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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

Energy prices and real wage trends

4 days ago

I’ve got a piece up in today’s WaPo on some of the economic and social implications of the recent tanking in oil prices. Obviously, such prices jump around, and OPEC is talking about reigning in supplies, so the negative trend could reverse. But the points of my piece are a) low oil may be a boon for consumers at the pump, but it’s inconsistent with sustainable growth, and b) especially post-midterms, it’s time to start talking about taxing carbon. I suggest raising the gas tax as a good start, which, as I show, is more bipartisan than you thought.
The piece also has a figure showing the impact of changes in energy prices on the growth of real wages of middle-wage workers. I point out that the correlation between those two variables is much higher now than in the past.
The “energy effect”

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Does faster wage growth imply passthrough to faster price growth? Not necessarily. (Though see update at the end.)

10 days ago

Introduction
As long as we’re sitting here on pins and needles re the midterms, let’s distract ourselves with some analysis of the state of the wage/price passthrough. Though not quite at the level of flipping the House, this is important information regarding inflation, interest rates, and Fed policy.
As the job market has improved, wage growth has picked up. Last week, two closely watched hourly wage series—the Employment Cost Index and the Establishment Survey wage—hit 3 percent growth on a yr/yr, nominal basis, about double their growth rate from five or six years ago.
Though it’s the highest growth rate of the expansion so far, 3 percent is a lower nominal growth rate than earlier periods when unemployment was as low as it is today (3.7 percent). That’s partly of function of slack

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Another strong jobs report yields critical insights

14 days ago

The nation’s payrolls added 250,000 jobs last month, the unemployment rate held steady at a 49-year low, the closely watched labor force participation rate increased, and year-over-year wage growth broke 3 percent for the first time since 2009. Given that inflation has been running a bit short of 2.5 percent, this means workers are finally seeing real gains in the buying power of their paychecks.
Wages were up 3.1 percent for all private sector workers and 3.2 percent for middle-wage workers, suggesting that the tight labor market is generating broad gains, not just helping those at the top of the earnings scale.
One slight caveat re wage growth is that in the previous October (2017), hourly pay in this series fell four cents in nominal terms, a rare event. Thus, the base off to which this

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Wage roundup: Amplifying new work on an important topic.

24 days ago

There’s been some interesting wage analysis in recent days and the findings are worth collecting and amplifying. Some of what follows is technical, but the punchlines are straightforward:
–As I’ve always stressed up in these parts, tight labor markets are especially beneficial to lower-paid workers.
–Even so, wage inequality remains alive, well, and connected to the recent boom in corporate profitability.
–In earlier periods, unemployment rates as low today’s would have generated faster wage growth. The reasons for today’s under-performance are likely slack, slow productivity growth, and weak worker bargaining clout.
This first figure, from my great pal Larry Mishel and Julia Wolfe, uses high quality administrative data to reveal key aspects of the real annual earnings’ story over the past

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An important correction: The U.S. does have a carbon tax. But it needs some serious attention.

25 days ago

I’m am avid listener to the NY Times podcast, The Daily, and I much enjoyed, if that’s the right word given the difficult topic, last Friday’s show on the urgency of pushing back on climate change. The show included an insightful discussion with recent Nobel laureate William Nordhaus on the importance of taxing carbon.
But somewhere in there (not in the Nordhaus section), it was asserted that the U.S. federal government does not tax carbon. In fact, such a tax exists: it’s the federal gas tax. Given that this is the carbon-tax-that-time-forgot, I can understand the mistake (the reporter was probably thinking about more sweeping, new taxes on carbon emissions). But there are two strong reasons for raising it. One, to more accurately price the social cost of carbon consumption, and two, to

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What’s wrong with upside-down Keynesianism?

October 17, 2018

Introduction
I’ve got a piece in today’s WaPo focusing on how the tax cuts have broken an important, fiscal linkage between budget deficits and the strength of the economy.
“When we close on full economic capacity, as is currently the case, tax revenues as a share of the economy should significantly rise, and deficits should fall. Instead, revenues have come way down, and deficits have climbed.
Why is the deficit 17 percent higher than last year, especially when the economy is growing faster, and unemployment is lower?
It’s primarily because the tax cuts have significantly reduced the amount of federal tax revenue the economy will spin off for any given growth rate. Increased spending also played a role but not as large a one as the tax cuts…
Consider these numbers. Using data back to

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What does “full employment” mean in the era of anchored inflation expectations?

October 15, 2018

There’s a new analysis out by a group of economists from the Goldman Sachs economic research team that raises the question of what the concept of full employment means in an era when the central bank expends significant and successful efforts to anchor inflationary expectations.
The paper (which lives behind a paywall) uses four distinct techniques to to derive different estimates of the natural rate of unemployment, aka u*, aka the lowest unemployment rate consistent with stable inflation. The results range from 4 to 4.8 percent, which, as their figure below shows, fit well within other commonly sourced versions, including CBO (4.6 percent) and the Fed (4.5 percent). Note also their forecast for the jobless rate to get to 3 percent (!) by the end of next year. As they say in the old

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Unemployment hits a 49 year low as jobs/wages stay on solid, hot-but-not-too-hot, trend.

October 5, 2018

The nation’s payrolls grew by 134,000 jobs last month and the unemployment rate fell to a 49-year low of 3.7 percent. While the jobs number came in well below expectations, that should not be considered bad news. First, Hurricane Florence may have slightly dampened monthly payrolls (see below discussion of the impact of hurricanes on the jobs data). But more importantly, upward revisions for the prior two months’ data reveal a trend over the past three months of 190,000 jobs per month, a solid pace of job gains for this stage of the labor market recovery. Hourly pay was up 2.8 percent, just slightly off last month’s cyclical high of 2.9 percent.
The decline in unemployment is “real,” meaning it occurred through fewer unemployed persons as opposed to people leaving the labor market. The

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The USMCA is not a free trade deal. That’s because there are no free trade deals.

October 1, 2018

I’m doing my best to work through the text of the new NAFTA, now called YMCA, I mean CAMUS, no…wait…USMCA!
Trade agreements make for a dense read…here’s a snippet from the Ag chapter, one of the 34 chapters, followed by “annexes” and “side letters”:
“Parties recognize that under Article XI:2(a) of the GATT 1994, a Party may temporarily apply an export prohibition or restriction that is otherwise prohibited under Article XI:1 of the GATT 1994 on foodstuffs to prevent or relieve a critical shortage of foodstuffs, subject to meeting the conditions set out…”
It’s just saying that in a food emergency, a party to the agreement can restrict food exports and remain in compliance, but I print that little example to make a larger point: There is no such thing as “free trade” and there are no “free

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Min wg panel model

September 27, 2018

I’ve got a piece in the WaPo today that presents findings from the model described in more detail here.
The model is a panel of the 50 states plus DC from 1979 to 2017 of wage, labor market, and minimum wage data. The results derive from fixed effects, panel regressions of the change in the log of the state real, 10th percentile wage on state unemployment and the change in the minimum wage variable. For this variable, I used the ratio of the state minimum wage in state i, year t, divided by the federal minimum wage in year t. Standard errors are clustered at the state level (results below).
The article mostly focuses on the first two rows of results below: outcomes for the log change in the real 10th percentile wage. But I also include the same regression for the 90th percentile wage, as a

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Nerd Alert. This is not a test. New BLS data on employer costs by percentiles!

September 21, 2018

You go, BLS!
The Bureau of Labor Statistics just released a new data series derived from the Employer Costs for Employee Compensation series. These ECEC data have been around for awhile–they’re the basis for the more commonly cited Employer Cost Index data*–but only for averages (see Technical Note here if you want more info). Now we have compensation, wages, and benefits for the 10th, 50th (median), and 90th percentile. I consider these to be high quality data that, relative to other series, provide a more fulsome look at the full compensation package.
At this point, the data only go back to 2009, with first quarter data through this year (i.e., all the data that follow are for the first quarter of the year in question).
And now, without further ado, here’s my initial analysis of these

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Some greatest hits of the 10-year lookback pieces on the crisis.

September 17, 2018

I’ve read probably 100 of those “lessons learned (or not)” pieces about the crisis on the 10-year anniversary of Lehman’s collapse.
Here are some that stood out to me, though one inevitably leaves out some worthy of your attention, so feel free to add others. (My own piece is out today on WaPo.)
–I found this Steve Pearlstein piece interesting on a couple of levels. It’s a solid take of the shampoo economy dynamics (bubble, bust, repeat) that I’ve long bemoaned, citing the insights of Minsky’s analysis (by putting financial cycles and regulatory amnesia at the heart of his model, Minsky explains a reality that conventional economics, which assigns finance a benign, intermediary role, assumes away).
But on a deeper level, as someone who’s read Pearlstein’s work over the years–he’s long been

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New Census data show that low-income people are responding as they always do to tight labor markets…by working!

September 12, 2018

One of the particularly frustrating, fact-free aspects of the conservative push to add (or ramp up) work requirements in anti-poverty programs like Medicaid or SNAP is that low-income people who can do so are already working hard. Moreover, as the job market tightens, they respond to tightening conditions.
Using the new Census data, Kathleen Bryant and I, with help from Raheem Chaudhry, used the 2017 microdata (the data on which the poverty and income numbers are based) to compare the employment rates of low-income single mothers (with incomes below twice the poverty threshold) with prime-age (25-54), non-poor adults. We found that between 2010 and 2017, the employment rates of the low-income single moms increased by 5.4 percentage points (67.7% to 73.2%), while those of non-poor adults

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Poverty and middle-class income data out tomorrow morning

September 11, 2018

It’s that time of year again, when the Census Bureau releases its poverty, income, and health-insurance coverage data for 2017. I’ll get a write-up out as soon as I can after the 10am data release, but be forewarned: these data are more complicated and a lot less standardized than, say, the BLS jobs data. So, it will take a few hours to chew through them.
For what it’s worth, which isn’t much, as recent survey changes make these data tough to accurately forecast, my predictions are that poverty fell half a point last year (from 12.7% to 12.2%) and real median household income grew about 1.7%. If so, both changes would be statistically significant gains.
But they would be smaller gains than the prior two years, and one reason for that, if I’m in the ballpark, will be that inflation was a

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A couple of economists respectfully disagree on the politics of policy in the age of Trump and the new socialists

September 10, 2018

Belle Sawhill is an economist I greatly admire, so I carefully read her Twitter-thread critique of a piece I recently posted in the WaPo.
My piece makes the case that technocratic policy wonks, like Belle and me, should not be overly critical of ambitious, even unrealistic, policy proposals by the new socialists. True, they often eschew the path dependency by which many of us are constrained. But they signal to key constituencies that, relative to establishment or centrist Democrats, they’re going to bring a new, aggressive fight to the powerful, well-endowed forces that have long been aligned against the progressive agenda.
I argue that:
“What Trump should have taught us by now is that if people believe you’ve got their backs, you can do things never imagined by the status quo. In this

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Jobs Report: A long-awaited wage pop that’s hopefully part of an emerging trend

September 7, 2018

Payrolls grew 201,000 last month, and the unemployment rate held steady at 3.9 percent in yet another in a long series of strong job reports (at 3.853 percent, the rate just missed a tick down). Though there are still some people and places who’ve been left behind, the U.S. labor market remain solidly in the midst of one of its longest expansions on record, with no signs of strained capacity or overheating.
Hourly pay for private-sector workers is a standout in today’s report, up 2.9% over last year, its strongest posting since 2009. Though we don’t yet know August inflation, my guess is that it comes in lower than that, perhaps ~2.6 percent, implying a much-needed gain in real hourly wage growth. For middle-wage workers (the 82 percent of the private workforce covered by the Bureau’s

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Thumb on the scale: correcting the CEA’s corrections re real wage growth.

September 6, 2018

By Jared Bernstein and Larry Mishel
President Trump’s Council of Economic Advisers has a new piece out claiming to show that real wages are growing faster than has been widely reported. Their conclusion stems from numerous adjustments to Bureau of Labor Statistics wage data that otherwise show flat real earnings for most workers.
However, most of CEA’s adjustments, applied accurately, do not change the inconvenient fact that even amidst strong macroeconomic results and a tight labor market, real wage growth for middle-wage workers has been weak over the past two years. That may change, if falling unemployment triggers faster wage growth, but at this point, measurement tweaks make little difference to the conventional wisdom, at least over the short period covered by the CEA report. As

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ISDS and the US

August 28, 2018

I’ve been touting the fact, i.e., as I understand it, that this new US/Mex NAFTA agreement just struck yesterday largely gets rid of investor dispute rules (investor state dispute settlement, or ISDS) that many progressive have long complained about. (To be clear, whether this deal is going anywhere is a whole other story; I’m skeptical.)
I’m working on a piece about how the new deal looks a lot better for workers on both sides of the border than prior agreements, but re ISDS, the very knowledgeable Lori Wallach tell me it “ends the possibility of any future U.S.-Canada ISDS cases. This is huge given major US-Canada cross investment.” For Mexico, where domestic courts are less reliable, investors who want to bring a case must first exhaust domestic court and administrative remedies, before

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Links; some wage thoughts

August 23, 2018

A few WaPo entries for your entertainment:
—A deeper dive into similarities shared by Trump and Erdogan. And yet, despite their…um…sub-optimal leadership, our economy booms and Turkey’s tanks. I focus on what that has to do with a) dollars, and b) Fed independence.
—My old pal Kudlow is sounding off on how the US economy is just “crushing it!” under Trump. Yeah…not so much. Co-written with Cong. Ro Khanna, who has some highly worthy legislative proposals in the mix which we link to in the piece.
Turning to other econ news, from the minutes of the latest Fed meeting, here’s their thoughts on wages:
Many participants commented on the fact that measures of aggregate nominal wage growth had so far picked up only modestly. Among the factors cited as containing the pickup in wage growth were low

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Lynx; Trump/Erdogan: compare and contrast

August 14, 2018

Recent links to WaPo pieces:
Productivity and wages: They’re connected, of course, but the extent of the connection requires nuanced analysis of wages at different percentiles and movements in labor’s share of national income.
There’s an interesting dichotomy here in how economists and people think about productivity and wages. For many economists, it’s the determinant of wage growth. For many people, it’s irrelevant, in that powerful forces divert productivity growth from paychecks to profits. The truth, especially once you get away from averages, lies in-between. Productivity matters a great deal, but it is not by itself sufficient to drive broadly shared prosperity.
Employment rates also matter a lot: They take the elevator down in recessions and the stairs up in recoveries. They also

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Trump 2020 game plan: Fake Laffer, Go Keynes.

August 5, 2018

I’m genuinely sorry to intrude on your Sunday like this, but this new forecast (no link) from the highly-skilled Goldman Sachs economic research team (GS) has me completely on shpilkes. I’ll make it brief, but not painless.
Back when the tax cut passed, this figure, also from GS, previewed an important fiscal fact about to unfold: outside of wartime, the Republican tax cuts and other deficit spending would add more fiscal juice to an economy already closing in on full employment than we’d ever tried before outside of wartime (note that the right-side scale is inverted; the point is low unemployment is usually associated much smaller deficits than we have now).

Here’s what I wrote at the time:
How unusual is [the divergence at the end of the above figure]? Well, looking at data back to

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July’s Jobs Report: Solid jobs but little wage acceleration

August 3, 2018

Summary: Today’s jobs report shows the U.S. labor market remains in a strong groove, with payrolls up 157,000 last month as the unemployment rate ticked down to 3.9 percent. The broader underemployment rate (“U-6”)–a more comprehensive measure of labor market slack–fell to 7.5%, its lowest rate since 2001, thanks to more part-timers finding the full-time jobs they seek.
Wage growth, however, remains a sore spot and despite further tightening, did not accelerate.
Expectations were for a higher payroll number–190,000–but these monthly data are noisy. To better pull out the underlying signal, we apply JB’s monthly smoother that takes average job gains over 3, 6, and 12-month periods (these averages include a combined revision of 59,000 jobs added to the May and June payroll gains). As shown,

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Breaking News: Trump’s chief economist says some reasonable things! (And some other stuff, too.)

July 27, 2018

I was just on MSNBC with Ali Velshi talking about today’s GDP report (here’s my take). I came on right after Ali interviewed Kevin Hassett, the chair of Trump’s Council of Economic Advisers. Since Ali and I were so engrossed in GDP talk, I didn’t get a chance to note some of the things Kevin said that were on point, and since you don’t get a lot of that from this crew, and because I’ve been highly critical of this CEA’s work in other areas, let me agree with some of Kevin’s points but also point out where I think he goes wrong on a very important matter: the lack of real wage growth in the current economy.
Kevin said:
–Real GDP growth is likely to hit the CEA’s 3 percent forecast for the year 2018: In an administration that’s constantly throwing around random 4s, 5s, and 6s re GDP growth,

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Prepping for Friday: What’s trend GDP growth?

July 23, 2018

This Friday morning at 8:30, we’ll see the first estimate of GDP for 2018Q2. Various trackers have it coming in at or above 4% (that’s the real, annualized quarterly growth rate). It’s that ballpark correct, as I expect it is—the trackers use much of the same incoming data as BEA—it will be a big political football, but that’s not the purpose of this post. Here, I’d like to think about the best way to pull out the underlying trend of real GDP growth.
While team Trump will be going bananas for any number with a handle of 4 on it (as would, to be fair, even a normal administration), it’s widely agreed upon by long-time GDP watchers that any single quarter should be down-weighted, and even more so if it’s an outlier (i.e., well above or below trend). But the concept of outlier implies the

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Responding to questions re my wage oped.

July 19, 2018

I’ve got a piece in the NYT on the cyclical, and more importantly, structural factors, that have long suppressed real wage gains. I’ve gotten many interesting responses, some of which I’ll address here.
Inflation: As I stressed in the piece, the ups and downs in price movements have been instrumental in recent years. A lot of this is energy prices, which crashed in 2015 and have picked up of late. If energy prices pull back, especially as unemployment falls further, real working-class pay should get a boost.
But the concerns I stress in the piece, especially the collision of stronger institutional and corporate anti-worker forces with weaker pro-worker forces, are robust to a short periods of real gains. This raises another good question I got, which I’ll tackle below: what is it you’re

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Team Trump’s phony poverty argument, GDP growth v. chaos, and a little e.g. of where an FTT would come in handy.

July 17, 2018

First, Trump’s Council of Economic Adviser abuses data and logic to conclude that work requirements would help poor people. Over at WaPo.
Next, I will not stray from my lane and comment on what everybody’s thinking about today: the summit from Hel…sinki. I will share this Steven Colbert clip, to which I’ve nothing to add.
I do, however, find it interesting that amidst all this madness–which feels too much like an existential threat to American democracy from within–the US macroeconomy is, if anything, stronger. Obviously, I’m all about the distribution of GDP growth, which remains a serious problem. Also, quarterly GDP numbers are jumpy and it’s a far more limited measure than we generally admit. But the latest GDPnow forecast for Q2 (data out late next week) is 4.5%, which is about 2.5%

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Lynx, trade politics, a super swingin’ slice of Kelly Roll, and a bit of pop psychology re JOMO

July 12, 2018

Trade policy has been really interesting of late. I get into the economics of what I think is going on here and here. The first piece makes the argument that Trump is fruitlessly and fecklessly trying unscramble the globalization omelet. The second takes on–with help from a great, new Susan Houseman paper–the incorrect but pervasive notion that the increased pace of labor-saving technology is responsible for manufacturing job loss.
I don’t get into the politics of trade in these pieces because I can’t clearly figure it out. Yesterday someone asked me, “where are the Democrats on trade policy right now” and I hemmed and sputtered until he walked away. For years, a large flank of D’s have opposed trade deals they judged to be unfair to workers and consumers, warned about China’s

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Why I’m not paying too much attention to the flattening yield curve.

July 9, 2018

As Nick Timiraos ably describes, there’s a debate afoot about how seriously to take the flattening and possible future inversion of the yield curve. I got into this a bit last week, pointing out that the signal from the yield curve is a lot more ambiguous than usual (my conclusion was that we should worry a lot more about how we’re going to offset the next recession versus when it’s coming, which is not reliably knowable).
One reason for this ambiguity is the very low term premium on long-term bond yields (see figure). Longer-term interest rates, like the yield on the 10-year Treasury, can be broken up into the expectation of the average of future short-term rates and the term premium, or the extra yield investors require to lock up their money for the term of the loan. Since it’s thought

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More solid job gains, but no real wage growth

July 6, 2018

In the latest solid report on the conditions in the US labor market, payrolls grew by 213,000 in June, and labor force participation ticked up two-tenths, as more people were pulled into the improving labor market. This led to a two-tenths tick-up in the unemployment rate to 4 percent (really, 30 basis points up, from 3.75% to 4.05%). Wage growth stayed at 2.7 percent, the same pace as last month, and the average since last December. It is also worth noting that inflation is now growing at about the same rate as wages, so, in one of the less impressive aspects of the current job market recovery, real hourly pay is flat.
As the economic expansion that began in June of 2009 enters its tenth year, the enduring recovery has moved the job market closer to full employment. However, the key

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