Macro Roundup

Lay of the land of Americans religiosity in 2020, "....According to PRRI’s 2020 American Values Atlas, seven in ten Americans (70%) identify as Christian, including more than four in ten who identify as white Christian and more than one quarter who identify as Christian of color. Nearlyone in four Americans (23%) are religiously unaffiliated, and 5% identify with non-Christian religions. The most substantial cultural and political divides are between white Christians and Christians of color. More than four in ten Americans (44%) identify as white Christian, including white evangelical Protestants (14%), white mainline (non-evangelical) Protestants (16%), and white Catholics (12%), as well as small percentages who identify as Latter-day Saint (Mormon), Jehovah’s Witness, and Orthodox Christian.2 Christians of color include Hispanic Catholics (8%), Black Protestants (7%), Hispanic Protestants (4%), other Protestants of color (4%), and other Catholics of color (2%).3 The rest of religiously affiliated Americans belong to non-Christian groups, including 1% who are Jewish, 1% Muslim, 1% Buddhist, 0.5% Hindu, and 1% who identify with other religions. Religiously unaffiliated Americans comprise those who do not claim any particular religious affiliation (17%) and those who identify as atheist (3%) or agnostic (3%). Over the last few decades, the proportion of the U.S. population that is white Christian has declined by nearly one-third. As recently as 1996, almost two-thirds of Americans (65%) identified as white and Christian. By 2006, that had declined to 54%, and by 2017 it was down to 43%.4 The proportion of white Christians hit a low point in 2018, at 42%, and rebounded slightly in 2019 and 2020, to 44%. That tick upward indicates the decline is slowing from its pace of losing roughly 11% per decade...."

Melissa Korn and Andrea Fuller, "‘Financially Hobbled for Life’: The Elite Master’s Degrees That Don’t Pay Off,"Wall Street Journal, July 8, 2021, https://www.wsj.com/articles/financially-hobbled-for-life-the-elite-masters-degrees-that-dont-pay-off-11625752773

‘Financially Hobbled for Life’: The Elite Master’s Degrees That Don’t Pay Off

Recent film program graduates of Columbia University who took out federal student loans had a median debt of $181,000.

Yet two years after earning their master’s degrees, half of the borrowers were making less than $30,000 a year.

The Columbia program offers the most extreme example of how elite universities in recent years have awarded thousands of master’s degrees that don’t provide graduates enough early career earnings to begin paying down their federal student loans, according to a Wall Street Journal analysis of Education Department data.

Recent Columbia film alumni had the highest debt compared with earnings among graduates of any major university master’s program in the U.S., the Journal found. The New York City university is among the world’s most prestigious schools, and its $11.3 billion endowment ranks it the nation’s eighth wealthiest private school.

For years, faculty, staff and students have appealed unsuccessfully to administrators to tap that wealth to aid more graduate students, according to current and former faculty and administrators, and dozens of students. Taxpayers will be on the hook for whatever is left unpaid.

Lured by the aura of degrees from top-flight institutions, many master’s students at universities across the U.S. took on debt beyond what their pay would support, the Journal analysis of federal data on borrowers found. At Columbia, such students graduated from programs including history, social work and architecture.

Columbia University President Lee Bollinger said the Education Department data in the Journal analysis can’t fully assess salary prospects because it covers only earnings and loan repayments two years after graduation. “Nevertheless,” he said, “this is not what we want it to be.”

At New York University, graduates with a master’s degree in publishing borrowed a median $116,000 and had an annual median income of $42,000 two years after the program, the data on recent borrowers show. At Northwestern University, half of those who earned degrees in speech-language pathology borrowed $148,000 or more, and the graduates had a median income of $60,000 two years later. Graduates of the University of Southern California’s marriage and family counseling program borrowed a median $124,000 and half earned $50,000 or less over the same period.

“NYU is always focused on affordability, and an important part of that is, of course, to help prospective students make informed decisions,” said spokesman John Beckman. Northwestern spokeswoman Hilary Hurd Anyaso said the speech-language pathology program is among the best in the world, leading to a “gratifying career path that is in high demand.” USC spokeswoman Lauren Bartlett said providing students financial support and employment opportunities was a priority for the school.

Undergraduate students for years have faced ballooning loan balances. But now it is graduate students who are accruing the most onerous debt loads. Unlike undergraduate loans, the federal Grad Plus loan program has no fixed limit on how much grad students can borrow—money that can be used for tuition, fees and living expenses.

The no-limit loans make master’s degrees a gold mine for universities, which have expanded graduate-school offerings since Congress created Grad Plus in 2005. Graduate students are for the first time on track to have borrowed as much as undergraduates in the 2020-21 academic year, federal loan data show.

“There’s always those 2 a.m. panic attacks where you’re thinking, ‘How the hell am I ever going to pay this off?’” said 29-year-old Zack Morrison, of New Jersey, who earned a Master of Fine Arts in film from Columbia in 2018 and praised the quality of the program. His graduate school loan balance now stands at nearly $300,000, including accrued interest. He has been earning between $30,000 and $50,000 a year from work as a Hollywood assistant and such side gigs as commercial video production and photography.

Highly selective universities have benefited from free-flowing federal loan money, and with demand for spots far exceeding supply, the schools have been able to raise tuition largely unchecked. The power of legacy branding lets prestigious universities say, in effect, that their degrees are worth whatever they charge.

“Students gravitate to Columbia because Columbia’s Columbia, right?” film professor and writer-director Katherine Dieckmann said in a 10-minute video about the program that the school posted on YouTube in 2019. “It’s a world-class, Ivy League institution with access to all kinds of other departments, other ideas. It’s a world-class university. And the next thing is it’s in New York City. And I think that combination of elements is pretty seductive.”

That was the case for Columbia film MFA student Patrick Clement, who attended community college in California before transferring to the University of Kansas for his bachelor’s degree.

“As a poor kid and a high-school dropout, there was an attraction to getting an Ivy League master’s degree,” said Mr. Clement, 41. He graduated in 2020 from Columbia, borrowing more than $360,000 in federal loans for the degree. He is casting for an independent film, he said. To pay the bills, he teaches film at a community college and runs an antique shop.

Columbia grad students who borrowed money typically held loans that exceeded annual earnings two years after graduation in 14 of the school’s 32 master’s degree programs tracked by the Education Department, the Journal found. In about a dozen Columbia master’s programs, the majority of recent graduates weren’t repaying the principal on their loans or took forbearance, according to data released for the first time this year.

Julie Kornfeld, Columbia’s vice provost for academic programs, said master’s degrees “can and should be a revenue source” subsidizing other parts of the university. She also said grad students need more financial support.

In the past four years, Columbia School of the Arts said it has increased average scholarships by about a third to nearly $24,000. The length of the MFA film program also was reduced to a maximum of four years from five.

In April, Columbia announced a $1.4 billion fundraising campaign aimed at financial aid. Mr. Bollinger said administrators have yet to settle on how much will go to students in master’s degree programs.

Debt counselors recommend students not borrow more than they will earn right out of school. Yet about 38% of master’s programs at top-tier private universities in the U.S. failed that test, according to the Journal’s analysis of salary data for graduates from the 2015 and 2016 classes, the latest available.

At for-profit schools, a common target of regulators for high student debt and poor job prospects, 30% failed to meet the debt counselors’ advice.

Whether or not students should have better weighed the personal consequences of borrowing heavily to pursue lower-paying careers, the burden is far-reaching. After 20 to 25 years on an income-dependent payment plan, the balance on Grad Plus loans—roughly $11.2 billion issued in the school year that ended in 2020—can be forgiven. Taxpayers will bear any losses.

At least 43% of the people who recently took out loans for master’s degrees at elite private universities hadn’t paid down any of their original debt or were behind on payments roughly two years after graduation, the available data show.

Universities, which receive their tuition up front, have an economic incentive to expand graduate degree programs and face no consequences if students can’t afford to pay the federal loans after they leave.

“They’re not really held accountable for the myth they’re selling to students,” said Ozan Jaquette, an associate professor of higher education at the University of California, Los Angeles’s Graduate School of Education and Information Studies. His doctoral dissertation was on the growth of master’s programs. “We should not be giving federal-aid dollars to these programs that systematically saddle students with high debt,” he said.

Jumping classes

Matt Black graduated from Columbia in 2015 with an MFA in film and $233,000 in federal loans. He signed up for an income-based repayment plan that in leaner years requires no remittance from him. With interest, his balance stands at $331,000.

Mr. Black, a 36-year-old writer and producer in Los Angeles, said he grew up in a lower middle-class family in Oklahoma. He earns $60,000 in a good year and less than half that in dry stretches. The faculty at Columbia was stellar, he said, but he blamed the school for his “calamitous financial situation.”

“We were told by the establishment our whole lives this was the way to jump social classes,” he said of an Ivy League education. Instead, he said he feels such goals as marriage, children and owning a home are out of reach.

During a car ride last year with three friends from the film program, Mr. Black said, they calculated they collectively owed $1.5 million in loans to the federal government. “Financially hobbled for life,” he said. “That’s the joke.”

An offer to attend Columbia is hard for many to pass up. Founded in 1754, the school boasts graduates who became U.S. presidents, Supreme Court justices and stars in the arts, medicine and business.

More than 800 people applied this year for roughly 72 spots in the film MFA program, which can total nearly $300,000 for tuition, fees and living expenses. Students aspire to join the lineage of successful alums who include Kathryn Bigelow, the director of “The Hurt Locker,” and Jennifer Lee, screenwriter and co-director of “Frozen.”

“The top anything tends to be more expensive than something that isn’t quite as good,” said Keith Goggin, a private investor in New York who until June was chairman of the Columbia Alumni Association. “I’d like to think the outcomes coming out of Columbia justify the cost.”

Like many of its Ivy League peers, Columbia offers generous financial aid to undergraduates. The neediest students pay next to nothing. Low-income Columbia undergraduates who received loans borrowed a median $21,500, according to the latest federal data covering students who received federal Pell Grants. Yet 2015 and 2016 master’s graduates from low-income backgrounds borrowed more than double that amount in every Columbia master’s program for which the Education Department publishes data.

Mr. Bollinger said undergraduates have “the most moral claim” to financial aid: “They are the people among us who are most trying to begin their lives and to build a base of education.”

Since fall 2011, Columbia has increased published rates for most master’s programs by a greater margin than it did for its undergraduates. In the most recent academic year, it kept tuition flat for undergraduate students because of the pandemic but raised charges for nearly every master’s degree.

‘Take more loans’

At least as far back as 2016, students said, they complained to top administrators about debt.

Mr. Morrison, who owes nearly $300,000, said he was invited to a fireside chat for graduate students at Mr. Bollinger’s Manhattan townhouse that year.

Mr. Bollinger asked for a show of hands by those who felt prepared to pay off their student loans and to succeed in the workplace, Mr. Morrison recalled. The grad student didn’t raise his hand, and Mr. Bollinger asked him why.

Mr. Morrison said the job market for aspiring screenwriters and directors looked bleak for someone with a six-figure debt load. He recalled Mr. Bollinger saying he understood the concern but that Columbia was a really good school.

“My immediate takeaway is that there’s a huge disconnect between the administration’s perception of the School of the Arts,” Mr. Morrison wrote to a faculty member a few days after the meeting, “and what’s actually happening for students.”

Mr. Bollinger said he recalled asking a question like that, and “I’m very much aware of what the School of the Arts needs in terms of financial aid support.”

That same year, more than 160 MFA film students petitioned Mr. Bollinger and School of the Arts Dean Carol Becker, lamenting how little financial support Columbia offered. They didn’t hear back from the president. Ms. Becker told them in meetings her hands were tied by the university administration, according to five students present.

Although the school created an emergency fund for international students, Americans “were just told to go and take more loans,” said Paul Carpenter, a 2018 film MFA graduate who joined the petition. Columbia said it also offset some student fees.

Scholarships cover only a small slice of Columbia master’s program costs.

Columbia MFA theater student Brigitte Thieme-Burdette, 31, negotiated up to $30,000 a year in scholarships but said the program remained a financial burden. She has so far borrowed $102,000 in federal loans. She said the school directed her to the federal loan application when she had financial questions, and didn’t say she could take out less than the maximum amount.

Columbia’s theater graduates who borrowed took on a median $135,000 in student loans, four times what they earned two years after graduation, the data show.

“There’s a virtual army of young people, most of whom may be naive about the financial obligations they’re undertaking,” said James Bundy, dean at Yale University’s drama school, which in June announced it would eliminate tuition. “I think there are some schools with debt loads that are indefensible.”

Christian Parker, a Columbia theater department faculty member and former department chair, said he and colleagues talked constantly about student debt. “I’ve never been to an all-school faculty meeting where it wasn’t brought up and where faculty were not advocating and agitating for this issue to remain at the front of the list of priorities for the dean’s leadership,” he said.

While Columbia is wealthy, it isn’t as wealthy as schools like Yale, limiting the funds available for scholarships, Mr. Bollinger, three Columbia deans and other top university administrators said.

Among the other priorities for Columbia, whose annual budget runs about $5 billion, is a 17-acre campus expansion in upper Manhattan that broke ground in 2008. Allocating school resources requires a complex set of judgments, and improving campus facilities can draw donors, Mr. Bollinger said.

The university said recent increases in grad-student aid weren’t reflected in the federal data the Journal analyzed. For example, the School of Social Work increased the number of full-tuition awards for new master’s students to 12 from two a few years ago.

The fall 2020 entering class had around 560 students.

Dog walkers

One foreign student said he notified School of the Arts officials in 2016 that he may need to drop out of the film program because he could no longer afford tuition and living expenses. International students aren’t eligible for federal loans. He received an email that August from an administrator.

“I was informed that you might be interested in additional on-campus work opportunities,” said the message, viewed by the Journal. “We were contacted by the Office of President Bollinger who hires students for dog caretaking.”

Mr. Bollinger said he didn’t know about or condone officials making the offer in response to the student’s situation. He said the job of caring for his yellow Labradors, Arthur and Lucy, while he traveled was intended to give students pocket money and wasn’t meant to address serious financial need.

In 2018, a group of almost 130 film students and alumni detailed their financial concerns in a letter to a faculty committee conducting a scheduled program review. The review criticized the School of the Arts for leaving students mired in debt, said a film professor who read the report. Columbia said the results of such reviews were confidential.

Ms. Becker said she was working to secure more donor support.

Around two-thirds of domestic students in the MFA film program take federal loans. The median debt for 2017 and 2018 graduates of Columbia’s film program who borrowed fell 5% from two years earlier but still topped $171,000, according to the latest federal debt figures, which combine the MFA and Master of Arts degrees.

Grant Bromley, 28, accumulated $115,000 in federal loans while getting his Master of Arts in film and media studies at Columbia. He had hoped to advance into academia after graduating in 2018. Instead, he moved back home with his parents in Knoxville, Tenn., for a year, taking a job at the TJ Maxx where he had worked as a teenager. He now works at a TJ Maxx near Chattanooga.

He is working on his third feature film in his spare time and credited Columbia for giving him the chance to pursue his passion.

For now, Mr. Bromley earns around $16 an hour and can’t afford to pay down his loan balance, which is $156,000, including undergraduate debt and interest. “It’s a number so large that it doesn’t necessarily feel real,” he said.

WSJ reports on the financial returns to masters degree programs, "... At least 43% of the people who recently took out loans for master’s degrees at elite private universities hadn’t paid down any of their original debt or were behind on payments roughly two years after graduation....Debt counselors recommend students not borrow more than they will earn right out of school. Yet about 38% of master’s programs at top-tier private universities in the U.S. failed that test, according to the Journal’s analysis. At for-profit schools, a common target of regulators for high student debt and poor job prospects, 30% failed to meet the debt counselors’ advice....Highly selective universities have benefited from free-flowing federal loan money, and with demand for spots far exceeding supply, the schools have been able to raise tuition largely unchecked....."

86 (86/49=1.75) (86/39=2.2)

39 (39/29=1.35)

U Chicago

49 (49/29=1.67)

29

Michigan State

Econ

History

(thousands of dollars)

Phil Gramm and Mike Solon, "Biden Turns Back the Progressive Clock,"Wall Street Journal, July 14, 2021, https://www.wsj.com/articles/biden-turns-back-the-progressive-clock-11626286594

Biden Turns Back the Progressive Clock

In a sweeping executive order aimed at reimposing Progressive Era regulatory policy across the U.S. economy, President Biden recounted the foundational myths of modern progressivism. The first canon of progressivism holds that breaking up the consolidating industries or trusts in the late 19th and early 20th centuries, and regulating those industries heavily until the late 1970s, benefited the economy and gave “the little guy” a fighting chance. Consumers, workers and the economy took a hit, according to the progressive myth, when the regulatory structure was overturned 40 years ago.

Progressive interpretation claims that the industrial concentration of the late 19th and early 20th centuries was evidence of the rise of monopolies, but if the consolidating industries were exhibiting anticompetitive behavior, output would have fallen and prices would have risen. The opposite happened. As economist Thomas DiLorenzo showed in a classic study, output in industries accused of being monopolistic during the debate on the Sherman Act in 1890 increased by 175% from 1880 to 1890—seven times the growth rate of the economy as a whole. The average price of products sold by these same industries fell three times as fast as the Consumer Price Index.

Hard economic data consistently shows that the industrial concentration at the turn of the 19th century was driven by vigorous competition arising from transformative technology and improved industrial organization. Efficient producers mastered the economies of scale to provide consumers with lower prices and improved product quality. Competition and new technology destroyed the pricing power of emerging trusts, and most failed to survive. Even the oil and sugar trusts, which existed because of protective tariffs, faced relentless price competition.

Many trusts welcomed progressive regulation. A comprehensive study by economist George Hilton and historian Gabriel Kolko showed convincingly that railroads championed regulation. They were more than happy to have the feds set freight rates. Market forces had driven down revenues per ton-mile by some 18% between 1870 and 1890. The first major action of the Interstate Commerce Commission was to ban price competition by outlawing price rebating, which the owners of an overbuilt railway system welcomed. When interstate trucking became an effective competitor of the railroads, the ICC muted that competition by regulating the new industry.

The 1970s brought two recessions, double-digit inflation and an end to America’s postwar economic dominance, setting off an intense policy debate. As economists, regulators, politicians, business leaders and policy advocates debated why the U.S. economy seemed to be losing its exceptionalism, a consensus formed around the belief that regulations based on the Progressive Era principles that Mr. Biden now seeks to revive were hurting consumers, workers and the economy.

Experts charged with protecting consumers, like then-Senate Judiciary Committee staffer (and Harvard antitrust law professor) Stephen Breyer and Civil Aeronautics Board Chairman Alfred Kahn, provided the hard evidence that convinced their bosses, Sen. Ted Kennedy and President Jimmy Carter, that America needed to reform agency regulation and end regulation of vast sectors of the economy. Any doubt that the consensus that Progressive Era regulation had failed ended when Ralph Nader testified before Kennedy’s subcommittee, denouncing regulations that kept prices high and choices low, and protected regulated industries.

When airline deregulation passed the Senate in 1978, Kennedy declared: “The success of this legislation is the result of a clear consensus... that rigid federal economic regulations of the airlines tends to increase prices, foster inefficiency in operations and perpetuate Government control, bureaucracy and red tape.... This consensus has been built brick by brick in recent years by serious and careful nonpartisan examinations of... the nature of government and competition in the 1970s.”

The Senate passed airline deregulation 82-4 on Oct. 14, 1978, and Sen. Joe Biden voted for it. But Democratic deregulation was only beginning. As Kennedy noted: “The restrictive price and entry provisions of the Federal Aviation Act... were copied directly from the Interstate Commerce Act of the 1880s governing railroads.... We need to now look beyond the airlines and the corrective measures we are voting upon today and recognize the fact that... heavy regulation, as illustrated by the airline industry, is not the answer.”

On April 1, 1980, the Senate voted on the Staggers Rail Act to deregulate railroads. Again, Mr. Biden voted for it. In signing the Motor Carrier Act of 1980, which Mr. Biden also voted for, President Carter sounded the death knell on Progressive Era regulation: “This historic legislation... will remove 45 years of excessive and inflationary Government restrictions and red tape.... No longer will trucks travel empty because of rules absurdly limiting the kinds of goods a truck may carry. No longer will trucks be forced to travel hundreds of miles out of their way for no reason or prohibited senselessly from stopping to pick up and deliver goods at points along their routes. The Motor Carrier Act of 1980 will bring the trucking industry into the free enterprise system, where it belongs.”

Far from hurting consumers, as progressive myth alleges, deregulation of the U.S. transportation system unleashed a wave of invention and innovation that reduced logistical transportation cost—the cost of moving goods as a percentage of gross domestic product—by an astonishing 50% over 40 years. Airline fares were cut in half on a per mile basis, while air cargo surged from 5.4% of all shipments to 14.5% by 2012, making air transit for people and packages a routine part of American life. “Our economy would be much smaller and per capita income significantly lower without these far-sighted changes,” according to FedEx CEO Fred Smith.

In this Carter-Kennedy led reform, the duty of government was to protect the consumer from harm, not to protect the producer from competition. Without the productive energy released by deregulating airlines, trucking, railroads, energy and communications, the U.S. might not have found its competitive legs as its postwar dominance in manufacturing ended in the late 1970s. The benefits of deregulation to this day continue to make possible powerful innovations that remake the world. Amazon, FedEx and Facebook are but a tiny fraction of a long list of progeny produced by lifting the heavy hand of Progressive Era regulation. We reimpose that regulation at our own peril.

Good finding from Leamer that permanent separations from manufacturing have been closely correlated with the length and depth of recent American recessions both on the national and state level, "... Using the recession recovery point equal to the month when private payrolls first exceeded their previous peak level, this paper argues that it was the negative secular trend in manufacturing jobs that was the most important determinant of the length and depth of the last three recessions/ recoveries. This negative secular trend changed the layoff/recall pattern of jobs in manufacturing into permanent displacements, a malady that lengthened the recovery periods and that is not the explicit target of either traditional monetary policy or traditional fiscal policy. Using the ideas gathered from an examination of the US two-digit sectoral data for the US overall, attention turns to the recession/recoveries of the 50 US states in the last three national recession periods. Regressions that explain the lengths and depths of the recessions in 50 US states reveal the importance of construction jobs, but the most important predictor was manufacturing jobs: the greater the share of manufacturing jobs prior to the recession, the worse was the recession/ recovery...."

His takeaway, "...The role of declining manufacturing jobs in making our recessions deeper and longer lasting has not to my knowledge had the attention of housing.... The long-term decline in manufacturing jobs from over 30% of jobs in 1950 to about 8% today has eliminated many of the best jobs for high school graduates, and devastated many communities around the United States. This decline in jobs was caused by a combination of technology, globalization and low savings. Process improvements in manufacturing have continuously increased worker productivity which means fewer manufacturing workers unless that force is offset by a combination of population growth and product innovations. Globalization which integrates high-wage countries with low-wage countries shifts the labor-intensive manufacturing work to the low-wage countries, leaving the high-wage countries with fewer manufacturing jobs.In addition, a country with a low savings rate needs a real exchange rate that is high enough to create an external deficit large enough to close the gap between savings and investment. This can shift the workforce out of the tradables sector into the nontradable service sector work: fewer manufacturing jobs and more restaurant work. The biggest public policy contributor to this outcome is probably the large deficit run by the Federal Government. Policies to increase national saving like tax breaks to encourage more savings for retirement would help out, but the fundamental technological and globalization forces cannot be reversed....In conclusion,there is substantial evidence that the behavior of job shares in construction and manufacturing predicted the length, depth and severity of the last two recessions. Theregressions that are used to support this conclusion have rather low R-squares, which means that there is a lot more than just manufacturing and construction that matter, and it remains to be seen if the results in all these regressions would be upended if other variables are included. All this is looking backward but the negative secular trend in manufacturing may be at an end, in which case what we learned about the last three recessions may not tell us much about future ones...."

The evidence, "... The unemployment data illustrated in Figure 4 reveal that the unemployment rate was always above its previous peak level when payrolls returned to their value at the previous peak. Both GDP and the unemployment rate are therefore suggesting that the recovery was not completed when payrolls returned to their previous peak level....”

“…Table 7 is a similar set of results for the Great Recession 2008/09 period with explanatory variables equal to construction, manufacturing and information employment shares in 2006, 2000 and 1990. The results on the left have a mixture of signs of coefficients and the results on the right with a reduced parameterization is again designed to make the results more understandable. All variables in the results on the right have unit standard errors and the coefficients are “beta-values.” The largest t-values and the largest beta-values are highlighted. Again manufacturing jobs contribute most noticeably to length, depth and severity of the recession, but here the manufacturing variable is not the level but the increase in employment share from 1990 to 2000 or to 2006. The change in share variables have negative coefficients which might seem hard to understand. The explanation for the negative coefficient lies in the scatter diagram at the right which compares the change in the manufacturing employment share from 2000 to 2006 with the change in the previous period from 1990 to 2000. What this scatter indicates is that a large decline in manufacturing employment in one period predicts a large decline in the subsequent period. What this suggests is that troubles in manufacturing before Again manufacturing jobs contribute most noticeably to length, depth and severity of the recession, but here the manufacturing variable is not the level but the increase in employment share from 1990 to 2000 or to 2006. The change in share variables have negative coefficients which might seem hard to understand. The explanation for the negative coefficient lies in the scatter diagram at the right which compares the change in the manufacturing employment share from 2000 to 2006 with the change in the previous period from 1990 to 2000. What this scatter indicates is that a large decline in manufacturing employment in one period predicts a large decline in the subsequent period. What this suggests is that troubles in manufacturing before…"

"...In preparation for the study of the variability of recession outcomes across US states,Figure 19 illustrates the national employment shares of manufacturing, construction and information since 1987 with the official recessions in red and the periods during which total payrolls were below their previous peak in yellow except that payrolls in the last month of each recovery exceeded the previous peak.These three sectors are thought to be “foundation” jobs on which the other jobs are constructed. The foundation sectors sell most of their output outside the state, to other states or to other nations. These are the sectors in which a state earns revenues that can be used to purchase goods and services produced elsewhere. If these foundation jobs are established in a state, then they attract support jobs in restaurants, health care, education, government and so on. The apparent exception to this statement is the construction sector which sells it’s output locally, but the finance needed to support the purchase of homes or other structures comes from the national or global bond market, bringing revenue that can be spent locally in restaurants and hospitals and schools. The declining share of manufacturing until 2010 probably contributed to both the depth and the length of the recessions, since this created large numbers of permanently displaced workers who had to find jobs in other sectors, something that probably took significantly longer than the recalls that occurred after earlier recessions. The construction sector probably contributed to the length and depth of the 1990 recession and the 2008/09 recession when the share of construction jobs fell substantially but not much in the 2001 recession when the share of construction jobs was rather constant. The Information jobs share bubbled up in the late 1990s but fell from then on. Those jobs are likely to have had adverse consequences especially for the 2001 recession but also played a role in the 2008/09 downturn....”

Explaining the Depth and Lengths of Three Recessions in 50 States Via “Foundational Jobs” Separations

“…The difference between “Layoffs and Recalls” versus “Permanent Separations” in manufacturing is made abundantly clear in Figure 9 which illustrates manufacturing jobs from cycle peak to cycle recovery point. Here we see the V-shaped patterns with a strong bounce back of manufacturing jobs except for the last three recessions: 1990, 2001, 2007. (2020 was a shutdown not a recession.) That confirms with the logic of Figure 8...."

“… The reason why the underlying long-term direction of job growth separates the labor market performance into these two categories is explained with the two illustrations in Figure 8.Each illustration begins with a cost-cutting phase with a downward stroke representing the job loss and a shorter upward stroke representing the amount of hiring that is necessary to get back to previous peak output, allowing for the improvements in productivity put in place during the recession, as was discussed above. To that cost-cutting partial V is added a secular time trend to reflect the long-term trend in employment, contrasting up from down. The first illustration shows that when positive growth in demand is added to the recession cost-cutting, the result is a happy V: layoffs followed by recalls. The lower image adds to the cost-cutting partial V a secular decline, and that is what produces the lazy L, with permanent layoffs and no recalls. The message of these images is that secular increases in jobs support a layoff and recall pattern but a secular decline creates permanently separated workers who may need to move to new locations and/or acquire new skills and/or greatly reduce their aspirations before they can find another job. That takes a lot more time than a recall….”

“…One important reason for a slow recovery is the prevalence of permanent job separations... One of the most important reasons for the slowing recoveries is illustrated in the manufacturing employment data in Figure 7 with log scales that allow straight lines to represent constant rates of growth This figure has three straight arrows, the first arrow identifying the period of generally rising employment in manufacturing and the other two identifying period of declining employment, the first labeled suggestively “Layoffs and Recalls” and the other two “Permanent Separations.”..”

“…To make clear that the last three recoveries have been unusually long,Figure 5 is a bar chart with one bar for each of the eleven expansions, with a blue segment representing the number of months from peak to trough and an orange segment representing the additional months until payrolls return to the previous peak. Until recently the recessions lasted a bit under 12 months and the recoveries occurred in another 12 months, under 24 months (2 years) in total. The previous peak was recovered in under two years in the first five recessions and the sixth was the first to exceed two-years, but by only one month. The seventh (1980) was very short-lived and then commenced a sequence of four expansions with variable length recessions but much longer recoveries....”

Nancy Rose, "Concerns About Concentration," Aspen Institute, 2019, https://www.economicstrategygroup.org/wp-content/uploads/2019/12/Maintaining-the-Strength-of-American-Capialism-Concerns-About-Concentration.pdf

Her takeaway from the current evidence, “….government has likely retreated too far from the role it assumed almost 130 years ago with the passage of the Sherman Antitrust Act to ensure open, fair, and competitive markets. Rebalancing competition law to invigorate enforcement will require a combination of agency action and legislative intervention. But some competition problems may not be actionable through antitrust enforcement. In these cases, recognizing that both markets and regulation are imperfect is essential to determining whether intervention is likely to improve outcomes, and to designing effective policy in those cases…”

Her four primary takeaways from the current concentration literature:

1) “…Studies of broad industry categories at the national levelsuggest increased concentration of revenue among the largest firms over the past 20 to 40 years….”
2) “…Rising national concentration is not mirrored by increased concentration at the more local level, which recent work suggests has declined on average. A plausible explanation for this divergence is growth in the national revenue share of the largest firms in most industry categories accompanied by expansion of those firms into geographies..”
3)“…Aggregate estimates of average markups or profit rates appear to have increasedover time….”

4)“…There is vigorous debate over the implications of these patterns in aggregateconcentration and markups for the state of competition….”

Industries should be defined narrowly"...economy-wide concentration studies typically use the North American Industrial Classification system (NAICS) or Standard Industrial Classification (SIC) codes to define industries, with levels of aggregation that range from very broad one or two digit sectors ("Manufacturing") to more narrow four - (SIC) or six-digit (NAICS) industry-specific codes ("Breakfast Cereal Manufacturing."Aggregations less specific than the four digit SIC industry code are almost surely too expansive to provide insight into anything beyond the question of whether large firms in broad sectors are getting larger. As an example, the NAICS three digit "Food Manufacturing" industry comprises manufacturers of breakfast cereal, chocolate and confectionary, dog and cat food, and animal slaughterhouses, among many, many others. It is difficult to think of what one could learn from changes in firm revenue shares, let alone concentration, across this mix of activities. The specificity of four digit SIC or six digit NAICS codes generally produces more interpretable industry definitions, though even those are rarely well-defined markets from a competitive standpoint…”
Measures of revenue shares should be built up from establishment data, not from assignment of top-line, firm level sales, "...Some studies in this literature rely on firm level databases, such as Compustat that report a primary industry code for a firm, typically at a four-digit SIC level. The assignment of all of a firm's revenue to one code in most cases systemically biases measures of industry concentration upward. It is much more accurate to measure industry revenues in the United States using the establishment level data produced by the Economic Census..."

Concentration measures should be based on the universe of firms, not only large or publicly traded firms, "...Economic activity in many small and privately held firms may be missing in databases such as Orbis or Compustat, which rely on publicly reported financial data, such as 10-Ks, that privately held firms may not disclose.If the total commerce in these firms is significant, individually or in the aggregate, statistics excluding their activities may be misleading and will distort changes when the companies sampled change overtime. This is especially problematic for studies of European concentration based on Orbis data, which expanded coverage of small and midsize European companies over time.
Concentration measures should reflect the size distribution of firms, "...Industrial organization economists and antitrust practitioners prefer the Hirschman Herfindahl Index, or HHI, which is the sum of squared market shares of all firms. Higher HHI's reflect more concentrated revenue, with an upper limit of 1 (or 10,000, if shares are measured as 0-100%) for monopoly. This provides more information about revenue distribution than concentration ratios, which are the revenue share accounted for by the largest N firms (commonly four or eight, denoted as CR4 or CR8). For example, a CR8 or 80% could reflect one firm with a 75% share, or eight firms with 10% shares, with very different implications for market structure. The HHI would distinguish between these situations….”

Concentration measures should reflect the appropriate geographic scope of a given product market, "This is aspirational and is virtually never satisfied in aggregate studies of concentration. Almost all studies apply a single geographic aggregation, typically national, to all industries. This is too narrow for markets with globally traded goods, such as aircraft, cement, or petroleum, and much too broad for markets with locally delivered goods and services, such as scheduled airline service between cities, concrete, or retail gasoline. Furthermore, to the extent that imports or exports are important in a given market, measures built up from sales only by U.S. entities could have severe mismeasurement. This is also problematic for firm-level data sources like Compustat, for which U.S. sales may be a fraction of firms' recorded global revenue..."

MIT's Nancy Rose on what best practices for measuring concentration should be:

Nancy Rose argues that many of the most commonly used aggregated measures of concentration across industries should not be used to study concentration dynamics given methodological challenge and we should look at industry level studies, which that this point while showing an increase in concentration it's still well under what is commonly though of as anti-competitive

But as Ben pointed out to me there is no published series such as Barkai’s. It requires a little work to back out what the economic profits actually are.”

Ben and I are thinking about this and Ben drew a meaningful distinction btw economic profits and accounting profits. So the series you liked to on FRED can be hard to interpret because companies try to limit their own tax burdens. To the extent that they’re measuring economic profits, it seems like they’re only measuring the profits that firms were unable to shift into something else. One way of approaching it is how Barkai attempted to define profits in his Declining Labor and Capital Shares (which was cited in chapter) this is pre-tax"....I draw a distinction between capital costs and pure profits and show that this distinction is critical for understanding the decline in the labor share. Capital costs are the annual costs of using all capital inputs in production. In a world in which firms lease all of their capital inputs, constructing capital costs would be simple: we would sum all annual leasing expenses. Pure profits are what a firm earns in excess of all production costs (material inputs, labor costs, and capital costs).Firms that use a lot of expensive equipment have high capital costs. Firms that charge consumers high prices relative to the cost of production have high pure profits. An increase in the capital share, equal to the ratio of capital costs to gross value added, at the expense of the labor share is indicative of a substitution from labor to capital inputs into production. By contrast, an increase in the pure profit share, equal to the ratio of pure profits to gross value added, is indicative of an increase in market power and a decline in competition...Consistent with earlier research,I find that pure profits were very small in the early 1980s. However, pure profits have increased dramatically since the early 1980s. In the main specification, the pure profit share (equal to the ratio of pure profits to gross value added) increases by 13.5 percentage points. To offer a sense of the magnitude, the value of this increase in pure profits amounts to over $1.2 trillion in 2014, or $14.6 thousand for each of the approximately 81 million employees of the non-financial corporate sector….”

Bill Dupor on the impact of halting the extended Federal unemployment insurance, "...This policy difference across states generates an interesting question. What is happening to RSP participation in “halting” and “non-halting” states?...As shown in the figure below, the blue and orange lines report the continuing claims indexes for non-halters and early halters, respectively... After May 15, and particularly for the last three weeks of available data, there is a substantial separation in the two series. Relative to May 15, non-halting states’ claims have fallen by 7% whereas early halters’ claims have fallen by 12%.This difference has been persistent over the past three weeks for which the data are available...."

2. I excluded states that will end participation after June 19. Though the RSP recipients in these states continue to receive the emergency benefits, these participants know that they’ll soon lose the federal benefits. Excluding these states provides for a more direct intergroup comparison.

Bill Dupor, "What Has Been the Early Impact of States Halting Federal Jobless Benefits?," Federal Reserve Bank Of St. Louis, July 13, 2021, https://www.stlouisfed.org/on-the-economy/2021/july/early-impact-states-halting-jobless-benefits

What Has Been the Early Impact of States Halting Federal Jobless Benefits?

Starting on June 12, several states have stopped accepting the federal government’s emergency unemployment insurance (UI) benefits, which were put in place in response to the pandemic. These benefits included a $300 weekly add-on for UI recipients, extended eligibility to unemployed people who otherwise would not be covered by their states’ programs, and a duration extension beyond those provided by regular state programs (RSPs).

Other states will be joining this group in the upcoming weeks, and this early termination will be in place in more than half of U.S. states by mid-July.1 The remaining states plan to maintain these emergency benefits until the federally mandated end of the program in September.

Importantly, all U.S. states will continue to operate their RSPs regardless of whether they halt the emergency benefits. While RSP details vary somewhat across states, a typical RSP offers benefits for up to 26 weeks and, up to some cut-off, a replacement rate of 40% to 50% of recent past wage income.

Halting and Non-Halting States

This policy difference across states generates an interesting question. What is happening to RSP participation in “halting” and “non-halting” states?

One possibility is that claimants on RSPs in halting states, recognizing that the $300 weekly add-on and duration extension have ended or will soon end, might drop out of the RSP for which they still qualify in light of the less-generous benefits. Those dropping out of RSPs in halting states might in turn be taking jobs and thus boosting employment levels in their respective states.

To explore this question, I considered two groups of states: (1) states that are continuing participation in emergency pandemic UI programs and thus continuing the generosity of those benefits, and (2) states that ended participation on or before June 19.2 I call the former group the non-halters and the latter group the early halters.

Next, for each group, I summed the total continuing claims in RSPs by week. I took each resulting time series and transformed it into an index equal to 100 for (the week ending on) May 15. I chose May 15 because this is roughly the midpoint of the dates that the early halters announced their intention to terminate emergency benefits.

Continuing Claims in Early Halting States Have Declined More

As shown in the figure below, the blue and orange lines report the continuing claims indexes for non-halters and early halters, respectively.

For both groups, the fall in continuing claims likely reflects the improved labor market, together with some claimants losing regular state benefits because they reached the maximum number of weeks afforded by their state programs.

After May 15, and particularly for the last three weeks of available data, there is a substantial separation in the two series. Relative to May 15, non-halting states’ claims have fallen by 7% whereas early halters’ claims have fallen by 12%. This difference has been persistent over the past three weeks for which the data are available.

Time will tell whether this difference persists, as new weekly data arrive and additional states implement plans to cease providing emergency benefits. Upcoming employment reports will tell whether the difference in RSP continuing claims is also associated with a difference in employment growth across the two groups.

Notes and References

1. A few of these states are no longer providing the $300 add-on but are continuing with other emergency benefits.