Germany's Different Unemployment Rates

Dean Baker criticizes the New York Times for reporting Germany's unemployment rate as 6.7% instead of 5.5%. The 5.5% rate refers to those who have no job at all, while the 6.7% rate also includes those who have only a part-time job but would want to have full-time employment instead. While there is a case for including those who have fewer hours than they want to, it becomes misleading to include them while making comparisons between countries because other countries only include those who are so to speak full time unemployed.

I agree with Baker on this point, and could add that numerous other media outlets make the same mistake as New York Times. but he is actually wrong to assert that the German government reports the higher number as its official rate. Obviously, the German government reported it, as they are the source of both numbers, but the number specified in its official press release on employment and unemployment is in fact 5.5% and only (for the overall unemployment rate) 5.5%. The same goes for the Eurostat release on unemployment in the 27 EU countries including Germany. That makes it all the more puzzling why so many media outlets insist on using the higher number for Germany, and only Germany.

Ukrainians Are Indeed Poor

A few days ago, I reported about two forms of protests that in different ways were somewhat odd, one of which involved young Ukrainian women protesting their alleged poverty (and blaming it on the decision makers meeting in Davos) topless.

While one can have doubts about whether these particular women were really poor given the fact that they could afford to travel to Switzerland, it seems clear that most Ukrainians are indeed poor, judging by the preliminary 2011 GDP report from Ukraine. According to it, GDP in Ukraine was just 1,314 billion hryvniah. Given the fact that a hryvniah currently is only worth only 12.36 U.S. cents, that means that in U.S. dollar terms GDP was only about $162 billion.

And with Ukraine having on average 45.7 million people in 2011
this means that per capita GDP is only $3,545 per year.

This means that yearly per capita income in Ukraine is actually lower than monthly income in most countries in Western Europe and North America as well as some in Oceania, East Asia and the Middle East (the Arab Gulf).

While this is partly compensated by the fact that the cost of living due to the Penn effect is lower in Ukraine, the fact remains that most Ukrainians are very poor compared to Switzerland and other countries in the above mentioned regions.

Why is Ukraine so poor then? One of the topless female Ukrainian protestors claimed that it was "because of you" (clearly refering to the people attending the Davos meeting), but in reality it is instead in part because of Ukraine's communist part, and in part because of the incompetent and corrupt way that the transition from communism has been handled by government officials in Ukraine.

Why (Some Parts Of) Europe Underperforms

Interesting Wall Street Journal editorial which discusses why European growth has been weak for so long-namely demographics and excessive government spending. The article mentions Germany and Sweden as two countries that are "better run", which is basically true, but the point that could have been added was that their better relative performance is mostly because they have implemented tax- and social benefits cuts.

Germany by the way is an example of how countries in the short run can compensate for the effects of a shrinking working age population by employing a higher percentage of the people in that age group. They still have room to increase the employment rate for a few more years but with a 5.5% unemployment rate there is a limit to that. Perhaps Germany should encourage some of those newly unemployed Southern Europeans to learn German and move to Germany?

Statistical Notes Monday January 30

-U.S. GDP growth was 2.4% at an annualized rate (2.8% unadjusted for the deterioration in terms of trade) during the fourth quarter, somewhat below expectations, but above the level seen in previous quarters.

Meanwhile, real disposable income rose 0.3% in December while real consumer spending fell 0.1%, raising the savings rate to 4%. Money supply fell slightly the latest week but was still up 9.7% compared to a year earlier.

-Spain's labor market is in a free fall with employment falling 3.26% in the year to the fourth quarter, increasing the unemployment rate to 22.9% overall and more than 50% for youths.

-Euro area money supply growth slowed from 2.1% in November to 1.6% in December.

-Sweden's money supply growth rose by contrast, but was still only 0.9%.

-Real retail sales increased in December by 5% in Estonia and 7.1% in Latvia compared to a year earlier.

Meanwhile, the first estimate of GDP in Lithuania indicates that yearly growth fell from 6.7% in the third quarter to 4.3% in the fourth.

-Employment in Taiwan rose by 0.13% compared to the previous month and 1.8% compared to a year earlier, helping to push down the unemployment rate to a new cyclical low of 4.18%

Odd Ways Of Promoting Your Movement

Members of the so-called "Occupy" movement in Oakland burn the American flag, because, considering the widespread support of outlawing this and the fact that most opponents of a ban are only motivated by a principal comittment to free speech, there is no better way of ensuring the support of ordinary Americans than burning the flag.

Meanwhile, young Ukrainian women protest topless in Davos, Switzerland, against their poverty. Just how they could afford to travel from Ukraine to Davos if they're so poor is unclear as is their ideas about how to end their alleged poverty. However, given the fact that a lot of men will want to have some "human action" with them, they could be promoters of Ludwig von Mises' classic economics book.

The Cost Of U.S. Sugar Restrictions

At least (it's probably higher) $3.86 billion

Stephen Harper's Pro-Growth Agenda

To boost economic growth in Canada, Prime Minister Stephen Harper will:

-Limit government spending.
-Make immigration policy more focused on immigrants that contribute to the economy.
-Increase free trade.
-Reduce regulatory delay for mines and energy production, thus increasing output of it.

How Fed Policy Creates Crony Capitalism & Inequality

A reader has sent this interesting interview of David Stockman, former Reagan official.

I don't agree with verything he says, but his basic argument that Fed policy creates a crony capitalism that in turn creates undeserved wealth for bankers is certainly correct, as is his observation that Obama, Gingrich and Romney are clueless about or complicit in it.

Demand Driven Stagflation?

It is pointed out by Brad DeLong that the British economy has fared worse than even during the 1930s, since 2008.

The numbers are even worse if you adjust for the fact that the British population has increased by more than 2% during the period, though population increased almost as much in the 1930s as well.

DeLong of course blames Cameron's austerity policies, but there is a problem (actually there are several). That would suggest that the slump is demand driven, and if that had been the case we would have seen price inflation fall. But as it happens, inflation has increased the last few years and is at an annual average of 3.6% the last 3 years the highest since the early 1990s, and also significantly above the alleged 2% target of the Bank of England.

British inflation has also been a lot higher than in almost all other advanced economies. For example Sweden, whose economy has fully recovered even on a per capita basis, had an average inflation rate of 1.75% during the last 3 years.

The part of the austerity package that involved higher taxes (mainly a higher VAT) is really the only part that can explain this since they represent a negative supply shock that both raise price inflation and reduce real output, but that should have largely been cancelled out in part by the reduction in real disposable income from the tax increases and in part by the spending cuts.

China's Economy To Surpass America's By 2020-Or Earlier?

According to preliminary estimates, China's GDP in 2011 was 47.156 trillion yuan, which at the current exchange rate of 6.3138 translates into roughly $7.47 trillion.

By comparison, tomorrow's GDP report for the United States will likely show that 2011 GDP was roughly, or slightly over $15 trillion. That means that China's economy is now nearly half as big as the U.S. economy.

This in turn means that China's economy could become bigger even sooner than previously thought. If the economic growth gap is 6% per year(lower than the average rate the last decade) and real appreciation is 2.5% per year (again, a lot lower than the average rate the last decade) than that would be sufficient for China's economy to become bigger by 2020. If the growth gap and/or real appreciation is closer to the average rate for the last decade, it could happen even sooner.

It is true that per capita income in China would still be a lot lower since China's population is more than 4 times as big. And in per capita terms, China might never surpass America. However, the fact that average income is so low is reason to believe thatv the "catch up" effect will continue to fuel growth in China. And so note that per capita income of one fourth of the U.S. level means that it would still be a lot lower than in the other majority Chinese countries (Hong Kong, Macao, Taiwan and Singapore).