October 2009

There were 2 posts published in October 2009 (this is page 1 of 1).

“The Uneducated American”

Krugman’s column essentially argues that a decline in public educational investment is leading to a decline in America’s global economic supremacy.
Excerpt:

[T]hese days young Americans are considerably less likely than young people in many other countries to graduate from college. In fact, we have a college graduation rate that’s slightly below the average across all advanced economies.
Even without the effects of the current crisis, there would be every reason to expect us to fall further in these rankings, if only because we make it so hard for those with limited financial means to stay in school. In America, with its weak social safety net and limited student aid, students are far more likely than their counterparts in, say, France to hold part-time jobs while still attending classes. Not surprisingly, given the financial pressures, young Americans are also less likely to stay in school and more likely to become full-time workers instead.

There’s no question that skyrocketing tuition cost increases place a greater strain on students, but does this really explain poor graduation rates?
The cynical side of me says that extracurricular activities and poor discipline are also to blame.
A few months ago I saw a documentary comparing the daily routines of Chinese high school students versus those in the U.S. The difference was striking. The Chinese youth’s day centers around academic advancement. Evenings are spent doing classwork. And it isn’t just the students; their parents are involved with homework, too (recall that in China many households only have one child due to population control).
Meanwhile, in the U.S., teen students are caught up in soccer, music, shopping, video games, and whatever else. Classwork is just one of many items on the plate.
Fast forward this track to college and it’s not a leap to conclude that one reason foreign students have better graduation rates is because they are more focused on academic achievement.
So while Krugman may be correct that budget cuts are hurting U.S. students, I think his column overlooks an important piece of the puzzle.

Unemployment No Longer A “Lagging” Indicator?

I’m afraid this guy may be correct:

Mohamed El-Erian says economists are wrong to dismiss unemployment as merely a lagging indicator, a sign of where the economy has been.
. . .
“Today’s unemployment rate is much more than a lagging indicator,” said El-Erian, whose Newport, California-based Pimco manages the world’s largest bond fund, in an e-mail after the Labor Department report on Oct. 2. “It is also a signal of future pressures on consumption, housing and the country’s social safety net.”
The job market tends to trail the economy in a recovery because companies hesitate to take on more workers until they are convinced the expansion will last. What’s different this time is the “large and protracted” rise in joblessness and the likelihood that it will stay high for years, according to El- Erian. That means unemployment will affect the economy going forward, not merely reflect where it has been.

“Less Credit, Fewer Jobs ”
A couple months ago I watched Australian economics professor Steve Keen give a convincing presentation pointing out that over the last couple decades, the only periods of significant job growth have been accompanied by large expansions in credit/debt (e.g., the housing and Internet bubbles). This doesn’t bode well for us today, as we are de-leveraging record debt.
Unless consumers (or the government) borrows and spends more, what is going to be the driver for job growth? I don’t see anything out there now.