Any one economic indicator is suspect as a measure of the broad trend, but the updates arrive one at a time and so we must take ‘em as we get ‘em. Taking this morning’s retail sales report at face value suggests that the recession talk of late is premature. Retail purchases rose sharply last month, gaining 1.1% on a seasonally adjusted basis over August. That’s the best month for retail sales since February. Recession where is thy sting?
Monthly Archives: October 2011
Research Review | 10.14.2011 | Inflation Expectations
The Future of Inflation
Joseph G. Haubrich (Cleveland Fed) | Oct 5, 2011
To the extent that actual inflation varies more than expected inflation and expected inflation varies more than the central tendency, there is reason to think that the high rates we have been experiencing are temporary, soon to be replaced with a different cut from the deck.
Caught In A Trap
There’s still not a whole heck of a lot going on with jobless claims. That’s good news to a degree since it suggests that the recession risk, while elevated, isn’t rising. But it’s also bad news because it’s a sign too that the labor market isn’t likely to break out of its slump with a burst of strong job growth any time soon. This could on for a while and it probably will.
Living On A Prayer
If you’re inclined to sit on the fence these days in the delicate art of anticipating the next phase of the business cycle, you’ll get no argument from the latest update on the Chicago Fed National Activity Index, a monster index of indexes that encompasses 85 measures of U.S. economic activity. This benchmark has weakened this year but it’s still not flashing a formal prediction of economic contraction. But it’s a precarious existence on this side of the line.
A Mixed Bag For Recession Risk
A new recession may be coming. Maybe it’s already here. Then again, maybe not. Calling major turns in the business cycle in real time is perhaps the most coveted of skills in all of economics. It’s also one of the most elusive gifts among self-proclaimed seers. That doesn’t stop anyone from trying, including this recent warning that dark days ahead are a virtual certainty. The risk of trouble certainly looks higher to most observers, and it’s not just in the U.S. Menzie Chinn of Econbrowser alerts us that the global economy “is close to stall speed.” Perhaps, although it’s still not obvious that the trend in the U.S. has definitively rolled over. For some perspective, let’s review some of the latest indicators.
Dissecting The Historical Equity Risk Premium For Clues About The Future
What is the historical equity risk premium? It’s a simple question, and a crucial one. Looking at the past alone is no panacea for predicting the future, but it’s an obvious place to start. If you’re focused on making informed decisions about portfolio design and management, understanding where capital markets have been provides some useful context.
Saving The Euro: Part 16-A/4.b (subsection F)
Managing a currency by popular vote every other week (or day) is water torture and almost surely doomed to fail. But with no other choice, the odyssey that is the euro rolls on, which means that the voting, the deal making, the deliberations, the polling–the rise and fall of governments–endures.
A Revival In Rational Expectations Theory?
Economic theory tied to rational expectations has taken a beating in recent years, at least in some circles. Remember this contentious skewering from Paul Krugman in 2009? Defenders of the faith responded with all guns firing, including this take-no-prisoners response from “freshwater” economist John Cochrane. Whatever you think of ratex, it earned some lofty recognition yesterday with the news that the Nobel economics prize was awarded to a pair of Americans.
Is The Levered ETF Tail Wagging The Market Dog?
Douglas Kass of Seabreeze Partners tells Andrew Ross Sorkin that levered ETFs “have turned the market into a casino on steroids. They accentuate the moves in every direction — the upside and the downside.”
Sometimes (Macro) History Bites
By now there should be broad agreement on one point in the grand debate on macroeconomics. A recession born of a severe financial crisis is an especially destructive force, and one that isn’t easily solved. Irving Fisher outlined the basic problem more than 80 years ago in his prophetic paper “The Debt-Deflation Theory of Great Depressions. The blowback cycle of unusually deep recessions and protracted recoveries after acute turmoil in the financial sector is a familiar syndrome, as economists Carmen Reinhart and Ken Rogoff detail in This Time Is Different: Eight Centuries of Financial Folly