Why doesn't 4.9% unemployment feel great?

The US unemployment rate fell below 5% in February, the first time this has happened since 2008. Good news? Not exactly. Here are three reasons why everyone isn't celebrating:

1. Fewer adults are working
With only 62.7% of adults working, the Labor Force Participation Rate is as low as it has been since the 1970s. The Baby Boomers are retiring, more people are going to college and graduate school and most alarmingly, many people have just given up on finding a job.


2. Long-term unemployment is still high
A lot of people who have been searching for jobs for a long time simply can not find them. Around 2.1 million Americans have not been able to find work for more than 6 months. The government calls these people 'long-term unemployed.'

3. Wage growth is anemic 
 The median income, once adjusted for inflation, has been the same for the past 20 years. What does this mean? It means that middle class families have seen stagnation rather than growth- they are staying afloat instead of swimming ahead.

http://money.cnn.com/2016/02/06/news/economy/obama-us-jobs/ 

Small businesses surviving month to month

According to the JPMorgan Chase Institute, small businesses have been having unexpected shutdowns in recent months and says it can be catastrophic to their survival. The Bureau of Labor Statistics estimated small businesses with 50 employees or less held about 35 percent of the country's net jobs in 2015. This was important for jump starting the job growth after the great depression. About 1 in 4 businesses wouldn't be able keep their business going if the business went 13 days with out income. Diana Farrell states " it is well known that small businesses are a critical driver of economic growth, but the consistency of their growth is in question if they're living month to month," The median of american small businesses sees and average daily cash flow of 374$ with an inflow of 381$ there is only a 7$ difference on any given day of receiving and spending. Reporters say policy makers should be aware that new educational programs and diversified credit offerings can help small business owners with their knowledge and how to manage their liquidity.


LINK:
http://www.usnews.com/news/articles/2016-09-21/small-businesses-surviving-month-to-month-says-jpmorgan-chase-institute

Outrageous EpiPen prices lead some people to make their own

The epinephrine medicine and delivery system (an epinephrine pump) are currently at the center of a debate about pharmaceutical pricing. Mylan, which virtually owns the market with its FDA-approved EpiPen, is facing scrutiny from the U.S. government for charging upwards of $600 for a two-pack set of EpiPens. It cost just $94 in 2007. It's the device, not epinephrine itself, that's so expensive.

There is a YouTube video created by Michael Laufer , a PhD mathematician, demonstrated how to inexpensively make one's own drugs or medical devices. The components can be purchased over the counter -- aside from the epinephrine, which doctors prescribe. The EpiPencil is bulky and not easy to carry, but the demo video shows it adequately injects liquid.

The FDA can't do anything about DIY devices like the EpiPencil as long as you have a prescription for epinephrine, since the components are legal. However, DIY your own pharmaceutical devices are highly risky. Apparently making your own EpiPen is not encouraged. 

Full article: http://money.cnn.com/2016/09/24/technology/diy-epipen-affordable-alternatives/index.html?iid=SF_LN

Bank Heist Scandal in Bangledesh

In February there was an attempted robbery of nearly $1 billion from accounts in the Bangladesh Bank. The government tried to keep it quiet and the finance minister decided not to publicize it. The finance minister has now made it public that $81 million dollars is missing. Many of the thieves managed to end up in the Philippines. On September 19th a regional court in the Philippines order the country's central bank, who received a portion of the stolen money, to return the $15 million. The rest of the money which mostly flowed through the casinos has yet to be retrieved but the Bangladeshi government and Philippines president are working hand and hand to resolve this issue.
There are two different theories of how this could of happen. The first is that there was a possible hack of the SWIFT systems at the Bangladesh Bank and issue transfer orders without the physical presence of a person inside of the central bank. This could be possible and this is how it would work SWIFT covers half of all big cross-border transfers. To issue transfer orders via SWIFT, tight security protocols must be followed including possession of a physical key and long passwords and biometric access control. So with this theory there would have to be people working from the inside to get access to this things. 
The second theory which is not liked by the finance ministry or the central bank is that this was at least partly an inside job; a collaboration of hackers and central-bank employees or other individuals who had access to the central bank terminals did the job. 
The Bangladesh police Criminal Investigation Department (CID) is reckons suspect employees of SWIFT staff and consultants to try to find out what could of happened. They have also tried to speak with Indian and Sri Lankan nationals but that hasn't been successful. The hunt for the robbers continues. 
http://www.economist.com/news/finance-economics/21707719-government-claims-publishing-report-would-undermine-efforts-retrieve

Wages in Japan: Behind a Pay Wall

Japan is struggling to figure out how to raise wages.  Economist's Olivier Blanchard and Adam Posen think that Japan should increase nominal wages, along with other benefits, by 5-10% "by fiat." However, since 1995, overall wages have only increased by 0.3%.  Japan's prime minister has been working on increasing wages.  He was able to increase minimum wages, and they will increase again on October 1st.  However, these increases have been very small and have only affected a small portion of the workforce. 

Japan's shrinking population is getting older, so the costs of pensions and medical care are large--1/3 the increases in wage are absorbed by social-security payments.  The article states that it is odd that it is so hard to increase wages because of the tightening of the labor market and the population. 
"One reason is that some industries that need to raise wages are unable to. Public nurseries, for example, are desperately short of staff yet cannot increase pay because of government rules."

"...Inequities, and the divide between traditional, regular “salarymen” jobs and non-regular workers, distort the labour market. Regular workers are more willing to trade higher wages for job security."



http://www.economist.com/news/finance-and-economics/21707221-raising-japanese-wages-harder-it-looks-behind-pay-wall

Fed's Kashkari sees cure for slow growth in immigration, tax reform

As of today, the Federal Reserve is powerless and cannot do much. A top Fed official argued in a 5100 word essay how US can achieve faster economic growth through non-monetary policy approaches such as immigration and tax reform. Minneapolis Federal Reserve Bank President Neel Kashkari noted that the U.S. labor market is "closer to normal" but that inflation is still below the Fed's 2-percent target and economic growth is well below precrisis norms. "Kashkari sketched out a wide range of possible reasons for slow U.S. economic growth, concluding that the most likely causes are an aging population, psychological scarring from the financial crisis that makes households and businesses unwilling to take risks, and "lackluster technological innovation." And to address those problems, Kashkari says that, the government could boost spending on basic research, rebuild worn-out infrastructure, streamline regulations and the tax code, and otherwise take small steps with little downside risk and plenty of potential. "Another promising policy is immigration reform, especially for high-skilled workers," Kashkari wrote. But government, and the Fed, should be careful of policy change that poses too much potential for harm, he also argued. Raising the Fed's inflation target is one such approach, he suggested; massive government spending is another. "I am skeptical that a large-scale expansion of government spending by itself is the best way forward, since larger fiscal deficits will lead to higher expected future taxes, which could further undermine private sector confidence," he wrote.

http://www.cnbc.com/2016/09/12/feds-kashkari-sees-cure-for-slow-growth-in-immigration-tax-reform.html

Fed leaves rates unchanged

In the Federal Reserve officials' most recent meeting (September 20-21), they decided to put off rate hikes until a later date. The committee said that they are still encouraged by the current economic growth, however they want to wait for continued upward trends in the economy before implementing higher rates. There was quite a division in the votes, about the rate increase, among the FOMC (Federal Open Market Committee) more so than in previous months. 'Most people were expecting some version of this, the idea that they weren't actually going to hike rates but they didn't want the notion that the Fed is never going to hike,' said Lewis Alexander." The main underlying reason for the hesitation in policy change is the upcoming election. The FOMC's next meeting is November 1st and 2nd, right before the election, so there probably will not be any changes again until the last meeting of the year held December 13th and 14th. 

http://www.cnbc.com/2016/09/21/fed-leaves-rates-unchanged-in-september-meeting.html

Activists Push for $15 Minimum Wage

With the upcoming presidential election approaching nearer, Donald Trump and Hillary Clinton have been pushing their agenda regarding their economic policies. One issue in the limelight is the presidential candidates' stance on minimum wage. Both Trump and Clinton seem to be in agreement that the minimum wage should rise, but none seem as aggressively interested in the $15 rate compared to activists who strive to make that a realistic goal from the Fight for 15 organization.

Terrence Wise joined Fight for 15 because a reality check that hit him when he was homeless for the second time with his fiance and three daughters because his fiance became ill. Many people in the Mid-Atlantic region work minimum wage jobs their whole life living paycheck to paycheck trying to make ends meet and when you can't work, you fall behind. Wise, 37, is currently employed at McDonald's and Burger King. After 20 years of experience in the fast food industry Wise is still only making $9 an hour at both jobs, no benefits, vacations, or paid time off.  Keep in mind, federal minimum wage is $7.25. For these reasons, Wise has not seen his mother in 10 years or a dentist in 18 years.

Although pushing for a living wage sounds philanthropic and beneficial for society, there are many factors to be considered when creating such a policy. Raising minimum wages will cause small businesses to raise prices and cut employees. Robert Mayfield, franchise owner of nine Dairy Queens in Austin, Texas is against any government interference in the market. Businesses need to cut costs and many tasks are already being automated by machines. A rise in minimum wage would cause some more unemployment to businesses like Mayfield's. Despite this, Mayfield is in fact paying efficiency wages because his starting wage rate is $12. Doing this attracts more qualified laborers which is crucial to small businesses.

Policymakers need to carefully consider the pros and cons of raising minimum wage before they initiate any economic policy effects. Establishing a living wage is not as simple as raising minimum wage.

http://0-web.a.ebscohost.com.dewey2.library.denison.edu/ehost/detail/detail?sid=21652a6d-9e62-4c21-bd19-6b75a9898fc6%40sessionmgr4010&vid=0&hid=4207&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#AN=6XN201608132003&db=nfh

More Weeks of Unemployment Benefits Don't Lead to Better Paying Jobs

The state of Florida offers less generous jobless benefits for fewer weeks than allotted in most states. The maximum length of unemployment-insurance benefits is tied to the unemployment rate in the state. So this year the insurance benefits last for just 12 weeks, compared to the 14 weeks last year. However, most other states provide the newly unemployed support for 26 weeks (6 months). In addition to the length of support being shorter, the benefit payments are also about 30% smaller. So how is this affecting the people of Florida? They are finding that it is simply a trade off. The unemployed are having to face a lot more hardships in the beginning, but they end up getting back to work more quickly. The JPMorgan Chase Institute released data that shows they are finding jobs faster and those jobs pay as well as positions found by workers in other states. In order to deal with the effects of the shorter duration and smaller payments, after losing their jobs, Florida workers are cutting back their spending by 13%, while people in the other states are only cutting back by 5%. Floridians who had been on unemployment rolls are starting to see their incomes rise again just four months after receiving their first payments. On the other hand, people of other states that receive six months of payments, are not seeing an increase in income until 7 months after their first payments.

We have studied in class how reducing the duration of unemployment benefits affects frictional unemployment. We also said that people tend to wait until the last minute- right before their insurance is going to expire- to start looking for jobs. This statement seems to correlate with the information discussed in this article about how people don't start showing an increase in their income until 7 months later. The fact that the newly unemployed are receiving less benefits and for a shorter amount of time shows that this pushes people a little more and gives them that incentive to go out and start working again.

http://blogs.wsj.com/economics/2016/09/15/more-weeks-of-unemployment-benefits-dont-lead-to-better-paying-jobs/

Fed Doesn't Raise Interest Rates

The Federal Reserve just adjourned a two day meeting with a 7-3 vote to leave interest rates unchanged for the time being. Janet Yellen, the Fed's chairwoman, acknowledged the economy's progress, claiming the decision did not indicate a lack of faith in the economy's growth, but rather that she saw it having "a little more room to run than might have previously been thought".  These remarks are in line with the relatively strong consumer spending and labor force participation, but inexplicably weak business investment that the US has seen. The decision passed despite three dissenters, a narrower margin than most Fed actions. Those who were not on board seem largely concerned that the Fed is taking too long to act, meaning it will eventually have to raise interest rates more sharply later on, possibly contributing to a recession. Inflation has remained quite low in the US, though not as low as in Japan and Europe, where central banks are still struggling to see positive numbers at all. The Fed has two more meetings before the end of the year, one in November, just days before the presidential election, and one in December. It is largely expected to raise rates on one of these two occasions, more likely in December so as not to be seen as influencing politics. Since inflation has still been so sluggish, I personally think is okay not to act until the end of the year, as long as it does so then regardless of the political situation or other factors. While business investment could be stronger, keeping interest rates at near zero levels has likely done most of what it can.

http://www.nytimes.com/2016/09/22/business/economy/fed-interest-rates-yellen.html?ref=business&_r=0