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Tile: How to prevent the next financial crisis

Summary: In this Washington times article, Stephen Moore talks about how to prevent the next financial crisis. Focusing on the Great recession of 2008/2009. Economist still don't know what happened and don't have a good answer as to why. According to Moore " The Fed’s shift from inflation to deflation inadvertently crushed the mortgage-backed securities marketsz". Leading to the rescission.

Reaction: while reading this article what came to me as a shock was that a mistake that we made "liquidated more than $7 trillion of wealth and sent unemployment rates to their highest levels in three decades". As an economy its important that we don't make mistakes and we don't repeat  them either. Economist know that the housing bubble caused it but they don't know how the bubble "inflated".

Relation to class:  In class we talk about the economy and its important to know. Before I took this class I didn't care or think how important it was to know about the economy and how we are doing financially. In the begging of the class we watched a video I don't remember what it was called but it had to do with this.

Citation: Moore, Stephen. “How to Prevent the next Financial Crisis.” The Washington Times, The Washington Times, 7 Apr. 2019, www.washingtontimes.com/news/2019/apr/7/holding-commodity-prices-stable-will-help-to-avoid/.

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What caused the financial crisis and Great Recession of 20082009? A decade later, economists still don't have a good answer. Of course, the financial bubble in the housing market was the proximate cause, but this begs the question of what inflated the bubble that burst in the first place.

This isn't just an academic exercise for the history books. It's critical that we never repeat the mistakes that liquidated more than $7 trillion of wealth and sent unemployment rates to their highest levels in three decades.

The real estate bubble was certainly exacerbated by half-witted national housing policies that offered low-down-payment mortgages with near 100 percent taxpayer guarantees to non-credit-worthy borrowers. The government made it easy for families to buy homes they couldn't afford. And when the defaults rolled in, the taxpayers picked up the tab. But the role of low interest rates and inflationary monetary policy is under-appreciated.

My colleague Louis Woodhill has crunched the numbers here. Mr. Woodhill finds that from October 2001 to July 2006, the Fed inflated and inflated with artificially low interest rates. See chart. The CRB commodity price index, which includes everything from aluminum to zinc, nearly doubled (up 84 percent). Oil prices more than doubled, to almost $75 a barrel.

These rising prices encouraged Americans to invest in inflation hedges - like houses. The Case-Shiller 20-Cities Home Price index rose in tandem with commodities, both peaking in July 2006. Then the Fed finally noticed the inflation and violently reversed course by raising interest rates, pushing the CRB index down by 14 percent in just six months.

This popped the housing bubble for sure, but there was no soft landing. The Fed's shift from inflation to deflation inadvertently crushed the mortgage-backed securities markets. This made the recession that began in December 2007 inevitable. Then, a second course-reversal by the Fed in June 2008 created a severe scarcity of dollars that contributed to the collapse of the real economy.

If the Fed had been watching commodity prices and had held them stable, as Mr. Woodhill and I recommend in a recent Wall Street Journal article, these wild gyrations in prices would have been avoided. A housing correction might still have happened, but the economic carnage would have been limited.

In a March 27 article in the The Wall Street Journal, economics columnist Greg Ip argued that critics of Federal Reserve Chairman Jerome Powell - like Mr. Woodhill and I - are wrong to recommend that the Fed keep prices for commodities stable.

Mr. Ip asserts that if the Fed had been targeting commodity prices in the 2000s, this would have made the recession worse by "tightening monetary policy in 2008 as the U.S. slid into its worst recession since the 1930s."

Mr. Ip doesn't get it. The financial bubble (which, by the way, the WSJ editorial page where I worked accurately warned of at the time) would have never been allowed to so severely over-inflate if the commodity index had been held stable all along. The Fed would never have gotten itself into a position where it had to financve $1 trillion in bailouts.

The two-decade growth boom from 1983-2000 was characterized by relatively stable commodity prices. Economists now call this period "The Great Moderation," because growth was high and prices flat. That is what the Fed should be attentive to today. Other prices (e.g., consumer, producer and asset prices) should also be closely monitored, but stable prices and a stable economy require stable commodities. When it comes to inflation, commodity prices are the canary in the coal mine because this information is available to policymakers in real time.

If the Fed targets stable prices on top of the pro-growth tax, regulatory, and energy policies the Trump administration has implemented, 3 percent to 4 percent real growth with continued rising wages for workers and low inflation is easily achievable over the next several years at least.
* Stephen Moore, a columnist for The Washington Times, is an economic consultant with FreedomWorks and co-author of "Trumponomics: Inside the America First Plan to Revive our Economy."
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Holding commodity prices stable will help to avoid economic carnage

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What caused the financial crisis and Great Recession of 20082009? A decade later, economists still don't have a good answer. Of course, the financial bubble in the housing market was the proximate cause, but this begs the question of what inflated the bubble that burst in the first place.

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Tile:  Housing Is Already in a Slump. So It (Probably) Can’t Cause a Recession.

Summary: In this New York times article Conor Dougherty talks about how the United States is having a decline in the housing market. Its possible for the U.S to enter a recession making it our 12th. Houses are increasing in prices making it hard for people to buy houses because they simply cant afford them. To better understand, when one goes into recession all trade and industrial activities are reduced and is connected to the fall in GDP.

Reaction: While coming across this article  I shocked to read that "Home prices have risen by about 50 percent since 2012". Depending on the area that you live and the month that you buy a house can truly determine the area of cost that your house may be in. But for prices to ride as much as almost half since 2012 is mind blowing. Houses just keep getting more and more expensive as years go on especially for renting out apartments.

Relation to class:
In class since the beginning of the semester we always fins ourselves talking bout GDP. To find out that recession is connected to GDP is quite interesting and something I wouldn't have know if I didn't come across this article. GDP will always be an important factor because its the main indicator of the economies economical growth.

Citation: Dougherty, Conor. “Housing Is Already in a Slump. So It (Probably) Can't Cause a Recession.” The New York Times, The New York Times, 19 Feb. 2019, www.nytimes.com/2019/02/19/business/economy/housing-recession.html.

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A decline in residential real estate has led several recessions. With construction still in a multiyear slump, it seems unlikely to be the culprit this year.

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Residential real estate prices have risen so fast that even markets previously considered affordable are now beyond the reach of many. Prices in Denver have risen 90 percent since 2012. Credit Credit Benjamin Rasmussen for The New York Times

The United States has had 11 recessions since the end of World War II. All but two were preceded by a big decline in the housing market.

Inside that bit of trivia lie some fundamental insights into housing's outsize role in the business cycle, along with clues to suggest that the economy is on firmer footing than the increasingly pessimistic forecasts make it seem. The gist is this: The United States may or may not enter a recession this year, but if it does, housing is unlikely to be the cause, because it never really recovered in the first place.

"Housing is not in a position to lead this thing down," said Edward Leamer, an economics professor at the University of California, Los Angeles.

How much it can help prolong the overall recovery is another matter. Home sales and prices have been sluggish in the face of rising interest rates. Still, the pace of construction, combined with pent-up demand from young adults, suggests that the sector should at least remain stable in the face of uncertainty elsewhere.

Why is housing so often a focus of anxiety as economic expansions run their course? Here are a few reasons.

Even though housing does not account for all that much of the economy, its role in recessions is huge, because it is highly cyclical and sensitive to interest rates. Think of expansions and recessions as the cycle of things that go up and down a lot. Housing is a big determinant of where that cycle is headed because, unlike many other sectors, it has wide swings.

The housing sector accounts for as little as 3 percent of economic output during recessions and about twice that during booms. Other pieces of the economy are much bigger, but they don't change nearly as much from boom to bust. Government spending, for instance, has hovered between 17 percent and 20 percent of the economy for decades. The three-percentage-point swing is about the same in each case, but government accounts for much more of the economy. Translation: Housing punches way above its weight.

As a result, while housing has never accounted for more than 7 percent of total output, it has on average accounted for about a quarter of the weakness in recessions since World War II, according to a 2007 paper by Mr. Leamer titled " Housing IS the Business Cycle."

After housing, the sector that has historically been second most important to recessions is consumer durables, or expensive purchases like cars, furniture and appliances. Those are often connected to the housing market's prosperity because people usually buy other things when they purchase a home.

Sometimes downturns have other causes, but they only underscore housing's role in economic cycles. The 1953 recession followed a decline in government spending after the Korean War, and the 2001 recession was driven by a decline in business spending after the dot-com bubble popped. Both were relatively brief and shallow - the 2001 recession was the least severe since World War II - in part because housing investment remained stable.

The most recent recession, from 2007 to 2009, offered one of the more exaggerated examples of housing's guiding role in downturns. A recent report from the Federal Reserve Bank of St. Louis found that the construction sector accounted for a little over a third of the decline in output in the past recession, and about half of the job losses (a figure that includes laid-off construction workers and job losses in connected industries).

How does housing look now? Mixed, but mixed in such a way that the things most important to economic growth are the most stable.

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Escalating prices, along with rising interest rates, deterred many home shoppers late last year. Prices in the Dallas area, which includes this neighborhood in Plano, are 76 percent higher than in 2012. Credit Brandon Thibodeaux for The New York Times

Measured in sales and prices, the housing sector appears to be in a precarious position. Existing-home sales were down about 10 percent in December from a year earlier, according to the National Association of Realtors. The group blamed rising prices and interest rates, and a lack of supply that has left buyers underwhelmed by their choices.

Much of the problem is that while job growth has been strong, home prices have gone up faster than incomes.

Prices have gone up so far so fast that even markets previously considered affordable are beyond the reach of many buyers. Home prices have risen by about 50 percent since 2012, according to Zillow, and many of the more affordable markets have shot up even faster. In Phoenix, home values have doubled since 2012, not adjusted for inflation. The Denver market is up 90 percent, Atlanta 84 percent, Nashville 78 percent and Dallas 76 percent. If people can't afford a home in Texas, where can they?

The sticker shock of rising prices, combined with rising interest rates that make monthly payments more expensive, scared off many buyers toward the end of last year. Some of that demand seemed to come back at the start of the year, after interest rates fell to roughly where they were a year ago.

Nevertheless, homes are sitting on the market longer, price cuts are becoming more common, and a number of homebuilders have had layoffs. Before a recent speech to 1,000 people from the housing industry, John Burns, founder of John Burns Real Estate Consulting, asked the members of the audience to forecast the year ahead. They were evenly split between those seeing sales and price declines and those seeing growth.

"Everybody is being really cautious right now," Mr. Burns said in an interview.

This all sounds very bad, but for anyone who isn't trying to sell a home or in the business of selling homes, it's not as bad as it seems.

A suburban neighborhood in Dublin, Ohio. Total housing starts grew in January at more than double the recession-era low, but still were far behind the long-run average. Credit Andrew Spear for The New York Times

When economists talk about a recession in housing, they largely refer to construction, not home prices. Most of the industry's contribution to annual gross domestic product lies in residential fixed investment, a category composed almost entirely of the building of single-family homes and apartment and condominium buildings (along with a small amount of home improvements and renovations).

Rising home prices help the economy in small but important ways, like making people feel richer and building up home equity that owners can tap and spend elsewhere. But increased spending from people feeling richer is not nearly as important as the pace of home sales and the volume of construction, since both of those create many jobs - for people like real estate agents and mortgage brokers on the sales side, and the architects, construction workers, electricians, plumbers and others who design and build new homes.

Home buying is weak and getting weaker, so that could be a concern. But construction is bordering on moribund. Total housing starts grew at an annual rate of 1.2 million a year in January, more than double the recession-era low of less than 500,000, but still well below an average of 1.5 million from 1990 to the start of the housing bust - despite an expanding population.

Clearly the need for housing is there, so why aren't builders building more? That is a confounding question.

During conference calls to announce their earnings, publicly traded builders like D.R. Horton and PulteGroup have said much the same thing as real estate agents, which is that buyers are put off by higher prices and creeping interest rates. Many builders also cite local regulations that make it harder to build homes in denser areas closer to jobs, and higher labor costs in a tight job market.

The overall message is that builders cannot build homes at the prices people want in the places people want them, so they aren't building much at all.

The largest demand for housing is at the lower end of the market, the hardest to serve profitably, although in conference calls a number of builders said they were shifting some of their building and land buying toward cheaper, smaller homes. This may or may not improve the pace of building.

The result is that the housing sector - the residential construction components of G.D.P., taken together - accounted for only 3.9 percent of the economy in the third quarter, and has helped drag down overall economic output for three quarters.

In other words: Housing is in recession already. It might not get better soon, but it probably won't get worse.

Conor Dougherty is an economics reporter. His work focuses on the West Coast, real estate and wage stagnation among U.S. workers. He previously worked at The Wall Street Journal, the San Diego Union-Tribune and The Los Angeles Business Journal. @ConorDougherty

A version of this article appears in print on , on Page B1 of the New York edition with the headline: Why a Downturn This Time May Not Be Housing's Fault. Order Reprints | Today's Paper | Subscribe

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Housing Is Already in a Slump. So It (Probably) Can't Cause a Recession.

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A decline in residential real estate has led several recessions. With construction still in a multiyear slump, it seems unlikely to be the culprit this year. The United States has had 11 recessions since the end of World War II. All but two were preceded by a big decline in the housing market.

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Title: Resale Is Expected to Be Bigger Than Fast Fashion Within 10 Years

Summary: Resale has been growing, especially online. online there's easier access and you don't have to leave your home. Signs show that it will increase more and shows no signs of slowing down. Millennials in this generation tend to stop wearing clothes after they've worn it a couple of times or maybe even once. So they are constantly buying clothes and accessories to keep up with fashion and their wardrobe and are helping the resale market increase. By 2022 the resale market will be worth $41 Bill.

Reflection: As a person who doesn't care how I look, care what people have to say, and just simply don't have time to dress up I'm happy to see that the fashion industry is doing fairly well. fashion is a big part of society now especially with the bigger brands such as yeezy's, Gucci, Givenchy and etc. In class we talk about inflation and market prices. The industry is facing inflation which is a downfall. we also talk about production cost.

Citation: Mau, Dhani. “Resale Is Expected to Be Bigger Than Fast Fashion Within 10 Years.” Fashionista, 3 Apr. 2018, fashionista.com/2018/04/resale-clothing-market-thredup-report-2018.

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The growth of resale - especially online - has been one of the biggest shifts in retail we've seen in recent memory. And based on a new report, that shift shows no signs of slowing down.

On Tuesday, leading resale site Thredup released its annual report covering the present and future of the resale market as a whole. It posits that the resale market will be worth $41 billion by 2022, and 49 percent of that will be apparel.

We knew resale was thriving, but were surprised to learn how quickly it may overtake other markets and shopping methods - including fast fashion - and how millennials, despite being broadly wasteful, are driving this movement. Read on for the most interesting takeaways.

Related articles

'Resale disruptors' are outpacing retail as a whole - by a lot.

Resale disruptors - meaning online consignment sites - will own nearly one third of closets by 2027, according to the report. They're growing nearly 24 times faster than retail as a whole: 49 percent year-over-year, vs. 2 percent. The three leading resale disruptors are said to be Thredup, The RealReal and Poshmark, which have raised $130 million, $173 million and $153 million in funding to date, respectively. "Additional players" mentioned in the report include Rebag, Depop, Tradesy and Grailed.

Millennials are both incredibly wasteful and sustainability-minded

They are the most impulsive generation when it comes to shopping, and typically discard items after 1-5 wears. At the same time, 77 percent of them say they prefer to buy from environmentally-conscious brands and they are "more likely to switch to thrift for environmental reasons." Forty percent of 18-24 year olds shopped resale last year.

Resale is actually overtaking fast fashion

Resale sites, as well as sharing platforms like Rent the Runway, have often positioned themselves as sustainable alternatives to fast fashion: A way to satisfy a social media-driven constant desire for newness without contributing to the negative environmental impact of buying disposable fashion from companies like Zara, H&M and Forever 21. Turns out, it's working. In 2017, resale had 6 percent market share while fast fashion had 9 percent. In 2027, that's projected to be 11 percent resale, 10 percent fast fashion.
Never miss the latest fashion industry news. Sign up for the Fashionista daily newsletter.

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Resale Is Expected to Be Bigger Than Fast Fashion Within 10 Years

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The growth of resale - especially online - has been one of the biggest shifts in retail we've seen in recent memory. And based on a new report, that shift shows no signs of slowing down. On Tuesday, leading resale site Thredup released its annual report covering the present and future of the resale market as a whole.

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Title: Job market bounces back in March with 196,000 gain in payrolls

Summary: This CNBC article talks about how the job market has bounced back. Economist estimated payrolls would be 175,000 but it ended up coming out better then what they had expected to 196,000. They thought it was going to fall but now they have some reassurance. Although wages are rising it isn't rising at a rate that's big enough to increase inflation also. Since February to March wage shave increased drastically.

Reflection: Jobs are getting harder and harder to find now and days. Everyone wants to be getting paid a decent amount of money to make it through in life. To see that wages and unemployment rate is increasing is amazing and I would love for it to continue to grow. As this grows so does inflation. In class we are constantly talking about GDP and the inflation rate and how it affects the economy in a positive and negative way

Citation: Cox, Jeff. “Job Market Bounces Back in March with 196,000 Gain in Payrolls.” CNBC, CNBC, 5 Apr. 2019, www.cnbc.com/2019/04/05/nonfarm-payrolls-march-2019.html.

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Job creation posted a solid rebound in March, with nonfarm payrolls expanding by 196,000 and the unemployment rate holding steady at 3.8%, the Bureau of Labor Statistics reported Friday.

That was better than the 175,000 Dow Jones estimate and comes after a dismal February that had economists wondering whether the decade-old economic expansion was nearing an end. The unemployment rate met expectations.

"With a strong March employment report now in the books, we've gotten some reassurance that the labor market is still strong," said Steve Rick, chief economist at CUNA Mutual Group. "Of course, last month's nosedive was disappointing, especially after December and January had such impressive numbers despite some sizable headwinds. But a good March report shows that February was more of an outlier than a canary in the coal mine."

Wage gains fell off the recent strong pace, increasing just 0.14% for the month and 3.2% year over year, below expectations of the 3.4% pace from last month. The average work week increased by 0.1 hour to 34.5 hours.

A broader gauge of unemployment that also counts discouraged workers and those holding part-time jobs for economic reasons also was unchanged at 7.3%. The measure, known as the "real unemployment rate" is down from 7.9% a year ago.

Job gains were fairly broad based.

Health care led with 49,000 new workers, professional and technical services added 34,000 and food and drinking establishments contributed 27,000. Construction rose by 16,000 but manufacturing saw 6,000 jobs lost.

The numbers came a month after February's jaw-dropping gain of just 20,000, which was revised up to 33,000 in the March report. January's big increase of 311,000 also got pushed up a nudge to 312,000, bringing the average gain over the past three months to 180,000. That's still solid though below the 233,000 average monthly gain for all of 2018.

Household survey data showed there were 201,000 fewer people counted as employed, but that came with a contraction of the labor force by 224,000. Those counted as not in the labor force increased by 369,000 to 95.6 million.The labor force participation rate declined to 63%, down 0.2 percentage points to its lowest level since November.

The total employment level nudged down to 156.7 million, while those counted as unemployed also edged lower to just over 6.2 million.

Broadly speaking, the report is likely to restore some confidence in a labor market that had looked shaky and an economy whose prospects were equally uncertain. Wednesday's private payrolls reading from ADP and Moody's Analytics was well below market expectations, indicating that more bad news could be on the horizon. Early-year data on retail sales and housing looked bad from a consumer standpoint, though some of those numbers have improved lately.

Economic conditions now look more favorable than they did at the start of the year. First-quarter GDP is projected to rise 2.1%, according to the Atlanta Fed, which had been tracking gains of just 0.2% only a few weeks ago. Fourth-quarter GDP increased by 2.2%, bringing the 2018 calendar year increase to 2.9%.

Federal Reserve officials continue to watch the jobs numbers closely as well. The central bank recently has indicated that it is on extended pause for more rate hikes as it evaluates the data coming through.

Market pricing currently sees about 50-50 chance the Fed cuts its benchmark interest rate before the end of the year. But that, too, has been in flux. By the Chicago Fed's measure, financial conditions are at the easiest in 25 years, indicating little need for the central bank to provide more accommodation.

"The 196,000 jobs added in March shows the US economy is not stalling out, something investors were worried about following February's disappointing numbers. And other data in the report showed wages are rising but not at a rate which would spur inflation," said Chris Gaffney, president of world markets at TIAA Bank. "This was a perfect report for equity investors as it shows the US economy is still marching along while the wage numbers will keep the FOMC on the sidelines."

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Job market bounces back in March with 196,000 gain in payrolls

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Job creation posted a solid rebound in March, with nonfarm payrolls expanding by 196,000 and the unemployment rate holding steady at 3.8%, the Bureau of Labor Statistics reported Friday. That was better than the 175,000 Dow Jones estimate and comes after a dismal February that had economists wondering whether the decade-old economic expansion was nearing an end.

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Title: Why People Are Outraged at Lower Tax Refunds (but Probably Shouldn’t Be)

Summary:
Us humans aren't always rational in how we think about money. Trump signed the tax Law in 2017 that reduced average American Households. its better to get no money taken out of your check rather then get taxes back since people don't get the full amount back. sometimes people even owe the IRS money so instead of receiving they have to pay them back. Not everyone's tax story is the same, some benefit more then others. The more you make the less you get back and the more you have to pay.

Reaction: what came to me as a surprise and something that I never knew is that When you withhold more in taxes than you ultimately owe, you are giving the United States government an interest-free loan.

Relation to class: Since its still tax season and it doesn't end until next month, April this is a topic that still comes up in the classroom. I haven't been in class in about a week so I don't specifically know what we have been talking about.

Citation:
Irwin, Neil. “Why People Are Outraged at Lower Tax Refunds (but Probably Shouldn't Be).” The New York Times, The New York Times, 27 Feb. 2019, www.nytimes.com/2019/02/27/upshot/lower-tax-refunds.html?rref=collection/timestopic/Economics&action=click&contentCollection=timestopics®ion=stream&module=stream_unit&version=latest&contentPlacement=3&pgtype=collection.

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Rationally, a dollar today is worth more than a dollar next year. Today, we offer further proof that humans are not always rational.

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Which would you rather have: an extra $50 in each biweekly paycheck, or a $1,300 refund payment in a single lump sum in April of the following year? Credit Jonathan Ernst/Reuters

Both these things are true: Most Americans received a tax cut in 2018. But many will see a smaller tax refund than they are used to when they file their 2018 returns.

Unpacking this seeming contradiction reveals a lot about the psychology and politics of taxes - and has big implications for anyone who wants to reform the way the government raises revenue.

We aren't always rational in how we think about money.

The tax law that President Trump signed at the end of 2017 reduced the average American household's 2018 average federal income tax obligation by about $1,600, according to an analysis by the Tax Policy Center.

To reflect those lower taxes, the I.R.S. published new tables to determine how much employers should withhold from each of their workers' paychecks and send to the government. This meant most people saw larger paychecks immediately.

But that also meant that over the course of the year, workers prepaid less tax. In a perfect world, the lower withholding and lower tax bill would be about equal to each other, and people filing their taxes would be no better or worse off than before in terms of their refunds.

In reality, though, not everybody's tax situation is the same. The details mean that some people received much more benefit from the changes than others.

The average tax refund filed through mid-February was down 17 percent, or more than $500, from the equivalent period last year, according to I.R.S. data. (Early filers aren't necessarily typical, so the numbers will most likely change as more Americans file.)

Still, some people have seen even larger reductions in their refund, or found that they now owe the I.R.S. money. And plenty of those people are irate about this, as evidenced on Twitter and in news coverage.

But Economics 101 would suggest that this trade - getting the money early and receiving a smaller refund or owing money to the I.R.S. at tax time - is the better deal.

Which would you rather have: an extra $50 in each biweekly paycheck, or a $1,300 refund payment in a single lump sum in April of the following year? The simple idea of the time value of money - that a dollar today is more valuable than a dollar tomorrow - suggests you should want the higher weekly paycheck.

When you withhold more in taxes than you ultimately owe, you are giving the United States government an interest-free loan. You're better off calibrating your withholding so that you have no refund, or owe a little when you complete your tax form (although you want to keep that obligation low enough to avoid I.R.S. penalties).

But as the discontent over smaller refunds shows, actual humans - as opposed to the rational automatons of economics textbooks - don't view it that way.

"The question that befuddles traditional economists is why people want these refunds," said Richard Thaler, a Nobel-winning economist at the University of Chicago's Booth School of Business. "Why do they want to make interest-free loans to the government? If they just went out and met a noneconomist, they would find that people like" refunds.

Essentially, the Trump administration chose to set withholding tables that created a short-term political talking point (your paycheck went up!) but that are likely to make people less happy over the medium term (your refund shrank!).

The term "behavioral economics," for the study of psychological dimensions of how people make economic decisions, had not yet come into use when the United States introduced tax withholding during World War II. But the creators of that system showed keen intuition about behavioral economics lessons that would become more formalized decades later.

At the time, the government needed to raise a lot of money fast for the war effort. If it had simply increased tax rates and expected everyone to write the government a large check at the start of the ensuing year, there would have been popular outrage.

But by compelling employers to deduct taxes from each paycheck as prepayment, the pain of filing taxes could be turned on its head. When most people end up receiving a refund from the government when they file their taxes, it becomes an occasion on which they receive a large lump sum, a form of forced, zero-interest savings.

In the language of behavioral economics, this reflects the " prospect theory value function," in which receiving a large check from the government at tax time is very pleasurable, and writing a large check to the government very painful. But a modest reduction to each paycheck is hardly painful at all.

As governor of California in the late 1960s, Ronald Reagan understood this, and resisted introducing a system of withholding state income taxes. "Taxes should hurt," he said, in opposing proposals that he believed would make the paying of taxes less noticeable - and therefore less painful.

His view was that anti-tax sentiment would be stronger if paying taxes meant actively writing a check to the government every year. (Eventually, in a 1971 budget crisis, he relented.)

So the anger of people faced with smaller refunds or new tax liabilities may prove damaging to President Trump and Republicans in Congress who face voters next year. But if Reagan's intuition was correct, over time it may make those voters more hostile to taxes - a win in the long run for anti-tax conservatives.

Neil Irwin is a senior economics correspondent for The Upshot. He previously wrote for The Washington Post and is the author of "The Alchemists: Three Central Bankers and a World on Fire." @Neil_Irwin * Facebook

A version of this article appears in print on , on Page B3 of the New York edition with the headline: Lower Tax Refunds May Spark Outrage, But Maybe Shouldn't. Order Reprints | Today's Paper | Subscribe

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Why People Are Outraged at Lower Tax Refunds (but Probably Shouldn't Be)

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Rationally, a dollar today is worth more than a dollar next year. Today, we offer further proof that humans are not always rational. Both these things are true: Most Americans received a tax cut in 2018. But many will see a smaller tax refund than they are used to when they file their 2018 returns.

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Title: US manufacturing output falls for a second straight month

Summary: In the past two  months January, and February the manufacturing output fell. The drop in manufacturing output was offset by gains in utilities and mining. Manufacturing activity, which accounts for about 12 percent of the economy, is losing steam as the boost to capital spending from last year’s $1.5 trillion tax cut package fades. February’s drop in manufacturing production added to soft reports ranging from retail sales to housing in suggesting the economy lost significant momentum early in the first quarter.

Reaction: My initial reaction was that I was surprised that it was the second outfall I would think they would learn from their first mistakes. It dropped by 0.4 in the last month. Officials at the Fed tend to look at capacity use measures for signals of how much “slack” remains in the economy how far growth has room to run before it becomes inflationary.

Citation:
“US Manufacturing Output Falls for a Second Straight Month.” 1BusinessWorld, 1businessworld.com/2019/03/business/us-manufacturing-output-falls-for-a-second-straight-month/.

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US manufacturing output falls for a second straight month

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U.S. manufacturing output fell for a second straight month in February, offering further evidence of

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Title: Gas prices start to climb

Summary: This Kiplinger article addresses that oil prices keep increasing. Prices are expected to rise once spring arrives. During these times more people are traveling and more out and about. It’s estmateed that WTI will trade at $55 to $60 per barrel. With one barrel being tha expensive it will force gas prices to go up. Gas prices anyways are always going up and down. It all depends on the area, the quality of the gas and how much gas you actually neeed. Intermediate traded near $56 per barrel recently, this is the highest level its been in about 3 months, i used to be around $42.50 in mid December.

Reaction: One thing that didn’t cross my mind was that gas pricesmay  increase drastically in the spring and summer since people are traveling more and they have no choice but to put gas. Peopleare  traveling all the time and I didn’t think for them to increase prices in the spring. To my knowledge gas prices are always increasing and decreasing. Prices range and you want to get the best quality gas.

Relation to class: Gas prices increasing is considered as inflation. Not every year can gas prices be considered inflation. Gas prices are either increasing or decreasing it just depends. In class we learn abou inflation and how you have to give something up inorder to increase the price or production of another product.

Citation:  Patterson, Jim. Kiplinger. Feb 19, 2019
Patterson, Jim. “Gas Prices Start to Climb.” Www.kiplinger.com, Kiplingers Personal Finance, 19 Feb. 2019, www.kiplinger.com/article/business/T019-C000-S010-energy-price-forecast.html. Accessed Feb 24, 2019

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Kiplinger's latest forecast on the direction of energy prices

By , Managing Editor February 19, 2019

Oil prices keep inching higher. Benchmark West Texas Intermediate traded near $56 per barrel recently, its highest level in roughly three months. U.S. sanctions on Venezuela are limiting exports of that country's heavy grades of crude, while OPEC is deliberately curbing production in order to push prices higher. Global oil demand also remains solid. Therefore, WTI has risen from a recent low of $42.50 per barrel in late December to today's mid-50s range.

We expect prices to rise further once spring arrives and Americans start traveling more. In June, we look for WTI to trade at $55 to $60 per barrel.

Gasoline prices are also heading higher. At $2.34 per gallon, the national average price of regular unleaded is up almost seven cents per gallon from a week ago and a dime from a month ago. Increased driving this spring, plus refineries' switchover to more-expensive summer gas formulations, should keep pushing up the price at the pump. Diesel, now average $2.94 per gallon, is also up a couple of pennies from last week and is likely to near $3 per gallon this spring.

In contrast to oil and gasoline, natural gas prices are well off their recent highs. Benchmark gas futures contracts are trading at $2.67 per million British thermal units. Last autumn, they briefly surpassed $4 during a bout of unseasonably cool weather that seemed to be a sign of a cold winter ahead. But for most of the country, the winter didn't turn out to be too frigid, except for the Midwest's January cold snap. And now, with spring approaching, gas traders seem to be betting that heating demand is going to weaken soon. An unusually frosty March could cause another brief price spike, but otherwise, don't look for gas futures to rally anytime soon.
Source: Department of Energy, Price Statistics

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Kiplinger's latest forecast on the direction of energy prices By , Managing Editor February 19, 2019 Oil prices keep inching higher. Benchmark West Texas Intermediate traded near $56 per barrel recently, its highest level in roughly three months. U.S.

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Title: The Economics of the soaking rich.

Summary: In the beginning of the New York Times article Paul mostly talks about Alexandria Ocasio- Cortez who is running for congress. This article also focuses on the rich and taxes. Rich people are only getting richer no matter how much tax they pay they still make more money anyways. some of them get away with not paying taxes or don't have to pay as much. This article also had a graph in it which shows the history of the top marginal income
tax rates vs.growth in real GDP per capita. America used to have high taxes on the rich as years went on the rates got worse and worse.

Reaction: When I came to this article I knew it was an opinion piece but I didn't expect Paul Krugman to come at people, he stated " Only ignorant people like … um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance". I honestly didn't expect that even knowing it was an opinion article. Also another thing that stood out to me

Relation to class: Currently in our Macroeconomics class we are learning about GDP deflator, CPI, producer price index, etc. This article is more about taxes, specifically tax rates and they also calculated the optimal top tax rate which came out to be 73%. Given that its tax season and everyone is filling for taxes. The Government recently had a shut down but have recently opened and no one knows if they will shut down again.

Citation:  Krugman, Paul. New York Times. January 5, 2019 Krugman, Paul. “The Economics of Soaking the Rich.” The New York Times, The New York Times, 5 Jan. 2019, www.nytimes.com/2019/01/05/opinion/alexandria-ocasio-cortez-tax-policy-dance.html?rref=collection/timestopic/Economics&action=click&contentCollection=timestopics®ion=stream&module=stream_unit&version=latest&contentPlacement=5&pgtype=collection. accessed 2/17/2019

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What does Alexandria Ocasio-Cortez know about tax policy? A lot.

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Representatives Alexandria Ocasio-Cortez of New York and Jahana Hayes of Connecticut on the House floor in Washington on Thursday. Credit Credit Carolyn Kaster/Associated Press

I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad - and in their madness they're inadvertently revealing their true selves.

Some of the revelations are cultural: The hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: The right's denunciation of AOC's "insane" policy ideas serves as a very good reminder of who is actually insane.

The controversy of the moment involves AOC's advocacy of a tax rate of 70-80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like ... um, Peter Diamond, Nobel laureate in economics and arguably the world's leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it's a policy nobody has ever implemented, aside from ... the United States, for 35 years after World War II - including the most successful period of economic growth in our history.

To be more specific, Diamond, in work with Emmanuel Saez - one of our leading experts on inequality - estimated the optimal top tax rate to be 73 percent. Some put it higher: Christina Romer, top macroeconomist and former head of President Obama's Council of Economic Advisers, estimates it at more than 80 percent.

[Never be uninteresting. Read the most thought-provoking, funny, delightful and raw stories from The New York Times Opinion section.]
Where do these numbers come from? Underlying the Diamond-Saez analysis are two propositions: Diminishing marginal utility and competitive markets.

Diminishing marginal utility is the common-sense notion that an extra dollar is worth a lot less in satisfaction to people with very high incomes than to those with low incomes. Give a family with an annual income of $20,000 an extra $1,000 and it will make a big difference to their lives. Give a guy who makes $1 million an extra thousand and he'll barely notice it.

What this implies for economic policy is that we shouldn't care what a policy does to the incomes of the very rich. A policy that makes the rich a bit poorer will affect only a handful of people, and will barely affect their life satisfaction, since they will still be able to buy whatever they want.

So why not tax them at 100 percent? The answer is that this would eliminate any incentive to do whatever it is they do to earn that much money, which would hurt the economy. In other words, tax policy toward the rich should have nothing to do with the interests of the rich, per se, but should only be concerned with how incentive effects change the behavior of the rich, and how this affects the rest of the population.

But here's where competitive markets come in. In a perfectly competitive economy, with no monopoly power or other distortions - which is the kind of economy conservatives want us to believe we have - everyone gets paid his or her marginal product. That is, if you get paid $1000 an hour, it's because each extra hour you work adds $1000 worth to the economy's output.

In that case, however, why do we care how hard the rich work? If a rich man works an extra hour, adding $1000 to the economy, but gets paid $1000 for his efforts, the combined income of everyone else doesn't change, does it? Ah, but it does - because he pays taxes on that extra $1000. So the social benefit from getting high-income individuals to work a bit harder is the tax revenue generated by that extra effort - and conversely the cost of their working less is the reduction in the taxes they pay.

Or to put it a bit more succinctly, when taxing the rich, all we should care about is how much revenue we raise. The optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.

And that's something we can estimate, given evidence on how responsive the pre-tax income of the wealthy actually is to tax rates. As I said, Diamond and Saez put the optimal rate at 73 percent, Romer at over 80 percent - which is consistent with what AOC said.

An aside: What if we take into account the reality that markets aren't perfectly competitive, that there's a lot of monopoly power out there? The answer is that this almost surely makes the case for even higher tax rates, since high-income people presumably get a lot of those monopoly rents.

So AOC, far from showing her craziness, is fully in line with serious economic research. (I hear that she's been talking to some very good economists.) Her critics, on the other hand, do indeed have crazy policy ideas - and tax policy is at the heart of the crazy.

You see, Republicans almost universally advocate low taxes on the wealthy, based on the claim that tax cuts at the top will have huge beneficial effects on the economy. This claim rests on research by ... well, nobody. There isn't any body of serious work supporting G.O.P. tax ideas, because the evidence is overwhelmingly against those ideas.

Look at the history of top marginal income tax rates (left) versus growth in real GDP per capita (right, measured over 10 years, to smooth out short-run fluctuations.):

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Top tax rates and growth Credit Tax Policy Center, BEA

What we see is that America used to have very high tax rates on the rich - higher even than those AOC is proposing - and did just fine. Since then tax rates have come way down, and if anything the economy has done less well.

Why do Republicans adhere to a tax theory that has no support from nonpartisan economists and is refuted by all available data? Well, ask who benefits from low taxes on the rich, and it's obvious.

And because the party's coffers demand adherence to nonsense economics, the party prefers "economists" who are obvious frauds and can't even fake their numbers effectively.

Which brings me back to AOC, and the constant effort to portray her as flaky and ignorant. Well, on the tax issue she's just saying what good economists say; and she definitely knows more economics than almost everyone in the G.O.P. caucus, not least because she doesn't "know" things that aren't true.

Paul Krugman has been an Opinion columnist since 2000 and is also a Distinguished Professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @PaulKrugman

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Opinion | The Economics of Soaking the Rich

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What does Alexandria Ocasio-Cortez know about tax policy? A lot. I have no idea how well Alexandria Ocasio-Cortez will perform as a member of Congress. But her election is already serving a valuable purpose. You see, the mere thought of having a young, articulate, telegenic nonwhite woman serve is driving many on the right mad - and in their madness they're inadvertently revealing their true selves.

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TitleTHE REAL LEGACY OF THE 1970’s
Summary: In the New York Times article, The real legacy of the 1970’s, it talked about inflation in the 1970’s. In the 1970’s inflation was very pivotal. It changed the thought process of Americans on views of their economic relationships with other peers. The author then goes on to talk about the Great Depression and how these events that happened long time ago can still affect our economy is various ways. People where forced to turn to credit cards and max them out, not many had credit cards because of how limited they where. Before the 1970’s the economy was doing well there where plenty of jobs to choose from and money wasn’t that much of an problem until the 1970’s. The great inflation changed our economy and ourselves for the worst but now it’s a learning experience that will help change us for the better.

Reaction: When I first read this article I had no knowledge about the 1970’s and the economics during that time. As I read more and more into the article I learned that this had a big affect in our economy. I have heard about the Greta depression but never the great inflation. I was shocked that the great inflation was affecting people for who they where. People had to look out for themselves and become selfish in order to survive and make it. It wasn’t about making and saving money anymore “your money had to make money”.

Relation to class: Now that we have gotten more into depth on macroeconomics I’m beginning to understand it more and relate it to my everyday life. In class we are learning about inflation rates, cpi’s And much more. We have to learn and look back in the past to learn from them. As we go on in life inflation is still being affect it’s either increasing or decreasing. As of 2019 the inflation rate is 1.9% but it should be up to 2.3%.

Citation: Tomasky, Michael. “The Real Legacy of the 1970s.” The New York Times, The New York Times, 2 Feb. 2019, www.nytimes.com/2019/02/02/opinion/sunday/inflation-economy-united-states-1970s.html?rref=collection/timestopic/United States

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Opinion | The Real Legacy of the 1970s (Published 2019)

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Forget leisure suits and disco balls. The decade’s economic tumult changed who Americans were as a people.

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Discussion and Summary:

Oliver Blanchard a well respected economist gave amclear message at a conference he stated " The world has been too obsessed in recent years with the supposed costs and risks of government debt". His case/research is about economic growth rates in modern times are higher than what the interest rates would be. After World War 2 the United States didn't pay their debts through taxes. Even Donald Trumps make the richer rich tax cut won't help with that. Recent growth rates have been lower in debt and can reach a level that will be damming. It can hurt our future generations before they even have a chance.

Citation:
Leohardt, David. New York Times. Jan 10, 2019  https://www.nytimes.com/2019/01/10/opinion/united-states-economy-public-debt.html?rref=collection%2Ftimestopic%2FEconomics&action=click&contentCollection=timestopics&region=stream&module=stream_unit&version=latest&contentPlacement=3&pgtype=collection accessed 1/3/2019

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Title:   The Experts Keep Getting the Economy Wrong

Summary: In this opinion article, David Leohardt talks about the false talks on how the economy is "booming". Everyone especially Trump seems to be bragging and talking about how the economy is doing great. It has now become an exaggeration given that the economy isn't doing so well. Federal Reserve officials have once again overestimated how rapidly the economy would grow. If they would have estimated correctly the economy should be up by 6%.

Reflection: what came to me as a surprise that the GDP growth still hasn't reached 3 percent 3 not even being a high number since the year of 2010. One topic that we went over in class and briefly still do is GDP. GDP for those who don't know is a measure of the value of all final goods and services in a period of time weather its quarterly or yearly.

Citation: Leonhardt, David. “The Experts Keep Getting the Economy Wrong.” The New York Times, The New York Times, 10 Mar. 2019, www.nytimes.com/2019/03/10/opinion/us-economy-stagnation-growth.html?rref=collection/timestopic/Economics&action=click&contentCollection=timestopics®ion=stream&module=stream_unit&version=latest&contentPlacement=5&pgtype=collection.

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[Sign up for David Leonhardt's daily newsletter with commentary on the news and reading suggestions from around the web.]
The second big cause is an investment slump. Despite all the savingsavailable to be invested, companies are holding back. Some have grown so large and monopoly-like that they don't need to invest in new projects to make profits. Think about your internet provider: It may have terrible customer service, but you don't have a lot of alternatives. The company doesn't need to invest in new technology or employees to keep you as a customer.

Beside a lack of competition, the investment slump stems from what Summers calls the de-massification of the economy. Developers aren't building as many malls and stores, because goods now go straight from warehouses to homes. Offices don't need as much storage space. Cellphones have replaced not just desktop computers but also cameras, stereos, books and more. Many young people have decided they're happy living in small apartments, without cars.

For all of these economic problems, there are promising solutions. But the United States is not giving those solutions a try.

The 2017 Trump tax law is a useful case study. It is a dreadful piece of economic policy - essentially a giant effort to aggravate income inequality. Tax cuts that benefit the wealthy most are huge and permanent. Tax cuts focused on everyone else are smaller and temporary.

But the law still pumped money into the economy last year, thanks largely to those temporary tax cuts for the middle class and poor. And guess what? G.D.P. growth finally met some forecasters' expectations, as you can see from the first chart above. The economy expanded 2.9 percent in 2018. Unfortunately, the boost seems to have been temporary. In the first quarter of this year, growth has slowed markedly, probably to about 0.5 percent. It will most likely grow faster over the rest of 2019, but not 3 percent. Once again, economists have started downgrading their expectations.

A better policy response would start with a tax cut focused on the majority of Americans, not the wealthy. And there are many other ways to take on secular stagnation. When I spoke to Summers last week, he rattled off a list:

Infrastructure projects, to jump-start investment. The retirement of coal-fired power plants, which would also lead to new investment. Stronger safety-net programs, including Social Security, to reduce the savings glut. More aggressive antitrust policies, to combat monopolies. And a Federal Reserve that, at long last, stopped making the same mistake - of overestimating both growth and inflation.

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Opinion | The Experts Keep Getting the Economy Wrong

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Sign up for David Leonhardt's daily newsletter with commentary on the news and reading suggestions from around the web.] The second big cause is an investment slump. Despite all the savingsavailable to be invested, companies are holding back. Some have grown so large and monopoly-like that they don't need to invest in new projects to make profits.

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summary:
This New York times article provides graphs from the Bureau of Labor statistics showing the change in rates in job increases in the years 2013-2015. The unemployment rate faced a drastic change when dropping from 10% to 3.7%. 250,000 jobs where added with the government estimating that the economy has grown by 3.5%. one of president Trumps main focuses are on manufacturing jobs and they have fairly increased. Despite unemployment rates going down wages have been increasing at a much slower rate. this results in many Americans not being able to afford too pay their bills or they are just not able to pay them on time.

Reaction:
When coming across this article I didn't expect to see some of these things. in this article it states that women are taking over the work force and are coming in more then men. Many more women are conniving and find them selves having to work and provide for their family. what I also found interesting was that it stated that employees where raising wages and making deals before hand to get people to work for them seasonally. Employers are actually feening for employees and are hiring way more given that completion for jobs have gone up and everyone is trying to make way in the world. to myna knowledge and given that the article was made in 2018 I personally think the numbers have decreased with the government shut down and everything.

Relation to class:
Not familiar with economics of any kind and this being my first class dealing with economics. In Macro economics I believe we will be dealing with unemployment and I would love to know more about this and how our country is doing financially. Its important to know the insights on employees and employers because they are the foundation. They are the ones the customers talk to and are the ones who are running your business or selling your product. if unemployment rates are going up who's working for these companies? How are people getting by and doing financially?

Citation:
Cohen, Patricia. “U.S. Added 250,000 Jobs in October; Unemployment at 3.7%.” The New York Times, The New York Times, 2 Nov. 2018, www.nytimes.com/2018/11/02/business/economy/jobs-report.html?rref=collection/timestopic/Unemployment&action=click&contentCollection=timestopics®ion=stream&module=stream_unit&version=latest&contentPlacement=10&pgtype=collection.

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The last official snapshot of the economy before Americans vote on Tuesday offered another reminder of the labor market's persistent strength. Hiring is up. Wages are up. The total number of workers and job searchers is up.

"It's really the strongest part of the broader economy at the moment," Michelle Girard, chief United States economist at NatWest Markets, said of the labor market.

A swerving stock market, tariffs and weakening growth in other countries may be causing agita, but they have done little to dent economic momentum in the United States. Employers added 250,000 jobs in October, extending a record streak of growth to 97 months, the Labor Department reported on Friday.

The economy has historically not played an outsize role in midterm elections, and this political season, border control, health care and Brett Kavanaugh's nomination to the Supreme Court have gobbled up airtime and political ad space. Still, about three-quarters of registered voters say the economy is "very important" in determining their vote, according to polls conducted by the Pew Research Center. Among Republicans, that number is even higher at 85 percent.

"Jobs and the economy" was also cited more frequently than other issues as the most important in a survey conducted in early October for The New York Times by the online research platform SurveyMonkey.

A recent string of reports suggests both are in good shape. Last week, the government estimated that the economy grew at a hearty annualized rate of 3.5 percent in the third quarter. Confidence remains high among consumers and business leaders. Over the past year, employers have added an average of 210,000 jobs a month.

Friday's roundup also offered evidence that sidelined workers are not only feeling optimistic about job prospects but are actually finding work, which is why the jobless rate was unchanged at 3.7 percent even as employers hired more people. An estimated 711,000 people joined the labor force last month. President Trump, on Friday, called the numbers "tremendous."

A modest monthly wage gain of 0.2 percent nonetheless produced a surprisingly big 3.1 percent jump in annual growth. That was partly because of an unusual drop in pay in October last year after hurricanes. Yet even if the year-over-year increase was somewhat inflated, the underlying trends point to a pickup in wage growth.

Some analysts saw warnings of inflation, but others said the pay increase should not bother policymakers at the Federal Reserve. "I don't think it's something the Fed should worry about," Ms. Girard said. "Productivity growth is picking up, and workers should earn more. It doesn't mean companies have to pass on higher wage costs to consumers. They can afford to pay them more."

The Fed, which has increased rates three times this year from historically low levels, is expected to raise them again to 2.5 percent in December as a hedge against inflation.

Mr. Trump has called the Fed "loco" and "out of control" for raising interest rates, and blamed it for the recent drop in stock prices and for potentially derailing the economy.

In a call with reporters, Kevin Hassett, the chairman of the president's Council of Economic Advisers, cited productivity growth as the explanation for higher wages, and not an overheating economy. He also took the opportunity to say that the president respects the Fed's independence.

As always, the monthly jobs report captures only a particular moment; the underlying trend is what's important. That caution is particularly pertinent this time.

The back-to-back hurricanes in September and October may have distorted the data in unpredictable ways. "It looks good, but it's never happened before when you have hurricanes making landfall in successive survey weeks," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Manufacturing jobs - which have traditionally paid well and have been a focus of Mr. Trump's policies - increased by a healthy 32,000.

Here, too, Mr. Shepherdson advised skepticism, noting that the Institute for Supply Management reported this week that its manufacturing index had fallen to a six-month low amid worries about tariffs, shortages of parts and a drop in global demand.

"If I were a Republican politician, I would be shouting about it," Mr. Shepherdson said, referring to manufacturing. "But there's no way that growth is going to continue." Manufacturing sectors in China, in particular, and Europe are weakening sharply. Producers, he said, are worried about "tariffs, tariffs, tariffs."

October's figures will be revised twice more, and September's once more.

Although the unemployment rate has consistently surfed below the levels reached in 2000, at the height of that expansion, wages have been growing at significantly slower rates.

Low wages in many sectors have contributed to financial instability. More than a quarter of Americans don't earn enough to cover basic expenses, while more than a third are unable to pay all their bills on time, according to a report released Thursday by the Center for Financial Services Innovation, which is funded by nonprofit foundations and several banks. That shortfall has contributed to mounting credit card debt and loan defaults.

October's report, however, is among several recent signs that wage growth is gathering steam.

According to a report last week from the research arm of the payroll processing firm ADP, American workers are earning nearly $1 more per hour on average than they were a year ago.

Protolabs, a digital manufacturing company based in Minnesota, hired 50 people last month, bringing the year's total to 340, a pace it expects to match in 2019, said Renee Conklin, vice president for human resources. But the competition for workers is becoming stiffer. "We're seeing more employers making counteroffers to retain people," Ms. Conklin said.

Since the recession ended, analysts have struggled to understand how many more potential workers are out there. Before the financial crisis, more than 66 percent of the population 16 or older was working or looking for a job. In recent years, that number - the labor-force participation rate - has rarely risen above 63 percent.

Many of those missing workers will never rejoin the labor force - some have reached retirement age, others have seen their skills lose value, and a number are too disabled to work.

Economists continue to argue about how many more people could be lured back to the labor market. Rising wages are certainly one attraction.

Women are coming back into the work force at a much faster rate than men, however. And over the past year, a net total of 1.4 million women have joined compared with 845,000 men. Drawing in even more women would require better child care, paid parental leave and more flexible hours, said Betsey Stevenson, an economist at the University of Michigan. "We know what to do for women," she said. "We're really at a loss as to what to do to induce more men back."

Job opportunities are also rippling out to groups that were largely bypassed during much of the recovery: African-Americans, Hispanics, less-educated workers and people with disabilities have all seen their unemployment rates drop in recent months.

Employers say they are constantly on the hunt for workers. "I speak to probably a thousand businesspeople a month," said Rick Lazio, a former Republican congressman who is a senior vice president at Alliantgroup, a tax-credit consulting firm. Midsize manufacturers are turning down lots of business, he said, "because they can't find the people and they can't get the equipment fast enough."

Help is not coming from abroad: The number of immigrant visas issued by the government has declined for two years in a row.

Worries about fierce competition for holiday hiring have prompted employers to be more aggressive, putting offers out earlier than usual and raising wages, recruiters said.

United Parcel Service has said it plans to hire 100,000 seasonal workers. Several applicants for packing or delivery positions who showed up at the company's hulking customer center in Manhattan during a recent nationwide hiring drive said they hoped temporary stints would turn into permanent jobs. A company spokesman said holiday positions paid $10.35 to $30 an hour, depending on the location.

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Worried about the competition for seasonal workers, companies are making offers earlier and raising wages. United Parcel Service recently held hiring events around the country, including this one in Manhattan. Credit Kholood Eid for The New York Times

"I'm just praying," said Chanique Cox, 42, who did not finish high school. She knocked her knuckles on a wooden counter and clicked her blue nails. "I'm only finding temporary jobs. I would love it if I got a permanent job."

Follow Patricia Cohen on Twitter: @PatcohenNYT.
Ben Casselman contributed reporting.

A version of this article appears in print on , on Page A1 of the New York edition with the headline: Employers in U.S. Add 250,000 Jobs As Economy Hums. Order Reprints | Today's Paper | Subscribe

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U.S. Added 250,000 Jobs in October; Unemployment at 3.7%

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The last official snapshot of the economy before Americans vote on Tuesday offered another reminder of the labor market's persistent strength. Hiring is up. Wages are up. The total number of workers and job searchers is up. "It's really the strongest part of the broader economy at the moment," Michelle Girard, chief United States economist at NatWest Markets, said of the labor market.