Economist 2/10/15

  1. SERGIO MATTARELLA, a 73-year-old Sicilian, constitutional-court judge and former government minister, became Italy’s 12th president on February 3rd. Matteo Renzi, the prime minister who backed him, said his election would “turbocharge” his reforms.The result has strengthened Mr Renzi’s position both in the PD and in government, weakened Mr Berlusconi, and thrown the right into disarray.
  2. SCOTT SUMNER has written a paper for the Adam Smith Institute in which he sets out the market monetarist interpretation of the great recession.The musical chairs model says that shocks to nominal GDP—or total spending in the economy—drive unemployment. When nominal GDP falls, there is no longer enough spending to sustain the same number of jobs unless wages fall. Because wages are slow to adjust, unemployment rises instead.There is certainly a strong correlation between the two series, most notably in 2008 when unemployment spiked. But it is striking for how long the musical chairs ratio declines while unemployment stays stubbornly high.One explanation could be a negative supply-side shock: commodity prices increased sharply in 2011, which might have caused additional structural unemployment.
  3. Baltimore has been losing people for 60 years. To address this its mayor, Stephanie Rawlings-Blake, wants to make it the most immigrant-friendly city in the world. Its libraries provide Spanish-language exercise classes. To help those with no papers, the city is introducing micro-loans which require no credit checks. In 2012 Ms Rawlings-Blake announced that city police would no longer routinely check the immigration status of citizens or enforce any federal immigration law unless explicitly required to. The then governor, Martin O’Malley, a Democrat, made it possible for illegal immigrants to get driving licences.Rustbelt cities like Cleveland, Dayton and Philadelphia all avidly court immigrants.Like Baltimore, Detroit woos refugees brought to America under federal programmes.Several studies suggest that when immigrants arrive, crime goes down, schools improve and shops open up.But attracting new immigrants to the cities which most need them is hard.They care about the same things as everyone else: safe streets, good schools and jobs.
  4. AMERICA’S jobs report, released on February 6th, shows that the economy is in rude health. It added 257,000 jobs in January, a little higher than expectations (of around 230,000). What is more, there were revisions to both December’s and November’s figures—during those two months, employment grew by 147,000 more than previously thought.The unemployment rate rose a little, to 5.7%, but even that is pretty good news, since it reflects an increase in the size of the labour force, not a decline in the available jobs.The most interesting thing from the latest report, though, relates to wages. You might not have expected wages to increase much, since about half of the jobs added in January were in the low-wage service sector (shops, restaurants and the like). But in fact, average hourly earnings increased by 0.5% in January, having fallen in December.
  5. On February 4th a report into the persistent abuse of children in Rotherham, a Yorkshire town, led to the resignation of the entire local cabinet and impelled the central government in London to take control of the council.The report on Rotherham, written by Louise Casey, an official in the communities department, confirmed most of the appalling claims aired in an earlier report by Alexis Jay, a former senior social worker. It found that between 1997 and 2013 some 1,400 children were abused in Rotherham, mostly by ethnic Pakistani men. Children as young as 11 were raped, abducted and trafficked to other cities; many were from broken homes and in the council’s care at the time. Ms Casey found that council employees did not report the crimes, which were widely rumoured, for fear of being accused of racism.

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