May 04, 2013
R&D and benchmark revisions of GDP for Robinson Crusoe
Beginning with the third quarter of this year, the BEA plans to report the U.S. GDP and national income accounts on a new basis. One of the purposes of the change is to better reflect the importance of intellectual capital and technological innovation in the modern economy. These changes are expected to cause the reported value of GDP to be about 3% higher than when calculated under the present system. I have been thinking about how I would explain these changes to an undergraduate economics class, and this is what I came up with.
April 29, 2013
A Message from the 2013Q1 Advance Release
And a slightly older message from the CBO.
April 26, 2013
Another mediocre GDP report: is this the new normal?
The BEA released today its estimate of 2013 first-quarter real GDP, which grew at a 2.5% annual rate from the previous quarter. That's below the average 3.1% growth rate since World War II, but better than the 2.1% average since the recovery began in 2009:Q3.
April 07, 2013
Is the recovery dying?
The Bureau of Labor Statistics reported on Friday that the number of Americans with jobs only increased by 88,000 in March on a seasonally adjusted basis. That's one of the weakest months in the last two years. Although it's clearly a disappointment, I would caution against reading too much into the latest number.
March 12, 2013
Revisions and Conditioning, Again
An interesting new working paper, "Quarterly GDP Revisions in G-20 Countries," by Manik Shrestha and Marco Marini, documents the fact that at the end of 2008, statistics understated the true extent of U.S. GDP decline.
February 07, 2013
Some Thoughts on the Recovery, Conditional Forecasting, and Proper Citations
More analysis from the Heritage Foundation
January 31, 2013
The 2012Q4 GDP Release: Upside and Downside Risks
Defense spending subtracted considerably; more to come if the sequester occurs. Uncertainty weighs—perhaps. Trade volumes decline. But final sales continue upward. And confusion about demand side analysis persists.
January 30, 2013
GDP falling again
The BEA released today its estimate of 2012 fourth-quarter real GDP, which declined slightly from the third quarter. How scary is that?
January 11, 2013
Guest Contribution: "Rewriting UK GDP history the chain-linked way"
December 29, 2012
The Year in Review II: Yet More Fantastical Pseudo Economics
Time to emulate the media’s "year in review" pieces, with my own take on the most outrageous, nonsensical assertions presented in the guise of analysis. Here are my ten most hilariously deluded excursions into the fantasy world from my postings to Econbrowser. The inspirations range from (once again) the Heritage Foundation's analyses (where have you gone, Bill Beach!) to the ongoing search for hyperinflation/crowding out.
December 26, 2012
Investment and the business cycle
I fell a little behind on blogging with the holidays, so today I'll outsource to Calculated Risk.
December 11, 2012
The Slow Growth in Investment
One of the puzzles of the post-crisis period is why investment has been so slow. Some would want to resort to stories of uncertainty. Is there something to this idea? Figure 1 depicts the gross investment to net capital stock.
December 02, 2012
Data revisions mean more of the same
Revisions to some of the key indicators bring us back to the same old story-- the U.S. economy continues to grow, but at a slower rate than any of us would like.
November 17, 2012
CBO: "What Accounts for the Slow Growth of the Economy After the Recession?"
"CBO estimates that about two-thirds of the difference between the growth in real GDP in the current recovery and the average for other recoveries can be attributed to sluggish growth in potential GDP."
November 10, 2012
Links for 2012-11-10
A few links to some items I found of interest.
October 28, 2012
Yet another discouraging GDP report
That's the same title I used to summarize the U.S. 2012:Q2 GDP report released back in July. Doesn't look like there's much need to use any different headline for the 2012:Q3 numbers released on Friday.
October 23, 2012
Guest Contribution: How “Different” is the Recovery from the Financial Crisis?
By David Papell and Ruxandra Prodan
October 15, 2012
If You Want Faster Growth...
From the Foreign Policy survey: The Economy (released today):
September 03, 2012
Are You Better Off Than You Were at the End of the Bush Administration? A Data-Based Assessment
I've heard a lot about the "four years ago" comparison. Four years ago, we were on the cusp of Don Luskin’s famous prediction (“... we're on the brink not of recession, but of accelerating prosperity.”), and Phill Gramm had two months earlier decried the ongoing “mental recession”.  It seems to me the more appropriate marker is the last election, in 2008Q4. We can then assess what the data tells us about 2012Q2 vis a vis 2008Q4.
August 05, 2012
Is this as good as it gets?
Several other new indicators confirm the message from the Q2 GDP report: the U.S. economy continues to grow, but at a discouragingly slow rate.
July 30, 2012
Yet another discouraging GDP release
The Bureau of Economic Analysis reported Friday that U.S. real GDP grew at an anemic 1.5% annual rate during the second quarter. When the same bad thing keeps happening to you again and again, "disappointed" no longer seems the appropriate word to use.
July 06, 2012
Current economic conditions
I see both dark clouds and rays of hope.
June 26, 2012
Guest Contribution: “Labor Shares and Corporate Savings”
In a Guest Contribution today, Loukas Karabarbounis and Brent Neiman (University of Chicago) discuss their recent research on "Declining Labor Shares and the Global Rise of Corporate Savings."
May 17, 2012
Ignorance Is Strength: House of Representatives Edition
The War on Data Collection Continues!
From the National Association for Business Economics (NABE):
[t]he U.S. House of Representatives was considering an appropriations bill for Commerce, Justice, Science, and Related Agencies (H.R. 5326) that would drastically reduce funding for the Census Bureau and make participation in the American Community Survey voluntary.
May 07, 2012
The War on Data Collection
Ignorance is bliss edition.
[The Census Bureau, BEA and BLS] have always had to fight for more funding. Now they may have to fight just to keep their budgets intact. As part of $19 billion in nondefense discretionary cuts in Paul Ryan’s (R-Wis.) budget—recently passed by the House of Representatives—the agencies are likely to get less funding.
April 27, 2012
Sluggish U.S. growth continues
The Bureau of Economic Analysis reported today that U.S. real GDP grew at a 2.2% annual rate during the first quarter, down from the 3.0% growth of 2011:Q4, and below the 2.4-2.9% range that the FOMC indicated yesterday it is anticipating for 2012 as a whole. I see some reasons to agree with the Fed that the rest of the year may be slightly better than the first quarter.
April 19, 2012
Recovery and Rebalancing
Several new items regarding assessing recoveries, here and abroad; and the prospects for rebalancing.
April 08, 2012
Current economic conditions
Friday's jobs report was unquestionably a disappointment. But other recent U.S. economic indicators are more encouraging.
April 05, 2012
The Recovery According to Ed “We are not in a recession” Lazear
In Tuesday’s WSJ, Edward Lazear argued that we are now experiencing the “Worst Economic Recovery in History”. Before dissecting this remarkable document, it would behoove the reader to recall that while he was Chair of George W. Bush’s Council of Economic Advisers, he stated unequivocally in May 2008 (also in the pages of the WSJ):
March 25, 2012
Disentangling the channels of the 2007-2009 recession
Harvard Professor James Stock and Princeton Professor Mark Watson presented a very interesting paper last week at the Spring 2012 Conference for the Brookings Papers on Economic Activity. Their paper studied similarities and differences between the 2007-2009 recession and other U.S. business cycles.
March 22, 2012
Chinn-Ito Financial Openness Index Updated to 2010
The Chinn-Ito KAOPEN index -- a measure of de jure financial openness -- has just been updated to 2010 (site here). The results show some slight retrenchment in recent years, particularly in LDCs and emerging markets, as shown in Figure 1.
March 07, 2012
Re-Examining that "Massive Stimulus"
I keep on seeing references to "massive stimulus", so much I have this feeling of innumeracy everwhere. Here's one example, provided by a commenter on Free Exchange the day before yesterday, responding to the linked article of Brad Delong:
March 01, 2012
The “Ever Expanding” Government Illustrated, Part III
- Real government nondefense spending on goods and services is declining, and is declining relative to real GDP.
- The ratio of government outlays to nominal potential GDP is declining.
- Total civilian government employment is declining, and is declining as a share of total nonfarm employment.
February 23, 2012
Famous Conditional Forecasts from the Real Business Cycle Side
Or, who else misunderstood the nature of the financial crisis and recession
As I was reviewing material to use in teaching how new classical models relate to the popular aggregate demand/aggregate supply models  used in policy analysis, I ran into this forecast in the real business cycle vein from October 26, 2008.
Barring a nuclear war or other violent national disaster, employment will not drop below 134,000,000 and real GDP will not drop below $11 trillion.
February 20, 2012
The 2012 Economic Report of the President
Markups, Competitiveness, and the Bush Tax Cuts and Deficits
The Administration released the annual Economic Report of the President on Friday. Many topics were covered, but here I’ll remark upon a few issues, motivated by several graphs.
February 17, 2012
Motor Vehicle Output and Sales, Three Years after the Deluge
Here is a summary graph of the state of the US motor vehicle industry, as indicated in the last GDP release.
February 14, 2012
The Budget Forecasts. . .
And forecasts in general
The forecasts, and comparisons against alternatives, are presented in Table 2-2 of the Analytical Perspectives of the Budget.
February 05, 2012
Economic conditions improving
Last week's data suggest that the U.S. economic recovery is continuing to gain some strength.
January 27, 2012
U.S. GDP: not a recession, but still not very encouraging
The Bureau of Economic Analysis reported today that U.S. real GDP grew at an annual rate of 2.8% during the fourth quarter of 2011. That's better than any of the previous 5 quarters, which tells you more about how disappointing the previous year and a half has been than it does about how great the fourth quarter was. The average historical growth rate for the U.S. economy over the last 60 years has been about 3.2%.
January 19, 2012
Miscellanea: America's Lost Decades, Wisconsin’s Lost Year, Hi Frequency Measures, Europe, and Conditional Inflation Targeting
Here’s my 25 minute presentation of Lost Decades at the Rotary Club of Madison, on January 4th (as recorded by Wisconsin Eye) Powerpoint. One point I made was that the global financial crisis and ensuing recession have exacted a tremendous cost on the US economy. In the absence of more aggressive action, another 2.4 trillion Ch.2005$ loss will be incurred through 2013Q4. The blithe indifference with which opponents of extended payroll tax reductions, extended unemployment benefits, food stamp expenditures and infrastructure investment contemplate the damage continues to astound me.
January 18, 2012
Links for 2012-01-18
FT Alphaville on crude oil and the eurozone crisis.
VoxEu notes the systematic international tendency for official deficit figures to understate the magnitude of the change in public debt.
Liberty Street Economics on forecasting with internet search data.
January 08, 2012
Current economic conditions
The latest U.S. economic indicators have taken a favorable turn.
December 04, 2011
Current economic conditions
The U.S. economy experienced disappointingly weak growth in the third quarter. Data coming in during the last week suggest that the fourth quarter is starting out a little better. But it doesn't look to me as much better as some accounts in the financial press might lead you to believe.
November 29, 2011
"The first thing we do, let's kill all the beancounters."
(With apologies to Shakespeare). Or, how political discourse in America is becoming more like that in Greece.
I’ve been away in Europe for much of the last few weeks, and have heard plenty about the euro crisis (and US fiscal paralysis). And while I think the comparisons often made between the Greek and American fiscal situations are overstated (different debt-to-GDP ratios and trajectories, and critically very different arrangements with respect to central banks), in one way -- namely the way in which Greece managed to enter into EMU, and to hide its debt to GDP ratio -- the US could become more like Greece, if some in the political sphere have their way. From the FT:
November 27, 2011
If you're prone to worry about where the economy's headed, last week's developments weren't very reassuring.
November 17, 2011
The Economy Slows Here and Abroad
And what we can do about it
From Macroeconomic Advisers and e-forecasting, some recent reads on the macroeconomy:
November 06, 2011
Autos, housing, and the business cycle
Here I offer some observations on what's been holding back the recovery.
October 29, 2011
CBO on Income Inequality, and Interpreting OWS
Tabulating Inequality Trends
The CBO released a report on income inequality earlier this week. This means that the "inequality deniers" are having a more difficult time arguing that widening spreads an wages, compensation, or overall income are merely statistical artifacts dreamt up by liberals (see e.g. here). What is of most interest is (i) real after-tax income of the top 1 percentile has risen about 275%, and (ii) the pre-transfers/pre-tax income share of the top 1% has increased most profoundly.
October 27, 2011
Could be worse
The Bureau of Economic Analysis reported today that U.S. real GDP grew at an annual rate of 2.5% during the third quarter of 2011. That's below the average postwar growth rate of 3.2% and well below the 4.3% growth for an average expansion quarter. Even so, it's better than any of the previous 3 quarters, and better than many analysts had been expecting when the quarter began in July.
October 23, 2011
Links for 2011-10-23
Dave Altig and Patrick Higgins at the Federal Reserve Bank of Atlanta have raised their estimate of 2011:Q3 real GDP growth from 1.4% as of the beginning of September to 3.2% currently.
Enterprise Products Partners and Enbridge Inc. announced plans to build a new pipeline from oversupplied Cushing, Oklahoma to the Gulf Coast (hat tip: Jim Brown). I reviewed the great need for such a pipeline here, and this may be one way to get one built without having to wait forever for White House approval.
Federal Reserve Bank of San Francisco President John Williams reviews lessons from the last 3 years on the effects of unconventional monetary policy.
Michael Plante and Mine Yucel at the Federal Reserve Bank of Dallas review the evidence on the role of speculation in recent oil price moves.
October 12, 2011
Wealth Inequality: A Time Series Plot
"Do you concur that measures of the wealth distribution have been mostly quiescent since the 1970s and that the distribution of wealth is more even today than it was in the 1940s (the peak for the US modern era)?"
Well, I think that this is an interesting question, and so I went a-searching for data. This is what I found, which led to my answer of "no".
October 11, 2011
Crowding Out Watch, Again
I thought my March post on crowding out would be my last for a while, but the latest data are startling enough so that I wanted to post this graph of ten year real interest rates. Just for all those people who were worrying about big jumps in rates with government borrowing.
October 10, 2011
The World Close to Stall Speed
Or at least OECD
plus China *, on the basis of the OECD's Composite Leading Indicators for August 2011:
October 08, 2011
Is another U.S. recession a 'done deal'?
Today we're pleased to feature a guest contribution from Michael Dueker, chief economist at Russell Investments and formerly an assistant vice president in the Research Department at the Federal Reserve Bank of St. Louis. Dueker is also a member of the Blue Chip forecasting panel. Econbrowser readers may remember that in February 2008 Dueker correctly predicted the onset of the current recession, using a model-based forecast. In a depths-of-recession piece from December 2008, he predicted in this forum that the recession would last until July or August of 2009, but that employment growth would not resume until March of 2010. We asked Mike to share the latest macroeconomic predictions from the Dueker Business Cycle Index model, subject to the disclaimer that the content does not constitute investment advice or projections of the stock market or any specific investment.
October 06, 2011
IMF Book Forum: Lost Decades
October 05, 2011
Slow growth continues
The stock market has looked scary. But economic indicators suggest U.S. growth is continuing.
September 13, 2011
Investment Behavior and Policy Implications
Over the weekend, both Professors Barro and Mankiw wrote on investment in the New York Times. As Modeled Behavior observed, the focus on business fixed investment (BFI) or nonresidential investment was somewhat odd because BFI behavior had not been particularly anomalous in the recovery. Here, I extend upon that analysis, and draw some policy implications.
September 02, 2011
Current economic conditions
The economic data arriving during the last week have been deeply discouraging, though are slightly less grim than some may have been concluding.
August 17, 2011
Not dead yet
We had a couple of pretty scary economic developments last week, but as far as I can tell, we're still standing.
August 16, 2011
The Slowdown at Home and Abroad
The news from the European core of near zero growth shouldn’t have been so surprising.   Growth is slowing in the US and abroad. Why are some US policymakers so dead set on withdrawing stimulus?
August 12, 2011
Chinn and Swagel on Radio Times: "Economic News Roundup"
This morning, I was a guest on WHYY's Radio Times with Marty Moss Coane. The other panelist was Phill Swagel, and topics covered the stock market, the stimulus, and the state of the economy. One can hear the podcast here: [mp3].
August 05, 2011
More on the debt ceiling aftermath
Here are interviews I did earlier this week on the debt deal:
August 02, 2011
Assessing the damage
We finally get our debt-ceiling deal, only to watch the S&P500 fall 3.7% from Thursday's close. What gives?
July 31, 2011
Tales from the GDP revisions
Or things got a lot worse in 2008Q4 than we thought
The 2011Q2 advance release and revised estimates  contained many unpleasant surprises (see Jim’s assessment; also [CR1] and [CR2] [John Taylor] [Izzo/WSJ RTE]). The below consensus growth rate, and downward revision in Q1 growth, have been discussed elsewhere. I want to focus on the implications of the revisions to the data going back to 2003 (with particular emphasis on data back to 2007).
July 29, 2011
Yet another discouraging GDP report
The Bureau of Economic Analysis reported today that U.S. real GDP grew at an annual rate of 1.3% during the second quarter of 2011, and revised down its estimate of first-quarter growth to an even more anemic 0.4%. We knew the first half of the year was disappointing, but this is even weaker than most of us were anticipating.
July 21, 2011
Dividing integrals by integrals versus other calculation
With an application to accurately counting stimulus effects, for the benefit of the numerically challenged
Here I try to explain why dividing a number at a point in time by a cumulative number does not make sense (Warning: some understanding of calculus helpful). Reader Manfred defends the Weekly Standard’s calculation of dividing net jobs created at an instant in time by cumulative spending to obtain a dollars/job figure. Specifically:
July 16, 2011
Consumers get more worried
Reuters reported yesterday that the preliminary July reading for the Thomson Reuters/University of Michigan's index of consumer sentiment fell to 63.8, the lowest level in more than two years. In fact, that's about as low as this measure ever got in the recessions of 1981-82 or 1990-91, and is well below values for the recession of 2001.
July 14, 2011
The Moral Imperative for the Continuation of Low Tax Rates for the Top Income Fractiles
Or lack thereof
Reports indicate that one of the reasons the "grand bargain" failed was the refusal of one party to accede to an increase in tax rates on households with AGI above $250,000. . I can understand this reluctance, given that the share of total income going to the top 5% of households fell from 38.7% to 36.5%, going from 2007 to 2008 (just ignore the increase of 17.6 percentage points in the previous 30 years). Below is an updated graph from our forthcoming book Lost Decades by myself and Jeffry Frieden, illustrating the grievous harm that these households have endured.
June 28, 2011
Forecasting Commodity Prices
With commodity prices exhibiting wide fluctations over the past few years, it's no wonder that many are interested in determining what procedure best forecasts. A recent New York Fed blog post by Jan Groen and Paolo Pesenti tackles this issue. In a horse race between various economic, time series, and futures-based approaches...
there is no obvious winner. Information from large panels of global economic variables can help, but their forecasting properties are by no means overwhelming. It all depends on the choice of the specific index and the forecasting horizon. ...
June 07, 2011
Growth Forecasts and Informational Rigidities
From a new IMF working paper by Prakash Loungani:
We document information rigidity in forecasts for real GDP growth in 46 countries over the past two decades....
June 02, 2011
A weakening economy
Incoming data over the last two weeks paint a consistent picture that the U.S. economy, which had been growing at a disappointingly slow rate, has weakened further.
May 30, 2011
Unemployment and Output Gaps in a New Keynesian DSGE
The output gap is big and negative; the unemployment gap is big and positive. From "Unemployment in an Estimated New Keynesian Model" (ungated version), by Jordi Galí, Frank Smets, and Rafael Wouters:
May 25, 2011
Forecasts: What and How Do Business Economists Think?
The WSJ and Philadelphia Fed surveys of economists were released last week. It’s of interest to consider what they imply for the macro outlook, and additionally, how they believe inflation will evolve as a function of other variables.
May 24, 2011
When the economy reaches stall speed
April 28, 2011
Economy still growing and still disappointing
The Bureau of Economic Analysis reported today that U.S. real GDP grew at an annual rate of 1.8% during the first quarter of 2011. Not exactly what the doctor ordered for a still very sick patient.
April 25, 2011
A Divergence of Opinion
As highlighted in Figure 1, estimates of GDP regarding 2011Q1 growth differ widely.
April 03, 2011
More favorable developments
March 29, 2011
Consumption spending slowing down
Guess what: rising energy prices are taking a toll on consumers.
March 15, 2011
Guest Contribution: The Macroeconomic Aftermath of the Earthquake/Tsunami in Japan
By Ilan Noy
Today, we're fortunate to have Ilan Noy, Associate Professor of Economics at the University of Hawai'i, as a Guest Contributor.
In the last 14 months, we have seen a spate of very large earthquakes which began with the unprecedented devastation caused by the earthquake in Haiti (1/10/10) -- the most destructive natural disaster in modern history (relative to national population), continued with the unusually strong earthquake in Chile (2/27/10), to the most recent events generated by the earthquake in Sendai, Japan.
March 13, 2011
Consumers see bad news
The Reuters-Michigan survey of consumer sentiment registered a decline from 77.5 in February to a preliminary reading of 68.2 in March. That's the biggest monthly decline since the financial crisis in October 2008, and wipes out the nice gains of the last four months to put us back where we were in October 2010.
February 26, 2011
The Economic Report of the President
The Economic Report of the President, 2011 is out. The topical chapters are:
February 07, 2011
Two Competing Views on America's Economic Future
Or, Palin and Eichengreen on Infrastructure Investment
In a recent speech, Sarah Palin, stated that:
... "The federal government is spending too much, borrowing too much, growing and controlling too much," she said.
February 02, 2011
An improving economic outlook
Looking a little better each day.
January 28, 2011
A modestly brighter GDP report
The Bureau of Economic Analysis reported today that U.S. real GDP grew at an annual rate of 3.2% during the fourth quarter of 2010. That's about the historically average growth rate. But we expect much better than average at this point in the cycle, and need much better than average to make real progress with the unemployment rate.
January 25, 2011
Real-time analysis of the Aruoba-Diebold-Scotti Business Conditions Index
One of the economic indicators to which we frequently call attention is the Aruoba-Diebold-Scotti Business Conditions Index that is maintained by the Federal Reserve Bank of Philadelphia. This uses a number of important economic indicators immediately upon release to get an updated view of the overall level of economic activity. One question that arises in using this index is that the raw data from which the index is constructed can be subject to considerable revision in subsequent data releases. A new analysis by the authors takes a look at this issue.
January 23, 2011
The Fed's new policy tools
We had to throw out our textbook descriptions of how monetary policy is implemented after the fall of 2008, as the Fed turned from its traditional tools to active use of large-scale asset purchases. A number of studies have now been conducted of the potential efficacy of these new policy tools. I surveyed some of the new studies last October. Today I'd like to discuss three new papers that have come out since then.
January 10, 2011
Explaining Recent Trends in Household Saving
From Reuven Glick and Kevin Lansing, Consumers and the Economy: Household Credit and Personal Saving:
In the years since the bursting of the housing bubble, the personal saving rate has trended up from around 1% to around 6%, while the ratio of household debt to disposable income has dropped from 130% to 118%. Changes over time in the availability of credit to households can explain 90% of the variance of the saving rate since the mid-1960s, including the recent uptrend, according to a simple empirical model.
December 30, 2010
Hazards in Interpreting Seasonals
Professor Casey Mulligan has an interesting post, in which he observes that while retail sales are about 15-20% higher in December than in the previous three months, retail employment is only about 4% higher in December than October, thus proving that fiscal stimulus cannot be very effective at raising employment.
December 29, 2010
Looking back at the Great Recession
Some people use the end of December as an opportunity for a retrospective on the year. But I decided to take a look back at the last three years, by way of updating some comparisons I made in April 2009 between the Great Recession and the average characteristics of other postwar recessions.
December 05, 2010
Still no strength in this rebound
The new news looks to me like the same old news.
November 07, 2010
Current economic conditions
Things look slightly cheerier than they did a month ago. But that's not saying much.
October 29, 2010
Another disappointing GDP report
The U.S. economy managed to keep growing in the third quarter, but well below what's needed for a normal economic recovery.
October 13, 2010
The "Ever-Expanding" Government Sector, Illustrated (Part II)
I've been lecturing on the government sector in my macro course. In updating my lecture notes, I plotted out some interesting graphs, which link up nicely with this previous post. The following four figures highlight: (1) normalized Federal outlays are not much higher than in 1986; (2) government consumption to GDP is back up to 1991 levels; (3) the cyclically adjusted budget deficit is only 2 ppts larger than that recorded in 1987; and (4) Federal consumption remains far below the previous peak in 2007.
October 06, 2010
Hangin' in there
Recent economic indicators tell more of the same story-- disappointingly weak growth.
August 27, 2010
GDP revised down
The Bureau of Economic Analysis, which last month had estimated that U.S. real GDP had grown at a 2.4% annual rate during the second quarter, today revised that estimate down to a 1.6% annual rate. But the revision isn't quite as discouraging as it might sound.
August 25, 2010
More thoughts on what to expect from the Fed
There is disagreement within the FOMC. How will it be resolved?
August 08, 2010
Current economic conditions
Last week's new economics data were a mixed bag. But on balance I'd have to say I'm more discouraged than when the week began.
July 31, 2010
The 10Q2 Advance GDP Release: Cautionary Notes from Revisions
The 2010Q2 advance GDP release has been covered by Jim, as well as others. [RTE/Izzo] [CEA] [FreeExchange/RA] [CR] [MA] The release was accompanied by an annual revision of data extending back to data for 2007Q1. This revision alters our understanding (or lack of understanding in the cases of certain people) of the evolution of this recession. Here are the points I gleaned.
July 30, 2010
About that recovery you ordered
"We have met the enemy and he is us," Pogo used to say. Well, we've also now met the recovery, and he is ugly.
July 26, 2010
More disappointing news
Just a quick note on a couple of new data releases today.
July 25, 2010
Update on the bumpy recovery
I was curious to take a look at how Mike Dueker's Business Cycle Index and other measures assess the current situation.
July 03, 2010
No double dip
Although many people are concerned about the possibility of a second economic downturn, I continue to see an economy that is growing, albeit significantly more slowly than we would have wanted.
June 26, 2010
Identifying business cycles
The 30th Annual International Symposium on Forecasting was held in San Diego last week. Among the many interesting presentations was Princeton Professor Mark Watson's discussion of estimating business cycle turning points using a large number of indicators.
June 23, 2010
June 07, 2010
Macroeconometrics in the Mountains
I'm just back from a two day conference at the Norges Bank's conference center in the mountains north of Oslo (organized by Karsten Gerdrup, Christian Kascha, Francesco Ravazzolo and Dagfinn Rime). For me as an end-user of econometric methods, this was a great experience. I got to see some recent developments in applying time series methods to problems in macro and finance (and to see Norway for the first time). Here were some of the papers presented and discussed (I've omitted the papers that are not posted online).
June 05, 2010
Current economic conditions
Yes, we're still in the economic recovery phase, and yes, it still looks pretty sluggish.
June 01, 2010
Mind the Gap
Even as inflation continues to fall , there are calls to raise interest rates soon in order to quell inflationary pressures. I remember reading similar calls for monetary restraint in Japan in 2000-01, when that country was struggling to escape deflation (I sure had a hard time explaining the fears to my boss, and indeed never came up with a good answer). But rather than dismiss these calls, I think it useful to revisit the different measures of the output gap, to see whether those fears of rampant inflation due to disappearing slack make sense. Fortuitously, Michael Kiley has just circulated a new paper reviewing the various concepts of the output gap (see also these previous posts:   ).
May 26, 2010
The (Macro) World at Your Fingertips
Or, at least the G-20 at your fingertips.
Eswar Prasad (Cornell and Brookings) and Karim Foda have put together a new website, "TIGER: Tracking Indexes for the Global Economic Recovery".
In collaboration with the Financial Times (FT), Eswar Prasad and Karim Foda of Brookings have developed a set of composite indexes which track the global economic recovery. The Financial Times has produced the Tracking Indexes for the Global Economic Recovery (TIGER) interactive map, which appears on the FT Web site.
May 25, 2010
Tales from the BEA's GDP by Industry Release: The Private Economy and Rebalancing
The BEA today released value added and output series by industry through 2009. A few highlights: (1) the share of the private sector value added in total GDP has declined by 1.34 percentage points since 2000; (2) manufacturing's share of GDP continues to decline in nominal terms; and (3) the share of finance and insurance barely rose in 2009.
May 23, 2010
Calling recessions in real time
My latest research paper reviews efforts to supplement the declarations by the National Bureau of Economic Research as to the beginning and ending of economic recessions with determinations made by purely mechanical algorithms.
May 05, 2010
The sluggish recovery
This week we received more evidence confirming that the U.S. economy has returned to positive, but still disappointing, growth.
April 30, 2010
The recession is over
That's the big take-away from today's report from the Bureau of Economic Analysis that the seasonally adjusted real value of the nation's production of goods and services grew at a 3.2% annual rate during the first quarter of 2010. But the details behind today's report suggest that the recovery so far remains pretty weak by historical standards.
April 21, 2010
The Administration's February Forecast Compared to Current Expectations
Back in February, some observers were characterizing the Administration's forecast as too rosy. Now, the Administration forecast is looking positively pessimistic by comparison to private sector forecasters, at least over 2010.
April 14, 2010
Averting the Consumption Disaster
The CEA has just released the newest quarterly report on the impact of the ARRA. In addition to tabulating the impacts on output and employment, there's a special section by Chris Carroll (one of the leading authorities on modeling consumption behavior -- I used to teach his papers in my PhD macro course), which concludes in the absence of the ARRA "...consumer spending would likely have continued to fall" (which is consistent with my post from a couple days ago).
April 12, 2010
"Where's the Consumption Disaster?", Again
Back in November 2009, Casey Mulligan asked this question, and observed:
Both of these [disposable income and consumption] are HIGHER in September 2009 than they were a year earlier.
I observed that it made sense to look at per capita values; and that changed the conclusions substantially.
April 04, 2010
Looks good to me
Finally we're starting to see some convincing indications of economic recovery.
March 24, 2010
Not a textbook rebound
Is this as good as it gets? For the time being at least, it seems to be.
March 07, 2010
A new index of financial conditions
What do current financial indicators tell us about where the economy is headed?
March 02, 2010
Net Fiscal Stimulus
From the abstract to "On the ease of overstating the fiscal stimulus in the US, 2008-9", by (my sometime coauthor) Joshua Aizenman and Gurnain Kaur Pasricha:
This note shows that the aggregate fiscal expenditure stimulus in the United States, properly adjusted for the declining fiscal expenditure of the fifty states, was close to zero in 2009. While the Federal government stimulus prevented a net decline in aggregate fiscal expenditure, it did not stimulate the aggregate expenditure above its predicted mean. ...
February 03, 2010
How does the Administration's forecast of the levels of real GDP compare against those of the CBO, and the Blue Chip and Wall Street Journal surveys?
January 29, 2010
Strong GDP growth with weak fundamentals
The Bureau of Economic Analysis reported today that the seasonally adjusted real value of the nation's production of goods and services grew at a 5.7% annual rate during the fourth quarter. That's great news, but...
January 26, 2010
CBO's Budget and Economic Outlook Update
January 16, 2010
The January WSJ Survey: Recovery and Interest Rates
The WSJ survey for January is out. Growth is predicted to be fairly rapid, but hardly torrid, in 2010, with q4/q4 mean estimate at 3.0%. Here's the mean forecast of the log level of GDP, and the trimmed high and low forecasts.
January 13, 2010
Assessing Stimulus Measures: Statistical and Economic Significance
The CEA has updated its estimates of the impact of the stimulus plan on output. As I observed in my earlier post on assessing the results on 2009Q3 impact, one could use either a model approach (using multipliers, which can be derived from either neo-Classical synthesis, New Classical, New Keynesian models  ) or examine the actual versus some counterfactual based upon historical correlations (what CEA calls the "projection approach").
December 23, 2009
Levels versus Growth Rates and the Impact of ARRA
Since there is often confusion in popular discussions of the net effect of the stimulus on GDP, I thought it would be useful to present Deutsche Bank's views on the impact on both the level and growth rates of GDP. (Here we are talking about seasonally adjusted at annual rates [SAAR] growth rates and levels; cautionary notes here: , .)
December 16, 2009
Links for 2009-12-16
- NY Fed economist Erkko Etula finds that he can predict oil prices using the volume of broker-dealer financial assets.
- Washington University Professor James Morley and separately Kansas City Fed economist Todd Clark haven't given up on the Great Moderation.
- My colleague Eli Berman discusses his book Radical, Religious, and Violent: The New Economics of Terrorism
- Fannie Mae and Freddie Mac may seek an increase to their $400 billion federal lifeline before the end of the year.
- Billy Hallowell puts together a blog carnival on Facing Up to the Nation's Finances.
- Berkeley Professor Petr HoYava proposes a new theory of gravity.
December 02, 2009
Recent indictors continue to support the impression that we're in the midst of a weak economic recovery.
November 19, 2009
GDP: Revisions and Forecasts
There's been some discussion of how the GDP estimates for 2009Q3 might be revised downward in light of the September trade release . e-Forecasting has presented its latest estimates up to October, and Macroeconomic Advisers through September. Macroeconomic Advisers writes:
November 18, 2009
Receiver operating characteristics curve
Travis Berge and Oscar Jorda of the University of California, Davis have an interesting new paper on statistical criteria for distinguishing economic expansions from recessions.
November 16, 2009
Assessing the Impact of Government Policy on Widget Consumption and Widget Sector Capital Usage
Let supply and demand for widgets (y) be given by the following two equations, respectively:
(1) yt = αt + β x t + ε t
(2) yt = γ + δ x t + Γ z t + u t
November 11, 2009
Politico Does Economic Analysis...
Be afraid; be very afraid.
From "'Created or saved' doesn't add up", by Joseph Lawler:
...[t]he "created or saved" numbers are meaningless. The administration purposefully devised the metric to be nebulous. Without a counterfactual, showing the trend of unemployment in the absence of the stimulus, it is impossible to know how many jobs the stimulus saved.
November 09, 2009
"Where's the Consumption Disaster?"
Casey Mulligan asks:
So a year later, in September 2009, after living through a year of "disaster," how did real consumption expenditure (one economists' favorite measures of living standards) compare to what it was in September 2008?
November 05, 2009
Some Thoughts Elicited by Reading Some Calibration Papers
(Warning: Might be considered "wonky" by some) In many economic analyses, one wants to isolate the "business cycle" component of macroeconomic series. Here is one such series, which has had a detrending technique applied to it. Try to guess what it is.
November 04, 2009
Current economic conditions
The U.S. recovery is underway. But so far it doesn't look as strong as we had been hoping.
October 29, 2009
A welcome GDP report
The Commerce Department reported today that the seasonally adjusted real value of the nation's production of goods and services grew at a 3.5% annual rate during the third quarter, a little better than the 3.2% average seen since 1947.
The 2009Q3 Advance GDP Release and Stimulus Measures
The 3.5% growth rate was, in my view, in large part attributable to direct measures to stimulate the economy, including direct spending on goods and services by the government (Federal, state and local), as well as tax measures. First, let's take a look at how each category of final demand accounted for total growth, in the context of a mechanical decomposition, in Figure 1.
October 26, 2009
The National Saving Identity: Private Saving, Household Saving, and Rebalancing
The National Saving Identity states:
CA ≡ (T-G) + (S-I)
Where CA is the current account, (T-G) is the consolidated government budget balance, and (S-I) is the private sector saving-investment balance. Figure 1 depicts the profound shifts that have occurred in these components (normalized by nominal GDP).
October 18, 2009
Real output grew significantly this quarter. Will employment follow?
October 03, 2009
Not much of a V
The latest auto and employment numbers paint a picture of an economic recovery that remains tepid and potentially fragile.
September 20, 2009
Economy improves but concerns remain
Last week we received positive readings for some key economic indicators. But I still see plenty to worry about.
September 17, 2009
Credit Stock Growth versus New Credit
Deleveraging implies slow growth in total credit, and according to the usual reasoning, slow growth in GDP. Several of Deutsche Bank's economists, however, focus on what they call the credit impulse. They provide the following provocative graph, which suggests a rapid recovery:
September 11, 2009
Guest contribution from Michael Dueker on the economic recovery
Michael Dueker is Head Economist for North America at Russell Investments and a member of the Blue Chip forecasting panel. In February of 2008 he warned Econbrowser readers that it appeared unlikely that the economy was going to escape the slowdown without a recession. In December of 2008, he predicted in this forum that the recession would last until July or August of 2009, but that employment growth would not resume until March of 2010.
With that track record, we were very interested to learn the latest macroeconomic predictions stemming from Russell's Business Cycle Index, subject to the disclaimer that the content does not constitute investment advice or projections of the stock market or any specific investment.
September 09, 2009
Tracking the Consumption Decline
The new semester has begun, and I was reviewing economic trends in my macro courses. In my lectures, I highlighted the sharp drop-off in consumption. In the following, I discuss how well my predictions for consumption from last November have held up.
August 30, 2009
Econbrowser Emoticon shifts to neutral
|Sep 13, 2006|
|Feb 21, 2007|
|Apr 25, 2007|
|Jun 27, 2007|
|Oct 5, 2007|
|Jan 4, 2008|
|Aug 30, 2009|
If you've only been following Econbrowser since 2008, you may have thought that the crabby countenance in the upper-right corner of our main page was a permanent fixture, conveying our general grumpiness about the state of the economy or perhaps life in general. Despite having been stuck in the pessimistic mode for quite some time now, the emoticon was in fact always intended to be a dynamic feature, adjusted from time to time to provide readers with our overall impression of incoming data. The table on the left provides links to each occasion that our Little Econ Watcher's countenance has changed in the past.
Last week's data persuaded me to move the Econbrowser Emoticon back into neutral, signifying that I now judge overall output to be growing slowly rather than declining. Here are details on the evidence that prompted this change in assessment, and what it signifies.
August 25, 2009
OMB and CBO Economic Projections
August 19, 2009
Monthly GDP Estimates: Stabilization and Upswing...for Now
Here are the latest reads on monthly GDP:
August 17, 2009
A Utilization-adjusted Measure of Productivity: Implications for the Output Gap
John Fernald and Kyle Matoba of the San Francisco Fed have just released a utilization adjusted total factor productivity series (data here). The importance of this development is clearly laid out by the authors:
This Economic Letter looks at potential output from the perspective of growth accounting, which assesses some of the key supply-side factors determining sustainable, noninflationary potential output. Perhaps most importantly, we find that the underlying pace of efficiency improvements -- "technological progress," broadly construed-- has remained strong during the recession. This strength offers a reason for cautious optimism about potential output and the long-term health of the American economy. More immediately, stronger potential relative to the same observed output implies substantial slack in the economy.
August 16, 2009
Leading Indicators: Key Economies and the BRICs
A month ago, I examined the information content of the OECD's Composite Leading Indicators. The August release (for June data) is out. There's substantial variation in the implied outlook across economies.
August 15, 2009
Current economic conditions
This was another week when everybody but me sees an economic recovery in the works.
August 11, 2009
The Paranoic Impulse in Current Discourse
Or, "return of the black helicopters"
Plenty of examples of hyperbole in current policy discussions, but here I want to return  to the specific topic of whether several key data series examined by economic analysts can be trusted, or whether in fact they are deliberately manipulated by government bureaucrats. Case in point is Econbrowser reader DickF's comments:
The government thinks it can run the economy on data that is years old and inaccurate at best. Also any time numbers are manipulated by government there is a political element involved. The whole reason the numbers are manipulated is to the will be "more normal" but who decides what is normal? In the government political bureaucrats who know their jobs depend on pleasing the politically connected. This is just another reason why centrally planned economies always fail. The hubris in government economic circles is enormous.
I am not saying that the agencies are manipulating data to make "each respective Administration look good." Sometimes they manipulate date to make an Administration look worse than it actually is. It depends on their political inclination.
August 04, 2009
Current economic conditions
July auto sales might be viewed as the first solid indicator of an improving U.S. economy. But what does it really tell us?
August 01, 2009
Good News and Bad News from the GDP release
Some additional observations (see Jim Hamilton's take, as well as others) on the GDP release: (1) the five year revision indicates that GDP was larger than we thought, but it also declined faster in 2009Q1; (2) GDP growth was lower throughout 2008 than earlier estimated; (3) GDP growth in 2008Q2 at 1.5% SAAR would have likely been at zero or negative in the absence of the January 2008 stimulus package in which case; (4) GDP q/q growth would have been negative from 2008Q1 to 2009Q2; (5) the case that ARRA directly affected 2009Q2 GDP is limited, in a mechanical sense since most of the increase in government spending is accounted for by defense spending; and (6) the US ex-oil ex-agricultural net exports to GDP ratio is back to where it was in 1998Q1.
July 31, 2009
Been down so long it looks like up
The Commerce Department reported today that the seasonally adjusted real value of the nation's production of goods and services fell at a 1% annual rate during the second quarter. That's about as bad as things ever got during the recession of 2001. But after the -5.4% and -6.4% growth rates that the Commerce Department now says characterized 2008:Q4 and 2009:Q1, some folks are cheering today's news. Reminds me a little of how I've seen people in Minnesota take off their shirts for the first 40oF day of spring, a little shocking to a traveler from San Diego.
July 17, 2009
Links for 2009-07-17
Some quick remarks about the evidence for economic recovery, central bank independence, and Goldman Sachs.
July 13, 2009
Pre-ARRA, How Badly Did Macroeconomic Forecasters Overpredict GDP and Employment in 2009Q1?
There's been a lot of breast beating over the fact that the Administration underestimated the severity of the downturn. From this has come a lot of confused argument -- sometimes not internally consistent -- over whether this invalidates the usefulness of the stimulus package, whether the stimulus worsened the economic outlook, etc. I'll dispense with the clearly economically illogical arguments and try to tease out what is the "surprise" element in the 2009Q1 figures, and from that infer how much worse the economy was relative to what private sector forecasters predicted, conditional upon the passage of the ARRA.
July 08, 2009
Global Financial Stress
Several months ago, I discussed the indicators of financial stress developed by the IMF in two posts  . The working paper documenting and extending the results in the World Economic Outlook has just been released.
July 06, 2009
The Informational Content of the OECD Leading Indicators
Sunday's NYT had a great interactive graphics by Amanda Cox detailing the dynamics of recessions and recoveries. One interesting graph pertained to the OECD Leading Indicators:
July 02, 2009
Back to the Stimulus Debate: W, Timing, the States, and Baselines
A "W" Recession?
Martin Feldstein has recently raised the possibility that we might experience a relapse into recession (a beautiful symmetrical W), with the next dip in 2010. In my view, this means (1) we should have opted for a bigger and better composed stimulus package, and (2) the timing of expenditures in the stimulus package might not be as problematic as many commentators have indicated. From Bloomberg:
June 24, 2009
The leading economic index
The Conference Board Leading Economic Index increased by more than 1% in both April and May. Since I've been scratching my head trying to find some confirmation for recent economic optimism, I was curious to take a look at what's responsible for the favorable reading from the LEI.
June 14, 2009
Do you see what I see?
I'm still looking for, and still not seeing, the economic recovery that everybody is talking about.
June 07, 2009
Not a robust recovery
Often after a sharp economic downturn we observe an equally dramatic recovery. But nobody can claim to be seeing that so far in the currently available data.
June 05, 2009
Relevant and Irrelevant Criticisms of the Stimulus Package
Keith Hennessey critiques the stimulus package. Some points make sense, some points, well, I wonder. For instance, Hennessey argues the stimulus is not timely. As I've noted before, it's not timely only if you think this will be a relatively short recession, characterized by a rapidly dissipating negative output gap.   .
May 28, 2009
More Thoughts on Potential GDP and the Output Gap
In several past posts, I've been taken to task for using the CBO measure of the output gap (and the associated measure of potential GDP)  . Some criticize the false sense of certainty that is provided by the official measures, since they are known to be revised as data comes in. Some criticize the measures on the basis the fact that the statistical methodologies (Hodrick-Prescott, Band-Pass) are divorced from a formal economic model. Some criticize the concept of potential GDP derived from a production function approach (i.e., thinking about the economy as one big production function associated with one big firm...). Arnold Kling's recent critique centers upon the idea that output is not homogenous, and we need different types of capital (and by extension labor) when the desired composition of output changes. Yet another -- not entirely unrelated -- perspective argues that when relative prices change a lot, potential GDP can drop due to technological frictions; Jim provides a cogent discussion of this approach.
May 17, 2009
The deterioration continues
The Federal Reserve reported Friday that its index of industrial production fell another 0.5% in April, after having fallen 1.7% in March. Some analysts took comfort in the fact that at least the rate of decrease has slowed. But any decrease means we're producing less than we did the previous month, and recovery requires growth, not a slower rate of decline.
May 15, 2009
Ready, Shoot, Aim
Or, how ignorance sometimes invalidates a critique.
I am always amazed at how often people jump to the most paranoid interpretations. One case in point is this article by Evan Newmark entitled Mean Street: Obama's Big Fat Fibbing Budget on WSJ's Deal Journal:
May 14, 2009
Where's my recovery, dude?
A couple of disappointments in this week's data.
May 12, 2009
Tracking the recession
Here are links to perspectives from others on where the economy stands at the moment.
May 07, 2009
This shoot is definitely growing bigger and greener
The Labor Department reported today that seasonally adjusted new claims for unemployment insurance fell by 34,000 to 601,000 for the most recent available week, resulting in a reduction of the 4-week average for this series for the fourth consecutive week in a row.
May 04, 2009
Dow Jones Economic Sentiment Index
Dow Jones has begun publication of a new Economic Sentiment Index, which is based on a text mining analysis of five million news articles referencing the U.S. economy since 1990, rating words such as "recession" and "depression" as negative and "recovery" and "rebound" as positive.
April 29, 2009
Good economic news?
Today's GDP numbers were about what I was expecting. Although economic activity continued its sharp decline, if we continue to follow the script, things should improve.
April 23, 2009
Initial claims for unemployment insurance
The Labor Department reported today that initial claims for unemployment insurance rose by 27,000 in the most recent available week. Although that's a disappointing development, it's still a small enough increase to allow the 4-week average to fall for the second week in a row. Since that declining 4-week average is one of the few encouraging pieces of news in an otherwise discouraging economic landscape, I wanted to take a closer look at just how significant a statistical signal it really sends.
April 16, 2009
Update on the latest economic indicators
Some good news, some bad, in the indicators we follow this week.
IMF World Economic Outlook
- Link to webpage.
- Link to Chapter 3. From Recession to Recovery: How Soon and How Strong?
- Link to Chapter 4. How Linkages Fuel the Fire: The Transmission of Financial Stress from Advanced to Emerging Economies (a preview of some results was in this post).
April 15, 2009
The Aruoba-Diebold-Scotti Business Conditions Index
Last weekend I attended an excellent conference on business cycles hosted by UC Riverside (program details here). Among the many interesting presentations was an update from University of Maryland Professor Boragan Aruoba on the index of current business conditions that he developed with Professor Frank Diebold of the University of Pennsylvania and Federal Reserve economist Chiara Scotti.
April 06, 2009
The Yield Curve, across Countries, across Time
A year and half ago, I asked "Does it matter that yield curves (around the world) are sloping downward?" (October 12, 2007). I included this snapshot of term premia in the post:
March 15, 2009
What will recovery look like?
When good news comes, what should we expect to see?
February 01, 2009
Links to a few items I found interesting on non-residential structure investment, the "bad bank" proposal, and separation of powers.
January 24, 2009
A Concise Summary of Macro Performance under the Presidents
"No matter who took office in 2001, they were destined to oversee dashed expectations regarding the economy, the markets and the geopolitical outlook," said Robert Barbera, the chief economist of ITG. "It was all captured in the lunacy of the $5 trillion surplus on the horizon. That vision required no wars, no recessions and a nonstop spectacular bull market for equities."
That said," he added, "it certainly did not have to come to this."
January 12, 2009
CEA Chair Lazear on the Economy
From Washington Post:
"It does look like a great eight years, aside from the last quarter, unfortunately," Edward P. Lazear, chairman of Bush's Council of Economic Advisers, said in a recent interview. "In the long term, things look good. The reason things look good is this economy will rebound, and it will rebound strongly. . . . We expect things to turn around, and I would say early in President Obama's administration."
January 09, 2009
Employment and Output in December
The U.S. lost more jobs in 2008 than in any year since 1945 as employers fired another 524,000 people in December, indicating a free-fall in the economy just days before President-elect Barack Obama takes office.
December 03, 2008
Measuring Import Prices: Implications for GDP Growth
A lot of what has happened to GDP growth over the past few quarters has, in a mechanical sense, depended upon developments in the external accounts. In this post, I examine whether mismeasurement of import prices might have induced mismeasurement of economic output. This idea was prompted by hearing a presentation of Nakamura and Steinsson a couple months ago. The abstract to "Lost in Transit: Product Replacement Bias and Pricing to Market":
November 14, 2008
Real Retail Sales
Here's a picture of 12-month percentage changes in real retail sales. Certainly unprecedented for the current series, not so much when including the previous (more volatile) discontinued series -- although you do have to go back to 1980 to see a bigger 12-month drop.
November 13, 2008
The Consumption Path under Certain Assumptions: Back of the Envelope Calculations
Suppose by 2009Q4, GDP is 0.13% below 2008Q3 levels, real equity wealth is 35.2% below end-June levels, and real nonequity wealth is 6% below end-June levels. Further assume that the real Fed Funds rate remains at 2008Q3 levels (-2.45%). Then, the conditional estimate of 2009Q4 consumption will be 2.16% below 2008Q3 levels. This implies a 3% y/y decline in consumption by 09Q3; the only comparable instance of such a decline is 1951Q3, when consumption declined y/y by 2.3% (all percent calculations in log terms).
November 11, 2008
Some Consumption Trends Reviewed
There's been a lot of talk about how consumption will fall in the future -- some of it added by myself . I'm trying to fit some regressions now, to make some guesses about how consumption will move in the future, based on guesses about GDP and net wealth. I haven't got very far, but at the very least, I can share some interesting pictures. Figure 1 depicts nominal shares of services, services and nondurables, and total (i.e., adding in durables) consumption, over the 1967-2008 period.
November 08, 2008
The Economic Situation: Some Random Snapshots
The latest employment release was stunning, insofar as the NFP employment figure was far below consensus . Net job loss was 240K, rather than 200K; moreover, September job loss was revised upward by 125K. In addition to Jim's assessment, some reaction is summarized here. The acceleration in net job loss is depicted in Figure 1.
November 05, 2008
Main Street Recession Watch: ADP Report on Employment
Further evidence that the small business segment of the economy is undergoing stress. From the ADP National Employment Report:
[Joel] Prakken added, "This month's employment loss was driven by the goods-producing sector which declined 126,000 during October, its twenty-third consecutive monthly decline. The manufacturing sector marked its twenty-sixth consecutive monthly decline, losing 85,000 jobs. These losses were compounded by an employment decline in the service-providing sector of the economy which fell by 31,000, the first loss in the serviceproviding sector recorded by the ADP Report since November of 2002."
"Large businesses, defined as those with 500 or more workers, saw employment decline 41,000, while medium-size companies with between 50 and 499 workers declined 91,000. Employment among small-size businesses, defined as those with fewer than 50 workers, declined 25,000. This is the first outright decline in small business employment reported by the ADP Report since November of 2002, and the largest percentage decline since the economy was emerging from recession in early 2002," said Prakken.
Manufacturers report more bad news
A quick update on the October ISM report.
October 31, 2008
More on Defense Spending
In my last post on the 08Q3 GDP release, I noted the remarkable contribution of defense spending. Here is a little more detail on the growth rates of defense spending on goods and services on a NIPA basis.
October 30, 2008
Real GDP fell slightly in 2008:Q3
The Bureau of Economic Analysis reported today that U.S. real GDP fell at a 0.3% annual rate in the third quarter of 2008. That's the second quarter of negative real GDP growth out of the last four, and puts the cumulative annual growth since 2007:Q3 at an anemic 0.8%.
October 21, 2008
From the FT: The European Economic Outlook
From Europe's Stormy Outlook:
Stormy conditions prevail across Europe's economies, blackening the outlook after the arrival of a full-blown banking sector crisis this month sent confidence plummeting and threatened widespread-economic damage.
Jean-Claude Trichet, European Central Bank president, warned late on Sunday on French television of a "strong slowdown".
The recent turmoil has hardened expectations that 2009 will see little, if any, growth across much of the Continent.
October 19, 2008
More unhappy numbers
Updates on some of the series we regularly follow, and they're not good.
October 15, 2008
Some encouraging developments
Plenty of gloom out there if you're hungry for more. But I wanted to pass along a couple of developments this week that give me some hope.
October 06, 2008
How Bad Will the Downturn Be? Stylized Facts
The IMF released several chapters of the World Economic Outlook; one chapter entitled Financial Stress and Economic Downturns provides some insights into the ramifications of the current financial turmoil.
October 05, 2008
The downturn worsens
UCLA Professor Ed Leamer recently proposed four criteria for determining whether the economy is in recession, and concluded at the time of his study (two months ago) that the U.S. had not yet crossed that threshold. But this week's data might cause him to change his mind.
October 03, 2008
Updating euro-area GDP forecasts
Here I relate some interesting new research on how to update economic forecasts with incoming daily data and the latest assessment of where things stand in Europe.
September 30, 2008
Real GDP likely fell in Q3
Calculated Risk observes that we already know the values for a significant chunk of 2008:Q3 GDP. And it doesn't look good.
September 28, 2008
Gross domestic income and recessions
The "final" values for 2008:Q2 GDP released by the Bureau of Economic Analysis on Friday were more disappointing than the earlier estimates. Still, the 2.8% annual growth rate for real GDP that we're now told characterized the second quarter doesn't sound like a recession. Or does it?
September 26, 2008
Last Quarter's Fundamentals...
Weren't as strong as some of us thought.
I was surprised; so were market observers. From Bloomberg:
U.S. Economic Growth Slower Than Initially Estimated (Update2)
By Timothy R. Homan
Sept. 26 (Bloomberg) -- The U.S. economy expanded more slowly than previously estimated in the second quarter, showing consumer spending was weakening before the credit crisis intensified.
September 15, 2008
Back to the Real Side of the Economy: Recession Watch
Only on a day like today does an over 1 percent decrease in industrial output move to third page. But this item (and this hilarious article h/t Economists View) reminded me to update the indicators used by the NBER BCDC are headed. Their trajectories are, in general, not too comforting.
September 09, 2008
Taylor Rules, Synchronized Recession and the Potential for Competitive Depreciation
In yesterday's FT, "All in this together" assessed the possibility of a roughly synchronized downturn in the world's major economies, with the United States, ironically enough, suffering the smallest hit. This brings up all sorts of interesting questions regarding exchange rates, if one believes that Taylor rules define monetary policy making to some degree, and that interest differentials affect exchange rates.
September 07, 2008
Three Pictures from the August Employment Situation Release
The employment situation release seems like old news, and Jim has already teased out some of the most important aspects in his post. However, I thought a little more context would be useful, given that some observers still think a recession can be avoided. From the White House economy fact sheet (accessed 9/7/08):
On September 5, 2008, the Bureau of Labor Statistics released new jobs figures for August. Nonfarm payroll employment decreased by 84,000 jobs in August, and the unemployment rate rose to 6.1 percent. While these numbers are disappointing, what is most important is the overall direction the economy is headed. Last week, the economy posted a strong gain of 3.3 percent at an annual rate in the second quarter, led by growth in consumer spending, exports, and a well-timed and appropriately sized stimulus package. This level of growth demonstrates the resilience of the economy in the face of high energy prices, a weak housing market, and difficulties in the financial markets. Orders for durable goods have been rising in recent months. In addition, productivity growth over the past four quarters has been strong at 3.4 percent -- above the averages for each of the past three decades over the course of the Administration.
See as well .
August 28, 2008
Why Does It Feel Like a Recession?
The preliminary GDP release today provided a number of surprises. The first surprise was not that GDP was higher than the advance release (given the June trade figures reported earlier this month), but rather that at 3.3% it exceeded the 2.8% (SAAR) of the consensus . The second surprise is that the reduction in imports comprises an even larger proportion of the overall growth.
August 25, 2008
The Dollar and the Trade Deficit: How Does Productivity Fit In?
Why is the trade deficit, even taking out oil, so large when the dollar is so weak? Maybe some insights can be gleaned from productivity measures.
August 24, 2008
Many people may not care whether our current situation meets the formal definition of a recession, but as I've explained previously, you should. Here's a summary of how I see the economy at the moment. I begin by discussing a new paper by UCLA Professor Ed Leamer, which has also been highlighted by Greg Mankiw, Frank Stephenson, Calculated Risk, and Brian Blackstone.
August 22, 2008
A Different Look at the Labor Market
Over the past few months, I've heard that, while job creation is insufficient to keep unemployment rates constant, job losses have not been consistent with recession. More recently, we've heard a slight modification on this "talking point". Commenting on the August 1 labor market release, WSJ RealTime Economics notes:
So far this year, the economy has shed nearly half a million jobs -- hardly a sign of strength.
But it could have been much worse. In testimony before a congressional panel Friday, Bureau of Labor Statistics Commissioner Keith Hall noted that the last two recessions had resulted in 1.5 million lost jobs. "Economic growth is not strong enough to support job growth," he told legislators, but he added that relative to the last set of official recessions, job losses this time around "have not been as severe."
August 19, 2008
Economic consequences of falling oil prices
I've maintained that rising oil prices put a significant burden on the U.S. economy in recent months. How much will falling oil prices help to alleviate those concerns?
August 06, 2008
Synergies of the unpleasant kind: recessions, credit crunches and housing busts
From the abstract of a new paper by Stijn Claessens, M. Ayhan Kose and Marco E. Terrones, entitled "What Happens During Recessions, Crunches and Busts?" (paper now online here):
We provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles for 21 OECD countries over the 1960-2007 period. In particular, we analyze the implications of 122 recessions, 112 (28) credit contraction (crunch) episodes, 114 (28) episodes of house price declines (busts), 234 (58) episodes of equity price declines (busts) and their various overlaps in these countries over the sample period. We document a rich set of stylized facts about the behavior of key macroeconomic and financial variables during these various events. Our results indicate that interactions between macroeconomic and financial variables can play major roles in determining the severity and duration of a recession. In particular, we show that recessions associated with credit crunches and house price busts are deeper and last longer than other recessions are. In light of our findings, we examine the implications of recent macroeconomic and financial developments in the United States for the future path of its economy.
August 01, 2008
Revisions matter. So do levels
The 1.9% SAAR growth rate in 2008Q2 [BEA] is widely viewed as a positive ; and the fact that GDP growth remained, in this advance release, above zero is a positive. However, when taken with the annual revision, one sees some interesting aspects. Not only was growth in 2007Q4 negative, albeit slightly; the revisions put 2008Q2 real GDP below what the final estimate for 2008Q1 GDP was: $11692 versus $11701. Future revisions will definitely occur to the 2008Q2 figure, and indeed the figures back to 2006Q1 will be again revised come next July.
July 31, 2008
Not quite a recession
The Bureau of Economic Analysis reported today that U.S. real GDP grew at a 1.9% annual rate in the second quarter of 2008, less than many analysts had been predicting a week ago, but substantially better than the 6-month-ahead predictions for that number that we were hearing back in January.
July 28, 2008
Taylor rules, exchange rates, and the speculation about the dollar/euro rate
As Europe teeters on the edge of recession , and the United States remains mired in slow growth, expectations of what interest rates, and hence exchange rates, are shifting. Here's a familiar depiction of where policy rates in the US and the euro area have been, and where they are predicted to go.
July 21, 2008
Why a lot of people think the CPI is not representative of their experience ... and are right. At least partly.
This post focuses on issue separate from the mathematics of the index forumulation, and has to do with what the typical weights at any given instant in time should pertain to. Should one use the expenditure weights that pertain to all the households aggregated in the economy? Or should one use the expenditure weights that pertain to the "typical" household? Kokoski (2003) summarizes the distinction thus:
In the democratic index, the expenditure pattern of each household counts in equal measure in determining the population index; in essence, it is a case of "one household--one vote". In the plutocratic case, the contribution of each household's expenditure pattern is positively related to the total expenditure of that household relative to other households--in essence, "one dollar, one vote".
July 20, 2008
Quarter 2 may come out OK, but challenges remain
July 18, 2008
IMF on the Global Macroeconomy, CBO on US-China Trade
The IMF released an update to it's World Economic Outlook yesterday.
- Global economic growth to slow significantly in second half of 2008.
- Rising energy, commodity prices have boosted inflationary pressure
- Need to adapt to shift in purchasing power from commodity users to producers
July 16, 2008
The Expansion: Retrospect and Prospect, Whine-Free
The President's press conference yesterday was meant to buttress consumer and investor confidence. I will leave it to others to evaluate whether he was successful in this endeavor . I will also ignore his disingenuous remarks concerning how allowing drilling offshore and in ANWR  would somehow affect gasoline prices today in a noticeable manner, and focus instead on his repeated emphasis on the fact that the economy is still growing (although he never mentioned at what pace).
July 14, 2008
Index Theory and the CPI
My previous post regarding government statistics elicited a lot of commentary, with a tremendous amount of vitriolic commentary directed at the current approach to calculating the CPI. Rather than provide more of my own thoughts on what constitutes an appropriate mix of theory and pragmatism, I will quote from the author whose work I had to read in graduate school, W. Erwin Diewert. From his entry in the 1998 Journal of Economic Perspectives which had a symposium on the Boskin commission report:
July 09, 2008
The Government's Macroeconomic Series: X-Files, Dilbert, or Resource Constraints?
Or, is the model for explaining why macro data sometimes appear so counter to intuition best explained by willful deception (Iraq and WMDs), incompetence (the FEMA response to Katrina), or prosaic (resource constraints)? The casual reader might think I'm overstating the extreme hypotheses, but there is, after all, a whole website devoted to the proposition of conspiracy:
Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting.
June 16, 2008
Prospects for Nonresidential Investment: Tales from Residential Investment and Corporate Profits
Nonresidential investment has been increasing until 2008Q1, at which time it essentially stalled (-0.2 ppts. annualized in log terms). On the basis of past historical correlations, what's in store?
June 10, 2008
Recession versus Negative Output Gap
Over the past few days, I've been trying to identify appropriate measures of the output gap (and trying to relate that to exchange rate changes). As I've done so, I've come to realize that (1) it's a difficult thing to do, and (2) interesting stories come out of different measures.
June 08, 2008
Trends in Key Recession Indicators
Since December 2007 is a commonly identified turning point , , I thought it would be of interest (given Jim's take on whether it matters if we're in a recession) to see what the indicators that the NBER BCDC focus on -- payroll employment, industrial production, real personal income less transfers, real manufacturing and trade sales, and to a lesser extent monthly real GDP -- are doing. They're declining...
June 07, 2008
Is this a recession and do we care?
Could well be, and yes you should.
May 31, 2008
GDP on the Eve of Recession: Then and (Maybe) Now
There's been relief in many circles that GDP in 2008Q1 was revised upward. I too take this as good news, to the extent that the economy seems to be growing more rapidly -- and output more balanced -- than previously thought. Figure 1 depicts the q/q SAAR growth rate, using the May 2008 preliminary release.
May 15, 2008
High Frequency GDP Estimates
From Macroeconomic Advisers, May 14:
Monthly GDP Index: March 2008
Monthly GDP rose 0.3% in March. This followed a 1.0% decline in February that was revised up from a 1.2% decline in last month's report. The moderate increase in monthly GDP in March can largely be accounted for by positive contributions from personal consumption expenditures and domestic spending on capital goods. A large positive contribution from net exports was essentially offset by a large negative contribution from inventory investment. The level of monthly GDP in March was 0.5% below the first-quarter average at an annual rate. Our latest tracking forecast of 2.6% growth of GDP in Q2 assumes average monthly increases of 0.4% per month from April to June.
May 07, 2008
Lazear Sees No Recession for U.S. Economy
From WSJ, Henry Pulizzi and John D. McKinnon write:
April 30, 2008
GDP still growing (barely)
The Bureau of Economic Analysis reported today that U.S. real GDP grew at a 0.6% annual rate in the first quarter of 2008, the same tepid growth rate we saw in the fourth quarter of last year.
April 17, 2008
Consumer Sentiment Indices: Do They Matter?
Michigan Consumer Sentiment Down Yet Again
April 11, 2008
By Tom Moeller
- The preliminary reading of April consumer sentiment from the University of Michigan fell another 9.1% m/m to 63.2. Consensus expectations had been for a lesser decline to 69.0. The decline dropped sentiment to near its lowest level since 1982.
April 07, 2008
Downshifting and Reversion in Forecasts: Global Version
March 25, 2008
Recoupling, Monetary Policy Divergence, and the Dollar
At the risk of losing my audience by skipping over the the record housing price decline, and an outsized drop in the consumer confidence index, I'm going to focus on what seems like old news (but is being reflected in current news on the dollar), namely the OECD reduction in growth forecasts for the G-7 economies. The euro area economy is slated to do better than the US economy in 2008H1, but that's not saying much.
March 21, 2008
More bad news
More confirmation that the slowdown in housing has spilled over to manufacturing.
March 10, 2008
Pretty Darn Good...(An Update on "Two Recession Bush Presidency?")
Two months ago, I posed the question "What Are the Prospects for a Two Recession Bush Presidency?" I think the answer is indeed "pretty good", given the recent data.
March 04, 2008
It's not just housing any more
Not a good start to the week week for those holding on to hopes that the U.S. will avoid a recession.
March 02, 2008
Just how badly is the U.S. economy doing?
That's the topic of a piece I wrote for today's San Diego Union-Tribune.
February 17, 2008
What you see is what you get
Another week to read what you like into the economic tea leaves.
February 06, 2008
ISM Nonmanufacturing index
February 02, 2008
More murk in the crystal ball
Some good news, some bad, in the economic data released yesterday.
February 01, 2008
A "San Diego-style" recession
Alan Gin is an economics professor at the University of San Diego (a separate institution from the University of California at San Diego, where I teach). His San Diego index of leading economic indicators is sending a pretty strong negative signal.
January 30, 2008
Weak GDP report
The Bureau of Economic Analysis reported today that U.S. real GDP grew at a 0.6% annual rate in the fourth quarter of 2007, a weaker report than many of us had been expecting.
January 17, 2008
More Things I Learned at ASSA: Inflation and Labor Cost Measures
One of the AEA sessions I attended (at least in part -- I missed the first paper) was titled (excitingly) "Reconciliation of Seemingly Inconsistent Data Series".
January 15, 2008
December retail sales
Disappointing yes, but the financial press is getting a little carried away.
January 09, 2008
What Are the Prospects for a Two Recession Bush Presidency?
With recession calls becoming more frequent (, , , , ) it might pay to revisit the indicators that the NBER looks at in determining the turning points in recessions (The fact that NBER put up some new recession-dating-FAQs just a couple days ago might be a leading indicator of sorts).
January 04, 2008
Economic indicators take a turn for the worse
No cheer for the New Year from the numbers released this week.
January 01, 2008
The Dollar in the New Year
Is there (an "equlibrium" exchange rate) model for all seasons?
December 23, 2007
The bears must wait another quarter
Currently available data on consumer spending make it very unlikely that we'll see negative real GDP growth for the fourth quarter.
December 13, 2007
Do We Know a Trend is a Trend?
As the U.S. economy goes into a downturn, we are going to be reminded that extrapolating trends is a hazardous enterprise. For instance, linear extrapolation of tax receipts (expressed as a share of GDP) is probably something that one should be wary of doing. And yet, as shown in some comments on previous posts (see here and here), there seems to be too much belief in what ocular regressions can tell one.
December 11, 2007
Is the Dollar Near the Bottom (II)
Last week, I wrote a post examining what the measures of central tendency for the dollar's trajectory were, based upon some standard forecasts. This week, I want to examine more closely whether we should anticipate more depreciation, in real terms, by way of discussing alternative measures of the dollar's value.
December 02, 2007
The White House and Other Economic Forecasts
On Thursday, the White House released its new forecasts. How does it compare against other forecasts?
December 01, 2007
Risk premia creeping higher
Since Halloween, financial markets seem to be getting spooked again.
November 30, 2007
New GDP figures
How bad can things be with almost a 5% growth rate of the real economy?
November 27, 2007
A Pocketful of Multipliers
...or putting some bounds on the magnitudes of effects.
knzn at Economics and... had an interesting post the other day on "The Indirect Effects of Export Demand", which seems particularly germane to the current situation. After all, net export demand is one of the few bright spots in the US economy.
November 16, 2007
Assessing CBO Projections
CBO releases CBO's Economic Forecasting Record: 2007 Update [pdf].
November 15, 2007
Musings on the Trade Release and Consumption Theory
Last week's trade release induced some wide-ranging thoughts, that spurred more questions than answers. In an experimental post, I'll pose some questions that I hope readers will help me answer.
November 12, 2007
The Credit Crunch Continues, and the Conundrum Is History
The credit crunch seems to be worsening, rather than lessening, and the conundrum seems to have disappeared.
November 10, 2007
The Expansion Compared: An Update
Just to put the 2007Q3 3.9% SAAR increase in GDP in perspective, here is how output stacks up during this expansion as compared to the last.
November 06, 2007
Well then, would $100 a barrel worry you?
A week ago I reviewed the reasons why $90-a-barrel oil by itself would not be enough to cause an economic recession. As oil prices charged up to $96 on Friday, a reporter asked me at what price I'd change my mind.
November 01, 2007
Some Observations on the GDP Release
The BEA's NIPA release had some surprises for many. Here are some aspects of the release that I find surprising.
October 31, 2007
GDP up, recession probability down
Fret as we all might, the U.S. economy just keeps on growing.
October 26, 2007
Have Net Exports Ever Prevented the U.S. from Going into Recession?
First, a look at what the blogosphere is thinking about recession.
October 12, 2007
The World Inverted: Does It Matter That Yield Curves Are Sloping Downward?
In glancing at Table 4 the last issue of the Economist (sub. req.), I was surprised that so many countries had downward sloping yield curves. Should we worry?
October 03, 2007
Not all the news is bad
We've been dwelling here quite a bit on the bleak incoming housing data. But I have to admit that I'm not seeing that spilling over so far into some of the other key economic indicators.
October 02, 2007
The Stock Market and Real GDP
With the recent surge in stock prices, some analysts believe that the probability of recession is receding.
September 05, 2007
August auto sales
August light-vehicle sales give us an early indication of how the real side of the economy is holding up under the financial turmoil that began August 9. And the results are not too bad, considering.
OECD downgrades growth
The OECD has just released What is the economic outlook for OECD countries? An interim assessment (5th September 2007), which reduces US 2007 y/y growth by 0.2 percentage points relative to what was forecasted five months ago. Yet, in a testament to how fast-moving the situation is, that reduction in growth estimates might have been too conservative (consider today's pending house sales numbers).
August 24, 2007
Latest economic indicators
August 19, 2007
Saving Glut Reversed? A Historical Analogy and Conjecture about US Adjustment
One interpretation of recent global capital flows is that the collapse in investment in East Asia post-crisis, combined with stable saving rates in ex-China developing Asia, led to an excess of saving in that region (so really the term of "investment drought" is better). Note that there was no excess saving until the collapse of unsustainable lending associated with bubbles, or crony capitalism, or -- in other models -- behavior of investors implicitly "insured" against losses. While this is a voluminous literature, it's interesting to me that few analysts have observed that a similar occurence can not be ruled out in the current unfolding drama in the ever expanding but always containable subprime mortgage crisis.
August 16, 2007
Part of the optimism regarding the economic outlook is based upon the robust growth -- to date -- in the rest of the world (see this post on the subject). The Euro zone looks like it's in for some slower growth, though.
August 09, 2007
The Administration Reassures the Markets
In light of the events of today, it makes sense for the President and his Administration to appeal for calm.
August 04, 2007
Interpreting fed funds futures
Despite what you may have read elsewhere, the probability of a fed funds rate cut has increased significantly over the last few weeks.
August 01, 2007
July auto sales
This is not just another bad sales month.
July 30, 2007
US Economic Growth: Retrospect and Prospect
Some interesting tidbits can be gleaned from the BEA's recent release. First, despite the acceleration in growth in 2007Q2, the level of output in 2007Q2 is less than what we thought -- as of 28 June -- it was in 2007Q1. Second, q/q consumption growth now looks weaker than it did before. Third, while net exports provided a big boost to GDP growth, a large chunk of that effect is attributable to import compression, rather than export acceleration. How one views the durability of the net export effect depends in large part upon how one views the sources of import and export trends.
July 28, 2007
Recession Indicators: Where Do They Stand?
Yesterday, Jim presented his latest estimates of the recession probability . Today, I want to update () where we stand regarding the indicators the NBER uses in judging whether the economy is in a recession.
July 27, 2007
Recession probability index rises to 26.2%
Definitely some things to be encouraged about by the latest GDP report, but the overall impression of economic weakness remains.
July 26, 2007
No, this was not a good housing report.
Will Dollar Depreciation Prevent A Recession?
As worries from ever expanding -- but always containable -- housing and mortgage market collapse mount (see this Reuters article), some analysts believe that the external accounts will save the day. From Bloomberg (July 23):
July 25, 2007
San Diego index of leading indicators
Professor Alan Gin's index may be of interest to those of us wondering where California's economy is headed and to anyone who might want to construct a similar index for their own local economy.
July 23, 2007
What is Chinese GDP really doing?
Amidst all the discussion about rampant Chinese GDP growth, the appropriate conduct of macro policy in restraining that growth, and the implications for the components of aggregate demand, a simple question leads to complicated answers.
July 04, 2007
June auto sales
Not a good month for the domestic automakers.
June 28, 2007
The 2006 Net International Investment Position
The BEA released the end-2006 net international investment position (NIIP) today.
June 27, 2007
Housing's struggle continues
As expected, those very robust new home sales numbers initially reported for April turned out to be too good to be true.
June 25, 2007
Inflation: Local or Global?
What does the empirical literature say about the sources of inflation movements in an era of globalization?
June 24, 2007
Following yields up and down
June 22, 2007
Econoblog on interest rates
I was pleased to participate in the latest Wall Street Journal Econoblog with Mark Zandi, Chief Economist and co-founder of Moody's Economy.com. Here's a brief preview of what you can find over at the WSJ.
June 18, 2007
Rejoice! The 2006 current account to GDP ratio has been revised up by 0.3 percentage points
There's a temptation to view the upward revision to the current account balance, and the components thereof, as yet more evidence that the US external situation is in better shape than commonly perceived.
June 17, 2007
More on those rising interest rates
Rising rates look scary, but I still read it as good news.
June 14, 2007
Lessons from the yield curve
The dramatic upward move of long-term interest rates gives me an opportunity to look back on some of the predictions made on the basis of the inversion of the yield curve, and what might be in store next.
June 08, 2007
The April Trade Release: Good and Ambiguous News
The April trade release surprised on the upside. Here are a few other insights, not all of which are unalloyed positives.
June 03, 2007
Diverging Trends in Recent Employment Measures
Little noted is the fact that, while May's payroll employment release surprised on the upside, the household series were providing conflicting indications.
June 01, 2007
Don't worry, be happy
Yesterday the Bureau of Economic Analysis told us that first-quarter real GDP grew not at the anemic 1.3% annual growth rate as was originally reported in the "advance" estimate given to us at the end of April, but instead was a barely-positive 0.6% as now claimed in the "preliminary" 2007:Q1 estimates. So what's worse than we thought?
May 31, 2007
Messages from the GDP Preliminary Release
GDP growth was revised down, as expected, in today's NIPA preliminary GDP release. At 0.6% q/q growth SAAR was below Bloomberg consensus of 0.8%. But even more revealing is the pattern in recent revisions; in addition, trade adjustment looks a bit further off.
May 17, 2007
Follow up on Housing Permits and Housing Starts: Do Permits "Predict"
In an earlier post on investment, I made the assertion that housing permits led housing starts. This assertion was contested by a number of observers (GWG, rana, spencer, CalculatedRisk). I've decided to revisit this question, since clearly, the best characterization of the stylized facts takes on heightened importance given the yesterday's release, as discussed by Bloomberg:
May 14, 2007
Tales from the WSJ Survey of Forecasts
The results of the Wall Street Journal's recent survey of forecasts were discussed in an article with the curious title "The Economy Is Clawing Back, but Not Much".
May 12, 2007
Deciding what to worry about
May 10, 2007
Oops. Or Trade Deficit Stabilization Deferred
May 03, 2007
Is the "Investment Disconnect" So Surprising? Could It Be Even More Extreme Than We Think?
April 26, 2007
Further implications of the productivity slowdown for the dollar
In a previous post, I noted that the slowdown in economic growth in the US relative to rest-of-OECD would have a number implications for the dollar's value in nominal and real terms.
April 25, 2007
Current economic conditions improve
Let's admit it-- the other shoe is not yet dropping.
April 17, 2007
The Coming (?) US Current Account Adjustment: Two Questions Inspired by Two Graphs
The IMF has recently released its Global Financial Stability report. Two figures inspired two questions from me.
April 15, 2007
Trade adjustment via import compression or export expansion?
April 13, 2007
The Last Throes of PoMo Macro?
That is to say, is Post-Modernist Macroeconomic Policy over?
April 08, 2007
Employment in March: Comparisons across Measures, Time, and Levels vs. Growth
The March employment figures have almost universally been hailed as evidence of a strong labor market, given how the announced value exceeded expectations, and the fact that previous months values were revised upward (WSJ1, WSJ2, Reuters, Bloomberg; contrarian opinion at Big Picture, Capital Spectator). (Jim Hamilton has already discussed how likely these figures are to be revised, in light of other complementary data.) Without disagreeing, I think it behooves us to consider other ways of looking at the data.
April 07, 2007
Exchange rate depreciation and expenditure switching in the United States
The IMF's April 2007 World Economic Outlook has been released -- or at least part of it. One chapter, entitled Exchange Rates and the adjustment of External Imbalances [pdf], deals with a subject close to my heart.
April 02, 2007
The Subprime collapse and the housing market: a bubble or "looting"
Jim Hamilton's recent post "Bubble, bubble, toil, and trouble" elicited a tremendous amount of commentary -- and incredulity -- amongst the readers.
March 29, 2007
Nonresidential investment spending: The message in the March 29 release
GDP growth was revised up in today's NIPA release. But there are some interesting aspects in the details.
March 28, 2007
About that downside
March 22, 2007
Three Four Pictures from the Investment Sector
Several observers have taken solace from the jump in housing starts; however others have noted the implications of the decline in housing permit applications are not so rosy.
March 18, 2007
Attaining Internal and External Equilibrium in China
China raises rates again. What will higher rates do?
March 17, 2007
Disappointing numbers on inflation and retail sales
March 15, 2007
Negative Net Income: The 2006 Balance of Payments
Most commentary on the 2006q4 current account balance release focused on the improvement in the overall balance. Little noted is the fact that 2006 is the first year in which the net income category has registered negative.
March 13, 2007
The Term Spread, Cross Country
How does the term spread correlate with recession in other economies?
March 10, 2007
The January Trade Balance: Reading the Tea Leaves
Are declining capital imports growth rates an indicator of recession?
March 08, 2007
WMDs in Iraq, "Last throes..." and... "deficits don't matter"
According to former Secretary of Treasury Paul O'Neill, Dick Cheney is reputed to have said: "...deficits don't matter." (see Suskind's The Price of Loyalty, and online here). What's the (updated) evidence?
March 05, 2007
Globalization and Inflation: Thinking about Identification
Recent news articles (, ) and blog posts (Economists View, Big Picture) have discussed Bernanke's March 2 speech on globalization and inflation.
March 01, 2007
New feature: Econbrowser faces the data
We've added a couple of new features to the sidebar.
February 28, 2007
Easy come, easy go
Well, that 3.5% 2006:Q4 GDP growth was fun while it lasted.
Recent data leave me significantly more bearish than I was a month ago.
February 22, 2007
The Growth Outlook
Society Survey of Professional Forecasters latest report (dated 13 February) has been released. The mean forecast is quite interesting, in light of Jim's recent post on industrial production and the growth outlook.
February 21, 2007
Worrisome data on industrial production
February 15, 2007
The market reads Bernanke's lips
The Fed Chair speaks, and the market jumps. But why?
January 31, 2007
Where did all that GDP growth come from?
The Bureau of Economic Analysis reported today that U.S. real GDP grew at an annual rate of 3.5% in the fourth quarter of 2006, more than most of us had been anticipating, and far better than the 0% growth that Nouriel Roubini had been predicting for 2006:Q4 as recently as November 28.
January 25, 2007
Exchange rates, output gaps and inflation rates
Is there any role for the Taylor rule in helping predict exchange rates?
January 23, 2007
What would Milton do?
What with next Monday apparently having been declared Milton Friedman Day, I thought I might try to contribute to the festivities with some thoughts on how recent U.S. monetary policy might be evaluated from a Friedmanesque perspective.
January 07, 2007
I have been suggesting that the best statistical approach, when confronted with conflicting signals such as the employment estimates from the BLS payroll survey, the separate BLS household survey, or the huge database from the private company Automatic Data Processing, is not to selectively throw some of the data out but rather to combine the different measures. Judging from some of the comments this suggestion has received both
January 04, 2007
President Bush on Economics
On Wednesday, the President writes in a Wall Street Journal op-ed (sub. req.):
January 03, 2007
December auto sales
Auto sales data released today look just great, as long as your name is Toyota.
January 02, 2007
Low Real Rates Disappear...but the Deficit Remains
I've been looking at real long term interest rates as proxied by nominal rates minus expected inflation. The problem of course is finding measures of expected inflation. Subtracting off the ex post rate (appropriate under the rational expectations hypothesis) can lead to misleading inferences -- and is not practicable for current measures of long term rates. Using ten year constant maturity rates and the Society of Professional Forecasters 10 year horizon CPI inflation rates yields the following picture.
January 01, 2007
What will the Fed do next?
December 25, 2006
Janet Yellen on Inequality in America
A survey of trends in income inequality, and some thoughts on what policy responses might be appropriate.
December 20, 2006
The term premium and reduced volatility
I earlier discussed the role that foreign government purchases of U.S. Treasury securities may have played in reducing long-term bond yields. A study by Fed researchers Glenn Rudebusch, Eric Swanson, and Tao Wu that is soon to appear in Monetary and Economic Studies explores an alternative explanation based on reduced volatility of underlying macroeconomic and financial fundamentals.
December 11, 2006
2006 and the Econbrowser crystal ball
This seems like a good time to review some of the occasions over the last year when I've been brave (or foolish) enough to make a specific quantitative prediction.
December 08, 2006
Employment remains solid
This week's employment data do not show an economy in recession.
December 07, 2006
Compensation Catch-up Postponed
The Administration has been lauding the acceleration in compensation growth. Newly revised figures indicate that the rejoicing was premature, as Q2 real compensation growth was revised downward.
December 06, 2006
November auto sales
November U.S. light vehicle sales were 2.8% higher than last year. Sounds good, until you take a closer look.
December 03, 2006
The yield curve and foreign purchases of U.S. debt
A few weeks ago I discussed some new research that suggests that the current negative spread between long-term and short-term yields may be a little less worrisome than earlier studies had led us to conclude, to the extent that the negative spread in part results from an unusually low term premium on U.S. bonds rather than an expectation of future declines in short-term yields. One factor that may be depressing that term premium is foreign holdings of U.S. securities.
November 28, 2006
Downshifting and Reversion in Forecasts
My post on CEA's forecast discussed the similarity between the Administration's forecast and the Society of Professional Forecasters forecast. What can we learn from recent SPF forecasts, in the wake of decelerating growth.
November 23, 2006
Forecasts Then and Now: A Cautionary Tale
The White House released its midterm forecast on Tuesday. Some thoughts on forecasts around turning points.
November 15, 2006
The Expansion Compared
There was a lot of mystification why the electorate was so concerned about the economy, when aggregate measures of economic performance were signalling positive.
November 13, 2006
The yield curve and the term premium
Some new studies suggest that the yield curve inversion might not be quite as ominous as some of us have been assuming.
November 05, 2006
Using those employment numbers
What do you do when one line of the latest government statistical release says that U.S. employment grew by 92,000 jobs during October, while 4 paragraphs later the same report gives the number at 437,000?
November 04, 2006
The October Employment Report: Dunking the Data in Some Cold Water
There has been much hullaballoo about how tight the labor market is given the upward revisions in the August and September figures, on top of the preliminary benchmark revision reported last month.
November 02, 2006
Estimating U.S.-China Trade Elasticities: Some Very Preliminary Results
Do we have any idea what the CNY appreciation against the dollar will accomplish?
October 27, 2006
Third quarter growth slows to a crawl
As expected, GDP growth became even weaker in 2006:Q3.
October 19, 2006
One way or the other
Mixed signals this week leave Bernanke still needing to earn his pay.
October 16, 2006
How Strong Is (Was) the Dollar?
An alternative view on the dollar's strength and trend over time.
October 13, 2006
Friday the thirteenth not so scary
The latest data on retail sales, tax receipts, and consumer sentiment all look consistent with the soft landing scenario.
October 03, 2006
And they all lived happily ever after
Can high-flying stocks be reconciled with an inverted yield curve? David Rosenberg of Merrill Lynch, via Felix Salmon and Business Week thinks "it is highly doubtful that both asset classes can be getting the story right." But here's one scenario under which both markets in fact might be telling the same story.
September 26, 2006
Further reflections on productivity and compensation trends
Another way to look at the relationship between productivity and real compensation.
September 17, 2006
Productivity and Compensation
A close-up picture
September 15, 2006
Steady as she goes
Some analysts, convinced a catastrophe is looming, are starting to jump at shadows. But this week's numbers do not give me much cause for alarm.
September 05, 2006
The labor market and the incipient slowdown
Some other aspects of the employment release in context.
September 04, 2006
Autos remain weak
Auto sales still a weak spot for the economy, but no big plunge yet.
August 30, 2006
So where's the surge in inflation expectations, now that the Fed has stopped tightening?
August 19, 2006
The yield curve: Mid-August 2006
What to make of the newest inversion?
August 09, 2006
Could it be that we're already in a recession? Lessons from the last episode
There's a lot of talk about recession these days, despite the fairly rapid average growth of GDP in the past few quarters. Krugman (via DeLong) observes a slowdown is coming that might feel a lot like a recession. DeLong considers whether Fed policy has already raised rates to such a degree a recession is inevitable. Roubini bravely cites probabilities. My colleague James Hamilton provides a contrasting opinion, based upon his academic work with Chauvet [pdf].
August 04, 2006
A pause it shall be
The last month has been something of a cliffhanger for Fed watchers. But today the market seemed to make up its mind.
August 03, 2006
Autos again taking a hit
The Big 3 U.S. automakers continue to get a little less big.
July 28, 2006
Slower second quarter growth
As expected, GDP growth slowed significantly in the second quarter.
July 24, 2006
Reading the yield curve
What are the implications of the current shape of the yield curve?
July 02, 2006
The Fed speaks and markets listen
Tim Iacono at The Mess That Greenspan Made had some interesting graphs this week.
June 18, 2006
Inflation and the Fed
Certainly the recent inflation data have been-- Dave Altig says insert something negative here, so I'll just say "unwelcome". But when Fed Chair Ben Bernanke declared that's exactly the way he sees it, too, markets stood up and took notice. Let's review some of the dramatic market adjustments that have occurred since Bernanke's June 5 remarks.
June 06, 2006
Bernanke tells it like it is
Once again I recommend the most recent statement of our Federal Reserve Chair as some of the finest economic analysis you will find anywhere.
June 03, 2006
Indications of slower growth
This week's data paint a picture of slowing growth.
May 28, 2006
M2 and inflation
High commodity prices and indications of rising inflation have renewed interest in the hypothesis that the U.S. has been increasing the money supply in recent years at an excessive rate.
May 17, 2006
We all understand that the Fed's next move depends on incoming data. But what if the incoming data raise concerns of both higher inflation and slower output growth?
May 16, 2006
Commodity price inflation
Commodity markets have been a little too exciting recently for my quiet tastes.
May 14, 2006
Early indications of trouble
One leading indicator heads south this week.
May 04, 2006
April auto sales
Motor vehicles is one of the key sectors to watch for an indication that the recent gas price spike might derail the current economic expansion.
April 28, 2006
Strong first-quarter GDP growth
The expected strong 2006:Q1 GDP growth included encouraging numbers for investment and exports, and warranted a slight drop in the recession probability index.
April 24, 2006
Who's afraid of $3 gasoline?
Does the expected strong 2006:Q1 GDP report mean that the economy will shrug off the recent resurgence of gas prices?
April 14, 2006
Real vs. nominal, seasonally adjusted vs. nsa
A primer on real, nominal, physical units, and seasonal adjustment
April 08, 2006
Who's grumpy about this week's good economic news?
People who bought long-term Treasuries at 4.3%, that's who.
April 04, 2006
What's moving long-term yields?
Long-term interest rates continue to creep up.
March 19, 2006
The Bureau of Labor Statistics reported that inflation as measured by the seasonally adjusted consumer price index for all urban consumers rose only 0.1% in February (a 1.2% annual rate), down from 0.7% (an 8.4% annual rate) in January. Those who view the monthly CPI as the most important inflation indicator breathed a sigh of relief, perceiving the economy to have lurched from hyperinflation back to price stability within the space of 30 days.
March 03, 2006
Autos limp forward
Could be better, could be worse.
March 02, 2006
Where Do All Those Numbers Come From
Are we adequately funding knowledge about the economy?
February 26, 2006
Not to worry about the January durable goods figures
There are things you may fret about, but the most recent statistics on durable goods orders shouldn't be one of them.
February 06, 2006
Gold and inflation
What's behind the ongoing run-up in gold prices? One popular interpretation is that investors fear a resurgence of U.S. inflation. But that story just doesn't square with the facts.
February 04, 2006
Latest employment data
The latest employment data are quite encouraging, though some may have overstated the case for enthusiasm.
February 01, 2006
Should the Fed worry about going too far?
January 29, 2006
Autos and the U.S. economy
A number of analysts have suggested that autos play a much less significant role in the U.S. economy today than they have historically. The data from 2005 would seem to call that conclusion into question.
January 27, 2006
The 2005q4 GDP report and the trade balance
Little sign of the reversal in the trade deficit.
Gloomy GDP report
Very weak GDP figures produced a slight rise in the recession probability index and warrant a more pessimistic outlook for 2006.
January 25, 2006
Soaring commodity prices
Is U.S. monetary policy behind the surge in commodity prices?
The full post of the discussion about economic forecasting that I had with Professor Kashif Mansori of Colby College and Angry Bear is now up at the Wall Street Journal's Econoblog. Here's my bottom line:
Don't ask for too much of your forecast or your policy, and it won't disappoint you.
Or maybe you should read the whole thing.
January 24, 2006
When is it good to be a bad forecaster?
I've been engaged in a very interesting discussion with Kash at Angry Bear on economic forecasting which will appear in the Wall St. Journal's Econoblog later this week. Kash has a couple of posts ,  based on his contributions over at Angry Bear. Here are the remarks that I used to open the discussion:
January 09, 2006
What's the Fed waiting for?
The Fed is likely to stop raising rates soon. What will be the final signal that enough is enough?
December 29, 2005
Who's afraid of the big bad yield curve?
December 23, 2005
Wages and compensation: a correction
Thanks to my readers Movie Guy, Joe Rotger, and Spencer (as well as Dave Altig in personal email communication) for helping to clarify a misunderstanding I may have helped promote with my post earlier this week on wages and total compensation.
December 19, 2005
Declining real wages
How concerned should we be about the downward trend in real wages?
December 17, 2005
The real yield curve
Economist's View reported last week on a letter from Alan Greenspan that addressed some questions about monetary policy posed for the Fed Chair by Representative Jim Saxton (R-NJ). I was particularly interested in Greenspan's explanation of why he is not concerned about the seemingly bearish connotations of the slope of the yield curve.
December 02, 2005
November auto sales
Lower gas prices aren't bringing Americans back to the large SUV's.
November 30, 2005
Facing the latest economic data
Here are a few thoughts about some of the economic news that's been coming in over the last few weeks.
November 27, 2005
Inverted yield curve edges closer
If you haven't been worrying about the possibility of an inverted yield curve, now might be a good time to start.
November 17, 2005
Inflation under control
Unlike September's troubling inflation statistics, yesterday's release by the Bureau of Labor Statistics of the October consumer price index is more reassuring.
November 06, 2005
Latest employment statistics: the clear thing is that it's not at all clear
October 29, 2005
New GDP data and recession probabilities
The Bureau of Economic Analysis yesterday released its advance estimates for the third quarter, reporting real GDP grew at an annual rate of 3.8%.
October 23, 2005
Ford joins the club
Having commented on a number of occasions about General Motors' woes, and striving to be an Equal Opportunity PunditTM, it's only fair to give credit where credit is due. Ford this week showed that it can compete with the best of them in terms of losing money, posting a loss on its North American operations of $1.2 billion for the third quarter and $2.4 billion over the last 15 months. I'm not sure what advice to give Ford. But here's what I think we might expect from U.S. policy makers.
October 18, 2005
GM losses and other economic news
No matter how amazing your accomplishments, it's always nice to try to set your goals even higher. I was pretty impressed when General Motors managed to lose $1.2 billion on its North American operations in the second quarter of this year. But yesterday GM announced it had outdone even this, losing $1.6 billion on its North American operations in the third quarter.
October 14, 2005
Does today's CPI release indicate that inflation has returned?
October 11, 2005
Do recent energy shocks mean we might see a replay of the 1970's stagflation? I believe not, and here's why.
October 09, 2005
Macro effects of oil shocks-- what should we be looking for next?
I recently prepared an entry on the macroeconomic effects of oil shocks for the new edition of the Palgrave Dictionary of Economics. Here I sketch some of the material from that essay and explore the implications for where the economy may be headed next.
October 07, 2005
Oil prices coming down
Oil prices have been coming down significantly this week. Is that good economic news?
October 03, 2005
What's good for GM...
U.S. automakers can't be very pleased about September sales figures.
September 25, 2005
Responding to supply shocks
It seems pretty clear to me that a monetary contraction isn't the appropriate policy response to a supply shock. Apparently there are those within the Federal Reserve who see things differently.
September 19, 2005
Consumer confidence plunges
Yet another key leading indicator turns gloomy. How much can the stock market and the Fed shrug off?
September 16, 2005
Who cares about core inflation?
This is another one of those months when you could report pretty much any number you like to summarize the current inflation rate, and, as William Polley noted, newspapers did. At times like these, the concept of "core inflation" can be very helpful.
August 25, 2005
Recession in 2006-07?
If you just extrapolate the dynamics of past economic expansions, you'd say that a recession within the next few years is quite possible but by no means certain. The question is how much weight you want to attach to some of the other factors.
August 19, 2005
It's easy enough to define inflation as a decline in the purchasing power of a dollar. But the power of a dollar to purchase-- exactly what? The devil is in the details.
August 12, 2005
The under-reported good news about productivity
If you focus too much on the latest statistics and speculation about what could go wrong, it's easy to lose sight of some very important long-term trends. The solid growth of U.S. productivity is one piece of very good news that's not getting sufficient attention.
August 10, 2005
Record auto sales for July
U.S. light-vehicle sales for July were the highest of any month in history.
August 04, 2005
When should we worry about the yield curve?
The slope of the yield curve is likely to become an increasingly bearish indicator as this year progresses, and recent changes in the calculation of the index of leading economic indicators should not be interpreted as in any way denying that fact.
August 01, 2005
Further thoughts about the latest economic statistics
I've had a little more time to ponder the meaning of some of the economic data released last week, and here's what I've come up with.
July 29, 2005
New GDP data and recession probabilities
The Bureau of Economic Analysis today released its advance estimates for the second quarter, reporting real GDP growth of 3.4%, implying a very slight increase in the recession probability index to 4.7%.
July 24, 2005
How many people should be working in America?
Quite a few commentators have suggested that the labor force participation rate is a much better indicator of the health of the U.S. labor market than is the unemployment rate. I feel that quite a few commentators have this wrong.
July 08, 2005
Are the new employment figures really that bad?
The unemployment rate has reached its lowest level of the last four years, and yet some economists still wring their hands in despair over the anemic job situation. I'm having some trouble following their reasoning on this one.
June 03, 2005
No sign yet of recession
The probability that the U.S. economy is experiencing a new economic recession remains below 5%, according to the latest value of the quarterly real-time GDP-based recession probability index.