Sunday, August 14, 2011

The Miracle Worker

Now we know that Texas Governor Rick Perry will be the Republican Party presidential nominee.  He'll probably be the next president. They say he is a miracle worker, you know.

So, what the hey, if this guy is a miracle worker, I can predict the future.  I forgive you for thinking neither of these things are true.  To prove the point about the phony Texas miracle, I give you comments and a graph from Nobel economics laureate and NY TIMES columnist, Paul Krugman:

"And now Texas: there has been a long-term process of employment shifting to Sunbelt states, Texas included, largely because of the availability of cheap labor, which in turn has a lot to do with a low cost of housing. On a long-term basis, people have been willing to move to Texas despite relatively low nominal wages because housing is cheap and the cost of living relatively low. Businesses, in turn, have been steadily moving to cheap-housing states to take advantage of those low wages.
And decisions about moving facilities, or where to open new facilities, have a long lead time. That is, there’s a lot of momentum in the process, which keeps employment shifting to Texas and away from the Northeast even in the midst of a slump that depresses employment everywhere. So it’s not surprising that Texas would have positive job growth at a time when overall employment is flat – it’s just the underlying trend on which the cycle is overlaid.
Wait: there’s more. Given this long-term supply-driven trend, the fact of positive job growth does not at all mean that Texas has been recession-proof. Since the jobs are in effect following the labor force rather than the other way around, Texas needs job creation at a faster pace than the Northeast to achieve similar labor market outcomes. That’s why the “Texas miracle” hasn’t prevented a sharp rise in the unemployment rate, smaller than the rise in California or Florida – which had huge housing bubbles – but if anything more ( I changed an obvious typo in the Krugman piece, which had clearly inadvertently placed the word less here) than the rise in New York and Massachusetts.
There’s more to the Texas story, especially the role of the oil sector. But in general, you want to think of the regional impacts of the recession as a demand shock overlaid on supply-driven trends. And neither the continued existence of summer jobs nor relatively rapid job growth in the same states that had rapid job growth before the recession are at all surprising."

Click the title below for the Krugman graph.

A Short Course in Miracles

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