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The 2016 election will be decided by changing demographics and shifting coalitions between Democrats and Republicans. The changing demographics mean that a higher Latino vote in states such as Nevada, Colorado and Florida could bring these states to Democrats. And the working class vote in the industrial midwest in Ohio and the vote in some farm rural states such as Iowa could bring these states to Republicans. Michigan is another industrial midwest state which is uncertain as the older industrial centres such as Youngstown, Ohio, Scranton, Pennsylvania, and parts of Michigan- a big change from when unionized workers voted Democratic. The millenials, college educated women, and suburban voters in cities such as Denver, Miami, Las Vegas and Washington are now part of a new Democratic coalition. Most striking is the way the electorate is divided between better educated and less educated, between men and women, and between young and older voters. In fact with the conservative cultural emphasis in the Republican platform older voters are looking back to bringing back the 50's, while Democrats and the younger generation are looking forward to the future in this election. This is not an accurate characterization though because in 1948 with Harry Truman and in 1952 and 1956 with Dwight Eisenhower America was changing rapidly and looking to the future, so that by 1960 the civil rights movement was already established, and women were making the transition to being college educated and working in business and government.   ...

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The Journal profiles the small company of Dell'Orco & Villani in Prato, in the Tuscany region of Italy, in the context of the eurozone financial crisis in Greece, Italy and Spain. The Italian economy is dominated by such companies that have remained small and decided not to grow because of the difficulties facing them in the form of red tape, the slowness of courts in enforcing contracts, and labor laws that make it harder to hire employees and retrench in a recession. Today Italy's economy is only 3% larger than 10 years ago. Companies with less than 20 workers dominate the economies of southern European countries, employing 60% of the workforce in Italy and Greece, and half the workforce in Spain and Portugal. This compares with 30% in Germany and 20% in the U.S., according to the O.E.C.D. Businesses face an average of 258 days to get permits to open a new warehouse in Italy, compared to 26 in the U.S., according to the World Bank. Enforcing a contract in court could take as long as 1210 days in Italy compared to 300 days in France and the U.S. Italy's postwar economic recovery was based on these small firms around cities like Turin, or textile locations such as Prato. But building economies of scale has eluded these firms, and businessman from that period such as the elder Dell'Orco are content with remaining small. The Dell'Orco family firm makes machines that recycle plastics, rubber and other junk into fibers that can be used for carpets or clothing. The firm has trouble making a decision to hire a new younger worker to do work after four older workers retired. The company makes the machine that only does the first stage of the processing, referring customers to another firm in Prato for the second machine. Most decisions including a tiny showroom are made in excruciatingly slow fashion because they go through the family patriarch, the 91 year old founder. The son and granddaughter defer to him in all decisions. An unsold machine costing 400,000 euros sits in the factory after one buyer decided to delay the purchase, making it risky to grow. During the pre-euro period of the last two decades Italian businesses could take advantage of the regular devaluations of the lira to price below their competitors in Germany and other countries. During the last two decades competition from emerging market economies S.Korea, China and India have added to problems competing in global markets, without the advantages of scale. The inability to hire younger workers hurts unemployment for the young- youth unemployment in Italy is 29% in 2011....

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Krugman says there is cause for concern from May's U.S. jobs report of only 38,000 jobs added- low even with Verizon strike jobs added back in- compared to the 200,000 a month average since Jan 2013. One cannot read too much into one months report, yet the political uncertainty in a election year adds to the problem. The low interest rates near zero offering little possibility for rate cuts, make it difficult to come up with a policy response. Under a Clinton administration the infrastructure spending option would face Republican resistance.  It is not clear how a Trump administration would respond. Krugman says the jobs figure reflects a stronger dollar- a result partly of the Fed's plan to raise rates- that is hurting U.S. exports.

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Wages remain stagnant, labor participation rate declines, and U-6 at 11.8%, as unemployment rate declines to 5.9% in U.S. labor market.

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Lawrence Katz, Harvard labor economist, talks to Friedman about the jobs crisis in the U.S.. Katz identifies three jobs crises occurring at the same time today. One is the drop in the demand for goods and services that resulted from the longer term effects of the financial crisis of 2008, with rising foreclosures, weak housing markets, bad debt on the balance sheets of banks, and interest rates at close to zero reducing the scope of action by the Federal Reserve bank. The second, is the widespread long term unemployment with workers dropping out of the labor market. The third, is the nature of new factories and hiring. Work in new factories is done through increased automation, information technology and fewer workers. As a result job creation is a fraction of what it was in the past. Not mentioned here is the shrinking of the public sector under the strain of budget deficits for local, state and federal government. This leads to the question of how America will create jobs in the future. Katz believes the answer is creating more "hubs," networked urban areas like Austin, Silicon Valley, and Raleigh-Durham, by bringing together universities, high-tech manufacturers, software providers, and startup companies, to cooperate in creating new products that enhance people's lives worldwide. This has to be done by the private sector and government working together to build the infrastructure and make the investments in education, training of workers, and equipment for new job creation....

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 U.S. Trade Representative Robert Lighthizer, views China's response in trade negotiations as one of conducting extended negotiations that lead to little change. This has continued says Lighthizer for over a decade putting the U.S. at a serious disadvantage in trade. At a White House meeting in August 2017 Lighthizer convinced president Trump that China was in his words "tap, tap, tapping us along."  This confirmed president Trump's own instincts about the U.S. trading relationship with China. Lighthizer is a veteran of trade negotiations, having experience in the Reagan administration as the Deputy Trade Representative in 1983 in negotiations with Japan, when Japan was in a similar situation that China is today. At the time trade negotiations with Japan were getting nowhere. Lighthizer is said to have turned one Japanese response in negotiations into a paper plane and sent it flying right back. Lighthizer does not seek the limelight but is serious about his role having published op-eds in the NYT and WSJ since 2000 about how U.S. trading relationships were putting the U.S. and U.S. workers at an unfair advantage. Many of these op-eds are in the Lyrarc archive and a Search with the term "Lighthizer" would bring up these articles. This report in NYT shows how the role of Lighthizer was not anticipated by China when it sent Liu He to Washington in November 2017 to negotiate with the U.S. President Trump made certain Liu He and other Chinese leaders would have to talk to Lighthizer first. In a session with president Jinping laid out U.S. views that the past negotiations had accomplished little and new negotiations had to be undertaken very differently from negotiations in the past. Earlier in July trade negotiations conducted by Commerce Secretary Wilbur Ross were "shut down" by president Trump because China continued to repackage earleir offers which meant little to the U.S. As a lawyer at Skadden, Arps, Slate, Meagher LLP Lighhizer represented steel industry clients hurt by subsidized Chinese steel industry imports. Mr. Trump and Lighhizer have bonded well because their instincts have been the same- that the U.S. had not been well represented in earlier negotiations by lawyers who saw themselves as speaking for American exporters.  Lighthizer is also a seasoned trade negotiator and has waited for the right time and situation to tackle the unbalanced trading relationship with China. For 30 years Lighhizer represented American manufacturers as he practiced trade law at the Skadden law firm. His strategy has been to get the administration to unite behind a clear trade strategy. He says "I try to be friendly in trade negotiations. I am not the theatrical type. The art of persuasion is about knowing where the leverage is." At this time the leverage lies in the huge trade surplus of about $300 billion China has with the U.S. The U.S. goal is to bring this down by $100 billion through this new negotiating strategy as earlier negotiations have failed. ...

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The European Union Commission says Ireland must recover 13 billion euros in back taxes for giving tax preferences to Apple that are against EU rules. The EU Commission says Ireland allowed Apple to pay a corporate tax rate of 1% on its European profits in 2003, and .005% in 2014. The EU Commissioner says the use of Ireland as the place where Apple pays taxes on operations in Europe has no base in reality, as most profits are earned in other countries outside Ireland. Taxable profits of Apple "did not correspond to economic reality," according to Ms. Vestager, the EU Commissioner.  In the current environment where political upheaval is unsettling the democratic process in the U.S., Britain, Spain, France and Italy, as well as in Brazil and other countries in the developing world- because of deep recessions, and efforts to cut the deficits with deep cuts in state spending including in education and healthcare, basic services- the moves by companies to reduce taxes to these absurdly low levels such as .005% when other companies in the EU are paying 12.5%, is becoming increasingly unpopular. As pointed out in this BBC News article this sounds like the way Carnegie, Rockefeller and Vanderbilt operated during the late 19th century, and were seen as operating in a manner that was above the law. Janet Yellen pointed out at a Boston Fed Conference on inequality in Oct 2014 that the bottom half of the distribution or 62 million households in the U.S. in 2013, had a net worth of about $10,000, One quarter of these households had a net worth of zero dollars. The working class and blue collar workers in the U.S. provide much of the support at Trump rallies. Younger college educated people support Sanders, because of the situation of the working and middle class in the U.S., and a similar situation exists in Europe. It is for the sake of the democratic process and delivering services in education, healthcare, and other basic areas to all, that companies small and large need to pay their fair share of taxes, regardless of size, influence, or technological advantages. Today this is is seen by most leaders who draw public support as the right way forward for the U.S., Latin America, Europe and Asian countries, including proper allocation of resources to best serve the needs of working people. For example the 13 billion euros is equal to all of Ireland's healthcare budget, and 66% of its social welfare budget.    ...

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This is an interview with Columbia University economic historian Adam Tooze about the international trade and economic issues brought about by globalization. The rapid emergence of China in manufacturing and overcapacity in steel has led to action on steel tariffs by president Trump. Tooze is typical of opinion that sees action by Trump not as limited action to level the playing field  as proposed by Trade Representative for the U.S., Robert Lighthizer, but as reckless move on trade.  Lyrarc.com shows articles from the WSJ and NYT showing how opinion got to this point in the U.S., on Robert Lighthizer's views that the U.S. was not facing a level playing field, and  on how trade has hurt communities across the U.S. a long distance away from Silicon Valley. President Trump's views reflect a different perspective that says the U.S. has to balance the favorable situation obtained by China and the European Union through moves of its own to protect U.S. interests. Political commentary that the U.S. was starting a trade war is not supported by the facts showing China's response as muted and a willingness by China to negotiate a balanced trading relationship as its trade surplus with the U.S. continues to grow. The trade surplus is so large that the Trump moves do not tell the real story. They are likely to be overshadowed by the increasing value of the U.S. dollar leading to a continued favorable situation for Chinese exports and a larger trade surplus in 2018, regardless of Mr. Trump's action.  Trump's moves are more significant in other areas- limiting China's access to advanced technologies, with the European Union also taking the same action. This is now the new field of competition for the major world economies. ...

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Dennis Berman takes a very instructive and reflective look at what happened in history, the thirties when something like what we are seeing now happened, a huge global downturn. One thing that is being repeated is the tendency to think that things will recover maybe in 2009 or 2010. But oftentimes this is not the way it turns out. President Hoover said to the American people in May 1930, " I am convinced that we have now passed the worst and with continued unity of effort we shall rapidly recover." Hoover is now seen negatively but a visit to the museum section of the Hoover Institution at Stanford University shows that he was a geological engineer, well travelled to other countries, was President of Stanford when it was a small school, and was active in relief efforts for Russia in the years of civil war after the first world war. Was he less compassionate than FDR, was he less educated, and less aware of conditions in other countries than FDR, and less determined than FDR? Could it be that he did not realize the depth of the downturn that lay ahead and for this reason failed to take more aggressive action? WIth FDR, less well known as Berman points out, is the period of 1936 and 1937 covered in the book "The Forgotten Man", a popular history of the Depression by Amity Shlaes. The Federal Reserve used New Deal laws to tighten reserve requirements on the nation's banks. The goal was to make the banks stronger, but the unanticipated result was that the banks tightened still further. This aggravated things in the economy when it was still stuck in difficulties. The Dow Jones Average fell by more than a third between August 1937 and January 1938. Unemployment jumped. Historians call it the 'depression within the Depression. Just a year before this period, FDR predicted in 1935, "Never since my inauguration in March 1933, have I felt so unmistakably the atmosphere of recovery." Berman reminds us that the main force in the economy at this time however well intentioned is the government. And the government is at the whims of politicians, and the error proneness of human beings in positions of responsibility, with so many decisions taken on an ad hoc basis, responding to emergencies and dire situations as they arise, with not enough time for careful thought, and often with little sleep. The AIG intervention has already taken $177 billion in government money in a few months, and everything is being done on a crash basis with little preparation mostly in response to surprises popping up in financial markets. As Frank Rich points out the danger to the President's plans and vision is not from the work outlined for education, energy, health care, or Republicans, as much as it is from this uncertain element about available capital to make the wheels of the economy move again to sustain employment and incomes....

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The Center for Economics and Business Research in London estimates GDP growth for the UK of 0.4% in 2012. According to Britain's Office of National Statistics the UK economy contracted by 0.3% in the fourth quarter of 2011 compared to the third quarter.

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The former CEO of GE (General Electric) says why he is skeptical about the decline in the unemployment rate to 7.8% as shown by the household survey of the Bureau of Labor Statistics. He says the economy has to have grown at breakneck speed for unemployent to drop from 8.3% to 7.8% in 2 months. The dozen companies he is working with are seeing third quarter 2012 results worse than the second quarter. The labor force participation rate declined to 63.5%, the lowest since Sept 1981- fewer people looking for work accounts for the drop from 8.3% in July to 8.1% in August 2012. Other numbers that look implausible are the BLS figures of federal state and local governments adding 602,000 workers to their payrolls in Aug and Sept 2012, the largest 2 month increase in 20 years. And the BLS figure of overall 873,000 workers being added in Sept. 2012, the largest one month increase since 1983. All this he calls implausible. Part of the problem is the way the data is collected because someone who for example says he got a job baby sitting for from anywhere in the range of 1 to 34 hours is a parttime worker, so that working 1-2 hours would be counted as employed parttime in the BLS methodology....

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U.S consumer spending declines by 0.9% in Dec. 2014 over the prior month, according to the Commerce Department. Consumer spending was up in Nov. 2014 by 0.4%. Excluding auto sales and falling gas prices the Dec. 2014 decline in consumer spending was 0.3%. This shows that consumers are saving most of the money saved as a result of gasoline at about $2 a gallon, or using it to pay off debt. Analysts had estimated a significant increase in retail spending which turned out not to be happening.

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Temp hiring is seeing a slowdown in Aug-Sept 2012. It declined by 2000 jobs in Sept and made no gains in August. By contrast in the first 6 months about 21,000 temp jobs were added each month. The historical correlation since 1990 of changes in temp employment with ensuing job growth in the next 3 months is 77%. This indicates job growth in the fourth quarter of 2012 will be about 72,000 jobs a month says Irwin, not enough to keep up with population growth, and likely to lead to an uptick in the unemployment rate. The results at temp hiring firms Manpower and Robert Half confirm this trend.

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U.S home prices declined by 3.9% for the third quarter compared with the prior year, according to the S&P/Case-Shiller index of 20 major metropolitan areas. Prices are expected to be affected by an increase in foreclosed properties put by the banks for sale in coming months. Affordability has increased as prices are down by 31% from the 2006 peak and mortgage rates are at 4%. Yet as one appraiser puts it the problem remains one of tight credit and strict mortgage lending standards, and further home price declines could depress the market.

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The current economic expansion in the U.S. in April 2014 is at 58 months from the beginning of recovery in 2009. In this exceptional account Josh Zombrun of WSJ compares the current expansion to previous expansions since 1950, with the views of experts such as Stan Hall of the NBER committee, which studies turning points. This expansion is forecast to go for 90 months into 2016 by the U.S. Federal Reserve, and 102 months into 2017 by the CBO. Sooner or later, says Stan Hall, some adverse unpredictable event takes place that ends the expansion. So far the expansion has been slow and protracted, as predicted by economists Reinhart and Rogoff from previous financial crises in the last century, giving it room to grow as corporate earnings continue to improve. Fed chairwoman's sense of slack in the economy also provides room for employment and incomes to grow in the later stages of the expansion. This is good news for the emerging market economies such as India and China, and for the European Union, faced with slowing growth. So how does this expansion compare with earlier ones. The expansion of the 1991-2001 of the tech boom was 120 months, 1961-1969 of the Sixties 106 months, 1982-1990 of the Reagan era 92 months. The controversial one on shaky foundations is the recent housing boom 2001-2007 of 73 months ending in a huge bust with the 2008 financial crisis. The shorter expansions are the 1975-1980 Post-Vietnam one for 58 months, and the 1970-1973 spurt before the OPEC price surge. Figures are from the NBER, CBO and the Federal Reserve's Summary of Economic Projections....

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French voters turned to parties outside the mainstream left Socialist Party and the right Republican Party for the first time in a run off presidential election. The National Front's Jean Le Pen made it to the runoff in 2002, then lost to Chirac of the Republican Party who won 78% of the vote. This time the Republican Party candidate Fillon had about 20%, the Socialist Party candidate Hamon won just 6% of the vote with the rest of the socialist vote going to a far left candidate Jean Luc Melenchon who had 19.6%. The winners were Emmanuel Macron, a former Economy minister under president Hollande of the socialist Party, getting about 24% and Marine Le Pen, the daughter of Jean Le Pen of the National Front, getting 21.5%. Compared to the U.S. the situation is slightly different in France because of the very high unemployment rate for young people- younger voters supported the National Front, and people especially in rural areas in the north, north east, and the south of the country around Nice and Marseille supported the National Front. Macron's movement En Marche, centrist party drawing support from centre right and centre left without clear ideology except to renew France and pro-EU, was strong in urban areas, among more educated people, especially in Paris and the area around Bordeaux and Toulouse in the south east of the country. Fillon did not do well in some traditional Republican Party areas including Nice, with inroads from Le Pen, who defined the party around anti-immigration, closed borders, and withdrawal from the European Union. ...

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Thomas Hoenig was Governor of the Kansas City Federal Reserve Bank for 20 years. Here he talks about the dangers of "too big to fail" with Gretchen Morgenson of the New York Times. He is due to retire at the age of 65 in 2011. Hoeinig has stood for conservative safe financial practices for U.S. financial institutions throughout his 20 year old career, and cautioned against extending the government safety net for banks that engage in risky financial activities including derivatives trading. And essential element of safe financial practice and part of necessary market discipline, he has pointed consistently, is the fear that taking on risky activities or acting recklessly has a price- creditors can take out their funds if they see a banks as unsafe, and the financial institution may have to be broken up or closed. He joins Alan Meltzer in his criticism of Federal Reserve policies under first Greenspan and then Bernanke that take on the job of stimulating the economy and creating jobs through a very loose monetary policy after the collapse of a bubble. Hoenig sees the role of the Fed in such situations as a neutral player. The reason say Meltzer and Hoenig is that the Fed has not given enough thought and attention to the long term consequences of its policies. What were the consequences of the low rate policies in 2003 asks Hoenig? It promoted another bubble and the mortgage meltdown of 2008. What were the consequences of QE II asks Meltzer in an op-ed piece in the Wall Street Journal on August 11, 2011, "The Folly of Economic Short-Termism?" It has failed to revive the economy or reduce unemployment. Hoenig also points to questions of fairness and equity that arise when banks are treated differently and farmers, seniors and other groups are asked to make sacrifices....