There’s good news and bad news in today’s weekly update of initial jobless claims. The good news is that new filings for jobless benefits fell last week, albeit by a slim 1,000 to a seasonally adjusted 368,000. That’s also the bad news. A more convincing drop–ideally to new post-recession lows–is what’s needed to boost confidence. Instead, we seem to be stuck in neutral, and so there’s no resolution yet for the main question weighing on the economic outlook: Are the last two months of weak growth in private payrolls signs of deeper troubles for the U.S. economy?
Author Archives: James Picerno
Does History Support NGDP Targeting Now?
The debate about targeting a higher rate of growth for nominal gross domestic product (NGDP) keeps the blogosphere humming, but the discussion doesn’t mean much if Fed Chairman Ben Bernanke doesn’t embrace the idea. Don’t hold your breath. Last month he said the idea is “reckless.” That’s monetary-speak for: Don’t even think about it. But if NGDP targeting is considered a radical notion by some, including those at the pinnacle of monetary power, the empirical record suggests otherwise.
Is The Recent Fall In Inflation Expectations A New Warning Sign?
The new abnormal is still with is, and that means that the recent fall in inflation expectations could be signaling trouble ahead… again. Implied inflation, based on the yield spread between the nominal and inflation-indexed 10-year Treasuries, remains tightly linked with the ebb and flow of the stock market and, by implication, the broader economy. That’s an unusual relationship in the grand scheme of financial and economic history, but it’s a relationship that rolls on in the wake of the Great Recession. It’s also a relationship that in recent weeks seems to be anticipating a new round of problems for the economy. (For the theory behind this empirical fact, see David Glasner’s research paper on the so-called Fisher effect.)
Investing In A G-Zero World
The planet is ripe with investment opportunity, according to most of the speakers at an ETF conference I attended yesterday in Boston. From emerging markets to sector rotation to alternative betas, optimism abounds, attendees were told.
Strategic Briefing | 5.7.12 | Fed Governors & Monetary Policy Under Pressure
The Most Important Economic Story Nobody Is Talking About
The Atlantic | May 3
By failing to appoint new members to the Federal Reserve, Obama has failed the economy…. Behind every great central banker stands a great central banking committee. Or at least a pliant one. It’s this latter reality that President Obama still has not quite recognized. And this malign neglect of most matters monetary has added a wholly unnecessary degree-of-difficulty to the economic recovery…. As Greg Ip of The Economist has pointed out, most of Bernanke’s colleagues now want to raise rates before he does. He increasingly looks isolated…. It’s worth remembering that even the hawks project inflation to remain below target and unemployment to remain above target for the next few years. If the Fed believes its own forecasts, it should be doing more…. There are two unfilled seats on the FOMC. President Obama’s picks for those positions have been among the victims of the endless Republican obstruction in the world’s greatest deliberative body. There’s a simple solution. Obama could just bypass the Senate with recess appointments. That’s what he did for the Consumer Financial Protection Bureau (CFPB) and National Labor Relations Board (NLRB). Why not do the same for the Federal Reserve (or the Federal Housing Finance Agency)?
Book Bits | 5.5.2012
● The Clash of Generations: Saving Ourselves, Our Kids, and Our Economy
By Laurence Kotlikoff and Scott Burns
Summary via publisher, MIT Press
The United States is bankrupt, flat broke. Thanks to accounting that would make Enron blush, America’s insolvency goes far beyond what our leaders are disclosing. The United States is a fiscal basket case, in worse shape than the notoriously bailed-out countries of Greece, Ireland, and others. How did this happen? In The Clash of Generations, experts Laurence Kotlikoff and Scott Burns document our six-decade, off-balance-sheet, unsustainable financing scheme. They explain how we have balanced our longer lives on the backs of our (relatively few) children. At the same time, we’ve been on a consumption spree, saving and investing less than nothing. And that’s not to mention the evisceration of the middle class and a financial system that has proven it can’t be trusted. Kotlikoff and Burns outline grassroots strategies for saving ourselves–and especially our children–from what could be a truly catastrophic financial collapse.
Is April’s Slow/Low Payroll Growth Signaling The New Normal Or A New Recession?
Economists were expecting a relatively weak month for job growth in April, but today’s payrolls report from the Labor Department managed to disappoint the crowd even by the downsized standards of late. Employment in the private sector rose by a thin 130,000 on a seasonally adjusted basis, down from March’s modest 166,000 gain. April’s increase was the lowest since last August. The unemployment rate, surprisingly, managed to slip a bit to 8.1%, but that’s irrelevant given today’s meager gain in the working population.
Strategic Briefing | 5.4.12 | Gov’t Spending & The Economy
What stimulus? Government is holding us back
Rex Nutting (MarketWatch) | May 4
Everyone’s worried that the economy may go over a “fiscal cliff” next year, but they’re missing something essential: We’ve been falling down a “fiscal hill” for two years already. After giving the economy a huge boost in 2009 and 2010, fiscal policy has become contractionary. Now that the private sector is on the mend, the lack of government spending is the biggest factor holding back the economy. And it could get worse.
Jobless Claims Fell Sharply Last Week
Suddenly the sun came out… again. New filings for jobless benefits dropped a hefty 27,000 last week to a seasonally adjusted 365,000. It appears that the downward trend in new claims is intact after all. The last several weeks had raised new doubts, courtesy of a modest rise in new claims, but today’s news takes the edge off the worst fears. As always, caution is required for reading too much into any one number for this volatile series. But the trend is far less prone to short-term noise and on that score there’s cheery news in today’s update, as the following charts show.
A New Old Explanation For Recessions & Financial Crises
Edward Conard, a retired executive of Bain Capital and a major donor to Mitt Romney’s presidential campaign, tells us that the precipitating cause of the 2008 financial crisis was a surge in demand for liquidity. He’s right, of course. The appetite for safety went into overdrive in the final months of that fateful year. This may be a controversial explanation in some circles, but it shouldn’t be. Divisive or not, Conard’s accounting of how the economy nearly melted down is an excuse to consider how far we’ve come (or not) in dissecting the business cycle when it goes negative in the extreme. It’s also an opportunity for a refresher course on considering the practical policy responses.