Archive for the ‘Economics’ Category
December 15, 2022
Says his economic policies tamed inflation.
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I guess it’s not as bad as when he declared inflation was down to zero, but…
According to WaPo: “Biden is now seeking to reframe the economic narrative ahead of announcing his own reelection plans early next year”.
It’s cringe worthy when Joe declares that he’s got inflation under control.
Yep, the year over year rate of change has dropped from over 8% down to the mid 7s, but that’s hardly an end to the inflationary pressures that everybody is feeling.
The number to focus on is 13.8% … that’s how much prices have gone up since Biden was inaugurated.
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Diving into the numbers:
> When Biden was inaugurated, the CPI was 262.2 … in November, it was 298.3 … that’s a 13.8% increase over Biden’s 22-month term … on an annualized basis, that’s a 7.1% APR
> In comparison: When Trump was inaugurated, the CPI was 243.6 … when he left office in Jan. 2021, it was 262.2 … that’s a 7.6% increase over Trump’s 4-year term … on an annualized basis, that’s a 1.9% APR
> Cutting the numbers a different way: From Trump’s inauguration date to Nov. 2022 (almost 6 years), the CPI increased 21.3% … 1/3 of the increase occurred during Trump’s run (at a 1.85% APR, which is roughly what the Fed targets for the U.S. long term rate) … and 2/3s of the increase has hit during Biden’s reign (2 years at a 7.1% APR)
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Think about this:
> If inflation had continued at Trump’s APR ( a 1.85% APR), the CPI would be about 270 today … we’d be seeing prices about 10% lower than they are today.
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Ask yourself a variant of Ronald Reagan’s “cut to the chase” question:
Is your pantry, wallet, IRA, 401K or 529s better off today than they were 22 months ago?
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July 26, 2022
Team Biden’s PR stunt reimagining what a recession is, in Biden-speak, pure malarkey.
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Team Biden’s crack team of political-economists is apparently trying to front-run this weeks GDP release by moving the goal posts.
Not by a couple of feet … or to the stadium parking lot … but to another stadium.
They’re saying “A recession is not fairly defined by a 2-quarter drop in GDP. It needs to be evaluated holistically, after all related data is available and analyzed. And, that takes time. Maybe a year or so after the GDP decline.”
That’s partially true.
The NBER — the “official” recession sanctioning body — does consider multiple factors (i.e. more than simply a 2-quarter drop in GDP) when declaring that a recession has occurred.
But, here’s an acid test question that cuts to the crux of the matter:
Out of the past 10 times the U.S. economy has experienced two consecutive quarters of negative economic growth, how many times was a recession officially declared (holistically after-the fact) by the NBER?
Answer: All 10 times !
Source: AEI
Said differently, post-WWII – a 2-quarter drop in GDP has been a perfect indicator of a recession.
In that time period, the NBER has always “holistically” confirmed a recession after a 2-quarter drop in GDP
Nonetheless, Team Biden would advise:
Don’t generalize from your personal experience …and certainly don’t rely on the data … trust us Team Biden economists when we say that everything is fine & dandy.
These guys have no conscience.
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P.S. The pundit consensus seems to be that Team Biden’s front-running “reimagination” is an attempt to defuse the impact of of a bad GDP number.
Obviously, they already know what the “top secret” number is.
Wouldn’t surprise me if the reported number is an infinitesimal increase in GDP.
That would give Biden a chance to boldly proclaim: “See, I told you that we’re not in a recession. The economy is strong.”
Naw, they’re not that smart…
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Posted in Bidenomics, Economics, Economy, Recession | 1 Comment »
July 14, 2022
A great contextual chart by the Visual Capitalist
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Highlights:
- The aggregate World GDP number: $100 trillion
- The U.S. has been the world’s largest economy since 1871
- But, China is projected to surpass the U.S. by 2030
- Russia — the small circle at the 6 o’clock position on the chart — is the 11th largest economy @ $1.8 trillion … less than 1/10th the size of the U.S. economy … smaller than Canada, Italy and both California and Texas.
click here to enlarge
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The Top 10
click here to view the ‘all countries’ list
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January 26, 2022
… that is, when you take the 2.3 million who left the work force out of the calculation.
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Today, let’s take a 3rd whack at Biden’s economic bravado.
True, the unemployment rate is down to 3.9%.
And, that’s a big decline from the 14.7% unemployment rate during the most intense Covid lockdown period.
But, it’s still .4 percentage points higher than the 3.5% pre-Covid unemployment rate.
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And, the current unemployment rate is understated since about 2.3 million people have left the labor force … and aren’t counted in the unemployment rate calculation.
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Combining the current unemployment rate (3.9%) and the number of people who have left the workforce (2.3 million), current employment is only 149 million … about 3.6 million lower than pre-Covid employment.
Bottom line: To stay grounded when the statistical shells start moving, total employment is the number to focus on …
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Posted in Biden, Joe, Bidenomics, Economics, Employment - Jobs, Jobs - Unemployment | 1 Comment »
January 10, 2022
Does the principle apply to education too, Joe … or just “big meat”?
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This week, Biden lashed out at “big meat” … blaming his policy-induced inflation on greedy meat purveyors … and flag-poling a broad theme: “Capitalism without competition is exploitation”.
As an academically-degreed economist, I agree that a condition for “perfectly efficient markets” is the presence of numerous direct and indirect competitors and product substitutes.
But, I think industry concentration is a lame excuse for the current skyrocketing inflation.
Industry consolidation hasn’t changed materially over the past, say, 5 years … and inflation was minimal in the 4 years preceding 2021.
That suggests that there are “root causes” other than industry concentration.
Catch my drift?
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My question:
Isn’t Biden’s condition for “market efficiency” generalizable to, say, education?
Even the NY Times concedes that “Many schools have still not returned to normal, worsening learning loss and social isolation.”
Why is it that many schools have not returned to in-person learning?
Simple explanation: Urban teachers’ unions in several cities are continuing to use their collective (and concentrated) clout to stiff-arm in-person classes.
Besides the well-publicized Chicago bruhaha, “closings are taking place in Atlanta, Cleveland, Milwaukee, Newark and several New York City suburbs, among other places.” NYT
The unions collective and concentrated actions are also a violation of economists’ “efficient markets” criteria” … causing havoc.
So, it seems logically consistent in principle to declare:
“Education without competition is exploitation”
President Biden may have inadvertently handed school choice advocates a resonating rallying cry for the 2022 mid-term elections.
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P.S. For an analysis of the real root causes of meat price increases, see WSJ: Meatpackers Are Biden’s Latest Inflation Scapegoat
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Posted in Biden, Joe, Economics, School choice - vouchers | Leave a Comment »
December 2, 2021
A microcosm of life in Bidenland
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Motivated by a leaky dishwasher and Black Friday ads, my wife and I ventured out to do some appliance shopping.
First stop: Best Buy … where we were “greeted” by a police car strategically positioned in front of the entrance … apparently a company self-defense reaction after the looting (err, a Psaki coined “pandemic reaction”) at one of their stores in Minnesota.
Slithering past the police car, I spotted the now commonplace “We’re Hiring” sign… an attempt to lure some government-supported couch- potatoes into the work force.
Entering the store, there were rent-a-cops prominently stationed to reassure people who might have thought that the police car outside wouldn’t stop a gang of flat screen and iPhone snatchers.
Note: I’m sure that the police presence was intended to give shoppers a (false) sense of security. All it did for us was raise suspicions and our anxiety level: “What are they expecting to go down?”
We haven’t had to buy an appliance in years, so I was unpleasantly surprised by the price tags on the appliances. Transitory inflation?
But, not to worry … Black Friday discounts will fix that right?
There was only one dude (err, “blue shirt”) working in the appliance department … the ratio of shoppers to “blue shirts” was about 20 to 1.
While browsing, I overheard the lone blue shirt tell another shopper: “None in stock … at least a 4-month wait”.
That seemed to apply to everything … even the stuff that was in the Black Friday ad.
Note: Decades ago, I worked for a retailer. The laws at the time were clear: If we advertised something that we didn’t have in stock, we got fined. I guess that practice went out the door with cash bail.
Enough for shopping!
When we walked out, there were 2 police cars out front — facing each other.
Note: I’’m told that’s a standard “pincer formation” that allows the police to quickly close off an entrance.
We couldn’t wait to get home
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Bottom line: We had the full Bidenomics experience: (1) police presence (privately contracted by the owner) to protect against mostly peaceful looting and thuggery (2) skeleton crews of store personnel (3) high prices, and (4) no inventory.
Am I better off than I was a year ago?
Nope.
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P.S. I’m not trying to dump on Best Buy. They’re doing what they have to do given the Biden-induced challenges they face. In fact, BB is probably doing a better job than other stores…
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Posted in Behavioral Economics, Bidenomics, Economics | 2 Comments »
June 14, 2021
The government reported CPI went up 5% in May.
Source: WaPo
Though Biden and his team of free-spenders are sanguine, ordinary folks are starting to notice.
Let’s look at a couple of benchmarks…
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Gasoline
Key consumer benchmark: gasoline prices … they’re up a whopping 47% in the past year.
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Housing
Zillow says that the price of a typical mid-tier existing home is up 13.2% over the past year … and is projected to go up another 14% this year … for a combined impact of almost 30%.
The price of new homes is skyrocketing … in part, because of the almost quadrupling of lumber prices.
According to CNBC the surge in lumber prices in the past year has added $35,872 to the price of an average new single-family home … which translates to about $15 per square foot … just for lumber!
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Food
The measured CPI for food rose “only” 2.2% in the government calculation.
Many (most?) consumers scoff at the 2.2% number … and benchmark their high volume staples (e.g milk, diapers) or personal favorites.
For example, a Homa family benchmark is the price of an Arby roast beef sandwich.
Not that long ago, Arby would regularly promote the sandwiches at 5 for $5.
Earlier this year, Arby’s went to 5 for $10.
Now, my price scouts report that an Arby’s roast beef sandwich regularly costs $4 …and the special is 2 for $6 … at $3 a sandwich, that’s up 50% from earlier this year, and triple the price from the good old days.
Ouch.
This inflation thing is getting personal….
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May 13, 2021
Early on in the pandemic, it was noticeable that:
(1) covid was spreading among locked down families — especially high density, multi-generational households and
(2) workers in some open businesses — think: grocery stores — weren’t experiencing pandemic levels of covid consequences.
Said differently, people confined to ostensibly protective “bubbles” were getting infected … but customer-facing workers weren’t.
Is this just Fauci-shunned non-projectible anecdotal evidence … or a relatively broad based truth?
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Casey Mulligan — a University of Chicago economist — studied that question and recently published his results in a research paper:
The Backward Art of Slowing the Spread? Congregation Efficiencies during COVID-19
Conventional public health wisdom held that lives would be saved by shutting workplaces and schools and telling people to stay home.
But, Mulligan found the opposite to be true:
Micro evidence contradicts the public-health ideal in which households would be places of solitary confinement and zero transmission.
Instead, the evidence suggests that “households show the highest transmission rates” and that “households are high-risk settings for the transmission of [COVID-19].
How can this be?
Mulligan argues that after the first months of the pandemic, organizations that adopted prevention protocols became safer places than the wider community.
Schools, businesses, and other organizations implemented a range of prevention protocols – from adjusting airflow to installing physical barriers to monitoring compliance to administering their own testing services – that households did not, and perhaps could not
But, households were bubble-fortresses isolated from the virus, right?
Wrong.
Few households were strictly “bubbled off” completely. The bubbles were routinely breached.
One or more members of practically all households would venture out to work or run errands — being exposed to the virus.
If the outside venturers happened to catch the virus, the other household members would be close-contact sitting ducks.
Without the business-level precautions, penetrated homes became veritable petri dishes for the virus.
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Mulligan’s conclusion:
Officials forgot that organizations are rational and look for cooperative solutions that improve the welfare of the group, such as reducing the risks of communicable disease.
Gee, who would have thought that self-interested private enterprises would be more creative, more efficient, more practical and more successful than government bureaucrats’ ivory-tower edicts..
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Posted in covid, COVID - Return to Normalcy, COVID - vaccine, COVID-19 Tracking, COVID-Herd Immunity, Economics | Leave a Comment »
August 12, 2019
Analyzing Census Bureau data, economist Mark Perry concludes:
The “middle-class is disappearing” as we hear all the time, but it’s because middle-income households in the US are gradually moving up to higher-income groups, and not down into lower-income groups.
That conclusion is way different than we’ve been hearing from Dem Presidential candidates … and the mainstream media.
So, let’s dig a little deeper…
(more…)
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Posted in Economics, middle class, Perry, Prof. Mark | 1 Comment »
September 12, 2017
Connecting some research “dots” suggests that may be the case.
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A recent Bankrate.com survey says that 40% of respondents or their immediate family ran into a major unexpected expense last year.
That’s a problem since most Americans (63%) don’t have enough budget-cushion or savings to cover an unexpected $1,000 expense (think, medical bill, house or car repair).
According to the poll, only 37% said they would be able to take the money directly from savings; the rest said they would try to cut expenses (24%), use their credit cards (15%) or borrow money from friends & family (15%). About 1 in 10 had no idea what they’d do.
Predictably, those with higher incomes were most likely to say they would be able to tap savings for emergencies or divert some discretionary spending.
75% of people in households making less than $50,000 a year and 2/3s of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill.
Even for the wealthiest 20% — households making more than $100,000 a year — more than 1 in 3 say they would have some difficulty coming up with $1,000. Source
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Obviously, the threat of a large, unexpected expense is emotionally daunting to most Americans.
“It definitely adds stress to everyday life. It hangs over you.”
To make matters worse, there is some evidence that the financial stress may impair “cognitive functioning” – that is, dent a person’s IQ.
(more…)
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Posted in Cognitive functioning, Economics, Household budgets, IQ - IQ Scores, Jobs - Unemployment | Leave a Comment »
January 27, 2017
Connecting some research “dots” suggests that may be the case.
======
A recent Bankrate.com survey says that 40% of respondents or their immediate family ran into a major unexpected expense last year.
That’s a problem since most Americans (63%) don’t have enough budget-cushion or savings to cover an unexpected $1,000 expense (think, medical bill, house or car repair).
According to the poll, only 37% said they would be able to take the money directly from savings; the rest said they would try to cut expenses (24%), use their credit cards (15%) or borrow money from friends & family (15%). About 1 in 10 had no idea what they’d do.
Predictably, those with higher incomes were most likely to say they would be able to tap savings for emergencies or divert some discretionary spending.
75% of people in households making less than $50,000 a year and 2/3s of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill.
Even for the wealthiest 20% — households making more than $100,000 a year — more than 1 in 3 say they would have some difficulty coming up with $1,000. Source
======
Obviously, the threat of a large, unexpected expense is emotionally daunting to most Americans.
“It definitely adds stress to everyday life. It hangs over you.”
To make matters worse, there is some evidence that the financial stress may impair “cognitive functioning” – that is, dent a person’s IQ.
(more…)
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Posted in Cognitive functioning, Economics, Household budgets, IQ - IQ Scores, Jobs - Unemployment | Leave a Comment »
December 7, 2016
After last week’s employment numbers, Administration reps emphasized that over 12 million jobs have been added … recovering the number of jobs lost, plus a few to spare.
Predictably, conservative pundits countered that that the “mix” of jobs has deteriorated … well-paying full-time jobs have been replaced with lower paying full-time jobs and involuntary part-time jobs … with many of the added jobs going to immigrants – some legal, some not.
=======
Coincidentally, I started reading a book titled Working Scared (Or Not at All) … about the plight of the American worker … both old-timers who worked hard and played by the rules and newbies who are graduating with high college debt and disappointing career prospects.
The authors cut to the chase by researching the core issue: have the workers who lost their jobs bounced back?
(more…)
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August 8, 2016
I can’t believe my eyes.
I’ve oft opined that the Washington Post is most biased of the Clinton-supportive print media.
Stories of the Post’s 30-person Trump attack team are widespread and not denied by the paper.
So, imagine my surprise when I saw the headline:
The article is a thorough investigative story — not an opinion piece.
Here’s the short version of the story …
(more…)
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Posted in 2016 Presidential Election, Clinton, Hillary, Economics, Jobs - Unemployment, Trump, Donald | Leave a Comment »
May 24, 2016
Connecting some research “dots” suggests that may be the case.
======
A recent Bankrate.com survey says that 40% of respondents or their immediate family ran into a major unexpected expense last year.
That’s a problem since most Americans (63%) don’t have enough budget-cushion or savings to cover an unexpected $1,000 expense (think, medical bill, house or car repair).
According to the poll, only 37% said they would be able to take the money directly from savings; the rest said they would try to cut expenses (24%), use their credit cards (15%) or borrow money from friends & family (15%). About 1 in 10 had no idea what they’d do.
Predictably, those with higher incomes were most likely to say they would be able to tap savings for emergencies or divert some discretionary spending.
75% of people in households making less than $50,000 a year and 2/3s of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill.
Even for the wealthiest 20% — households making more than $100,000 a year — more than 1 in 3 say they would have some difficulty coming up with $1,000. Source
======
Obviously, the threat of a large, unexpected expense is emotionally daunting to most Americans.
“It definitely adds stress to everyday life. It hangs over you.”
To make matters worse, there is some evidence that the financial stress may impair “cognitive functioning” – that is, dent a person’s IQ.
(more…)
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Posted in Cognitive functioning, Economics, Household budgets, IQ - IQ Scores, Jobs - Unemployment | Leave a Comment »
May 17, 2016
After last week’s employment numbers, Administration reps emphasized that over 12 million jobs have been added … recovering the number of jobs lost, plus a few to spare.
Predictably, conservative pundits countered that that the “mix” of jobs has deteriorated … well-paying full-time jobs have been replaced with lower paying full-time jobs and involuntary part-time jobs … with many of the added jobs going to immigrants – some legal, some not.
=======
Coincidentally, I started reading a book titled Working Scared (Or Not at All) … about the plight of the American worker … both old-timers who worked hard and played by the rules and newbies who are graduating with high college debt and disappointing career prospects.
The authors cut to the chase by researching the core issue: have the workers who lost their jobs bounced back?
(more…)
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Posted in Economics, Jobs - Unemployment, Working Scared | Leave a Comment »
March 29, 2016
Great analysis by Prof. Mark Perry (AEI Scholar) … entire analysis is worth reading … here’s the essence of the argument.
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Question: It’s oft-reported that household income has been falling … but, digging into the data, hourly earnings have been increasing.
How can that be?
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According to Prof. Perry’s analysis, the answer lies in “mix” – the composition of households ….
(more…)
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Posted in Earnings, income, Economics, Household income, Labor force participation rate (LFPR), Perry, Prof. Mark | Leave a Comment »
March 10, 2016
In light of the oil glut, Exxon has announced that it’s moth-balling some rigs and cutting capital expenditures.
That fits a bigger trend … supply high, demand slow, prices down, production down.
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From a supply side, the economics of the business raise some interesting questions …
(more…)
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Posted in Cost Management - Productivity, Economics, Marginal economics, Oil & Energy | 2 Comments »
January 22, 2016
Here’s a chart that caught my eye re: the value of a college degree …
Since the mid-60s, the real wages of a worker holding a bachelor’s degree have increased by about 40%.
The increase for workers with a graduate degree is even greater …. almost 90%
That sounds formidable, but even it is only about 1.3% per annum.
Source
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Dragging the numbers down further …
During the same period, real wages for high school grads only increased about 15% … about 1/4% per annum.
And, real wages for workers without a high school degree stayed flat … or arguably, fell.
Of course, those small percentage differences in growth rates have a dramatic compounding effect …
(more…)
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Posted in Economics, Employment - Jobs, Wages | Leave a Comment »
January 14, 2016
Last night’s Powerball payoff was $1.6 billion.
Even at Powerball’s ridiculous odds – 1 chance in 250 million of winning – that’s a good bet statistically, right?
Let’s go thru some math.
In econ-speak, the nominal expected value of the payoff is $1.6 divided by 250 million … about $6.
Since each PB ticket costs $2 … and $6 is way greater than $2 … that’s a good bet, right?
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As Mr. Miyagi would tell the Karate Kid: “Not so fast, Grasshopper”
(more…)
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Posted in Behavioral Economics, Econ, Economics, Expected value, Powerball | 2 Comments »
January 7, 2016
Hot topic these days is how wages have remained stagnant for a long, long time … while productivity – think output per labor-hour has soared.
The political explanation: over-sized paychecks to greedy CEO’s have been draining the coffers.
That may be a part of the answer, but I bet it’s statistically insignificant.
I haven’t run the nums, but I bet that zeroing all CEO compensation wouldn’t budge the below chart.
In addition to greedy CEO’s, the batch of suspects usually includes: automation (shifting jobs to machines & computers), globalization (moving jobs to low wage areas), immigration (an influx of cheap labor).
In other words, the supply of labor and the demand for labor are out of whack.
OK, I get that.
But nobody seems to ever mention a pretty obvious bump in the supply of labor ….
(more…)
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Posted in Economics, Labor force participation rate (LFPR), Wages | 3 Comments »
October 27, 2015
In a prior post, we dissected the declining labor force participation rates in the U.S. …
Splitting the population by gender revealed some interesting differences in LFPR trends…
Note that from 1965 to about 1999, men (blue line) were steadily leaving the labor force.
But, during that period women (red line) were entering at a faster clip than the men were dropping out … so total LFPR (black line) continued to inch up.
Around 1999, women’s LFPR flattened out … but men continued to leave the workforce … so the total LFPR peaked and started to creep down.
Since 2008, both men and women have been leaving the work force, so the total LFPR has steepened its decline.
But, men are leaving at a slightly faster rate than women.
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And, we posted the results of a study indicating that women’s LFPR in the U.S. is low relative to other countries … and declining at a time that it’s increasing in other countries.
Pundits attribute the higher LFPRs in other countries to more flexible work hours and government subsidized childcare.
Let’s look into things a bit deeper … (more…)
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Posted in Childcare - cost of, Economics, Economy, Labor force participation rate (LFPR) | Leave a Comment »
October 26, 2015
One of the biz show pundits made an off-hand remark that he thought much of the recent decline in labor force participation rates was at least partially traceable to women dropping out of the workforce because of the high cost of childcare.
Plausible explanation that piqued my trust but verify interest, so I did a little digging.
Let’s start with the big picture : The total labor force participation rate (LFPR).
Some takeaways ….
Note that the history breaks into roughly 3 distinct eras.
From 1965 (as far back as I looked) until about 1990, the LFPR increased by about 8 percentage … almost a straight line, trending up.
Then, coincident to the 1990 recession, the LFPR essentially flat-lined with some bouncing around between 66% and 67%.
Since the 2008 financial crisis and the LFPR has dropped around 4 percentage points … not quite half of the 1965 to 1990 gain.
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Splitting the chart by gender is where things start to get interesting.
(more…)
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Posted in Economics, Economy, Labor Force, Labor force participation rate (LFPR) | Leave a Comment »
February 10, 2015
Wash Post had an interesting analysis titled “This graph shows how bad the Fed is at predicting the future
The crux of their argument: the Fed has a clear recent tendency to mis-forecast economic growth … not by a little, by a lot … forecasting almost twice as rapid growth as is ultimately realized.
For example, in 2009 the Fed was predicting 4.2 percent growth in 2011. But then in 2010 it revised that down to 3.85 percent growth. And in 2011 they revised it further to 2.8 percent growth. And when all was said and done, the economy only grew about 2.4 percent that year. The Fed projected growth almost twice as fast as what actually happened.
What’s going on?
(more…)
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Posted in Econometrics, Economic indicators, Economics, Forecasting, Predictive Analytics, Silver, Nate | Leave a Comment »
February 9, 2015
A lot of chatter over the weekend about how President Obama’s economic policies are – after 6 years — humming.
More than 250,000 more people were employed … but interestingly, the unemployment rate inched up as the labor force participation rate increased a bit.
What’s going on?
A couple of economists at the NBER – the think tank that officially declares when recessions begin and end – just issued a study with an evidenced-based hypothesis …
(more…)
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Posted in Economics, Economy, Employment - Jobs, Unemployment | Leave a Comment »
October 8, 2014
Earlier this week, we looked at one of the no-BS economic measures: household income.
Adjusted for inflation, median household income dropped 8% during the recession … and has been flat after bottoming out a couple of years ago.
That means that the median real household income is still down 8% from the pre-recession peak.
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The drop in median household income has come despite a steady increase in average hourly wages … they’re up about 10% since the official end of the recession.
See Let’s celebrate the economy … err, let’s wait. for details
Here’s another no-BS indicator sent along by a loyal reader …
(more…)
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Posted in Economic indicators, Economic Recovery, Economics, Stock Market | Leave a Comment »
October 7, 2014
Wash Post had an interesting analysis titled “This graph shows how bad the Fed is at predicting the future
The crux of their argument: the Fed has a clear recent tendency to mis-forecast economic growth … not by a little, by a lot … forecasting almost twice as rapid growth as is ultimately realized.
For example, in 2009 the Fed was predicting 4.2 percent growth in 2011. But then in 2010 it revised that down to 3.85 percent growth. And in 2011 they revised it further to 2.8 percent growth. And when all was said and done, the economy only grew about 2.4 percent that year. The Fed projected growth almost twice as fast as what actually happened.
What’s going on?
(more…)
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August 19, 2014
Warning: Adult Content.
The Economist – a reputable publication — recently reported the results of a groundbreaking economic analysis.
Specifically, staffers “analysed 190,000 profiles of sex workers on an international review site … with data going back to 1999 … with prices corrected for inflation.”
What did they find?
“The most striking trend our analysis reveals is a drop in the average hourly rate of a prostitute in recent years”
=====
What explains the 30% drop in prices?
Well, pardon the pun, it’s pure economics …
(more…)
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July 14, 2014
Last week, we pointed out that the 288,000 jobs gain in June wasn’t all that it was cracked up to be since full-time employment declined by over 500,000 and part-time employment increased by almost 800,000.
For details see: Last week’s employment report in 4 charts …
I thought the spike in part-time employment was a bad thing … a drift to a part-timer economy.
Silly me.
Liberal economist Dean Baker hset me straight in a HuffPost article:
“The Good News About Obamacare in the June Jobs Report”
Here’s Mr. Baker’s spin …
(more…)
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April 18, 2014
Wash Post had an interesting analysis titled “This graph shows how bad the Fed is at predicting the future
The crux of their argument: the Fed has a clear recent tendency to mis-forecast economic growth … not by a little, by a lot … forecasting almost twice as rapid growth as is ultimately realized.
For example, in 2009 the Fed was predicting 4.2 percent growth in 2011. But then in 2010 it revised that down to 3.85 percent growth. And in 2011 they revised it further to 2.8 percent growth. And when all was said and done, the economy only grew about 2.4 percent that year. The Fed projected growth almost twice as fast as what actually happened.
What’s going on?
(more…)
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June 28, 2013
Earlier this week we posted Nums: Why’s the Fed so bad at forecasting?
We cited Nate Silver’s thesis that economists’ forecasts are generally poor for 4 main reasons:
- Complexity makes it hard to to pin down cause & effect.
- The economy is dynamic, especially subject to policy jolts
- Economic data is imprecise and subject to large revisions
- Forecasts often reflect political bias … pro and con.
On cue, the Feds released released their revision to Q1 GDP …
Based on revised data, the economy grew at a 1.8% annual rate in the first quarter, well below previous estimate of 2.4% growth.
The biggest change was a cut in the government’s estimate of consumer spending which is more than 70% of the economy.
Consumer spending growth dropped to 2.6% from 3.4% growth.
Source: USA Today
======
The revision — .6% – may initially sound like loose change, but it’s a 25% miss.
So, economic models that operating on the original (higher) estimate have a starting point that is off by 25%.
The error compounds over time.
It’s a version of what theorists call chaos theory … how a seemingly small variation at a starting point can compound into a major effect over time.
= = = =
Side note: And, in the “new normal” economy, the downward revision was good for the stock market since it puts pressure on the Fed to continue pumping money into the economy … the bulk of which is flowing straight to the stock market.
Go figure.
* * * * *
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June 24, 2013
Wash Post had an interesting analysis this week titled “This graph shows how bad the Fed is at predicting the future
The crux of their argument: the Fed has a clear recent tendency to mis-forecast economic growth … not by a little, by a lot … forecasting almost twice as rapid growth as is ultimately realized.
For example, in 2009 the Fed was predicting 4.2 percent growth in 2011. But then in 2010 it revised that down to 3.85 percent growth. And in 2011 they revised it further to 2.8 percent growth. And when all was said and done, the economy only grew about 2.4 percent that year. The Fed projected growth almost twice as fast as what actually happened.
What’s going on?
(more…)
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June 4, 2013
Last week, the American Legislative Exchange Council (ALEC) – a right-leaning economic analysis group – released its 6th annual report on state economic performance.
= = = = =
The 10 states that had the best economic performance over the decade 2000 to 2010 were …
Notice anything common across those states?
Here’s the code-breaker …
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Tags:ALEC, Laffer, Moore
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May 1, 2013
Pew released a sobering report last week: An Uneven Recovery, 2009-2011
The central conclusion: the rich have gotten richer and the middle class has gotten crushed.
Upper and lower income groups have both increased by about 5 percentage points of the population mix.
In other words, the percentage of middle class folks – earning from 2/3s to twice the median income – has dropped by 10 percentage points.
What’s going on?
(more…)
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January 30, 2013
First. my stake in the game: I consider myself an economist … at heart and by schooling … majored in econ … grad work in applied econ … worked for awhile doing econometrics.
Econ still permeates my marketing strategy work.
So, I was naturally drawn by an article in the UK Independent:
“Fraudster fools a whole nation: Portuguese economics pundit exposed as conman.”
Just looking at this dude has gotta set off some alarm bells …
Here’s the story and my take on the question ….
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January 16, 2013
About 29% according to JP Morgan Wealth Management …
I expected the number to be much higher
Financial assets are more than half.
Material “stuff” such as autos is less than 10%
In nominal terms, the aggregate consumer balance sheet has just about fought its way back to pre-crash levels.
So, why does it feel so bad?
Source
* * * * *
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September 27, 2012
Punch line: Forecasts of U.S. corn and soybean yields are set to have a major impact on the prices we pay for everything from processed food to beef and poultry.
* * * * *
Excerpted from NYT.com, “Government Lowers Crop Yield Forecast Again”
The Agriculture Department lowered its forecast of corn and soybean yields as record heat continued to batter crops in the Midwest.
The new data suggested that customers would pay more at the grocery store next year as the prices of corn and soybeans — major ingredients in processed food, animal feed and biofuels — rise to record levels.
The United States is the world’s largest exporter of corn and soybeans.
The report said exports of both crops would be substantially lower than last year, which could have a devastating effect on countries like China and Mexico, which depend heavily on American exports.
The report said beef and poultry production was expected to increase this year as livestock producers culled or sold their herds because of higher feed costs.
But prices for beef and poultry are expected to rise 4 to 5 percent next year.
Edit by JDC
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August 29, 2012
One of the drags on the economy is that folks have tried to deleverage – i.e. pay down debts – and are saving more.
Recently, I’ve seen several articles talking about the “alarming” spike in the savings rate.
Strikes me as odd since, in the past, saving was considered a good thing (you know, savings is what funds investment which drives the economy) … and there was hand wring that folks were spending like drunken sailors and weren’t saving enough.
Hmmm.
Here’s a glance at the numbers …
Yes, the savings rate has been increasing since troughing around 2005.But – and it’s a big BUT – the saving rate is still about 5 points lower than it was in the 1970s and 1980s … when there was concern that we weren’t saving enough.
So, if you think the current rate is alarming, expect to be more alarmed as we bounce back to the old normal.
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July 30, 2012
Couple of articles caught my eye in the past couple of days that together have me scratching my head …
First, an HBR blast which argued that the best way to reduce stress is to lower your expectations.
Don’t expect much out of life, your friends & family or your co-workers.
If you don’t expect much, you won’t be disappointed and your stress level will be kept in check
Say, what?
Then came a Newsweek article about the economic jam Millennials are in … with student loans, a bad job market, etc.
Started with an interesting point:
Median net worth of people under 35 fell 37 percent between 2005 and 2010; those over 65 took only a 13 percent hit.
The wealth gap today between younger and older Americans now stands as the widest on record.
The median net worth of households headed by someone 65 or older is $170,494, 42 percent higher than in 1984
The median net worth for younger-age households is a paltry $3,662, down 68 percent from a quarter century ago.
OK, reason for the Millennials to despair, for sure.
And, the proposed prescriptions?
There’s a growing notion among economists that the new generation must lower expectations.
For example, the millennial generation shouldn’t set its sights on homeownership … “because it’s going to be out of reach for so many of them.”
They are understandably more amenable to government-mandated income redistribution … since so few young people pay much in the way of taxes.
All I can say is: YIPES.
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July 23, 2012
A couple of months ago, the Obama campaign unveiled its “Life of Julia,” a website detailing “how President Obama’s policies help one woman over her lifetime” … by showering her with the benefits of the entitlement state, from Head Start to student loans to Obamacare.
In response, the Weekly Standard has resurrected H.E.N.R.Y. — marketing slang, first used in Fortune in 2003, for High Earners who are Not Rich Yet.
Henrys run households with annual incomes between $100,000 and $250,000.
There are about 21 million of them.
Henrys make up the overwhelming majority of affluent consumers, who account for 40 percent of consumer spending — which in turn is 70 percent of economic activity.
Without the Henrys’ getting and spending, the U.S. economy would be much poorer.
One can find Henry and his family in the affluent suburbs and exurbs surrounding cities like Washington, D.C., New York, and Los Angeles, or in the counties of suburban Dallas-Fort Worth, Houston, Raleigh, and Philadelphia.
He owns his house. He plans to send his children to college. He shops at Target, Saks, Coach, Restoration Hardware, Banana Republic, and, on special occasions, Tiffany.
The Obama years have not been kind to Henry.
His economic fortunes have bobbed up and down.
He’s never been flush, but he’s never been broke, either.
So much to him seems dependent on forces outside his control — whether the Fed engages in another round of quantitative easing, whether the eurozone survives for another week.
Henry is the true swing voter in this Presidential election.
Read more about Henry
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June 12, 2012
Article in the NY Times concluded that Obama has a tailwind because shifting demographics work to his advantage …
This fall’s election will be a contest pitting “demographics versus economics.”
White working-class voters have gotten seriously squeezed by high unemployment and stagnant or declining incomes.
But, the number of working-class whites is shrinking and minority voters have edged up as a share of the population … the combined effects of immigration and disparate birthrates.
Comprising 89 percent of the electorate in 1976, whites had fallen to 74 percent four years ago. During the same period, Hispanics grew from 1 percent of the electorate to 9 percent.
In 12 battleground states, the proportion of votes cast by working-class whites, a group Mr. Obama lost lopsidedly in 2008, will drop by three percentage points this fall.
A number of states are urbanizing and losing their historically large rural conservative vote.
Somehow, it doesn’t seem like a good trend when “working class” people — regardless of their race — simultaneously get squeezed economically and lose their voting clout …
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March 15, 2012
Punch line: The Feds are reporting that inflation is in check at just over 3%. An independent assessment puts the number over 8% … more credible given what’s been happening on supermarket shelves.
Excerpted from the NY Post
On the face of it, the government measure of consumer prices, the CPI, is just mildly alarming — with the government estimating prices to be rising at a 3.1 percent annual rate.
But as anyone who pays the bills or does the household grocery shopping knows, a government-reported 3.1 percent inflation rate is laughably low.
Bought cereal or mac and cheese for the kids lately? If so, you’re aware of the near double-digit increase in prices in the supermarket aisles.
So what is the true inflation rate?
The folks at the American Institute of Economic Research have resurrected the idea.
Their Everyday Price Index (EPI) strips away the cost of big-ticket items, like homes and cars, and looks at the cost of things that consumers encounter on a daily or monthly basis, such as groceries, prescription medicine, and telephone and cable bills.
By that measure, the Everyday Price Index shows inflation galloping ahead at an 8.1 percent annual rate.
Reference: AIER Report
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October 5, 2011
As far back as July, 2009, the HomaFiles is on record as saying that the economic recovery would be slow and delayed for reasons beyond pure economics. That CEOs would be reluctant to hire as long as the Administration was punitively anti-business.
At the time, we said:
The bottom line: businesses will resist government policies passive aggressively. Fewer jobs will get added back than history would suggest, and those that get added back will materialize later than past patterns. Businesses will add jobs as a last resort rather than trying to build capacity ahead of the economic growth curve. Why should companies increase their costs and risks any more than is absolutely necessary ? Companies will continue to off-shore jobs, but will be more clever and clandestine about it, e.g. by vertically disintegrating and simply buying goods and services from 3rd parties.
Given the Administration’s anti-corporate rhetoric, actions, and proposed game-changing rules, I doubt that many CEOs will be taking on added costs and risks to boost the administration. More likely, they will let unemployment continue to creep up, and will slow roll the process of rehiring. Corporate chieftains will sit back and watch the President squirm.
Why private sector jobs won’t be coming back any time soon … hint: it’s called passive aggressive resistance, July 21, 2009
My view wasn’t really original thinking. It was simply what I was hearing privately from senior biz execs.
Well, a couple of years later, the argument seems to be catching some traction.
In an article titled The Coming Post-Obama Renaissance, Victor Davis Hanson writes:
When Obama leaves office, there will be a sense of psychological release in the business community that will lead to a far greater “stimulus” than printing more money.
the country is still growing, still needs new homes, more food, and more energy.
We are not a shrinking nation with the demographic crises of a Europe or Russia.
Soon the mounting pressure will be released by a new change in government and we will see a recovery that should have occurred more than two years ago when the recession officially “ended” in June 2009 — only all the more enhanced due to its delay.
If I were a GOP President-elect, I’d call in the business movers & shakers … tell them that I’ll be working feverishly to support business … and ask them to give the benefit of the doubt and to start making decisions “at the margin” – e.g. an extra job here or there – to move the economy ahead. Not dumb stuff – just some decisions at the margin. Suddenly, there would be a virtuous cycle.
Remember, you heard it here first. …
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September 30, 2011
Punch line: Netflix got into a hole by initially giving away its video streaming offerings … in essence, pricing based on marginal cost.
That can work, when everybody isn’t a marginal customer …
Excerpted from The Atlantic by Megan McArdle:
The Qwikster and the Dead
Netflix tried to build their streaming video service by giving it away for free, as an add-on to their snail-mail service.
This was a good way to add customers. But the history of the internet indicates that once you convince people something is supposed to be free, or close to it, you will have a devilishly hard time getting them to pay for it.
People decided that they were supposed to be able to stream unlimited movies for free.
This never made any sense; people were confusing the marginal cost with the average cost.
You can always get a sweet deal if you are the customer who gets marginal cost pricing.
Medicare does this — reimburses hospitals at above their marginal cost, but below their average cost, so that private insurers have to pick up most of the hospital overhead.
European countries do this with prescription drugs: reimburse above the marginal cost of producing the pills, but below the total cost of developing the pills, so that the US has to pick up most of the tab for drug development.
The problem is that as voters and as customers, we often get the notion that marginal costing can be extrapolated to everyone.
So liberal policy wonks want to save money by putting everyone on Medicare, or some equivalent program that uses the government’s monopsony pricing power to get lower prices for everyone.
But, it doesn’t work that way.
Everyone cannot be the marginal cost consumer.
Someone has to cover things like overhead and development costs.
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September 9, 2011
Simple.
The GOP-led Congress should draft and pass the “Barack Obama Stimulus Act of 2012 (aka. “American Jobs Act”) containing substantially all of the program that the Presidential teleprompter channeled through Obama.
Why?
First, let’s acknowledge that the money will be a complete waste. There’s no reason to expect that Son-of-Stimulus will be any more successful than its predecessor.
And, I’m assuming that the price tag really is $450 billion – chump change in this era of reckless spending that rewards irresponsibility and mortgages the future…. especially since the President promised that it would be paid for (yeah, right).
The biggest political downside (to the GOP and the country) is that Obama will have a $450 billion election year slush fund to sprinkle across his constituencies – unions, blue-state governments, etc.
But, passing Stimulus Deux would clearly put the economic recovery — or lack thereof — on Obama’s shoulders.
If it turns the economy around, Obama gets the credit. That’s fair.
If it bombs, Obama loses his major campaign pitch: the GOP tied my hands.
He’d be left with the silly claim: “woulda been worse, I saved you from Armageddon again”.
I say pass it and sit back.
If it works, we have an economic burst.
If it fails, we get a president who understands business and economics.
For the country, it’s a win either way.
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July 13, 2011
Some sobering statistics reported in the Chicago Sun Times …
“History is going to say the black middle class was decimated” over the past few years.
For many in the black community, job loss during this recession has knocked them out of the middle class and back into poverty.
- In 2004, the median net worth of white households was $134,280, compared with $13,450 for black households.
- By 2009, the median net worth for white households had fallen 24 percent to $97,860; the median net worth for black households had fallen 83 percent to $2,170.
- Blacks are overrepresented in state and local government jobs that are being eliminated because of massive budget shortfalls.
- Since 2009, the overall unemployment rate has fallen slightly, while the black unemployment rate has risen from 14.7 to 16.2 percent — The highest rate since the government began keeping track in 1972.
- Only 56.9 percent of black men over 20 were working, compared with 68.1 percent of white men.
- The college-educated unemployment rate is 3.9 percent for whites and 7 percent for blacks.
- Nearly 8 percent of African Americans who bought homes from 2005 to 2008 have lost them to foreclosure, compared with 4.5 percent of whites.
Some see a bitter irony in soaring black unemployment and the decline of the black middle class on the watch of the first black president.
* * * * *
Ken’s Take: No question, the recession has hit the lower rungs of the economy most severely. The numbers are striking.
Note: According to Gallup, Over 80% of blacks still approve of job President Obama is doing …
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June 20, 2011
According to Business Week: Tyler Cowen is America’s Hottest Economist.
* * * * *
Cowen says that most economists don’t read, at least not widely.
Robert Frank, who teaches economics at Cornell University, agrees.
He says the ascent to tenure leads young economists toward math and small questions.
Universities hold on to only the leading figures in each academic sub-specialty.
“You want to climb to the top of a hill,” says Frank, “and it’s a lot easier to climb to the top of a small hill than a big broad one.”
There’s an idea among academic economists that the privilege of writing a narrative argument must be earned through the hard work of modeling and econometrics.
“There is a view that what can’t be disproven isn’t science.”
* * * * *
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June 17, 2011
Recent bad economic news has been reported as “surprising” and “unexpected” by the mainstream media.
That causes two problems:
- Since the news is bad, it understandably breeds low consumer confidence.
- More nuanced, since the news is “unexpected”, it breeds low confidence in the folks who are in charge: “do they know what they’re doing?”
While politicos need to maintain an optimistic façade, how much damage has been done by “we’ll hold unemployment under 8%” and “this is recovery summer”?
* * * * *
Excerpted from RDP: Hunkered-Down America by Robert Samuelson
Economists suffer from what one of them (Ricardo Caballero of the Massachusetts Institute of Technology) calls “the pretense-of-knowledge syndrome.”
They act as if they understand more than they do and presume that their policies, whether of the left or right, have benefits more predictable than they actually are.
For example, economic models, based on past relationships and assumptions, don’t capture shifts, which embody new assumptions and beliefs.
So modern economics has been oversold, and the public is now disbelieving.
The disillusion feeds stubbornly low confidence.
Because psychology is so important, the good news is that if the economy surprises on the upside, the boost to confidence could accelerate the recovery.
[The bad news is that if the economy surprises on the downside, the hit to confidence could slow the recovery.]
* * * * *
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