Here’s how I would describe Orange County, my home since 2017:

1. The population is a bit over 3 million.
2. It’s one of the most affluent places in the entire world. There are many luxury car dealerships, marinas that are full of expensive boats, and elegant shopping malls full of the usual stores.
3. It has a very diverse population, which comes from all over the world. Some women wear headscarves.
4. Most of the hard work is done by immigrants from low income countries. The native born are quite fortunate.
5. It was mostly built after the advent of the automobile, and hence almost everything looks fairly new. It is also very spread out, and lacks quaint old walkable neighborhoods. You need a car to go almost everywhere.
6. The weather in January is mild and pleasant. There are some big theme parks for children.

7. Some US military people are stationed here.

My wife and I recently decided to take a vacation. I wanted to get as far away from Orange County as possible, to see a very different part of the world. I’d always dreamed about visiting the exotic, ancient Near East. The world of Scheherazade. The world of camel trains and remote oases in the midst of great sandy deserts. A place with little coastal villages full of pearl divers and souks with rug merchants that served tea as they bargained over prices. The mysterious Orient!

Then I saw the name “Abu Dhabi”, which sounded exactly like what I was looking for. It was on the other side of the world—I wouldn’t even need to adjust my watch. So we booked three nights in an Abu Dhabi hotel. Upon arrival, we discovered that Abu Dhabi has the following characteristics:

1. The population is a bit over 3 million.
2. It’s one of the most affluent places in the entire world. There are many luxury car dealerships, marinas that are full of expensive boats, and elegant shopping malls full of the usual stores.
3. It has a very diverse population, which comes from all over the world. Some women wear headscarves.
4. Most of the hard work is done by immigrants from low income countries. The native born are quite fortunate.
5. It was mostly built after the advent of the automobile, and hence almost everything looks fairly new. It is also very spread out, and lacks quaint old walkable neighborhoods. You need a car to go almost everywhere.
6. The weather in January is mild and pleasant. There are some big theme parks for children.

7. Some US military people are stationed here.

In fairness, Abu Dhabi’s government buildings are way more impressive than those of Orange County. Otherwise, not much difference.

If you plan to visit, I’d wait a couple years until they finish the museum island, which will be a showcase of modern architecture.

Part 2: I wrote the above a few weeks ago. Since then, we visited Oman and Qatar. Oman was a bit more like I envisioned the Middle East, although even it has been transformed by oil wealth. Its road system seems every bit as good as the US system, maybe better. Qatar is a very new country. Its population has grown from 25,000 in 1950 to roughly 3 million today. Qatar is even richer than Abu Dhabi, although oddly it seemed much more foreign to me. Whereas in Abu Dhabi we stayed in a suburban location, in Qatar we were right in the central area, in a Western urbanist’s idea of a dream neighborhood, with lots of very stylish young people hanging out.

I recall once being startled to see Western waiters serving wealthy Asians at a restaurant in Hong Kong. I recognized that this probably reflected a deep seated prejudice about the natural order of things. I had the same feeling in Qatar, but based on dress, not ethnicity. In Qatar, both the locals and the foreigners tend to look Middle Eastern/South Asian. But the locals are more likely to dress in traditional Middle Eastern clothing. (Not sure why this surprised me, but it did.) And of course they are also the upper class in Qatar—overturning my prejudice that people in traditional costumes are more backward than those in Western dress.

I suspect that there is much more that could be said about the complex sociology of this region, but I’m already in way over my head, so feel free to enlighten me in the comment section.

PS. I have a better post on the same theme over at Econlog.

PPS. Here’s a picture of Orange County in 1920. I did not see any oil wells in Abu Dhabi or Qatar:

Matt Yglesias directed me to a new CBO report, which confirms that immigration explains the recent GDP boom:

In our projections, the deficit is also smaller than it was last year because economic output is greater, partly as a result of more people working. The labor force in 2033 is larger by 5.2 million people, mostly because of higher net immigration. As a result of those changes in the labor force, we estimate that, from 2023 to 2034, GDP will be greater by about $7 trillion and revenues will be greater by about $1 trillion than they would have been otherwise. We are continuing to assess the implications of immigration for revenues and spending.

I often get accused of Trump Derangement Syndrome (TDS), perhaps with some justification. My attitude toward Trump lies somewhere between horrified and bemused, depending on the time of day. But I can’t hold a candle to the greatest TDSer of them all. There is one man who made the following reckless claims about Trump:

1. He suggested that Trump wanted to become a dictator.
2. He suggested that Trump was rooting for the economy to crash before the election.
3. He suggested that Trump planned to use his second term to seek revenge against his opponents.
4. He suggested that Trump viewed himself as above the law, immune from being criminally prosecuted, even for the crime of killing his political opponents.

Look, I know when I’m beaten. I’d like to continue my TDS tirades, but there is no way I can compete with this guy. So I graciously give up the crown, and hand it to the new champion of Trump derangement.

Update: And they say Biden is senile!

In recent years, I’ve suggested that trend RGDP growth is around 1.8%, which implies a 3.8% NGDP figure in order to achieve the Fed’s inflation target. Recent strong GDP growth, combined with the Atlanta Fed’s current 4.2% RGDP estimate for Q1, suggests that trend growth might be stronger than I assumed. Why might that be?

In theory, faster than expected trend growth could be due to either productivity or labor force growth. But if I was wrong about GDP, it was probably related to a similarly over-pessimistic assumption about labor force growth.

In theory, the recent strong jobs numbers might reflect a variety of factors:

1. Falling unemployment.

2. Discouraged workers re-entering the labor force.

3. Immigration.

I lean toward the third explanation. The unemployment rate has not fallen over the past 20 months, so the first explanation won’t work. In theory, the correct explanation should be growing labor force participation, as the Census Bureau claims that recent population growth has been very slow (0.4% and 0.5% over the past two years.)

But I’m skeptical of the population growth figures. There’s a lot of anecdotal evidence of a surge in illegal immigration. We are seeing big increases in illegal migrant detentions, even from far-flung places like China, India and Russia, not just Latin America. While migrant detentions don’t tell us how many people slipped through the net, the two figures are widely assumed to be highly correlated.

I suppose this is good news for monetary policy, as this view suggests that the recent strong jobs figures don’t necessarily imply overheating. But in order for immigration to prevent overheating, we need it to prevent strong nominal wage growth. And on that score the 0.6% figure for January is worrisome:

Wages skyrocketed on the month and from the prior year, both above what economists expected to see. Average hourly earnings were up 0.6% from the prior month, double the average estimate, and rose 4.5% from the prior year. Part of the outsize gains could be attributed to reduced hours, which tend to distort pay. Hours worked fell to the lowest since March 2020.

The report clearly shows that demand and wage pressures are far from cooling. That is consequential for the Federal Reserve, which has been signaling that the strength in the labor market shows inflationary pressures are still in the system, and that’s something policymakers will keep in mind before pivoting to rate cuts. Wage growth in particular points to additional fuel for consumers.

The bond market also seemed a bit worried about the wage figures, as interest rate futures jumped on the news. Still, it’s just a single month, and the longer run trend still points to an increasing prospect of a soft landing.

This is one of those odd periods where both hawks and doves seem to have missed something important. Hawks warned that inflation would stay high if we avoided recession, and it’s come down quite a bit. Doves warned that the Fed was holding rates high for too long—but there is little sign of the recession they feared would result from that mistake.

I still say that monetary policy is not tight, just a bit less loose than back in 2021 and 2022. People have consistently put too much weight on interest rate increases, but as Larry Summers recently pointed out, the neutral rate is probably higher than we’ve been assuming:

Former Treasury Secretary Lawrence Summers said the economy’s enduring strength in the face of vigorous Federal Reserve tightening makes it increasingly likely that neutral interest rates have risen.

It’s also increasingly clear that the strong labor market of the late 2010s had relatively little to do with Trump. We have an equally strong labor market under Biden. And he also deserves zero credit.

Speaking of politics, Matt Yglesias linked to a 5-minute clip of a Sam Harris interview. I cannot think of a single person who’s political views are closer to my own. Except Sam Harris is far more eloquent.

To give you an idea of how bizarre our politics has become, I have no idea whether that tweeter is attacking Harris from the left or the right.

And I feel a bit better knowing that Yglesias has exactly the same sort of nuts in his comment section that I have over here:

That’s what I find so funny about my trolls. They are not even aware of how others see their posts. And that “@harvard.edu” email address doesn’t fool anyone.