent in 2008. The fall in private sector unionization in 2009 was largely due to regional variation in the recession’s burden on industries. In the manufacturing industry, for instance, the union membership rate fell from 11.4 percent in 2008 to 10.9 percent in 2009. This decline in the national rate stemmed largely from the disproportionate impact of the recession on manufacturing jobs in the Midwest, where unions are relatively strong.