Links for the day

Interesting reads of the day.

Alabama Can't Find Anyone to Fill Illegal Immigrants' Old Jobs:

The nursery and landscape industry will need as many as 4,000 workers in southern counties early in 2012 to get ready for the growing season, he said, and forestry and farming will require still more laborers. Unable to find legal residents to fill all the employment gaps, [Deputy commissioner with the Alabama Department of Agriculture and Industries Brett] Hall said the Agriculture Department is consulting with the Department of Corrections to determine whether prisoners could do some of the work.

Are wages too low or is there a shortage of skilled workers?  Here is another link, this time from the Huffington Post:

A four-person crew of immigrant workers can pick and box more than 250 crates of tomatoes in a day, Spencer said, or enough for each person on the crew to earn about $150 at the height of the harvest.A 25-person team of citizens recently picked and processed about 200 boxes in a day, he said, earning each member only $24. Spencer said the people weren't in good enough physical condition to work harder or longer hours and typically gave up when faced with acre after acre of tomato plants ready to be picked.

If this holds on more than just an anecdotal level, it appears there is a shortage of willing and skilled labor.   This should put slight upward pressure on wages which should attract more laborers over the long term.   Whether or not native Alabamians  make the shift remains to be seen , it will require a large gain in productivity (determination and fitness in this instance). My guess is that skilled legal field laborers will take advantage of the higher wages and move to the vacated positions before the native Alabamians make the structural shift.  In that sense, I don't foresee this law having much of an impact on the employment rate of legal residents in Alabama.  

The Theory of the Leisure Class

In 1965, leisure was pretty much equally distributed across classes. People of the same age, sex, and family size tended to have about the same amount of leisure, regardless of their socioeconomic status. But since then, two things have happened. First, leisure (like income) has increased dramatically across the board. Second, though everyone's a winner, the biggest winners are at the bottom of the socioeconomic ladder 

Bernanke needed Roosevelt

http://seekingalpha.com/article/23597-the-bond-yield-curve-as-an-economic-crystal-ball

Bill Gross really used to get it and most likely still does, but his recent fund performance has been lackluster to say the least.  But still let's look at what he had to say in 2007.

He finds that short term rates need to be 100 basis points or more below estimated forward GDP growth to be supportive of the economy. Since he sees a 4% GDP growth, he sees 3% short term rates as necessary. A big question mark is whether individuals will “take the bait” and buy homes when short-term rates go down. He does not address whether he expects long rates and mortgages to fall, or whether he simply expects improved economic growth from lower short-term rates to resolve into house buyer confidence to buy at current mortgage rates, which really aren’t very high at around 6%

How did Bernanke do?  Was his fed funds rate 1% below NGDP growth?  

Ouch, maybe we should us a policy tool that doesn’t stop at zero. 

Or perhaps he needed some more Rooseveltain resolve, from his 2002 speech:

A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.¹⁷ The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation.

What's Wrong with Increasing (NGDP) Expectations?

This notion that we must have 2 percent inflation or the world collapses needs to end.  First let's look how the US fared coming out of the 1980-1982 recession.  Note that NGDP stayed right around 4 percent throughout the recession, until 1982 when the fed opened up the spigot and allowed NGDP growth to expanded to 12%.  As you can see from the graph, inflation expectations remained well anchored throughout the whole expansion process, most likely do to the excess capacity and high unemployment.

Could you imagine how badly people would scream of runaway inflation if NGDP growth was at 12% today?!...  Now let's compare and contrast with 2007-2011. 

10 year inflation expectations as released by the Cleveland Fed last month are 1.42 annualized.  I’m guessing GDP this year and next is right around there.