12/8/20: Beware of Longing for Pre-COVID19 Days

 

We tend to focus on shorter-term and sharper shocks than on longer-term trends, a sort of 'boiling a frog' conundrum in our behavioural biases. Hence, with the development of the current pandemic, we seem to have forgotten a simple fact of pre-COVID19 reality: things weren't going all too happily for the global economy in 2019 before the pandemic struck.

Here is a reminder: look at the economic policy uncertainty measures from the late 1990s through today

As it says in the chart comment box, economic uncertainty was running at elevated levels well before the pandemic struck. 

Here is another way to see this point:

There is a 'problem', folks, even though there is no Houston to page about it. The legacy of the Global Financial Crisis did not dissipate when non-performing loans were finally (largely) wiped out from the banks balance sheets. Since the 'recovery' from the Great Recession, we have been living in a state of perpetual precariat all the way into the current pandemic shock. This state of precariat has been evident in the world data and the European data, so the problem is not 'demographic' or at least not that of ageing. May be it is generational? 

Here is an interesting view on generational changes via Pew Research: https://www.pewsocialtrends.org/essay/on-the-cusp-of-adulthood-and-facing-an-uncertain-future-what-we-know-about-gen-z-so-far/.  As education levels rose across generations, state of insecurity rose as well. Quote; "There are already signs that the oldest Gen Zers have been particularly hard hit in the early weeks and months of the coronavirus crisis. In a March 2020 Pew Research Center survey, half of the oldest Gen Zers (ages 18 to 23) reported that they or someone in their household had lost a job or taken a cut in pay because of the outbreak. This was significantly higher than the shares of Millennials (40%), Gen Xers (36%) and Baby Boomers (25%) who said the same. In addition, an analysis of jobs data showed that young workers were particularly vulnerable to job loss before the coronavirus outbreak, as they were overrepresented in high-risk service sector industries." Note that GenZ has higher levels of educational attainment of any generation. And yet, they are more susceptible to labour market shocks. 

The younger generations are also progressively more attuned to news flows and more anxious about key structural (non-COVID shock) problems we face. 

Have the mid-2010s been a pivoting point toward the new Age of Anxiety? Did COVID19 pandemic exacerbate this onset of the new age? In the long run, these are more important questions than the coronavirus threat alone.

21/5/20: Weekly Unemployment Claims: Updated

In the previous post, I have updated one of the charts relating to the U.S. labor market, namely the chart on employment https://trueeconomics.blogspot.com/2020/05/21520-horror-show-of-covid19.html. The data used is a mixture of monthly employment numbers and within-month weekly unemployment claims.

For consistency, here is the chart plotting weekly unemployment claims based on half-year cumulative numbers:

21/5/20: The Horror Show of COVID19 Unemployment

New initial claims data is out for last week, and so time to update one of my scary charts:

Here is a summary table:

At 2,174,329 new claims filed in the week ending May 16th, the lowest number in weekly new claims since the start of the COVID19 pandemic, it's quite tempting to say that things are improving in the labor markets. Alas, last week's print was greater than the entire recession period combined prints of four past recessions.

Cumulative first claims filed in the last 9 weeks now stand at 35,276,270, which amounts to 23.2 percent of the entire non-farm labor force in the U.S. at December 2019. 

15/5/20: Generational Effects of Ultra Low Interest Rates

Just because jobs are so plentiful and careers are so rewarding in terms of potential growth in life cycle income. the Millennials are really cheering their future in the Social Mobility Central, the US of A... oh, wait, sorry, theatre of absurd is so 1990s...

Here is the chart showing returns on savings for the already financially-distressed younger generations, updated through March 2020:

Things are ugly. In March 2020, retail nominal deposit rates for 3 months-duration Certificates of Deposit in the U.S. banks have fallen from December 2019 levels of 1.76% (annualized) to 1.35%. This is the lowest level since November 2017.

Think of the longer term comparatives. During the decade of the 1960s, average nominal rate of return on 3mo CDs was 5.51% with real return of 4.76%. In the 1970s, this rose to 7.27% and 5.66%, respectively. Through the 1980s, nominal average was 9.89% and real average was 8.73%. In the 1990s, things crumbled, with the nominal savings returns falling down to 5.32% and real rates down to 4.75%. The first decade of the 2000s saw nominal rates averaging 3.2% and real rates falling to 2.67%. And over 2010-2019, average nominal rate was 0.76% and average real rate was 0.39%.

Yes, avocado and toast are killing Millennial's financial wealth. Not ultra low returns on savings.

3/5/20: Updated: The Scariest Chart in Economics

Updating one of the two 'Scariest Charts' in economics with the latest data - preliminary, through April 25, 2020:

This goes hand-in-hand with the earlier chart here: https://trueeconomics.blogspot.com/2020/05/3520-updated-shocking-wave-of-jobs.html. 

The speed and the depth of jobs destruction in the U.S. during the last two months has been beyond precedent. 

23/4/20: U.S. Labor Force Participation Rate Heading into COVID19 Disaster

Adding to the two scariest charts in economic history (see https://trueeconomics.blogspot.com/2020/04/1942020-two-scariest-charts-in-economic.html), a third chart, showing changes in the U.S. labor force participation rates during and following recessions:

The above clearly shows that 2008-2009 recession has been unique in the history of the U.S. economy not only in terms of the unprecedented duration of unemployment (link above), but also in terms of the scale of exits from the labor force. In fact, this was the first recession on record that resulted in post-recession recovery not reaching pre-recession high in terms of labor force participation rates.

19/4/2020: Two Scariest Charts in Economic History

I have been posting quite a bit on U.S. unemployment and jobs destruction numbers coming from the COVID-19 pandemic. So here are two charts to watch into the future, and I will be updating these throughout the crisis here.

The first chart plots evolution of non-farm payrolls index for each official recession. I used as the index base average payroll numbers for 6 months prior to the first month of the recession. I then compute and plot the index from month 1 of the recession through the last month prior to the next recession.

The second chart is the average duration of unemployment claims or average weeks unemployed. Again, series start from the first month of officially-declared recession and run until the subsequent recession.

Both charts illustrate the contradictory nature of the post-2008-2009 recession recovery. Whilst the recovery has been the longest in duration (chart 1 above), it has not been the most dramatic in terms of employment creation relative to prior pre-recession peak (line "2008-2009" solid segment runs longer than any other line, but does not gain heights of at least 6 prior recoveries.  Per chart 2 above, recovery from 2008-2009 recession has been associated with unprecedented length of duration of unemployment. The series here stop at the end of February 2020, so they do not account for the recent jobs losses, simply because there has not been, yet, official announcement of a recession.

You can read on March-April jobs losses here: https://trueeconomics.blogspot.com/2020/04/16420-four-weeks-of-true-unemployment.html and in the context of prior recessions here: https://trueeconomics.blogspot.com/2020/04/18420-shocking-wave-of-jobs-destruction.html.

Stay tuned, as I will be updating these two charts as data arrives.

16/4/20: Four Weeks of True Unemployment Numbers: #Covid19

The U.S. has added 5.245 million more unemployment claims in the week ending April 11, 2020, with additional 9,000 claims added to the April 4, 2020 week total. In summary,

• Week ending March 21: official unemployment figures rose 3,307,000
• Week ending March 28: new claims 6,867,000
• Week ending April 4: new claims 6,615,000
• Week ending April 11: new claims 5,245,000

Four weeks total is now 22,034,000. As noted here: https://trueeconomics.blogspot.com/2020/04/1342020-four-weeks-of-unemployment.html last four weeks of increases in unemployment in the U.S. have fully erased all cumulative jobs gained during the 2009-2019 'recovery' period.

This is by a mile not a fully accurate picture of true extent of jobs losses. As noted by the researchers in the https://bfi.uchicago.edu/insight/blog/key-economic-facts-about-covid-19/#unemployment-rate: many unemployed do not seek unemployment benefits, opting to drop out of the labor force instead. Why?

1. Eligibility for unemployment assistance is quite restrictive in the U.S.
2. States' unemployment support systems are both cumbersome and severely overloaded in the present environment.
3. Many unemployed fear Federal retribution against their migrant spouses (including legal migrants) and many are themselves on green cards, making them a potential target for removals.
4. Many unemployed become severely discouraged by the lack of potential jobs to continue job-seeking.

University of Chicago researchers used data from Nielsen survey to estimate the impact of early stage Covid pandemic on labor force participation rates. These numbers imply a drop in labor force participation from the officially-reported 64.2% to 57%. 

The research conducted through April 8th suggested that some 20 million Americans have lost their jobs due to COVID19. Adding to these 3 days to get us through April 11 would have pushed the total number of unemployed to around 3,140,000-3,969,000 more unemployed to the 22,034,000 total reported above. Splitting the difference, we can estimate new claims filed, pending and not filed due to reasons (1)-(4) above at closer to 25,500,000. 

My estimates are roughly in line with those prepared by Alexander Bick of ASU, who estimated (https://azbigmedia.com/business/unemployment-rate-jumps-from-4-5-to-20-2-asu-analysis-shows/) that through the second week of April:

• The employment rate decreased from 72.7% to 60.7%, implying 24 million jobs lost
• The unemployment rate increased from 4.5% to 20.2%
• Hours worked per working age adult declined 25% from the second week of March.

13/4/20: Four Weeks of Unemployment Spikes: U.S. Jobs Losses in #Covid19

COVID-19 social toll: according to Deutsche Bank Research, since the end of the 2008-2009 Great Recession through mid-March 2020, the U.S. total new jobs creation amounted to ca 22 million jobs. Since then, the economy has lost over 16.8 million jobs over the first three weeks of the pandemic, and according to the DB forecast, the U.S. is now on-track to lose 25 million jobs over the four weeks, once last week numbers come in.

• Week ending March 21: official unemployment figures rose 3.3 million
• Week ending March 28: official unemployment claims rise 6.9 million
• Week ending April 4: additional 6.6 million new unemployment claims
• Week ending April 11: ???

Note: claims filed do not fully reflect actual unemployment levels in the economy. In fact, they underestimate, severely, the true extent of unemployment.

Now, remember, the Millennials entered their careers in the periods of the Global Financial Crisis, the Great Recession and the Eurozone debt crisis. They are now going through career maturation stage (faster growth in income stage) amidst this pandemic. Or as I asked on Twitter a few minutes ago: who is going to buy Boomers' properties inherited by X-ers if the Millennials are skinned?..

28/1/2020: Federal Tax Revenues Over Time

Via the @SoberLook, WSJ's data / charts newsletter, a neat summary of changes in the U.S. federal taxation base over the years:

What does it tell us? In the 1940s-1960s, the share of excise, inheritance and other taxes, plus the share of corporation taxes in total federal tax revenues ranged above 30 percent, declining from around 45 percent in the 1940s to roughly 35-36 percent in the 1960s. Over the last decade, that share was around 14-15 percent. The burden of taxation, instead, has dramatically shifted onto labor income and personal income. This trend is forecast to worsen over the 2020s decade, with non-income taxes expecting to decline in their importance to around 12-13 percent of the total tax revenues.

It is worth noting that the benefits distribution has been also trending against current income earners, with a rising share of Government spending accruing to old-age support programs, social security payments and, of course, as usual - Pentagon.

Given these trends, it is hard to see how the politics of the younger electorate (growing role of the Millennials, GenXers and GenZers in voting) is going to be compatible with this situation. Likewise, given the likelihood for future shift in electoral politics against low corporation tax revenues share in total tax take in the U.S., it is hard to see how continued prosperity of the well-known corporate tax havens, including Ireland, Luxembourg, the Netherlands et al, can be sustained either.

13/12/19: UK Vote and Younger Voters

On foot of the UK General Elections results, here is a telling sign of the changing generational effects on voting with some questions for the U.S. 2020 election:

Given the above numbers, the 'younger voters tide of change' expected in 2020 in the U.S. elections is a function of two factors: turnouts and demographic concentrations. We are, of course, yet to get this data from the UK polls.

Worth thinking about these, if you are a political analyst.

Note: some data on voter turnout as of 627 MPs elections completed.

• Turnout was about 67%; circa two-points lower than in 2017, signalling no upswell in political activism by the voters. Given that younger cohorts of eligible voters increased in numbers, while older cohorts diminished due to time lapse, this suggests that younger voters were not as energised to show up at the polls as media hype suggested.
• Per Brunel University analysis: "youth turnout lagged well behind that of their elders. If we look at the 20 constituencies with the highest proportion of 18-35 year olds, the average turnout yesterday was 63%; the turnout for the 20 constituencies with the fewest 18-35 year olds was 72%." See: https://www.brunel.ac.uk/news-and-events/news/articles/Labour's-car-crash-result-by-age-group. Again, evidence that the younger, more 'Remain', voters were not sufficiently fired up to show up at the polls. 
• Per same source: "The decline in turnout since 2017 was also slightly greater – at 1.5 points lower – in those constituencies with more young adults than those with the fewest – where it was 0.8 points lower." Again, a signal of younger voter apathy?
• Younger voters did go for Labour: "Labour held onto every one of the constituencies with the highest number of 18-35 year olds that it won in 2017."

Here is a really damning conclusion, emphasis mine: "What is clear is that, once again, claims of a youthquake – a sharp rise in turnout among young voters that would benefit the Labour party – have proven well short of the mark. At no point in the campaign have the opinion polls suggested that a youth turnout surge would materialise, but there was a great deal of excitement surrounding the surge in voter registrations among the under-35s – 2.8 million between October and December of this year, more than half a million more than in the same period before the 2017 election – which fuelled claims that a youthquake was on the horizon."

6/7/19: American Pride: Another Divide

A great nation, divided and wanting for change as it may be... But just how divided are Americans? Bloomberg chart on a recent Gallup Poll data is quite telling:

The first thing to note is the demographic divide by age. Less than 50 percent of 18-29 year olds in the survey are 'extremely' or 'very' proud of being American. Less than 2/3rds of those of age 30-49 do as well. For older generations, the same number is 80 percent and higher.

The second is the partisan divide by party affiliation: only 50 percent of those identifying with the Democratic Party are 'extremely' or 'very' proud, against ca 95 percent of the Republicans. The Independents clock in under 65 percent.

Overall, Liberals, Democrats and the young are the flash points of relative disenchantment with the American identity, although the proportions of those who do not identify themselves as proud whatsoever and those identifying as proud 'only a little' is below 1/3rd for all three categories.

The numbers suggest less of a disillusionment problem than the weakening of the sentiment. Which does offer a glimpse of hope: repairing American's perceptions of their identity is not an insurmountable task. The good news, American people do appear to be longing for change and hope. The tougher-to-deal-with news is that we seem to lack leadership candidates to take us there...

31/5/19: Generational Gap in Self-reported Satisfaction with Life is at Whooping 28 percentage points

Commonly discussed in the media and amongst economists, generational gap in quality of life and socio-economic environments is also evident in the self-reported satisfaction with life surveys. Here is the recent data from Gallup (link: https://news.gallup.com/poll/246326/six-seven-americans-satisfied-personal-lives.aspx) released back in February 2019:

In 2017, 57% of Americans of all ages were very satisfied and 30% somewhat satisfied with their lives. This remained relatively stable in 2019 poll (56% and 30%, respectively). However, over the same period of time percentage of those in the age group of 18-29 year old reporting their status as "very satisfied" with their lives dropped from 56% to 40%, and for the group of those aged 30-49 years, the corresponding decline was from 58% to 55%. In 2007 through 2011, generational gap was at a maximum point 8 percentage points wide. This rose to 16 percentage points in 2013, before blowing up to a massive 28 percentage point by 2019.

21/5/19: 'Popping up everywhere' or not? Entrepreneurship and start ups

Much has been written, taught and said about the New Age of Entrepreneurship and the new generations of entrepreneurs, allegedly springing up across the modern economies. The problem is, for all the marketing hype and academic programs enthusiasm, entrepreneurship (new business formation) is actually running pretty low.

Here is the U.S. data on new business formation:

While other data, e.g. Kauffman Foundation, shows relatively stable and even higher rates of entrepreneurship over recent years, much of this data aggregates both incorporated and non-incorporated businesses, including sole traders and self-employed. This is reflected in the fact that entrepreneurship rates in recent years have been sustained solely by a massive increase in entrepreneurship uptake by individuals with less than high school education and of older age cohorts:

Source: https://indicators.kauffman.org/wp-content/uploads/sites/2/2019/02/2017-National-Report-on-Early-Stage-Entrepreneurship-February-20191.pdf

Over the same time, cohorts with higher education have seen a decrease in their entrepreneurship rates, driven in part by their rising share of population, their rising numbers, and, well, yes, lower incentives to undertake entrepreneurial risks.

Now, as to the age of entrepreneurs we have.

Source: https://indicators.kauffman.org/wp-content/uploads/sites/2/2019/02/2017-National-Report-on-Early-Stage-Entrepreneurship-February-20191.pdf 

In  summary, the above table shows that the rates of entrepreneurship amongst the Millennials have declined, the rates for GenX-ers (35-44 cohort) have risen, but are quite volatile, with significant increases (2009-2010) associated with greater involuntary entrepreneurship (high unemployment), while overall increases in entrepreneurship have ben sustained by entrepreneurs of ages 45 and older.

So, to that often repeated popular and academist 'truism' of the New Age of Entrepreneurship and the great entrepreneurial spirit of the younger generations... errr, not quite.

Note: caveats notwithstanding, good data on the subject is available here: https://www.kauffman.org/currents/2019/02/indicators-provides-early-stage-entrepreneurship-data.

9/2/18: Angus Deaton on Monopolization and Inequality

For anyone interested in the topics of wealth inequality, structure of the modern (anti-market) economy and secular stagnation, here is an interview with economist Angus Deaton on the subject of market concentration, rent seeking and rising inequality: https://promarket.org/angus-deaton-discussed-driver-inequality-america-easier-rent-seekers-affect-policy-much-europe/.

I cover this in our economics courses, both in TCD and MIIS, as well as on this blog (see here: http://trueeconomics.blogspot.com/2018/02/7218-american-wages-corporotocracy-why.html).

In simple terms, rising degree of oligopolization or monopolization of the U.S. (and global) economy is, in my opinion, responsible for simultaneous loss of dynamism (diminished entrepreneurship, weakened innovation) in the markets, the dynamics of the secular stagnation and, as noted in our working paper here (http://trueeconomics.blogspot.com/2017/09/7917-millennials-support-for-liberal.html), for the structural decline in our preferences for liberal, Western, values.

As Deaton notes, "Monopoly, I think, is a big part of the story. Both monopoly and monopsony contribute to lower real wages (including higher prices, fewer jobs, and slower productivity growth)—just a textbook case! But there are things like contracting out, which are making it much harder at the bottom, or local licensing requirements—mechanisms for making rich people richer at the expense of stopping poor people starting businesses and stifling entrepreneurship. There are also more traditional mechanisms other than rent-seeking, like the tax system. All these affect the distribution of income very directly. One of the things that seem to be going on more than it used to be is rent-seeking that’s redistributing upwards."

While I agree with his top level analysis on the evils of monopolization, I find the arguments in favour of unions-led 'redistribution downward' to be extremely selective. Unions co-created the current rent-seeking system through (1) collusion with capital owners, and (2) selective redistribution based on membership, as opposed to merit. In other words, unions were the very same rent seekers as corporations. And, just as capital owners, unions restricted redistribution downstream to select few workers at the expense of all others. Which means returning unions to a monopoly power of representation of labor is a fallacious approach to solving the current problem. Instead, we need to make people shareholders in capital via direct provision of carefully structured equity.

Disagreements aside, a very good interview with Deaton, worth reading.

7/2/18: American Wages, Corporotocracy & Why the Millennials Should be Worried

Pooling together a range of indicators for wages, Goldman Sachs' Wage Tracker attempts to capture more accurate representation of wages dynamics in the U.S. Here is the latest chart, courtesy of the Zero Hedge (https://www.zerohedge.com/news/2018-02-05/goldman-exposes-americas-corporatocracy-wage-growth-slowing-not-rising)

According to GS, wage growth is not only anaemic, at 2.1% y/y in 4Q 2017, and contrary to the mainstream media reports and official stats far from blistering, but it has been anaemic since the Global Financial Crisis. The latter consideration is non-trivial, because it implies two things:

1. Structural change, consistent with the secular stagnation thesis, that is also identified in the GS research that attributes wages stagnation to increasing degree of concentration of market power in the hands of larger multinational enterprises (or, put more succinctly, oligopolization or monopolization of the U.S. economy); and
2. A decade long (and counting) period in the U.S. economic development when growth has been consistent with continued leveraging, not sustained by underlying income growth.

The first point falls squarely within the secular stagnation thesis on the supply side: as the U.S. economy becomes more monopolistic, the engines for technological innovation switch to differentiation through less significant, but more frequent incremental innovation. This means that more technology is not enabling more investment, reducing the forces of creative destruction and lowering entrepreneurship and labor productivity growth.

The second point supports secular stagnation on the demand side: as households' leverage is rising (slower growth in income, faster growth of debt loads), the growth capacity of the economy is becoming exhausted. Longer term growth rates contract and future income growth flattens out as well. The end game here is destabilization of the social order: leverage risk carries the risk of significant underfunding of the future pensions, it also reduces households' capacity to acquire homes that can be used for cheaper housing during pensionable years. Leveraging of parents leads to reduced capacity to fund education for children, lowering quantity and quality of education that can be attained by the future generation. Alternatively, for those who can attain credit for schooling, this shifts more debt into the earlier years of the household formation for the younger adults, depressing the rates of their future investment and savings.

Goldman's research attempts to put a number on the costs of these dynamics, saying that in the longer run, rising concentration in the American private sector economy implies a 0.25% annual drop in wages growth since 2001. While the number appears to be small, it is significant. From economic perspective this implies 3.95% lower cumulative life cycle earnings for a person starting their career. And that is without accounting for the effects of the Great Recession. A person with a life cycle average earnings of USD50,000 would earn USD940,000 less over a 30-year long career under GS estimated impact scenario, than a person working in the economy with lower degree of corporate concentration. 

The 0.25% effect GS estimate is ambiguous. So take a different view: prior to the Global Financial Crisis, longer term wages growth was averaging above 3% pa. Today, in the 'Best Recovery, Ever' we have an average of around 2.2-2.4%. The gap is greater than 0.6-0.8 percentage points and is persistent. So take it at 0.6% over the longer term, forward, the lower envelope of the gap. Under that scenario, life cycle earnings of the same individual with USD 50,000 average life cycle income will be lower, cumulatively, by USD 1.53 million (or -6.4%). 

That is a lot of cash that is not going to be earned by people who need to buy homes, healthcare, education, raise kids and save for pensions.

Remember the "Don't be evil" motto of one of these concentration behemoths that we celebrate as the champion of the American Dream? Well, their growing market power is doing no good for that very same Dream.

Meanwhile, on academic side of things, the supply side secular stagnation thesis must be, from here on, augmented by yet another cause for a long term structural slowdown: the rising market concentration in the hands of the American Corporatocracy. 

28/1/18: Political Polarization: Evidence form the U.S. trends

What's 'normal'? Pew Research data on political polarization in the U.S. (full report here http://www.people-press.org/interactives/political-polarization-1994-2017/).

A very dramatic drift toward the tails of the original distributions for both the Republicans and the Democrats, and, associated with this, an effective collapse in the numbers of the U.S. voters in the overlapping/shared position.

Removing the potential filter for political affiliation skewing the results:

Looking at pure preferences (excluding party identification), there has been a flattening (left-skewed) of public preferences spectrum. This also is consistent with growing polatization, but it is also consistent with increasing support by the voters for Extreme-Left and Left positions. The Center worldview has diminished substantially.

You can read my view on longer term trends and drivers for this dynamic here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3033949.

21/1/18: Student Loans Debt Crisis: It Only Gets Worse

A new research from the Brookings Institution has shed some light on the exploding student debt crisis in the U.S. The numbers are horrifying (for details see https://www.brookings.edu/wp-content/uploads/2018/01/scott-clayton-report.pdf) (emphasis mine):

"Trends for the 1996 entry cohort show that cumulative default rates continue to rise between 12 and 20 years after initial entry. Applying these trends to the 2004 entry cohort suggests that nearly 40 percent may default on their student loans by 2023." In simple terms, even 12-20 years into the loan, default rates are rising, which means that after we take out those borrowers who are more likely to default (earlier defaulters within any given cohort), the remaining borrowers pool is not improving. This applies to the cohort of borrowers who entered the labour markets at the end/after the Recession of 2001 - a cohort that started their careers before the Global Financial Crisis and the Great Recession, and that joined the labor force at the time of rapid growth and declining unemployment.

"The new data show the importance of examining outcomes for all entrants, not just borrowers, since borrowing rates differ substantially across groups and over time. For example, for-profit borrowers default at twice the rate of public two-year borrowers (52 versus 26 percent after 12 years), but because for-profit students are more likely to borrow, the rate of default among all for-profit entrants is nearly four times that of public two-year entrants (47 percent versus 13 percent)." Which means that the ongoing process of deregulation of the for-profit education providers - a process heavily influenced by the Trump Administration close links to the for-profit education sector (see https://www.theatlantic.com/education/archive/2017/08/julian-schmoke-for-profit-colleges/538578/ and https://www.politico.com/story/2017/08/31/devos-trump-forprofit-college-education-242193)  - is only likely to make matters worse for younger cohorts of Americans.

On a related: "Trends over time are most alarming among for-profit colleges; out of 100 students who ever attended a for-profit, 23 defaulted within 12 years of starting college in the 1996 cohort compared to 43 in the 2004 cohort (compared to an increase from just 8 to 11 students among entrants who never attended a for-profit)." So not only things are getting worse over time on their own, but they will be even worse given the direction of deregulation drive.

"The new data underscore that default rates depend more on student and institutional factors than on average levels of debt. For example, only 4 percent of white graduates who never attended a for-profit defaulted within 12 years of entry, compared to 67 percent of black dropouts who ever attended a for-profit. And while average debt per student has risen over time, defaults are highest among those who borrow relatively small amounts." This highlights, amongst other things, the absurd nature of the U.S. legal frameworks governing the resolution of student debt insolvency: the easier/less costly cases to resolve (lower borrowings) in insolvency are effectively exacerbated by the lack of proper bankruptcy resolution regime applying to the student loans.

Some charts:

Data above clearly highlights the dramatic uplift in default rates for the more recent cohort of borrowers. At this point in time, borrowers from the 2003-2004 cohort already exhibit higher cumulative default rates than the previous cohort exhibited over 20 years horizon. Worse, the rate of increases in default rates is still higher for the later cohort than for the earlier one. Put differently, things are not only worse, but are getting worse faster.

And here is the breakdown by the type of institution:

For-profit institutions' loans default rates are now at over 50% and rising. In simple terms, this is a form of legislatively approved and supported debt slavery, folks.

Beyond the study, here is the latest data on student loans debt. Student loans - aggregate - transition into delinquency is highest of all household credit lines:

And the total volume of Student Loans debt is now second only to mortgages:

11/1/18: Physical Mobility and Liberal Values: The Causal Loop

One of the key arguments relating the decline in the Millennials' support for liberal democratic values to socio-economic trends, identified in our recent paper on the subject (see Corbet, Shaen and Gurdgiev, Constantin, Millennials’ Support for Liberal Democracy Is Failing: A Deep Uncertainty Perspective (August 7, 2017): https://ssrn.com/abstract=3033949) is the argument that reduced socio-economic mobility for the younger generation Americans (and Europeans) is driving the younger voters away from favouring the liberal economic system of resources allocation.

In this context, here is an interesting piece of supporting evidence, showing how the rates of physical migration across the states of the U.S. have declined in recent years - a trend that pre-dates in its origins the Great Recession: http://www.latimes.com/business/la-fi-declining-domestic-migration-20171227-story.html.

In basic terms, two sets of factors are hypothesised to be behind the declining mobility in the U.S. and these can be related to the broader theses of secular stagnation:

• On the demand side of the secular stagnation thesis, as the article linked above states, "social and demographic factors such as an aging population and declining birth rates; older people tend to stay put more and starting families often motivates people to go out on their own";
• On the supply side of the secular stagnation thesis, "The decline in mobility is due partly to what has become a less-dynamic and fluid American labor market, some economists believe".

Note: I explain the two sides of secular stagnation theses here: http://trueeconomics.blogspot.com/2015/10/41015-secular-stagnation-and-promise-of.html.

On balance, these are troubling trends. Jobs churn has been reduced - by a combination of structural changes in the American economy (e,g. rise of corporatism that reduces rates of new enterprise formation, and lack of new business investment), as well as demographic changes (including preferences shifting in favour of lower mobility).  But there are also long-term cyclical factors at play, including rampant house price inflation in recent years in key urban locations, and the significant growth in debt exposures carried by the younger households (primarily due to student debt growth). There is also a structural demographic factor at work in altering the 'normal' dynamics of career advancement in the workplace: older workers are staying longer in their positions, reducing promotional opportunities available to younger workers. Finally, the rise of low-security, high-volatility types of employment (e.g. the GigEconomy) also contributes to reduced mobility.

In simple terms, lower mobility is a symptom of the disease, not the cause. The real disease has been ossification of the U.S. economy and the continued rise of the status quo promoting rent-seeking corporates. Lack of dynamism on the supply side translates into lack of dynamism on the demand side, and the loop closes with a feedback effect from demand to supply. 

28/10/17: Income Inequality: Millennials vs Baby Boomers

OECD's recent report, "Preventing Ageing Unequally", has a wealth of data and analysis relating to old-age poverty and demographic dynamics in terms of poverty evolution. One striking chart from the report shows changes in income inequality across two key demographic cohorts: the Baby Boomers (born at the start of the second half of the 20th Century) and the Millennials (born in the last two decades of the 20th Century):

Source: http://www.oecd.org/employment/preventing-ageing-unequally-9789264279087-en.htm.

The differences between two generations, controlling for age, are striking. In my opinion, the dramatic increase in income inequality across two generations in the majority of OECD economies (caveats to Ireland and Greece dynamics, and a major outliers of Switzerland, France and the Netherlands aside) is one of the core drivers for changing perceptions of the legitimacy of the democratic ethics and values when it comes to public perceptions of democracy. 

You can read more on the latter set of issues in our recent paper, here: http://trueeconomics.blogspot.com/2017/09/7917-millennials-support-for-liberal.html.

The dynamics of income inequality for the Millennials do not appear to relate to unemployment, but rather to the job markets outcomes (which seemingly are becoming more polarized between high quality jobs/careers and low quality ones):

In other words, where as in the 1950s it was sufficient to have a job to gain a place on a social progression ladder, today younger workers need to have the job (at Google, or Goldman Sachs, or other 'star' employers) to achieve the same.

Thus, as low unemployment swept across the advanced economies in the post-Global Financial Crisis recovery, there has not been a symmetric amelioration of the youth poverty rates in a number of countries:

In 25 OECD countries out of 35, poverty rates for those aged 18-25 are today higher than for those of age 65-75. Across the OECD, statistically, poverty rates for the 18-25 year olds cohort are on par with those for of 76+ year olds cohort, and both are above 12 percent. 

There is a lot that is still missing in the above comparatives. For example, the above numbers do not adjust for differences between different age groups in terms of quality of health and education. Younger workers are also healthier, as a cohort, than older population groups. This means that their incomes should be expected to be higher than older workers, simply by virtue of better health.  Younger workers are also better educated than their older counterparts, especially if we consider the same age cohorts for current Millennials and the Baby Boomers. Which also implies that their incomes should be higher and their income inequality should be lower than that for the Baby Boomers.

In other words, simple comparatives under-estimate the extent of income inequality and poverty incidence and depth for the Millennials by excluding adjustments for health and education differences.