First, you know that the economy can add jobs and still have an increase in the unemployment rate (right? You know this right?). You know this because the unemployment rate is only counting people currently looking for work and not those that have given up for the time being. If the number of people looking for work increases, then the unemployment rate can go up if they don’t find jobs. So why is this a good thing?

More people looking for work can’t be a bad thing. The reason the job market hasn’t fully recovered isn’t simply the fact that not everyone is hiring yet. The labor market is highly inefficient. Job hunters and hirers regularly don’t find optimal matches. A hiring manager may post a job but can’t fill it with someone with the right skills because either that person isn’t currently looking for work or can’t relocate to take the job. With more people searching for work, you have a greater chance of finding someone with the right skillset and lives nearby.  The right fit for a job is far more productive than just filling the job.

The Labor Department is only able to report the total number of jobs added or lost. They can’t really speak to how good that job is or whether the hiring decision was ultimately the right one. Hiring the wrong person can lead to decreases in productivity which hurts the economy and the labor market.

But, a properly matched labor market (aided by an increasing number of people looking for work) is better for the economy. A healthier economy is going to create more job opportunities for people that haven’t managed to find one yet.

Don’t assume this as an endorsement of an increasing unemployment rate. It’s very possible for the unemployment rate to fall and people continue to enter the workforce (more people find job than people enter the workforce). However, our economic recovery has been so feeble that sometimes the headline numbers don’t tell the whole story. As long as the economy is adding more jobs each month, an increasing unemployment rate is acceptable.

Nationally, you can see that housing inventory is still way down from the good ole days of real estate. Inventory is up a bit in 2013 so it may have bottomed out, but even from a year ago it’s still low (this is partially what is driving the uptick in prices). However, according to people that measure these things, inventory in the wealthiest zip codes is down even further. Sure these rich people could just build their own houses; but even amongst the wealthiest, location is one of the biggest factors in a purchasing decision. So with house prices finally on the up and up, why aren’t more mansions on the market?

The economics of the mansion market are somewhat different than the houses you and I might be looking for. First of all, the wealthiest are more likely to own multiple homes. And buying or selling one does not necessarily mean another comes on the market. If you were to own a home and sell it, I’d probably be buying another as well, so two houses were sold. For the wealthy, the sale of one home may not be contingent on the sale of another.

Furthermore, the wealthy are less likely to need to sell in the first place. If housing prices are moving up, they can afford to sit on the house for a while to see if prices continue to rise. This keeps inventory low and is likely a major contributor to the current housing shortage for the wealthy.

We can see a proxy for the housing market in the interest rates being charged on mortgages. If a wealthy person decides to get a mortgage (sometimes they have good reason), they would get a jumbo mortgage. Jumbos are for mortgages that Fannie Mae and Freddie Mac have deemed too large for them to get involved with. As such, they carry a higher interest rate because the lender bears all the risk. The chart below shows the changes in interest rates for a conventional and jumbo mortgage over the last few months.

We’ve just learned that interest rates are on the rise so there’s no surprise on the uptick for both rates. But the rates on jumbos haven’t moved nearly as much. This is likely due to the fact that the mansion market is still a bit locked up.

Will the wealthy ever solve this problem? Undoubtedly. But in the meantime some of them might just have to rent.

Read: Mansion Shortage Could Slow Sales in Rich Towns (CNBC)

Also, wow you people spend a lot for a Hallmark holiday.

Read: Father’s Day spending looking up for Dad (Detroit News)

Read the rest here: As Job Flow Slows, Americans Get Stuck in Place (Bloomberg)

Though I enjoy the benefits of this part of the tax code myself, I’ve never quite understood it until now. My thoughts were that everyone should just file separately. That way no one gets the marriage benefit. We weren’t trying to encourage unions with this benefit so why offer it at all?

It turns out, back in the 1940s many married couples had learned there were ways to move assets and income around to optimize the two separate filers. Couples were using the legal benefits of marriage to exploit an unsophisticated income tax code at the time. So the ‘married filing jointly’ option was created to stop these behaviors. It was never an incentive to be married, it was just created to stop tax avoidance.

But in today’s world, the filing jointly option may not be a good fit. Gay couples are fighting for equal treatment under the law, but tax treatment could be one scenario where no benefit should really be offered to anyone.

Read: As Marriage Changes, Should Joint Filing Go The Way of Ozzie And Harriet? (Tax Vox)

While demographics are playing a factor, recent research shows that there’s a cyclical component as well. That is, the job situation is still so sour the many working age people are not even bothering to look for a job. The cyclical component isn’t super strong though which is a small victory for my baby boomer theory.

But there are other demographics are work here affecting the labor force participation rate. One thing is the potential peak in women entering the labor force. You can see in the 70s and 80s a huge pickup in people working, a lot of that are women entering the workforce. That level once sat as high as 60% but has since declined a bit. So we’ve seen a potential peak as long as our society conforms to predefined gender roles around family.

There are other factors in the 21st century influencing this overall decline in labor force participation. For one, people are going to school more often and for longer periods of time. Retirees and students are included in this population, so if students remain in school longer they won’t enter the workforce. This could actually be considered a positive development for the decline in labor force participation. But on the flip side, handing out increasingly elevated levels of government support has also made it easier for some to drop out of the labor force and survive without a regular job. This is a negative for the economy and the deficit.

The cyclical nature of the decline in labor force participation is evident though. The decline during and after the recession clearly shows the pace was accelerated by something. Analysis at the state level shows that when the job market finally does return, so will the people looking for jobs. But labor force participation only turns around with job growth is strong, and this helps to explain why the rate continues to fall.

Read: Will Labor Force Participation Bounce Back? (SF Fed)

• Path to citizenship: This is actually in the reform bill. Pay some taxes, be a good person, and in a decade you’re in.
• Border enforcement: The bill will beef up enforcement of the borders, throwing more money at the problem.
• Actual immigration: Tech companies want educated immigrants. Service and agriculture want laborers who will work for cheap and not complain. Each group has it’s own lobby arguing for and against these workers. The bill will make it easier for them to get in, but likely make it more likely they go home when they’re done.

The labor piece is really the big thing here. Employers love immigrant labor. An educated immigrant comparable to an American is willing to work for less money, and isn’t likely to leave their job because they need the sponsorship. Employers argue that they can’t find the right skills in the US, that’s really just BS. They know they can save a bunch of money and I can’t blame them for trying. Employers of low-skilled labor have similar thoughts in mind. Many farmers have become reliant on immigrant workers at this point. You pay them seasonally and there’s very little training. Surely some farmers will miss out employing these people illegally, but this is the right move.

Implementation of this bill is going to be the biggest headache. In order for any of this to really take effect the security at our borders must be made measurably better. 90% of all people crossing the border illegally must be caught.  This is called the apprehension rate. How realistic is this? It sounds impossible, but based on the metrics today the borders could get there with a little more strategy or resources. How that metric is defined will very much shape how these policies get implemented.

But I’m not convinced everyone in Washington is really taking this seriously. We know that Republicans got burned in the election for taking the wrong stance on immigration, and we’re seeing their change of heart in these new efforts. It’s unclear if either side is quite ready to cave on talking points that are close to 20 years old at this point. The one thing that is clear is that people from Paul Krugman to Grover Norquist agree that comprehensive reform of our broken system will be good for the economy.

Read: Senate immigration bill clears first hurdle; debate begins (CNN)

Image: brunosan

The unemployment rate in Washington DC is currently 5.3%. The national unemployment rate is 7.6% and we’ve all known these numbers have been falling for some time. In the modern era, “The District” has always had a stronger economy than the rest of the country. Even the other major cities in the US (NY, Chicago, LA…) don’t compare in economic strength and resiliancy. One very important reason is that the DC metro area employs a lot of federal workers. By a lot, I mean “so many people leaving work at 4:30 it’s the worst city in the country for traffic” a lot.

It’s not just people employed directly by the government either. Law firms, consultants, and lobbyists are all over the place. And then you have all the organizations and private firms that have a presence in the area to be close to “The Hill”. All of this is built around the federal government. Estimates vary, but perhaps 40% of the entire economy relied on the feds. But what was once thought of as perhaps the only industry in town has diversified itself into far more than just government.

As of last year, federal spending is about 36% of the economy. A 4% change is a big deal. Much of that can be attributed to the cutbacks the federal government has been making. But perhaps just as much is thanks to many of the firms located around DC diversifying away from government checks. Recognizing a need not to rely on just federal money, these companies and contractors sought business and provided services to each other and other companies.

Today the median household income is comparable to the wealthiest region of silicon valley. This is thanks to the companies that have worked with the government taking their lessons and experiences to other governments and organizations that could just as easily benefit from those skills. The city also benefits from an influx of diverse and well educated talent. DC called my name a few years ago, and anyone that’s ever lived there can speak to the wealth of intelligence that call DC home.

All of this and more is outlined in a very rosy article in the Wall Street Journal entitled “What Sequester? Washington Booms as a New Gilded Age Takes Root”.

But it’s not telling the entire story

DC has a lot of problems. One of them is the attempt to push poorer citizens out of the city. Due to crowded living along the river, many don’t move to the Virginia side. This means they crowd the suburbs around Maryland. DC has been overrun by an emerging elite class and it’s made living near all the activity extremely expensive. It’s also not a great place for large businesses. Building restrictions limit the height of a building to just a 130 feet or so and this makes office space a big problem. The roads and intersections are another mess and it wouldn’t be out of the question to see a congestion tax in DC before too long.

These are a part of the growing pains of a city that seeks to distance itself from reliance on federal spending while still being the capital of the country. This DC is different than the DC of the last century, and even last decade. But I think the WSJ should have given the cities problems a bit more attention.

Image: Forest Wander

So there’s some stuff going down in Washington it seems. The government is either spying on us, or has the capability to spy on us, or has a secret court to spy on us, or something else. The buzzwords and names in this story are great. We have Prism, Clapper, Snowden… I don’t know if these are the names of people or secret operations. But who cares.

Central to all this coverage is the revelation of a whistleblower that says the government has more or less abused its power to secretly have the ability to big brother us all the way back to 1984. The shock and anger are two-fold: first, we aren’t sure if the government should have such wide-reaching capability; and second, we certainly didn’t know about it.

Interestingly, our government for the most part is unified in that there’s nothing illegal going on and the only secrets being kept were the ones needed to protect the operations. This make sense because if terrorists knew how they were being monitored, they would find new ways to communicate. I’m not yet of the opinion there’s much going on here at all. So far all I’ve noticed is a UK-based media agency milking their first US scoop for all the eyes and clicks we can give them. All this news warrants an investigation since it’s now public, but I don’t feel surprised, threatened, or violated (yet).

Now that we’ve got that out of the way, let’s focus on the central issue here: the balance between privacy and protection. An economist can look at this debate quite simply. On one side you can get virtually 100% protection from terrorists if you’re willing to give up all your privacy. On the other side you can lose most of your protection in exchange for some privacy. The chart at the top is anything but scientific, but it visualizes the spectrum up for debate. With the appropriate data, we could determine exactly how much privacy we have to give up to save one additional life, thereby creating a value for the balance.

People that don’t want to give up their privacy feel this way for a couple of reasons. For the first, it’s none of our damn business. But the second is they don’t trust the government to use it responsibly. These are both valid concerns. On the other side you have people that are willing to sacrifice a bit of privacy because they have nothing to hide. Again, valid.

So where do you sit on this spectrum? The answer doesn’t really matter for our purposes. But you need to know where you stand before you take a side on this NSA stuff. The only other thing left for us is to determine how much of these claims are true. Only after you know where you stand and how much of this is true can we actually have a discussion about how much snooping power our government should have.

Until then, we’re just angry because we’re being told we’re supposed to be.

The US is a very large country. In addition to being large it’s also quite diverse. This has led to different regions pronouncing words in very different ways. NC State conducted a survey to map out our dialects based on how was say a number of words or phrases. The results are quite interesting. Notably, there’s clearly a huge market for more Bru Thrus.

Check out over a hundred maps showing how we say different things here.