MacroScope

Sustainable full employment is within reach: Green Party U.S. presidential candidate Stein

As Americans get ready or tonight’s presidential debate, there’s one candidate they won’t be seeing on television and may not even have heard of: Jill Stein, a Harvard-trained doctor and Green Party candidate. Stein is promising a Green New Deal that she says could create more than 20 million jobs, 16 million through a government-sponsored program for full employment and millions more due to the increase in demand that would come from the new investments. She wants to expand Medicare coverage for all Americans and sharply reduce military spending, and says her policies would reduce the deficit by boosting tax revenues. She spoke to Reuters recently by telephone. What follows is an abbreviated transcript of the interview.

The Green Party does not appear to have realistic chance to win a major election at the moment. What is the goal of your candidacy?

An election is a wonderful time when people get involved and have a much broader conversation than usual. My hope is that we can drive some really critical solutions that already have majority support from the American public, that we can actually drive them into a political system that has been terribly hijacked and disconnected from the interests of everyday people.

I think it is beginning to spread like a little bit of a wildfire. I’m not holding my breath that we are going to turn the White House into a Green House. Someday that will happen, I’m not sure whether it will happen this time or not.  But regardless I think, if we don’t win the office we still can win the day by driving these critical issues forward and into the public dialogue that are otherwise just going to be completely swept off the table. Really creating jobs. Medicare for all. Public higher education for free. A Moratorium on foreclosures. Bringing home our military.

How difficult would it be to accomplish these things politically given the resistance that, say, the Obama administration faces when it attempts anything that even edges close to the word stimulus. Why do you think the political system continues to support leaders that work in a way that’s so different from the vision that you have?

Attempting to measure what QE3 will and won’t do

Deutsche Bank economists have tried to quantify what effect QE3 is likely to have on the U.S. economy. For an assumed $800 billion of purchases of both agency securities and Treasuries through the end of next year, the economy gets a little over half a percentage point lift over the course of two years and a net 500,000 jobs – or about two months’ worth of job creation in a typical strong recovery from recession.

In a model-driven assessment based on the past impact of QE1 and QE2, Deutsche Bank Securities chief economist Peter Hooper says this is what the Federal Reserve printing another $800 billion — slightly less than the gross domestic product of Australia — will do:

1. Reduce the 10-year Treasury yield by 51 bps

2. Raise the level of real GDP by 0.64%

3. Lower the unemployment rate by 0.32 percentage points

4. Increase house prices by 1.82%

5. Boost the S&P 500 by 3.06%, and

6. Raise inflation expectations by 0.25%

Apart from the fact we are more likely to win a lottery jackpot of epic proportions than see all of those predictions come true to that degree of precision, the pressing question is whether a 0.32 percentage point reduction in the unemployment rate would be significant enough for the Fed to stop printing money. After all, the Fed tied whether or not it would be satisfied by the results of QE3 to a substantial improvement in the labour market.

U.S. recession signal from the Philly Fed

Will the U.S. economy continue coasting along at a slow but steady clip or does it actually risk tipping into a new recession? Tom Porcelli, economist at RBC Capital, says he’s concerned about a new trough from a little-watched Philadelphia Fed survey of coincident indicators.

Here’s another indicator flashing red. The three-month trend for the Philly coincident index (which captures state employment and wage metrics) fell to a fresh cycle low of +24 in August – it was +80 just three months ago.

A reading this low historically bodes ill for future economic activity. Looking back at the last five downturns, this index averaged +41 three months prior to the official start of the recession. We have decidedly crossed that threshold.

Lucky enough to pay taxes

“People. People who pay taxes, Are the luckiest people in the world …” That may not be exactly how the lyrics, most memorably sung by Barbra Streisand in the musical “Funny Girl” actually go, but one could argue that one is lucky to be well off enough to pay federal income taxes.

A research note from Stone & McCarthy Research Associates economist Nancy Vanden Houten wonders why “obsessing about taxpayers with no federal income tax liability” has become a focus of the U.S. presidential campaign.

We think the emphasis is misplaced. A more appropriate question to ask is how much all taxpayers benefit from provisions of the tax code.

Krugman’s legacy: Fed gets over fear of commitment

Jonathan Spicer contributed to this post

An important part of the Federal Reserve’s recent decision to embark on an open-ended quantitative easing program was a fresh indication that the central bank will leave rates low even as the recovery gains steam. According to the September policy statement:

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.

Just why does the Fed believe promising to keep policy stimulus in place for a long time might help struggling economies recovery? Mike Feroli, chief U.S.economist and resident Fed watcher at JP Morgan, traces the first inklings of the idea to the work of Paul Krugman, the Nobel-prize winning economist and New York Times columnist.

Safe-haven Canada

The European crisis has thinned the ranks of countries considered safe-havens for investors, and may be contributing to an increase in foreign ownership of Canadian assets. Canada, whose comparatively robust banking sector helped it weather the 2008-2009 financial crisis better than many peers, saw capital inflows in July that helped reverse a June decline, according to the latest figures.

Foreigners resumed their net purchases of Canadian securities in July, taking on C$6.67 billion ($6.88 billion) after having reduced their holdings by C$7.76 billion in June, Statistics Canada said on Monday. Canadian authorities have said foreign investors view Canada as a safe haven. So far this year foreigners have made C$41.23 billion in net purchases, a substantial amount though down from C$54.31 billion seen in the first seven months of 2011.

According to Charles St-Arnaud, economist at Nomura, stocks saw their biggest inflow since February 2011:

Olympics provided gold for Team GB, but not the economy

Britain’s Olympic and Paralympic teams may have brought home more medals than organisers had dreamed possible but the Games themselves have probably failed to lift the economy as much as the government had hoped.

The country’s gross domestic product will grow 0.6 percent in the current quarter, according to the latest Reuters poll, revised down from a 0.7 percent prediction in an August poll.

That is enough to drag Britain out of its second recession in four years but most of the bounceback is from an extra working day and better weather in the quarter.

Not enough jobs? Blame the government

The U.S. labor market has been adding jobs for two-and-a-half years, helping bring down the jobless rate from a peak of 10 percent in late 2009 to the current 8.1 percent rate. But recently, job growth has slowed to under 100,000 per month – not enough to keep the jobless rate on a downward path. Heidi Shierholz at the liberal Economic Policy Institute in Washington says this leaves the U.S. economy well short of achieving its full capacity:

We’d need to add around 350,000 jobs a month to get back to the pre-recession unemployment rate in three years.

With just 96,000 jobs created in August, we’re still a long way off from that kind of strength – and a steady flow of job losses from the public sector isn’t helping. State and local governments have been slashing public payrolls to balance their budgets. In August, the public sector lost 7,000 jobs, but that was mere drop in the bucket of public sector job losses that now total 680,000 lost jobs since August 2008. The total impact is even larger, says Shierholz.

Help not wanted: U.S. online job ads see biggest two-month decline since recession

U.S.job seekers saw online job ads dwindle this summer, according to a survey from The Conference Board. Advertised vacancies fell 108,700 in August to 4,684,800, the industry group said.

Jonathan Basile at Credit Suisse noted that the combined drop of 262,000 jobs for July and August was the biggest two-month decline since the last recession.

This measure of labor demand suggests businesses have become a lot less willing to hire in the last two months. Jobless claims in recent months are not showing a deteriorating picture for the layoff side of payrolls, but help wanted online ads are showing weakness on the hiring side.

India inflation consistently tough to pin down

High inflation is a drag on economic growth in the world’s second most populous country and matters immensely to over 400 million people, or over a third of India’s total population, who struggle to earn enough to feed their families three meals a day.

The particularly volatile nature of inflation in India has confounded policymakers and small business owners and has left economists, who are often running complex statistical models based on a dearth of reliable data, with a poor forecasting record.

To be fair, predicting economic data can be pretty tough in a country where collecting and reporting national statistics is still in its infancy stage. Provisional numbers are often completely revised away.