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NEWSWIRE: 7/8/19

  • A decade after Spain faced economic crisis, its population has hit a record level as immigrants and returning locals flock to its robust economy. The country’s economic growth has outpaced the rest of the eurozone and is expected to be roughly double that of the eurozone average this year. (Financial Times)
    • NH: Over the last thirty years, Spain has been one of the most volatile economies of Europe--going white-hot during economic booms and plunging to the abyss during recessions. In 2000, for example, Spain's GDP growth hit 5.3%, higher than any of Europe's other Big 5 (Germany, France, UK, and Italy). In 2004 through 2007, its GDP growth averaged 3.7%--again beating out the other Big 5 in GDP growth in each of those years. But then, in 2009 through 2013, Spain's GDP growth averaged a lamentable minus 1.8% during those five years, worse than any of the other Big 5. Even (slightly) worse than Italy.
    • Starting in 2015, Spain has shifted gears once more. Since Q1 2018, Spain has again been beating the rest of the Big 5 with quarterly growth of nearly 3%. And it isn't slowing down.
    • Whence this outsized volatility? Migration. Thanks to the 16th-century Spanish conquest of the New World, there are now nearly 15 times as many Spanish speakers living in the western hemisphere who regard Hispania as their ancestral home as there are living in Spain. Every time Spain's economy heats up, these kindred are attracted to move to Spain in large numbers. After Spain's entry into the eurozone sparked a financial and housing boom in the mid-00s, a flood of migrants from Latin America threw extra fuel on the fire. And this was on top of the influx from eastern Europe that impacted every European economy. (There are roughly 750,000 Romanians living in Spain. Special attraction for Romanians: Spanish and Romanian are related languages.)
    • But the real migration action is with Latin America. Back in 2007, flights across the Atlantic to Madrid routinely reported full planes arriving and nearly empty planes departing. After the GFC, that flow reversed direction. And now? The flow is reversing again. Spain is now home to over 2.5 million Latin American-born residents, mostly Spanish citizens.
    • Fifteen years ago, Latin Americans were attracted to Spain by the extraordinary strength of the Spanish economy. Most emigrants came from very poor countries like Honduras or chronically troubled countries like Columbia. Today, Latin Americans are more likely to be fleeing the extraordinary disappointment of their own economies. Emigrants are increasingly from Venezuela (of course) and from Brazil and Argentina, two once-hopeful nations that are now lamenting their "lost decade." 
    • Spain abets this inflow with fairly lenient naturalization laws for Latin American citizens (only two years residence required, rather than ten for immigrants from most other countries). It also funds a robust PR campaign abroad reminding Latin Americans of their kinship. Spain has a reputation as a reasonably tolerant host for Latin American immigrants, although with the rise of new right-wing parties (like Vox) this could change.
    • The impact on GDP is significant. According to the UN estimates, net immigration to Spain averaged 600,000 annually in 2001-2005. Adjusting for the younger age profile of this flow, that was enough to add 1.5-2.0% to annual labor-force growth. That translates directly into GDP growth.
    • While no other European country has such a vast repository of "ex-pat" workers, there are some similarities with Portugal (now getting a sizable net boost from Brazil) and with Ireland (now welcoming returnees from its abundant diaspora throughout the English-speaking world).
    • Both Spain and Portugal, though not Ireland, are tied with several other countries for the lowest total fertility rate in Europe (around 1.3). So this re-migration will be welcome--so long as it lasts. Italy, also tied for lowest fertility, benefits from no such re-immigration of Italians. The unlucky Italian economy also suffers from chronic under-employment and moribund productivity. Recently, Italy has begun to experience a net migration of job-seekers to Spain--something that would have been unthinkable a generation ago. According to the IMF, in fact, Spain surpassed Italy in GDP-per-capita in 2017.

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart2

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart3

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart4

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart5

  • A new report comparing Generation X’s finances with those of prior generations shows that Xers are trailing on key indicators like net worth and homeownership. But the difference isn’t universal: The indicators of the upper two income quartiles were nearly equal with those of prior generations, but those of the bottom two quartiles were so poor they pulled down the overall results. (Employee Benefit Research Institute)
    • NH: Oh Gen X... time once again to rend garments and throw ashes! This time it's EBRI, merging its own retirement numbers with the Fed's Survey of Consumer Finance data for 2016. See full text here. EBRI highlights three age brackets, corresponding (in 2016) to late-wave Xers and Millennials (born after 1976); core Xers (born 1965-76); and first-wave Xers and late-wave Boomers (born 1952-64).
    • Simply put, none of these cohort groups are doing well relative to Americans in the same age bracket 12 years earlier (in 2004) and 24 years earlier (1992). The important trends to track are the declining real dollar values and percentages over time for the same age bracket.
    • Nothing looks good. Median net worth is down. Homeownership is declining. The share of households with a retirement plan is declining. And the debt-to-asset ratio is rising. EBRI notes brightly that the share of core Xers with "individual account" retirement plans (basically DC plans) is rising slightly. But of course this is merely the Xer response to the unraveling of DB plans. Total retirement plan coverage is declining.
    • EBRI correctly notes that, superimposed on the declining averages, Xers and late-wave Boomers also manifest an unusually large rise in inequality. Coming of age during the "free-agency" 1980s and 1990s, these cohorts have experienced the steepest declines in union membership and the steepest rise in immigrants per capita and workplace globalization. (See my Forbes overview of Gen-X in the economy.) Thus, college-educated white Xers are doing the best relative to college-educated white Boomers or Silent. But for others, the bottom has fallen out. The real median net worth of noncollege households in their 40s, for example, was 29% lower in 2016 than it was in 1992. And among nonwhite households in their 40s, the ratio of household debt to assets nearly doubled, from 16% in 1992 to 34% in 2016.

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart6 

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart7 

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart8 

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart9

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart10 

  • Millennials are headed back to the suburbs, but they’re far more selective than their parents and grandparents were about where they want to live. Their suburbs of choice are largely in the Sun Belt, whose schools and roads are struggling to accommodate the influx: “I love it here, but I can’t turn left out of my neighborhood.” (The Wall Street Journal)
    • NH: Sure, for a few years after the GFC, America's core urban centers grew at a faster rate than suburbia or rural counties. Neo-urbanists like Richard Florida gushed once again about how city life represented the cutting edge of high-tech productivity, progressive values, and youth enthusiasm. But more recently, as Brookings' Richard Frye explains, the suburbs have re-established their dominance. While cities remain vital contributors to economic prosperity, let's not get carried away. Suburbs are here stay. (See "Suburbs Make a Comeback.")
    • So what happened to the great urban revival? Mostly, it failed because cities continue to be poorly governed--with deteriorating infrastructure, inferior schools, inadequate transportation, and anti-growth land-use management. They are home to growing ranks of affluent high-rise dwellers and homeless, while simultaneously they have become unaffordable to middle-income workers. Perversely, the hipster-driven anti-gentrification movement plays right into the hands of rich owners and real-estate developers who thrive off limited supply. Read Joel Kotkin if you want to hear the full rant against urban politics.
    • All other things being equal, Millennials love city life. But other things aren't equal. Increasingly, they can't afford to live there. What's more, as they start families, they want to give their children access to better schools, safer streets, and more open space. So welcome to "Millennial Mayberry." 
    • As the WSJ article points out, suburbs are growing much faster in the sunbelt than in the snowbelt. But that's just because the sunbelt overall is growing faster demographically than the snowbelt. Since 2014, within each region, suburban growth has gradually accelerated ahead of urban growth. (See last chart below.)

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart11

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart12

Spain's Secret Economic Weapon: Latin America. NewsWire. - July08 chart13 

  • A new piece offers a glimpse into the lives of Sikh truckers, who are quietly transforming the industry as veteran truckers age toward retirement. Dozens of truck stops around the country, many along Interstate 40, now cater to Punjabi immigrants: “Today, you go to some stops and can convince yourself you are in India.” (Los Angeles Times)
    • NH: The global Sikh community is a great example of path dependence in migration. In general, migration is not a diffuse phenomenon. Most migrants come from a specific social or religious community--and end up in a specific locality or profession. For the Patels of India, for example, the favored profession in America is motel management: Through family networks, these Indians from the state of Gujarat have acquired roughly half of all U.S. motel franchises. For the Sikhs of the Punjab, the favored profession in truck driving--in Australia, in Canada, and--the subject of this story--in the United States.
    • Many Sikhs own their trucks and the businesses that service them along their routes (especially I-5, I-80, I-40, and I-10). With native U.S. drivers aging and retiring, Sikhs are rapidly taking over this industry. By one estimate, Sikhs control roughly 30% of trucking in California and 60% of trucking in Canada.
  • A growing number of airport terminals are opening up to people who want to meet arriving passengers beyond security or just hang out. It’s both a return to  pre-9/11 days and a response to the expanding slate of dining and entertainment options popping up on the other side. (Bloomberg)
  • Costco has emerged as an unlikely apparel success story: It now generates more in sales of clothes and footwear than Old Navy or Ralph Lauren. Why? It offers the name brands and prices of off-price stores like T.J. Maxx, but doesn’t overwhelm customers with too many choices. (The Washington Post)
    • NH: Costco has now become the nation's 4th-largest retailer, behind Amazon, Walmart, and Kroger. A decade ago, Millennials hitting their mid-20s gravitated heavily to the Target brand. Today, while Target continues to do well among Millennials, moms and dads hitting their mid-30s are starting to ramp up sales at Costco and Walmart, each serving a different (if overlapping) socioeconomic stratum of this generation.
    • What's their secret? They don't behave at all like the experiential boutiques that Millennials are supposed to like. Costco has no mannequins or dressing rooms--just well-chosen apparel neatly stacked in brightly lit aisles. Costco and Walmart have the heft to procure (and pass on) deep savings. Millennials like that. They also (like Target) create an easy-to-navigate space and spare the consumer the burden of sorting through too many styles and brands. Of all generations, Millennials are the most deterred by the "paradox of choice." (See "When Less Is More.") A year ago, The Washington Post asked, "Will Millennials Kill Costco?" Now it's beginning to change its tune.
    • What's standing in the way of Amazon's total e-conquest of retail? Walmart and Costco. For now, anyway.
  • Psychedelics—in particular, psilocybin—are being explored again as a potential mental health treatment, half a century after they were banned. The research is delivering promising results, but this generation of scientists is also worried that pushing too hard and too fast will ignite another moral panic. (The Economist)
    • NH: In the early 1960s, psychedelics like DMT, mescalin, psilocybin, and (newly synthesized) LSD attracted growing interest from scientists and psychologists who were mainly interested in their potential for treating mental illness. Research came to a sudden end in 1970, after growing drug use among Boomer youth (encouraged, it is said, by Timothy Leary's injunction to "turn on, tune in, and drop out") persuaded Congress to classify all psychedelics as class one controlled substances.
    • Lately, many medical researchers--and aging Aquarians--are suggesting that this prohibition be lifted. And many voters on both sides of the aisle seem ready to embrace liberalization. Just last week, Oakland, CA, followed Denver, CO, in effectively decriminalizing its use. Mainstream research and use, of course, won't happen until Congress lifts the federal ban or until the FDA allows broader medical discretion.
    • This will probably happen soon. Arguments in favor? The fact that decriminalization of marijuana has proceeded without many noticeable ill effects. And the fascinating promise of new treatments for everything from addiction (using psilocybin to end cigarette smoking) to serious depression (using it to comfort terminal cancer patients). For a fascinating overview of both the history of psychedelics and what it's like to take them, see Michael Pollan's new book, How to Change Your Mind. (Subtitle: What the New Science of Psychedelics Teaches Us About Consciousness, Dying, Addiction, Depression, and Transcendence.) Pollan is interviewed by Russ Roberts on EconTalk here.
  • The University of Minnesota’s recent tuition hike has drawn attention to a longstanding program that lets retirees enroll in classes for $10 per credit. Some undergrads say that it isn’t fair: Their tuition has gone up more than 2,700% since the program launched in the 1970s, but retirees are actually paying less per credit when adjusted for inflation. (Star Tribune)
    • NH: What triggered the ire of Millennials was an NBC Nightly News story interviewing Boomers on campus about what it was like going to college in their 60s and 70s. The Boomers went on at length about how deepening and mind-expanding they find the experience. Millennial viewers paid no attention to those remarks. What they did pay attention to was the brief explanation that "seniors" get to go to college at almost no cost. (Well, college was always nearly free for Boomers.... why change that now?)
    • Policy makers have often wondered when young adults would challenge the massive tilt in public budgets toward seniors. Well, now that Millennials are the young adults--and Boomers are the seniors--we may be reaching that moment.
  • Only-child families are the fastest-growing family unit in the country, spurring Americans to reexamine what it means to have “just one.” Stereotypes labeling only children as selfish and worries about loneliness are giving way to a more nuanced picture. (The Washington Post)
    • NH: Low fertility, the principal force driving population aging, is reshaping family size and structure. Large families are becoming rare, and only children are becoming commonplace. Since 1976, the share of U.S. women giving birth to four or more children by their early 40s shrank from 40% to 14%. And the share giving birth to only one child grew from 11% to 22%.
    • Much research suggests there are significant personality differences between only children and children from large families. The best-established finding is that only children score higher on tests for aptitude, creativity, and flexibility; and also that they score lower on agreeableness (a basic personality trait), sociability, and compromise. See this wide-ranging and entertaining summary of the only-child personality: "15 Dead Giveaways You're Dealing with an Only Child."
    • In The Graying of the Great Powers (Chapter 3), I wrote at length on how changes in birth order, "onliness," and family size may change the mood and function of aging societies.
  • 32% of Millennial dads don’t own a hammer, compared to only 7% of Boomer dads. While this figure has inspired many clickbait headlines about Millennials’ lack of DIY skills, it may simply reflect the fact that modern tech is harder to install without professional help—though it’s also true that young dads’ priorities have changed, with most saying they’d rather spend time with their kids than DIY. (Alarm.com)
    • NH: When Peter, Paul, and Mary sang "If I Had a Hammer" back in the early 1960s, part of the lyrics' deeper meaning was that, well, nearly everybody does have a hammer. Certainly, all those Boomer kids who listened knew how to use one. According to this survey, 93% of Boomer dads today own a hammer. But their kids, not so much.
    • Sure, everyone knows that Millennial dads are better at programming IT gadgets. But old-school DIY? Let me quote the report: "46 percent of Millennial dads reported not owning a cordless drill. 48 percent don't own a stepladder, and 38 percent don't own a set of screwdrivers." And don't even think about asking them about what goes on under the hood of an automobile.


Let’s Talk About Anything But Politics. Americans don’t look kindly upon the state of political discourse in this country, according to new findings from the Pew Research Center. A large majority (85%) say that the tone of political debate has gotten more negative in recent years, as well as less respectful and less fact-based. These views are shared by Democrats and Republicans. Partisan differences emerge when asked about the acceptability of different kinds of political criticism: Democrats are more likely than Republicans to say that certain behaviors are unacceptable, including claiming that your opponents love America less (76% vs. 45%) or calling them stupid (70% vs. 51%). When it comes to personal expression, most Americans on both sides of the aisle say it’s important to use language that doesn’t cause offense. Within both parties, however, there’s a gender and age gap, with women and older adults more likely to prioritize using inoffensive language. More education is also associated with this—but only among Democrats.