Tough going for Millennials in the US: census data

Thanks to Derek Thompson of The Atlantic for this article on the latest US Census data.  The focus is how Millennials are doing relative to their parents’ generation, now that the former has reached solid working years.  Some thoughts:

  • I was surprised to hear that Detroit was one of the highest-earning cities in 1980, with huge income losses for this generation.  In my head, the wonder years of auto factory workers’ pay were earlier than that.
  • Lots of averages and medians to make headlines – the median Millennial is $2,000/year worse off than his/her parents, taking inflation into account.  So far my dad is right: this is the first generation where parents are better off than kids.
  • The continued prosperity along the coasts makes a lot of sense, given our society seems to be diverging into professional classes earning more and a shrinking middle class.  Those folks with college degrees, looking for entry-level white collar work, are almost certainly worse off than the previous generation.
  • Along the geographic split, there seems to be an obvious political takeaway: Republican interior states will most likely want to hear how they can resurrect the middle class, and/or save their kids from economic doom (example policies: blame immigrants, implement austerity, cut taxes).  Democrat coastal states will more likely be sanguine for more tax/spend (e.g. improve infrastructure, increase immigration, etc.).  In sum, the economic data support the central tenets of the main voting blocs in the various areas.

In sum: initial data support my dad’s thesis over mine (I’m optimistic Millennials will still do better than parents).  The separation among states makes this an interesting political issue – particularly if the main parties can get Millennials to vote.


Greek elections: The difference between known- and unknown-unknowns

I win!  Now what?  Source: Reuters

I win! Now what? Source: Reuters

Congrats to the protest voters in Greece’s election on the weekend, with the anti-austerity Syriza party taking a majority position in their parliament.  A few thoughts:

  • Now what?  The story of Syriza brings to mind the Tea Party in the US.  It started as a small protest party with extreme views – a simple message of ‘We can’t handle this debt burden that was left to us.’  Now that the party is in control, simple messages don’t work as well for continued governance: for example, Tea Partiers became very selective in which debts were OK to keep (Social Security and Medicare, mainly).  The press has already picked up on the challenge for Syriza going forward, as they figure out how to balance the simple message with realpolitik.
  • Markets priced the news well.  Yes, the Euro crashed for a little bit.  Stocks took a little hit.  But within hours (at least as I write), we’re practically back to where we were before the election.  So the market did a great job of pricing this known unknown: the winning margin of Syriza in Greece, and how aggressive they’ll be in renegotiating their debt burden.
  • Contrast with SNB manoeuvre.  The weekend news provides a good foil for the SNB move a couple weeks ago: that unknown unknown meant the markets had no time to price expectations.  On the plus side, market efficiency meant the prices moved quickly to reflect new info.  On the minus side, those discontinuous moves brings much heartburn to investors/traders.
  • What would you do?  Suppose you’re in a big position of power, and you have big news to communicate to the markets.  Do you drip in the info, like Super Mario and the ECB?  Or do you shock and awe, as the SNB did?  Markets clearly prefer the former, but maybe there are reasons for the latter method.
  • The bigger message.  I wonder if this qualifies under ‘folks with pitchforks’, when we talk about the demise of the Western middle class.  Now protest parties (e.g. Podemos in Spain) are expected to get a lot more votes, which will bring similar uncertainties.  Without being too ominous, the status quo seems to be unravelling.

Political and economic sense…a difficult combo

The soundbite was good, but sadly not sensible from an economic perspective.  Source: Google Images

The soundbite was good, but sadly not economically sensible. Source: Google Images

Going into this year’s UK general election – or the 2016 US Presidential election, a common thought I have is ‘why can’t politicians make economic sense with their policies’.  Some things, such as the looming pensions crisis or tax policy, just don’t get much airtime for trifles such as an actual accounting of economic impact.  These are generally left for agencies such as the IFS in the UK to communicate, which folks typically ignore.  Political parties seem to understand this well enough, so don’t engage in enlightened debate.

Anyway, my old colleague Rob has written a great treatise on this issue on his blog (link to the blog at right).  Thanks for the useful analogy, Rob.