The Unassuming Economist

A new IMF report finds that “Over the past three years, the Spanish labor market has seen a strong turnaround, recovering more than a third of jobs lost during the crisis. This rebound has taken place on the back of significant wage moderation and regained external competitiveness, supported by labor market reforms. Employment has been growing across sectors, with services accounting for 80 percent of net employment creation, marking a sectoral shift away from construction. Except for some fast-growing smaller sectors such as information and communications, the new service-sector jobs are generally in the lower-productivity segment, including in tourism-related activities, and just over half are of temporary nature. Job growth has also varied across regions, reflecting different employment situations and sectoral specializations. Generally, the newly created jobs make sub-optimal use of existing skill patterns in Spain, with over-skilling becoming more prevalent and persistent skills gaps among the lower-educated preventing many from finding employment.”

The IMF’s latest report states: “In staff’s view, the strong fiscal buffers, the availability of financing, and the current cyclical position of the economy mean that rapid fiscal consolidation is neither necessary nor desirable. Saudi Arabia has some fiscal space that can be used for a more gradual fiscal consolidation that balances the budget by 2022 rather than in 2019 …”. Read the report for the full background and context for the advice.

A new IMF working paper ranks countries combining data on average incomes and the extent of income inequality, and how much societies are assumed to dislike inequality (called ‘inequality aversion’). Hong Kong SAR is almost always at the top. The United States is second if societies are assumed not to care too about inequality. But it slides to number 24 if societies are assumed to dislike inequality a lot, with more equal societies like Norway, Canada, and New Zealand taking the higher ranks. (For wonks: see Appendix Table 1 of the working paper for hours of fun comparing countries.)

From a new IMF blog: “Our analysis provides information on potential cross-country effects from domestic fiscal policies. For example, fiscal stimulus in Germany through higher public investment would generate meaningful spillovers to neighboring countries in Europe where output remains below potential and interest rates are exceptionally low. Spending on public investment is also likely to produce greater cross-border dividends than tax cuts. Conversely, given cyclical conditions in the United States, a U.S. fiscal stimulus would likely have modest spillovers, especially if implemented through tax policy measures.”

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A new IMF blog by David Lipton, Alejandro Werner, and Carlos Gonçalves says that “Corruption continues to make headlines in Latin America. From a scheme to shelter assets leaked by documents in Panama, to the Petrobras and Odebrecht scandals that have spread beyond Brazil, to eight former Mexican state governors facing charges or being convicted, the region has seen its share of economic and political fallout from corruption. Latin Americans are showing increasing signs of discontent and demanding that their governments tackle corruption more aggressively.”

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