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Can the West’s perplexing employment miracle continue?

economist.com

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Re: Can the West’s perplexing employment miracle continue?

#151
post #37
post #20

Earlier quoted context omitted.

This isn't a high interest rate ecconomy, this is normal interest rates. Rates have been absurdily low for a while so you may not remember it, but history provides a record.

Historians in 500 years will stare in wonder at the stunning evidence we did not, in fact, build ALL the infrastructure, physical and otherwise, during the last ~25 years of absurdly cheap money.

The low interest rate environment was certainly responsible for the fracking boom in the US.

Because one cannot talk about the recent low interest rate environment without also talking about the quantitative easing environment which pumped trillions of dollars into Banks who figured they had should do something with some of it

Re: Can the West’s perplexing employment miracle continue?

#152
post #108
post #87

Earlier quoted context omitted.

To someone who took out a loan expecting it to stay at the rate it was at… It’s extremely high.

And why would they expect that?

Before I answer that I’d be interested to know if you have ever met any people? And secondly, do you have any compassion? Because it seems like the answer to one or the other might be “no”, in which case you’re going to struggle to understand any answer I can provide.

Re: Can the West’s perplexing employment miracle continue?

#153
Credibility of the author is out the door when they are using strawman comparisons with Japan (Tokyo) indicative of someone who spent a week there as a tourist and had to shoehorn this experience in. It's like a foreigner traveling to America, and by that I mean LA or NYC, and talk about how fashionable people in SoHo were or how vibrant Time Square is, meanwhile 99% of Americans aren't in this way of life. I'm almost certain "in one of Tokyo’s best bars, a team of four people was involved in the preparation of your correspondent’s gin martini" refers to The SG Club, an overpriced tourist trap for tourists who want to feel refined, sophisticated, edgy.

As economists say, there are four types of economies: developed, undeveloped, Argentina, and Japan. Not having a permanent place to be during the 9-5PM, whether that is school or work, is a badge of shame in Japanese society. If you read crime reports in Japan, they will almost always mention the persons state of employment. Even the tragedy of the commons / prisoner's dilemma is thwarted in Japan, atleast in a public context. On microeconomics, people are not making decisions that would be deemed economically optimal or even rational from an American lens.

The example with the airport and malls being overstaffed. The first part is that both the government and people would rather that people work, rather than rely on government/society, even if it means the enterprise is not operating optimally. This is one reason why, quantitatively atleast, Japan has one of the lowest productivity rates of developed countries. Everyone has to appear working diligently, regardless if they've past the point of productivity or not. For the second part, the mall, in this time and age you can order stuff online. The value proposition of retail is that people want and value human services. Especially if it for higher end products and luxury products, where the retail and customer experience is part of the purchase, which is likely the case for a mall in Japan. Even Uniqlo is a splurge for people to be honest. Furthermore, Japanese people trust humans not computers, and there is an expectation that service be 1:1 and available. Just wait into the author sees the staff ratio in the electronics store, especially in the appliance section. They are dozens of tables where they go through a step by step process with customers, explaining the appliance, delivery process, etc. Part of this is also a desire for human interaction which is relatively limited compared to America where you have no shortage of small talk with randos.

Re: Can the West’s perplexing employment miracle continue?

#154
post #129
post #106

It's difficult to take serious any article that tries to apply Japanese customs to other western (Euro/US/Aus/NZ) cultures. We are deeply entangled, but JP is a different beast. Aside from the aging population and low birth rate, it's still a distinctly different culture than say, New York or London. What the author describes are long term artifacts of Japanese culture. It's a service culture (dunno if that's a term)…

The difference is that people in Japan feel like it is normal to work hard (and long) for a pittance. People in Europe feel like their boss is being unreasonable if they ask them to come in 35 hours a week. And think 4 days, or even better, 3 days is optimal. Then since they’re not being paid a lot, they feel it’s fair to just not give a rats ass about anything they’re doing. I think there might be some balance in be…

As a European this is just as dumb a comment as me saying Americans expect a work lunch consisting of cheeseburgers and will shoot up a place if it runs out of cheese.

Re: Can the West’s perplexing employment miracle continue?

#155
post #94

Earlier quoted context omitted.

How does one determine the 'real' interest rate?

To parallel the other comment with a wiki leak, the short version is the risk-free interest rate (e.g. treasury bills) minus the rate of inflation. So if you have 6% inflation, and the return on e.g. the 1 year t bill is 4.75%, you have -1.25% "real" interest rates, because your money at the end of your year of investment will be worth ~1.23% less than it was at the beginning of the year. I'm not sure I completely ag…

does that really work? inflation is a backward looking metric and interest rates are forward looking.

this is just about making a prediction of the future.

if you believe that inflation will decrease then your guaranteed rate of return from interest rates is great.

if you believe that inflation will increase or stay the same, then yes we have "negative interest rates"

I don't think it's reasonable to call it a "real" interest rate, because I can't buy T bills against it and it has no guarantees

Re: Can the West’s perplexing employment miracle continue?

#156
post #72
post #9

We have gone from a zero interest rate economy to a high interest one within months. Whoever claims to accurately predict what's going to happen in the next few years is talking out of their ass. We know inflation should start decreasing within a year or so, but you cannot predict how millions of people will react to suddenly not being able to afford stuff.

Accurate prediction: Job data trails rate increases by many months. So do recessions. If the fed levels off interest rates within the next year or so, we have a very good chance of avoiding a recession. I am young/old enough to remember the last time interest rates were this high, and we were BOOMING. If the fed pushes the gas on interest rates, it will likely push us into a mild recession. Thanks (covid!) to million…

We've had more than a decade for businesses to get used to being able to borrow on short timeframes of ~2 years with extremely low interest rates.

Increasing those interest rates will cause zombie business interests to go broke by increasing their borrowing costs.

This will probably look something like a meltdown in the office and retail commercial MBS for a start (I have no idea who else is out there ready to join the party once it gets started, but that's a good start).

Already sales of CMBS have fallen 85% from where they should be this year:

https://www.bloomberg.com/news/articles/2023-02-17/sales-of-...

Those interest rates also go into everyone's Discounted Cash Flow models, which affects the prices of assets across the board, once people start to adjust to the fact that higher interest rates are going to stick (until the Fed blows up the economy, which of course means the beta value in those models needs to increase).

Once the unemployment rate climbs back to 6-8% or higher then the Fed will probably cut interest rates back down to zero again due to the recession that they will have created. With more slack in the labor force then when they do that inflation will not reemerge. The recovery won't be V-shaped like the pandemic recession because businesses will be allowed to go bust without any kind of government support -- the recession may be particularly bad since the Republicans in the House will want to hang the recession on Biden (a situation which didn't happen in the 2001/2008/2020 recessions since there were Republicans in the WH and cooperative Democrats).

Re: Can the West’s perplexing employment miracle continue?

#157
post #50

Earlier quoted context omitted.

Claiming that "a little more inflation" is preferred to "a bigger recession" is an opinion, I'm really not sure it's a consensus, though even if it is a consensus, it's not a good argument for or against it. I think it comes down to whether we soon realize we're near hard landing (recession) or no landing (ongoing inflation). As far as I know (though I'm really not well educated when it comes to economy), in the enti…

I am starting to doubt that interest rates are the best lever against inflation. Rising prices are supply not meeting demand. It feels like improving productivity would be an equally powerful tool with less human cost. Granted that is a harder thing to control quarter over quarter. Consider this analysis that intetest rates may in some cases raise prices. https://economicsfromthetopdown.com/2023/02/04/do-high-inter..…

Absolutely.

The mainstream economists are wringing their hands over full employment and rising wages, the first time in decades that we might see the middle class grow, because production isn't sufficiently meeting demand.

We should be producing more stuff - especially housing - instead of trying to keep people from earning more.

Re: Can the West’s perplexing employment miracle continue?

#158

Earlier quoted context omitted.

Yes. For the longest time everyone was saying there’s no way the fed can raise rates above 2% without completely crashing the economy because the entire world was “addicted to low rates”. Whatever happened to the crash?

A phrase in known in macroeconomics that interest rate changed have unpredictable lags.

Recessions usually follow at least 6 months after the Fed hits their terminal rate.

The lag is also easy to understand since interest rates don't immediately hit businesses borrowing cheap money short, until their loans rollover and readjust on a roughly 1-2 year schedule. The economy can also absorb the first waves of those failures and it just takes awhile for the volume to build up.

Re: Can the West’s perplexing employment miracle continue?

#159
post #94

Earlier quoted context omitted.

How does one determine the 'real' interest rate?

To parallel the other comment with a wiki leak, the short version is the risk-free interest rate (e.g. treasury bills) minus the rate of inflation. So if you have 6% inflation, and the return on e.g. the 1 year t bill is 4.75%, you have -1.25% "real" interest rates, because your money at the end of your year of investment will be worth ~1.23% less than it was at the beginning of the year. I'm not sure I completely ag…

I think the best "real" interest rate we have is the current interest rate minus inflation expectations. Central banks try to influence credit demand, and the real cost of credit is the current interest rate minus the inflation rate over some future period.

Re: Can the West’s perplexing employment miracle continue?

#160
post #78

Earlier quoted context omitted.

> no one going to work for three years Where did this happen?

I'm not sure about three years, but anywhere the service and entertainment industry was shut down due to Covid. Eg California.

No nobody works in California outside of that industry?
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