The Economics of Unions

Gary Becker (link) and Richard Posner (link) opened a discussion on how unions influence policymaking decision. Recently, president Obama imposed punitive 35 percent tariff rate on imported Chinese tire (link) risking the coming trade war. Indeed, China may file a case against the U.S at the WTO, and the WTO may rule against the U.S for imposing illegal and discriminatory trade practices.

Many believe that president Obama enforced trade protection to win the support of the unions in health care reform. In fact, the bailout of GM and Chrysler was one of the major efforts to help unions, particularly the United Auto Workers, in paying the health-care and pension benefits that GM and Chrysler couldn’t actually afford to pay.

Recently, the Congress has been split up on Employee Free Choice Act which suggests giving mandate to unions representing employee in arbitrating union-management contracts. I believe the Congresional Budget Office will yield a meaningful research on the economic effects of the act.

The empirical evidence on union activity is, in fact, quite clear. In OECD comparison panel (link), there is a strong, negative and significant relationship between the density of union membership and labor market rigidity. Sweden, for example, hasn’t enforced a general level of minimum wages. Yet in 2007, over 7o percent of the working population was unionized. High union density further contributed to inflexible labor market structure which led to low employment growth, low productivity growth and exerted a strong upward pressure on real labor cost.

Yet, there is a distinctive character of trade unions within Europe. Traditionally, unions in Europe possessed a stronger influence on political decision in areas such as taxation, income redistribution and government size. However, there are significant disparities in union activity throughout Europe. In 1990s, Denmark enforced a series of reforms that deregulated labor market structure towards greater flexibility. Today, Denmark’s labor market is cited as the most competitive in the world (link). From 1990 to 2007, union density decreased from 75.3 percent to 69.1 percent. On the other side, labor market structures in Continental and Mediterranean Europe are known for inflexible features, regulation and rigidity. Meanwhile, Anglo-Saxon countries, Britain and Ireland, are known for flexible labor markets and few barriers impeding labor market performance. Dismissing and employee costs 10 weekly salaries in Ireland compared to 56 weekly salaries in Spain.

Although variation in trade union density over time explains a relatively large part of variation in productivity, union activity and influence in political decision-making could be the decisive factor in explaining cross-country variation in labor market outcome. That would requiring the design of principal indicator that could measure union influence on the quantitive basis. The influence of trade unions has, in my opinion, a strong common connection to cultural patterns and informal institutions.

For instance, countries with weak rule of law, persistent corruption, high tax burden and barriers to trade and investment, tend to have larger underground economies. Empirical estimates on the size of underground economies suggest that, in Europe (link), Mediterranean countries (Italy, Spain, Greece, Portugal) have the largest share of shadow economies. There is a significant cross-country variation. The estimates of shadow economies for 28 transition countries is 40.1 percent and 16.3 percent for the OECD. So, could union activity affect the size of shadow economies

If unions, as an interest group, exert a strong influence in politics, their political philosophy will probably lean left. Thus, if unions influence decisions on taxation issues, welfare benefits, pension schemes and government size, the outcome will probably induce more complexity, more regulation and more barriers to trade, entrepreneurship and investment. The combination of those factors can strongly influence labor and business incentives and, hence, also determine and productivity growth.

Is Germany Dependent on Exports to Grow?

The analysis that follows accompanies Manuel’s political overview, over at GEM, of the recent events in Germany as well as Edward’s economic survey of the current state of play in the German economy. Essentially we are going to have a look at, arguably, one of the more salient features of the German economy in the recent period, namely that of her dependence on exports to grow. What we are going to ask here is then furthermore whether this presence of export dependency is related to the fact that Germany is one of the oldest economies in the world measured on median age (currently running at approximately 44 years)[1]. This is a bold claim and if it is unlikely that we will be able to provide decisive evidence for our claims that Germany; 1) is dependent on exports to grow and 2) that this can be traced back the economy’s ageing population, we hope that at least we will provide some perspective.  As an editorial note, the arguments presented follows closely Vistesen (2010) which is essentially a working paper under preparation at this point in time.

In the first instance, it is worthwhile to point out that while export dependency in the form it will be presented here enjoys very little, if any, backing in the academic literature it remains one of the more popular ways to narrate the German situation in the context of its recent economic performance, not least in a financial crisis context (see e.g. Martin Wolf Martin Wolf (2008) – Global Imbalances Threatens the Survival of Free Trade). The main question which arises is thus how the global economy will, or indeed can, emerge in a situation where hitherto external deficit nations (the US, Spain, etc) now have to live less off of foreign borrowing while those surplus nations supporting these deficits cannot arrive at stimulating domestic demand. This question which ties together a lot of the contemporary discourses on the global economy is important to keep in my as we move along into a more static world of academic theory.

What is Export Dependency?

We define export dependency as a high and increasing connection between the variation of total output and the variation of the external balance, the latter which will be proxied by the trade surplus in the analysis that follows. Consider consequently the following very simple empirical relationship for an open economy;

Where Y(t) is national income modeled as a simple function of its components; consumption expenditures, government spending, investments, and the current account. All partial derivatives are naturally positive and if we focus strictly on the partial derivative for national income with respect to the current account, we get;

In this simple framework, export dependency may arise as function of the increasing importance of this derivative in explaining the variation of total output which simply means that the extent to which we observe the trade surplus as an increasingly strong driver of economic growth we are moving closer to a state of de-facto export dependency.

Now, this still does not answer the question of exactly what export dependency is the present context since while it is certainly one thing to be export oriented or perhaps even export reliant, the term dependency implies a much strong and potentially malignant situation as it translates into a situation where domestic economic activity becomes overtly reliant on matters elsewhere and external to the economy.

In this sense, export dependency arises in the distinction between an economy where external demand may simply be an extra boost to growth beyond a vibrant domestic economy and an economy where domestic activity is not sufficiently able to spur growth to an acceptable degree and  where the positive contribution from extra demand become a prerequisite to maintain growth. It is exactly in this context that the demographic perspective becomes interesting since one obvious and intuitive consequence of the prolonged process of ageing as a result of lingering below replacement fertility as seen in Germany is that domestic demand proxied by consumption and investment demand will decline to reflect the decline in the labor force relative to the total population. This would then be a natural consequence of a standard life cycle analysis set in a closed economy where savings have to equal investment in every period.

Of course, the rub which arises as a result of this quite natural and logical process is that the need to keep and maintain economic growth does not dissipate with ageing. If anything, in a society such as the German this need will remain, or even increase, as an ever growing headache in the context of how to maintain (or viably reform) key institutional structures such as pension and health care systems whose continuing existence, whether one likes this or not, is contingent on headline economic growth. In this sense, the open economy opens up a window of opportunity to fight this situation and essentially to make up for an increasingly lackluster domestic economic environment by exporting excess capital and capital goods abroad to earn a return either in the form interest income of a pure addition to growth in the form export revenues.

Demographics and Open Economy Macroeconomics

If the introductory section above should convince you what export dependency is and why it may be related to ageing the fundamental question here is whether and how demographics may ultimately act as a driver of open economy macroeconomics and international capital flows. The empirical and theoretical contributions here are extensive, so we won’t deal with them in detail but merely point out that the idea that demographics may affect capital flows is not an original postulate and has been investigated in seminal contributions such as Summers et al. (1990), Higgins (1998), Feroli (2003), Bryant (2006), Supan et al. (2007) and Ferrero (2007) to mention just a few.

Despite considerable uncertainty surrounding the exact effects, these studies jointly find that demographics indeed do form strong drivers of open economy dynamics and that, by a applying a standard life cycle framework, come reasonably close at providing some interesting results even if for example the hypothesis of rapid dissaving is still highly contested. But what is a standard life cycle framework then in the context of the effect of demographics on the current account? Well, life cycle theory as postulated by Franco Modigliani and Richard Brumberg (see Deaton (2005)) simply states that a consumer’s saving pattern will be hump-shaped to reflect the fact that she will need to spend her working years saving for retirement where she, by definition, will not be receiving labor income. This also indicates that the current account should follow a similar pattern if modeled entirely as a function of the age structure of society

This figure is essentially drawn free hand on the basis of the empirical estimations of Higgins (1998) and  comes with an important interpretation. According to Higgins (1998), and in a general life cycle perspective, we need to distinguish between two centers of gravity as economy moves through the demographic transition:  One is when the demand for investment is largest as a function of age and thus when, one could argue, the capacity to absorb external investment is largest (e.g. the demographic dividend). Such periods are traditionally thought to be associated with a current account deficit since whereas investment demand may be large, domestic savings are not likely to be adequate to cover this thus implying a current account deficit to the extent that foreign savings stand ready and able to move. The second period occurs later as the total labour force begins to decline relative to the total population. This has the effect of depressing investment demand, but since this is also the period in which savings are maximized (really not counterintuitive when you think about it), it should, all things equal, be associated with a current account surplus.

The green line is a pure hypothecial construct and has no empirical counterpart (yet). It essentially represents a constraint in the form of the economy’s need to rely on external demand to provide economic growth. In this sense, the constraint is non-binding up until the economy moves into old age (say a median age of >42 years) after which the expected result from ageing based on the life cycle theory stands in stark contrast with the fundamentals of an ageing economy where external demand becomes one of the only real sources of continuous growth in headline GDP. Remember here, as a rather important point aside, that economies such as Germany need this growth if they want to maintain the continuity of their welfare societies.

Within the typology of Malmberg, Germany would clearly be in the ageing phase, but since the threshold here is very unclear as a general rule, we could say that it is placed  somewhere in the maturity phase inching over to the ageing phase and thus the period in which we should hypothetically observe dissaving as the savings supply will decline faster than investment demand. The first thing to observe here is then that the fact that Germany is running a surplus is not surprising given this model framework since, but the crucial and all encompassing question becomes whether this becomes a de-facto state of dependency with respect to economic growth since the decline in domestic demand will continue to depress the potential growth rate of the economy. In the jargon of the typology above, thesis of export dependency attacks the assumption of dissaving and postulates instead that keeping domestic savings above domestic investment demand and thus running an external surplus is one of the only ways in which an economy such as Germany may hope to achieve the desired growth rates as she, inevitably, moves into the unknown with an increasingly skewed old age structure.

An Empirical Perspective

In order to get a hold of the argument in the specific context of Germany it is worthwhile to start out with the following charts which depicts the ratio of consumption to GDP, the ratio of the trade surplus to GDP, the ratio of government spending to GDP as well as the ratio of total savings (including the trade surplus) to GDP. The data is taken from OECD in current prices (seasonally adjusted) and covers the period Q1-1960 to Q3-2008. All manipulations are based on own calculations.

The first thing to notice is that up until the very end of the 1990s the trade surplus did not represent a substantial part of total income in Germany. If we take the large perspective we can say that up until the latter part of the 1980s Germany was running consistent trade deficit, a deficit which narrowed substantially throughout the 1990s and moved into a substantial surplus at the entry to the 21st century. Moving on to consumption it is possible to observe a slight negative trend in the share of consumption to GDP and especially in recent 10 years, the negative trend has been strong and thus we could say that decline in consumption has been substituted for an increase in the trade surplus, at least; it would appear so from just eyeballing the graph. It is also interesting to observe that the point in time where consumption to GDP peaked from somewhere around 1975 to 1985 coincides quite nicely with the peak of the trade deficit in a historical context.

Moving on to the share of government spending to GDP the trend is, contrary to the corresponding figure for consumption and investment, is upwards. However, there is a certain sense of optical deceit here since if you disregard the sharp increase in government spending as a share of GDP from the 1960 to the middle of 1970s, the trend has been very much like the one for consumption with the interesting detail that the share of government spending to GDP has not declined to the same extent as consumption.

If we finally look at the graph which plots the share of investment of GDP in combination with the trade surplus to GDP, it is obvious that while domestic investment has steadily declined as a share of GDP total savings have been more stable thanks to the addition from the trade surplus. In fact, we look at the total savings to GDP in 2008 it resides at the same level seen in 1970. What is crucial here of course is the composition of this saving base in the sense that the external surplus takes up a substantial part (around a quarter).

This last point is interesting with respect to the framework above since while the life cycle framework would definitely predict that Germany would be running a current surplus at the given juncture, it also predicts that, at some point, domestic savings will decline so as to make the external balance a negative contribution to output in GDP. The question we must ask ourselves is whether this is an optimal response to the increase in ageing since this process is also driven by a secular decline in the ability of consumption and domestic investment (not to mention government spending)  to spur economic growth.

Specifically, it would be interesting here to check whether Germany may have reached a point in terms of its age structure (proxied by median age) where the contribution from external demand to output growth has been important. To that end, let us have a look at the following graph;

Notwithstanding the fact that this graph can hardly be seen as decisive evidence either way, it is worthwhile just observing the trend of the two series. The first thing we should note is that throughout the median age bracket 33-38 years the external balance has been deficit with a moderate trend towards balance as we move closer to a median age of 38 years. This is an interesting observation in so far as goes the life cycle framework sketched above where we can say that all things equal, this period was when Germany was moving towards its maturity phase in which it now finds itself slowly but surely moving into the horizon where we may only speculate to effects of further ageing. If we relax the typology a bit we can add that if a given economy may have a propensity to run a surplus as a function of its age structure it may only grow to be dependent on the continuing accumulation of this surplus as it enters a later stage of the age transition and it is this point that we are interested in here. Looking at the graph, we can superficially infer that the trade surplus to GDP increased sharply from the point where Germany moved above and beyond a median age of 39 (roughly the beginning of the 2000s).

This point in time is interesting since the sharp increase in the trade surplus’ share of GDP has occurred at the same time as a sharp decline in investment and consumption and thus a substitution in growth derived from internal domestic demand and towards one derived from external demand. The key to which this signifies export dependency is the extent to which this substitution in some sense is involuntary in the sense that it is a natural and necessary (and optimal?) way to compensate for the fact that the ability of domestic demand to generate growth declines as an economy enters the latter part of the age transition.

One issues which is worth stressing here towards the end is that the prediction of an entry into some form or the other of rapid dissaving as a function of age seems very difficult to reconcile with the economic realities of an ageing society such as Germany’s. This is not to say that it won’t ultimately occur, but it is important to emphasize that the extent to which we will see this, it is going to be a very serious issue for the structure of the Germany economy since one would assume that with an external deficit at the same time as an inability to create domestic growth as well as a potentially very large public debt overhang the German economy and indeed society will be in a very difficult position. It then seems a more likely outcome that Germany (and other ageing economies) will fight this and one of the only ways to do this (besides reversing the underlying demographics trends) will be through keeping domestic investment accumulation persistently above the domestic economy’s ability to absorb this and thus rely on the ability to offload this excess investment off to foreign takers.

List of References

Cutler, David M., James M. Poterba, Louise M. Sheiner and Lawrence H. Summers  (1990)An Aging Society: Opportunity or Challenge? Brookings Papers on Economic Activity, Vol. 1990, No. 1: 1-56

Deaton, Angus (2005)Franco Modigliani and the Life Cycle Theory of Consumption, Research Program in development studies and Center for Health and Wellbeing, Princeton University; the paper was presented ad the Convego Internazionale Franco Modigliani Feb. 17th-18th March 2005

Ferrero, Andrea (2007)The Long Run Determinants of the US External Imbalance, FRB of New York Staff Report No. 295

Borsch-Supan, Axel H; Alexander, Ludwig; and Krüger Dirk (2007) – Demographic Change, Relative Factor Prices, International Capital Flows and their Differential Effects on the Welfare of Generations, NBER Working Paper No W13185

Bryant, Ralph C (2006) – Asymmetric Demography and Macroeconomic Interactions Across National Borders, Brookings Institute, the paper was presented at a conference hosted by the Reserve Bank of Australia in 2006

Higgins, Matthew (1998)Demography, National Savings, and International Capital Flows, International Economic Review, Volume 39 (1998) Issue (Month): 2 (May) pp 343-69

Vistesen, Claus (2010)Ageing and Export Dependency, Working Paper 2009 (forthcoming)

[1] Japan would be another obvious candidate here and essentially Japan and Germany are very similar on this account.

Buy Now or Pay Later!

Hat tip — Eric Dondero.

Here’s the text of a note from Tom Barthold, chief of staff to the Joint Committee on Taxation, to US Senator John Ensign (R-NV) [Click here for PDF]:

Dear Senator Ensign,

Sec 7203 of the Code provides that if there is a willful failure to file, pay. maintain appropriate records and the like that the taxpayer may be charged with a misdemeanor with a penalty of up to $25,000 and not more than one year in jail.

Thomas A. Barthold

The “Code” in question is the Internal Revenue Code, and Barthold’s note was a followup to Ensign’s public interrogation of him on the issue of whether or not the IRS would be responsible for enforcing the “individual mandate” in President Barack Obama’s health care “reform” plan. Apparently the answer is “yes.”

If the IRS enforces the thing, and if failure to comply is prosecuted under the tax code, it gets pretty hard for Obama to argue with a straight face — as he did last Sunday to George Stephanopoulos — that the mandate isn’t a tax.

Last year, some companies were “too big to fail.” This year, apparently, some companies are “big enough to get Washington to sic the IRS and the cops on people who don’t want to buy their stuff.”

How big does a company have to be to get that kind of sweetheart deal? Will the store ads that arrive in the mail each week eventually come with red letter warnings that a warrant may be issued for your arrest should you fail to take advantage of Wal-Mart’s low low prices every day, or to transfer your medical prescriptions to Walgreens? Will we be assessed fines (with jail time for not paying) if we choose to nurse a few more miles out of our clunkers, or ride bikes, instead of ponying up for something new from Detroit every five years?

A liquidator with friends in DC could really clean up on this kind of thing — buy a warehouse full of Slim Whitman albums, say, then get a two-years-in-stir penalty passed for willful non-possession of “Indian Love Call.” It’s a matter of personal responsibility! We must each carry our fair share of the yodeling fandom burden!

The Remarkable Indian Automobile Industry

Swaminathan S. Anklesaria Aiyar has an article in Economic Times on India’s remarkable emergence as an exporter of automobiles. Mahesh Vyas has an article in Business Standard on the recent rebound in automobile production and sales. And, here’s the link to the CMIE website on cars.

It’s interesting to look at (seasonally adjusted) US data for sales of automobiles. Possibly helped by the cash-for-clunkers program, this data shows a strong bounce, back to the levels seen in early 2009. Click on the graph to see it more clearly:

Giovanni Veronese emailed me a fascinating graph, with seasonally adjusted data for Indian commercial vehicles. Click on the graph to see it more clearly. This is not quite comparable with the above, since it pertains to commercial vehicles and not cars. And, Indian exports are unlikely to have benefited from the US cash-for-clunkers program. All the three lines on the graph are seasonally adjusted levels, indexed to 100 for the production of January 2005. The red line is for Indian exports. It shows a very high rate of growth – a roughly 50% rise over the period from 2005 to early 2008. This is the incredible rise of India as an automobile exporter, the story told by Swaminathan S. Anklesaria Aiyar. Unlike sales of cars in the US, this has not recovered to pre-crisis levels.

The green line is domestic sales. This shows a recovery similar to that seen in the US – back to the values immediately before the crisis, but without a cash-for-clunkers program being run by the government.

The blue line is automobile production. It shows savage cuts in production executed by the industry when the financial crisis appeared. This was unlike the standard script for downturns as we know them, where firms generally build up inventory when sales slow down. This time around, working capital financing in order to hold inventory was hard to find. I also think that the headlines and television dramatisation of the early stages of the downturn, accompanied by sharp movements in the prices of securities, were useful as an early warning system. This triggered off action by CEOs well before the full bad news came out through sales. As a consequence, there was very little inventory in hand, and production bounced back nicely when sales came back.

If the three indexes had continued to grow as they had done pre-crisis, then all three would have been roughly at values like 200 today (i.e. one doubling ahead of the values of January 2005). Instead, we’re back to the pre-crisis level of 150.

It is really important to do seasonal adjustment, and then eyeball time-series of seasonally adjusted levels, in order to understand what is going on with these series. We’ve been updating a set of series every Monday morning, and releasing these as a public good.

Those Who Don’t Remember

“Those who do not remember the past are condemned to relive it.” That celebrated quote by long gone philosopher George Santayana is familiar to most people because it is so true. Sadly, people and nations choose to forget.

The Holocaust Museum in Washington D.C. is a stark reminder of a not-so-distant history, a grim and disturbing past that many believe cannot happen again. Those people are wrong. Extreme concentration of power, contempt of the governors for the rights of the governed and worship of a powerful leader as savior lends itself to the conditions that have always ended in disaster for a nation and its people. Museum visitors who are aware of contemporary politics likely come away from it with a disturbing sense that something is eerily familiar in that history.

The rise of the Nazis in Germany didn’t just happen overnight in the 1930’s. The people were conditioned over a long period. Many actually cheered the rise of the Fuehrer as a powerful and charismatic leader, someone to regain their proud heritage after the humiliation of World War I. While Hitler was not academically accomplished, he was a genius with a goal that prodded him for many years. He had a plan and came to power within the existing system. He was named Chancellor by the President, with significant support from powerful parties.

The ultimate political accomplishment which allowed Hitler to elevate himself to dictator was the passing of the “Enabling Act.” As described by William L. Shirer in his classic book, “The Rise And Fall Of The Third Reich”, “Parliament had turned over its constitutional authority to Hitler and thereby committed suicide.” They abdicated their role as a check against power and allowed a domineering politician to take his stand among the coldest and most brutal totalitarian rulers the world has known.

The Bolshevik Revolution in Russia in 1917 capped a series of events over many years. The people of Russia suffered oppression at the hands of the Czar and revolutionaries used unrest and chaos to seize power. What they didn’t comprehend is that a government ostensibly of “the people” could multiply the oppression and terror on the people. Hitler, Lenin, Stalin, Mao and so many others who legitimized themselves as saviors of the masses put their ideologies above the people. Countless millions suffered brutal deaths at the hands of cold ideology.

On the other side of the coin, the American Revolution did not happen overnight either. England’s war with France over colonies to the north meant that the British colonies benefited from benign neglect for an extended period of time. Independence and a mentality of freedom grew up over dozens of years. The revolution was merely the natural culmination of a long train of events. The embedded tradition of individual liberty set the stage for an America that quickly blossomed into a nation of prosperity for the common man.

For decades America has been on a different course. It is not to the point where a dictator can take over without a fight. America is, however, definitely heading down that path, like most other Western countries infatuated with socialism. Progressivism started in Germany in the late 1800’s. The conscious objective of the welfare state was not charity, but rather to make the German people dependent on the government. Dependent people can more easily be bent to the will of the state. Contemporary American government is consciously, actively and progressively making Americans dependent.

The harsh reality is that dependence and freedom are opposites. Slaves are totally dependent on their masters. They have no rights, no powers, no property and no dignity. They will, however, likely have some level of security and some food for their bellies. Freedom, on the other hand, is difficult. It may entail periods of failure, hunger, struggle and rebuilding. But free individuals are the most likely to rise from the hunger, the failure and the struggle to become more, to have more and to live more.

If Americans, including the poor, want to prosper and improve their own lot, we need to un-elect all those politicians who would make us dependent. We are at a turning point in our history. We can continue over the cliff to our demise or we can turn back and begin again to honor those characteristics that made America great: freedom and personal responsibility.

Benjamin Franklin gave us another profound thought, which cannot be denied – anyone who trades liberty for security deserves, and will soon have, neither.

October Reports off to a Very Good Start

As another October comes into focus there are many signs that robust recovery is no doubt firming in late 2009:

1. Retail sales improved in the last week in Sept according to ICSC-Goldman’s tally which rose 0.1 percent. The gain represents a 0.9 percent year-on-year gain that compares with a plus 0.6 percent gain the week before. Goldman’s report summarizes that retail traffic is indeed improving. Redbook, like Goldman, reported strength for store sales and extends an improving trend. Redbook further reports that Halloween sales are off to a good start. Later in the week the Commerce Department reported that while everyone was expecting spending to be up in motor vehicle sales, consumers were actually spending elsewhere, too. Consumer spending spiked on clunkermania auto purchases as personal consumption expenditures surged 1.3 percent in August. Indeed there was strength in durable goods spending, which jumped 5.3 percent on sharply higher motor vehicle sales. However, non-durables were robust also with a 2.3 percent boost and services also advanced 0.4 percent.

2. Case-Shiller reported a third month of gains for home sale prices. Their index rose 1.7 percent in July on top of a 1.4 percent gain in June and a 0.5 percent gain in May. Interestingly almost all metro areas now show sale price gains or at least flat conditions in the July report period. Year-on-year rates also improved for a third month. The pending home sales index also jumped in August, up 6.4 percent for a year-on-year gain of 12.4 percent. All regions posted home sales increases for August.

3. The third estimate for second quarter GDP clearly shows the economy at the recession bottom back when we technically called the recession’s end in June. And the component mix for second quarter GDP adds to credibility our argument that the third quarter will be much more positive than the lackluster results many had predicted. For the second revision to second quarter GDP, the Commerce Department pushed up its estimate to an annualized 0.7 percent decrease from the previous estimate of minus 1.0 percent.

4. On the employment front, Challenger’s count of layoff announcements fell to 66,404 in September, down from 76,456 in August for the lowest total since March 2008. Industrial goods employment showed improvement as did the health care and construction segments. The Monster employment index also showed firming job prospects in many blue collar segments.

The first half of September was full of economic good news, and October is bringing more of the same.