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Jared Bernstein

Jared Bernstein

Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, Executive Director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute, and between 1995 and 1996, he held the post of Deputy Chief Economist at the U.S. Department of Labor.

Articles by Jared Bernstein

Here’s a simple way to tell if someone (like the Nat’ Restaurant Assoc.) is abusing numbers to mislead.

3 days ago

One sure way to tell in someone is making a biased argument is showing up in various statements by those who oppose the proposal to raise the minimum wage. I wanted to be sure to elevate this dastardly ploy, as it’s a tell that someone is trying to win an argument based on their bias, not on the evidence.
Here’s a tweet from the National Restaurant Association, a group that’s honor bound to oppose the minimum wage, and here’s the same ploy from a Texas Republican member of Congress. In both cases, they exclusively characterize the CBO’s job loss estimate from the agency’s recent minimum wage report as “as many as 3.7 million.”
Now, if you’ve been following the debate over the CBO’s findings, you’ve probably heard the number of jobs lost cited as 1.3 million, not 3.7 million. Here’s how the

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No question, the unemployment rate paints an incomplete picture…and yet…

7 days ago

It’s long been understood by anyone trying to assess the labor market that the unemployment rate is, by itself, not up to the task. Most importantly, it leaves out those not looking for work, but it’s also not adjusted for demographic change, nor does it factor in those who are working fewer hours than they’d like. It combines racial groups with persistently different levels of unemployment. At times like now, these shortcomings can lead this premiere indicator to underestimate the extent of slack in the job market.
This WSJ article from yesterday–“For decoding labor market, unemployment rate may not do the job”–is but the latest salvo in this healthy discussion about the need for a dashboard, not a single dial.
And yet, most of us, when trying to provide a quick overview of economic

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Judy Shelton and her sponsor—President Trump—want to tie the hands of the Fed

12 days ago

When someone seeking confirmation to high office has a paper trail fraught with positions antithetical to their confirmation, their theme song quickly becomes Shaggy’s It Wasn’t Me, as they flip and flop to disavow their earlier convictions.
The most recent purveyor of this strategy is Judy Shelton, one of President Trump’s most recent likely nominees for the Federal Reserve. Ms. Shelton, who worked on Trump’s campaign and transition team, currently holds a Senate-confirmed position as the U.S. representative to the European Bank for Reconstruction and Development.
After reviewing her writings and comparing them with what she’s saying in her current campaign to get the Fed job, I’m convinced that her appointment would be extremely problematic for at least two reasons. One, she would try to

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Why a Fed rate cut makes sense

13 days ago

[written with Mark Zandi, chief economist of Moody’s Analytics]
This is a post about one-quarter of one percent.
That’s the amount by which the Federal Reserve is expected to reduce the federal funds rate, the key interest rate they control, when they meet at the end of this month. If that sounds like too small a change to get worked up about, we assure you, Fed rate changes can be a big deal, especially when they change direction. The central bank had been steadily raising rates over the past several years, and only just a few months ago was predicting further rate increases this year and next.
The decision to cut rates has become a bit more complicated, as last week’s solid jobs report weakened the case for the cut. Why add interest-rate stimulus to an economy that’s already going

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More evidence–this time from CBO–that higher (even much higher) minimum wages largely do what they’re supposed to do.

14 days ago

Raising the federal minimum wage to $15 per hour by 2025 would lift the pay of 27.3 million workers—17 percent of the workforce—according to a new report from the Congressional Budget Office. It would raise the incomes of poor families by 5 percent and thus reduce the number of people in poverty by 1.3 million. Since these low-end gains would be partially financed out of profits, the increase in the wage floor would reduce inequality.
CBO also estimates that “1.3 million workers who would otherwise be employed would be jobless in an average week in 2025.” Because economists’ estimates of the job-loss effects from minimum wage increase are so wide-ranging—some studies find little-to-no job loss impacts; other find more—CBO estimates that there’s a two-thirds chance that the actual change in

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July jobs: nice pop on payrolls but flat wage growth

17 days ago

[This jobs report is an important one in terms of assessing the impact of headwinds on the job market, but because it’s sort of a holiday, I’ll just offer up a truncated, bullet-point report. As always, thanks to Kathleen Bryant, who got up early on vacation to help me out!]
Toplines:
–Payrolls rose 224,000 last month, well above expectations for ~165K. Though we never want to over-weight one month of noisy data, that’s an important number, suggesting that building economic headwinds haven’t dented job creation much yet at all.
–Our monthly smoother shows average monthly job gains over 3, 6, and 12-month windows. Even including May’s weak 72K (revised) gain, the average over both the past 3 and 6 months has been around 170K jobs/month. That’s a slight downshift from the 12-month average

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The economic outlook: The importance of getting ready for the next downturn sooner than later.

24 days ago

Yesterday, some colleagues and I gave a talk on the urgency of being ready for the next downturn before it hits. Here’s the PowerPt (as a PDF) and below is an annotated version. To be clear from the outset, you will not learn from this presentation when the next recession will be upon us because no one knows (as you’ll see, the presentation features some headwind and tailwind slides). What we do know is that there are some important and unique attributes re the current expansion that makes planning now for the next downturn especially urgent.

What do I mean, “limited monetary space?” The arrows in the next slide shows how much–how many percentage points–the Fed funds rate has fallen in downturns since the 1970s–north of 5 ppts, on average. Note that cute, little arrow at the end of the

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Three observations about current monetary policy (the last one is the most important)

June 21, 2019

If you follow such things, you know that earlier this week, the U.S. central bank shifted its bias from patient waiting to a bias toward rate cuts. Here are three observations about this moment in monetary policy.
1. The market reaction has been interesting as bond yields have tanked while equity prices have climbed. Such a dynamic is not a mystery, as both movements reflect a dovish turn by both the U.S. Fed and the European Central Bank. Also, as has been the case throughout the expansion, low yields for fixed income investments can juice risk appetites for stocks.
But there’s also an ongoing argument between the two sides of the market, with the bond market more worried about global growth (and thus expecting bigger Fed rate cuts i.e., not just insurance cuts, but recessions cuts*) than

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Should they cut or should they hold?

June 18, 2019

Should they cut or should they hold?If they cut there will be trouble.If they pause it will be double.Tell me quick, I want to know.Should they cut or should they hold!?
Pretty much everything has been said about whether the Fed should take out an insurance cut in the fed funds rate when their FOMC meeting concludes tomorrow afternoon. But not everyone’s had a chance to say it. So, I’ll briefly weigh in. My punchline: There are good arguments on both sides, but I’d hold for this meeting and signal forthcoming cuts as necessary. I’m not convinced that an insurance cut would have much upside relative to dovish forward guidance, and my bar for surprising the markets is high.
The case for a cut:
–Inflation is not only soft, but more importantly from the Fed’s perspective, inflationary

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Un- vs. Under- (K. Bryant in the house!)

June 7, 2019

[My CBPP/Full-employment-project colleague Kathleen Bryant has a new paper coming out next week with Dartmouth econ professor Danny Blanchflower (et al) on measures of labor market slack and their correlation with wage growth. A key focus of the paper involves the underemployment rate, and since we learned today that u6 hit a cyclical low last month, I asked Kathleen to dash off a note to get folks ready for the paper’s release.]
By Kathleen Bryant:
Today’s jobs report showed that the U6 rate – a measure of underemployment including the unemployed, involuntary part-time workers, and those who aren’t currently employed or job-hunting but still interested in working – hit its lowest level since December 2000, at 7.1%. While the unemployment rate is the slack variable that receives the most

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Headwinds in the job market? Payroll gains slow and wages fail to accelerate

June 7, 2019

Payrolls were up 75,000 last month, less than half of what was expected, though the unemployment rate held steady at its 50-year low of 3.6 percent. Despite the low jobless rate, wage growth failed to accelerate, and has been stuck around 3 percent for a few months now. Downward revision shaved 75,000 jobs off of payrolls over the previous two months and our smoother, below, shows a mild deceleration in the pace job gains.
All told, it’s a weaker jobs report than we’ve become used to seeing, but what is it telling us? Is it a warning signal of weakening demand or is it more that the job market is closing in on full capacity? This sounds like a technical distinction–are the constraints on the demand or supply side?–but it’s a critical one. If we’re hitting supply constraints then the threat

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Trump and the Mexican tariffs: How far is this administration willing to go to achieve their protectionist, anti-humanitarian goals? Maybe farther than we thought.

May 31, 2019

As you know if you’ve looked at any morning paper, the Trump administration has proposed an escalating tariff on all imports from Mexico, starting at 5 percent on June 10th and rising by five percentage points each month until it reaches 25 percent. The tariffs are intended to force Mexico to take actions to reduce the flow of migrants into the U.S. Trump said the tariffs will remain in place until Mexico “substantially stops the illegal inflow of aliens coming through its territory.”
Here’s a Q&A on this proposed action. Initially, it may not look like a big deal for us (much more so for Mexico). But if it doesn’t fizzle quickly, and I don’t think it will, it could turn out to be important along various dimensions.
Q: Isn’t this is an unusual use of tariffs?
A: It is. The majority of

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The Trump administration’s proposed “update” to the poverty threshold is a wolf in sheep’s clothing

May 22, 2019

The Trump administration’s proposal to change the way the poverty line is annually adjusted for inflation is the policy equivalent of a wolf in sheep’s clothing. Sounds technical and weedy, but a new paper by CBPP’s Aviva Aron-Dine and Matt Broaddus shows just how damaging the change will be for the health coverage and benefits of millions of low- and moderate-income people. (An earlier CBPP report focused on other forms of assistance that would be less accessible under the change.)
Because the change will make the poverty line grow more slowly than it would otherwise, fewer people will be counted as poor and thus, fewer will benefit from government programs whose eligibility or benefits are keyed to the poverty line. Over time, millions will lose health coverage or face benefit

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Pushing back gently but firmly on Michael Strain’s non-stagnation argument

May 16, 2019

A few folks have asked me about my friend Michael Strain’s recent Bloomberg piece where he argues against wage stagnation (it’s “more wrong than right”). It’s an old argument but one worth having, and Michael makes some important points and misses some big ones too (5, to be precise).
Larry Mishel and I counter a much shorter-term version of Michael’s case here but similar issues pertain. Certainly, the evidence he presents doesn’t change the basic wage story that I and many others carry around in our heads.
I think Michael’s most germane point is that nobody defines “stagnation.” If you think stagnation means real wages for low-wage workers have never gone up in the past four decades, you’re wrong. The figure below, from a recent piece I published (one I’ll get back to re a key point

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Jobs report: no one wants to be incautious re inflation, but…Laissez les bon temps rouler!

May 3, 2019

Payrolls rose by a larger-than-expected 263,000 last month and unemployment rate ticked down to a 49-year low of 3.6 percent. Yearly wage growth held steady at 3.2 percent, which is also its average over the past 12 months (raising the question: are wage gains on pause?). Since consumer inflation is running at around 2 percent, this implies real wage gains of a bit more than 1 percent, a welcome development for workers who are clearly benefiting from the persistently tight job market (see more on the wage story below).
The tick down in the unemployment rate is not, however, as positive a sign as it appears to be, because it fell in April for the “wrong” reason: people leaving the labor market, not people getting jobs. This negative change should be discounted because the household survey

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Sen. Warren’s debt cancellation plan: Should progressive policy aim for narrow targets or structural change?

April 29, 2019

Introduction
Sen. Warren’s college debt cancellation plan, which I explain here, has gotten a mixed reception. While many progressives and, predictably, student debt holders give it high praise, it has taken flak from two broad groups: those who just don’t like cancelling debt and those who view it as insufficiently progressive. The latter group objects to the extent to which it helps higher income debtholders who, in their view, don’t need the help relative to those with lower incomes.
Their critique provides a microcosm of a major policy debate for Democrats between progressive targeting on one side versus a broader approach aimed at reducing structural inequalities that have grown to historical proportions. It’s an important debate, as it plays out in Medicare for All versus Medicare

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It takes two to tango: The complementarity of the derigging project and expanded tax credits.

April 14, 2019

In a hearing last week, an exchange between Rep. Katie Porter (D-CA) and JPMorgan’s CEO Jamie Dimon caught my eye. Dimon was touting the bank’s new minimum wage of $16.50, increasing to $18 in high-cost areas, for entry level workers. That’s a decent minimum wage, above the $15 that most progressive plans call for (and those proposals typically include a phase-in of numerous years). According to recent EPI analysis, $16.50 is well north of the national 40th percentile wage of just under $15.
To be clear, I’m not suggesting the highly profitable bank—market cap about $380 billion; Dimon made over $30 million last year—is fairly compensating its entry-level workers (Dimon says such workers tend to just out of high school). My point is an empirical one: given the nation’s wage structure, its

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Ch-ch-ch-changes! (Both personal and fiscal impulse)

April 10, 2019

Good changes: I continue to recover from the brain hemorrhage I sustained on March 23. Today’s my first meds-free day and I’ve been blessedly headache free. Thanks again for the outpouring of support–it’s been really uplifting.
Neutral Changes: As I slowly rev up Ye Olde Analysis Shoppe, I found the figure below (by GS fiscal analyst Alec Phillips) to be worth a close look. It underscores a point that even seasoned budget analysts sometimes miss: the role of fiscal impulse. 
One of the more important policy-driven determinants of near-term US growth is under debate right now: setting discretionary spending levels for 2020/21. Because of 2011 legislation that set caps for such spending, avoiding a sharp drop requires Congress to pass a bill approving spending above the caps. They’ve done so

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An update on my condition

April 4, 2019

Friends and followers —
As some of you know, on March 23 I had a brain hemorrhage, technically known as a subarachnoid hemorrhage.  This is a very serious condition, often fatal or disabling.

But I appear to have been very lucky.  After spending nine days in the ICU at Fairfax Hospital, I was discharged and am now recovering at home.  The recovery period is likely to take quite a while, with good days and bad days.  It could be a matter of months before I’m back to some version of my pre-hemorrhage self.

I’ve benefited immensely from a tremendous outpouring of love and support from family, friends and colleagues, for which I am enormously grateful.  I’ve also benefited from excellent medical care.

I’m not sure when I’ll be posting or writing about the economy, but I plan to do so as

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A personal update

March 27, 2019

I won’t be posting for a couple of weeks due to a medical emergency. However, the prognosis is good and I look forward to returning to my blog soon.

Share the post "A personal update"

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The loss of a great economist and a great man

March 18, 2019

Like everyone else who knew him, I’m in shock and despair over news of the death of the economist Alan Krueger. Alan was the best kind of colleague: always inquisitive, incredibly rigorous about what constituted facts and evidence in economics, and willing and able to talk about his work in ways that made sense to anyone who would listen.
I admired everything about Alan, but a few things stand out. He taught us a lot about creativity. Like the rest of us, he crunched numbers that were available from the usual sources. But he didn’t stop there. He believed that if you want to know the answer to something, sometimes you have to go out and get the data yourself, something very few economists do.
I can’t be the only one who’s been in meetings with Alan, scratching our heads about some policy

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Jobs report, Feb 2019 [truncated]: Outliers happen, and faster real wage growth!

March 8, 2019

Got a late start this AM, so just highlights for now, with more analysis to come.
Outliers happen!
Payrolls rose a mere 20K last month, a huge downside outlier given the recent trends as shown below in our monthly smoother. The average over the past 3-months of 186K is a much more reliable take on the current underlying pace of job growth. Consider, for example, that payroll jobs were up 311K last month, a value well above trend. So, at least for now, consider this downside miss payback for last month’s huge upside.

Of course, the 20K could be harbinger of a downshifting in the pace of payroll job growth. Such a downshift–though not of that magnitude–is not unexpected given a number of facts: job growth slows as we close in on full capacity in the labor market; US GDP is slowing as fiscal

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There’s a new financial transaction tax proposal in town. Here’s why that’s good news.

March 1, 2019

The 2017 Trump tax cut committed at least two fiscal sins. By delivering most of its cuts to those at the top of the wealth scale, it worsened our already high-levels of pretax inequalities. And in so doing, it robs the Treasury of much needed revenues; based on our aging population, we’re going to need more, not less, revenues for the next few years.
Now, along comes an idea that pushes back against both of these problems (and one other one!): a small tax on financial transactions (FTT). Sen. Schatz (D-HI) and Cong. DeFazio (D-OR) are planning to introduce a tax of one-tenth-of-one-percent, or 10 basis points (100 basis points, or bps, equals 1 percentage point), on securities trades, including stocks, bonds, and derivatives, one that would raise $777 billion over 10 years (0.3 percent of

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What does it mean when both stock and bond prices are falling?

February 25, 2019

Just a quick comment on this recent NYT piece that scratches its head about an ongoing, simultaneous rally in both stock and bond prices. “Stock and bond prices are not supposed to rise and fall in tandem,” claims the writer.
Consider the grid below. I don’t have the relative frequencies for each box but I’ve seen them, and while the boxes on the diagonal get fewer hits than the others, my recollection is that periods with price movements in those boxes isn’t that unusual (bond yields move inversely to their prices). But correct me if I’m wrong about that.

Stock Prices

+

Bond Prices
+
B+, S+
B+, S-

B-, S+
B-, S-
The Times piece focuses on the upper left box. In the near term, being there is largely a function of the Fed deciding to pause, mixed with an argument between stock and

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Real wage gains and energy prices

February 14, 2019

Readers know I’m a huge booster of the impact of low unemployment rates on wage gains, especially for middle and low-wage workers. This dynamic is alive and well in current data and those of us on team Full Employment should elevate and tout it!
But, when it comes to real wage gains in “high frequency data,” which have been notable of late–as in, beating productivity growth–it’s important to also parse out the role of low energy prices.
The most recent CPI report showed a low topline inflation rate of 1.6 percent over the past 12 months (core CPI inflation rose 2.2 percent). The main factor pushing down on price growth was energy, down 5 percent, with gas prices (a sub-category of energy), down 10 percent.
In my recent write-ups of the jobs and other reports with wage info, I’ve mentioned

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Foreign holdings of US debt have been coming down a bit. Is that a problem?

February 7, 2019

I remember when foreign ownership of U.S. government debt amounted to very little, as shown on the left end of the figure below (the share of total publicly held debt owned by foreigners).
Source: US Treasury
I next remember that this share was growing rapidly, closing in on half about a decade ago. What I didn’t know was that the share has been falling back a bit. In fact, it’s about 10 percentage points off of its peak.
I discovered this because I went to look at the data as part of the broader conversation I’ve been engaged in regarding the lack of attention to and concern about our growing fiscal imbalances, an unusual dynamic what with the economy closing in on full employment.
In the course of that conversation, some have raised the concern that because a significant share of our

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January Jobs: Another upside surprise shows the benefits of closing in on full employment.

February 1, 2019

The US labor market just keeps on rolling along, turning in one good jobs report after another. Payroll gains continue to outpace expectations, wages are handily beating inflation while not pushing it up much, participation continues to suggest more room-to-run than most economists expected, and even the slight uptick in the unemployment rate last month, to 4 percent, was likely a temporary blip caused by the government shutdown (more detail on that below). The underemployment rate, which also spiked last month, was another temporary victim of the shutdown, causing a sharp, temporary increase in involuntary part-timers (those working part-time who want to work full-time). These measures of increased slack should fully reverse in coming months, assuming the government remains open, of

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No correlation between top tax rates and growth rates

January 28, 2019

In a piece in WaPo today, I note in passing that there’s no persistent correlation between top tax rates and growth rates across the US time series, nor in oft-cited international data from Saez et al. This is widely understood among empirical public finance folks, but just in case, here are a few figures.
As Krugman did the other day, I’m using top marginal income tax rates and 10-year, annualized growth rates of real GDP per capita.
First, as Paul’s figure suggests, here’s a scatterplot that looks pretty random. One can, of course, plunk a regression line in there, and it has the “wrong” slope (higher rates associated with faster growth). To be clear, I neither think nor claim that higher top rates lead to faster growth (though such a case is sometimes made). These are just correlations.

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There’s heightened nervousness about the next recession and there are signs pointing in both directions.

January 11, 2019

I can’t turn around without seeing or hearing people worrying more about the next recession.
Google Trends: Web search for “next recession”
Source: Google Trends
My peeps at the Indicator have a nice podcast on the topic. The WSJ points out that more than half of economists they surveyed expect a downturn by 2020, which, in case you live under a rock, the article helpfully notes is an election year.
The reasons for the heightened anxiety are:–Slower global growth, particularly in China (also Europe and Japan). Remember how Apple’s market cap fell 10 percent in one day a couple of weeks ago. That was on the news that their China sales were down. We’re all connected, man…also, trade war.
–Higher interest rates and the flat yield curve. Interest rates are up, which acts like a brake on growth

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Blanchard on public debt and interest rates; also: thanks, MMTers!

January 10, 2019

There’s a deservedly nice bit of buzz about a new paper by tony economist Olivier Blanchard. My WaPo piece today takes you through the argument, along with a heavy dose of my own interpretation, one familiar to OTE readers.
“The key points are disarmingly simple, and they’re ones I have written about before in this column. Part one is this: When a country’s growth rate is higher than the interest rate on its debt, the fiscal costs of sustaining its debt levels are somewhere between zero and low. The reason is that even if the government does not raise taxes to offset its higher debt, the ratio of debt to gross domestic product will decrease rather than explode over time. Part two: For most of the period covered by Blanchard’s research (1950-now in the United States), g>r, i.e., the GDP

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