Commentary & Analysis
Dr. Joe's Reading for a New Day
Recommended reading from Dr. Joe Webb: It's the end of days for London's print newspaper New Day. Atlanta Fed's GDPNow Model Estimating Q2-2016 GDP at +2.2%, Lingering Effects of Recession, Justice Denies Staples and OfficeDepot... Again. Rubbing Sahl in an Old Wound
By Dr. Joe Webb
Published: May 12, 2016
There Will Be No New Days for New Day
It's the end of days for London's print newspaper New Day. The publisher of London's Daily Mirror believed that there was an unserved market of print enthusiasts and there would be no need for a digital media presence. Their statement about what they learned can be read online in a news report at Business Insider. The main thing they learned was that when you miss forecast circulation (200,000) by -85%, you can't stay in business. Whoops.
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Atlanta Fed's GDPNow Model Estimating Q2-2016 GDP at +2.2%
The latest GDPNow model as of the time of this writing for Q2-2016 is +2.2%. It will be updated again late morning on Friday May 13, but so far the idea that we had a mini-recession in the early part of the first quarter may be turning out to be the case. The first official reading of Q2 GDP won't be seen until the end of July.
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Lingering Effects of Recession
The Wall Street Journal had an article about the lingering effects of recessions as people's work lives are interrupted and have trouble re-adjusting. Among the “enduring scars” as the writer called them, were...
- death rate for middle-aged whites has been rising as a result of suicides, substance abuse and liver diseases
- link between high unemployment and increased abuse of painkillers and hallucinogens.
- suicide rate climbed 24% between 1999 and 2014, a rise that accelerated after 2006
- a spike in mortality following a layoff, with middle-aged men set to lose a year to 18 months off their lifespans
- children of people who lose their jobs perform worse on school tests and are more likely to repeat a grade
- a father’s layoff is linked with a substantially higher likelihood of anxiety and depression in his children
There are social costs to having slow economies were detailed by economics Nobel Prize winner Angus Deaton in his book “The Great Escape”:
“Slower growth makes distributional conflict inevitable, because the only way forward for me is at your expense. It is easy to imagine a world with little growth but endless distributional conflict between rich and poor, between old and young, between Wall Street and Main Street, between medical providers and their patients, and between the political parties that represent them.”
There are still many economic measures that have not recovered from their values at the start of the recession. Perhaps these social measures will stimulate interest in having a robust, high-growth economy again. Work, regardless of pay, is an essential part of our social fabric. Not working, regardless of safety-net payments meant to ease the burden, can have destructive social consequences.
For companies that find themselves downsizing, post-employment counseling is often considered an unnecessary cost when the focus is on severance payments instead. Perhaps these data can lead to a reconsideration of that premise.
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Happy Birthday, Fred!
The anniversary of the birth of economist Frederich von Hayek was observed on May 8. A free download of essential writings can be found at the Fraser Institute. They also have short videos about some of Hayek's explanations of prices, the role of knowledge, rule of law, and other foundations of economic thought. The videos are especially recommended for those new to economics, or those interested in a perspective that might be different than they might have encountered in their original college economics.
(Econostories has an entertaining rap video of actors in Keynes and Hayek roles expressing their theories about economic booms and busts.)
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Justice Denies Staples and OfficeDepot... Again
Be prepared for a shakeout in the office supplies superstore sector. The Justice Department has turned down the combination of Staples and OfficeDepot yet again. The first time was twenty years ago. Staples has been closing stores, downsizing others, and any new stores are much smaller than they used to be as they push online sales.
Staples is seeking to invest in other business services. I wonder if, in 20 years, they will still have stores at all.
Is this an opportunity for printers in the areas where there will be shuttered stores?
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Rubbing Sahl in an Old Wound
I always enjoyed comedian Mort Sahl (yes, I'm dating myself), and despite many of his utterances found dear friends among the political class on both sides of the aisle. There is one line that he has used for nearly every presidential election. I first head him use it after the 1972 election. It's one of those lines that you can adapt many business situations. Sahl would say something like: “After all those primaries and elections with so many candidates, two large conventions of delegates selected two people, [INSERT NAME] and [INSERT OTHER NAME]. What does that prove? [and then he would raise his voice and exclaim] Darwin was wrong!”