Dean Baker

Recent Articles

Creating 162,000 Jobs Without a Drop in the Unemployment Rate Is Not a Paradox

In the middle of an article telling readers about Alan Greenspan's (yes, the guy who couldn't see an $8 trillion housing bubble) assessment of the economy, the NYT refers to the "paradox" that the Labor Department reported that the economy created 162,000 jobs in March but the unemployment rate remained fixed at 9.7 percent. This is hardly a paradox. The labor force is growing at the rate of about 125,000 workers a month. This means that March's job growth was just a little faster than what is needed to keep the unemployment rate from rising. There was no reason that anyone should have expected a decline in the unemployment rate. In fact, the number of people reported as being employed in the household survey used to measure the unemployment rate has grown far more rapidly than the number of workers on payrolls as measured in the establishment survey. Given the data reported in the establishment survey , it is surprising that the unemployment rate has not been rising the last four...

Thomas Friedman Discusses Economics and It Really Really Hurts

Thomas Friedman has refrained from discussing economics in his columns for some time and the world was happy. But, now he's back with a vengeance. He begins his column with today's "fun fact": "Between 1980 and 2005, virtually all net new jobs created in the U.S. were created by firms that were 5 years old or less, .... That is about 40 million jobs. That means the established firms created no new net jobs during that period.” The rest of the column is devoting to touting the importance of new firms, which Friedman tells us are started disproportionately by high IQ foreigners. He therefore emphasizes the need to have a more open door for high IQ immigrants. Making the U.S. more open to highly educated (I don't think we will be admitting foreigners based on IQ test results) immigrants is undoubtedly good policy. It would be great if doctors, lawyers, economists and other highly educated professionals got to enjoy the same sort of competition with low-paid workers in the developing...

How Did Greenspan Miss the Housing Bubble?

This is the question that everyone should be asking, not just of Greenspan, but of every economist in the country. The NYT has nice column by Michael Burry on the topic. --Dean Baker

NYT Reports on Private Equity Rip-Offs of State Pension Funds

The NYT had an excellent piece on how private equity funds (e.g. Peter Peterson's Blackstone Group) ripoff state and local governments by charging them large management fees. A standard arrangement will give the equity fund managers 2.0 percent of the funds under management and 20 percent of the profit. The article notes several cases where these investments have turned out poorly for pension funds and cites academic studies that show private equity funds, net of fees, provide on average no better return than broad stock indexes. --Dean Baker

Does Anyone Who Writes on Housing for the NYT Know Arithmetic?

When people talk about plans to "help" homeowners they must (yes, I said "must") ask two simple questions: 1) Are the homeowners being "helped" paying less in mortgage and other housing costs than they would to rent a comparable unit: and 2) Are the homeowners likely to end up with equity in their homes? Neither of these questions get asked in this discussion of the merits of the Obama administration's plans to "help" homeowners. This means that the NYT wasted readers time and killed trees for no good reason. The point should be really straightforward. We help homeowners when we actually put money in their pocket. If homeowners are paying more in housing costs than they would to rent the same unit, then we have not put money in their pocket, we have put money in the banks' pockets. This is a policy to help banks, not homeowners. That can be offset if there is reason to believe that the homeowner will eventually end up with equity in their home. Do we have any reason to believe that...

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