The Economic Cycle Research Institute last week repeated its forecast that the U.S. is headed for a new recession, a prediction that the consultancy has been emphasizing since last September. There is some damning evidence to consider, starting with the slumping rate of growth in personal income, a danger sign that’s been with us for months.
Book Bits | 5.12.2012
● Better, Stronger, Faster: The Myth of American Decline… and the Rise of a New Economy
By Daniel Gross
Q&A with author via Kai Ryssdal (Marketplace)
Ryssdal: All right, so here comes the put-up-or-shut-up: You say early in this book that the ingredients are already here. You say ‘it’s tough to see what exactly is going to propel the United States forward, but the ingredients are already here.’ Like what?
Gross: Well exports is obviously one of them. The fact that the world has been growing more rapidly than the U.S. is a big source of this declinist thinking. An author like Tom Friedman goes to China and says, ‘Oh boy, they’re building high-speed rails and look at us, we can’t build infrastructure; we’re finished.’ Exports started turning up in April 2009, before the economy at large did. In the last two years, they’re up 35 percent. When the rest of the world gets rich, or gets middle-class, they buy what we make. That includes Boeing jets, gas turbines. I found a family-controlled, little company in suburban Pennsylvania that makes wallpaper. 2007, 2008 — 80 percent of this business was at home; now 70 percent is overseas.
Strategic Briefing | 5.11.12 | The Outlook For Oil Prices
Oil: A Temporary Selloff?
BCA Research | May 10
Oil prices may stay under downward pressure in the near term and are particularly vulnerable to euro volatility. Nonetheless, our cyclical bias is still positive…. Moreover, many of the headwinds for oil prices should prove temporary even if a washout in the euro does develop. Generous Fed liquidity reduces the odds of sustained U.S. equity weakness at a time when the U.S. economy is on a stable, albeit slow growth path. In this environment, lower oil and product prices have a self-stabilizing aspect by supporting consumer and business confidence, suggesting that without a major exogenous shock, the downside in oil prices from current levels is lmiited. Bottom line: Our Commodity & Energy Strategy service maintains that oil prices should be higher by year-end.
Jobless Claims Fall (Just Barely) Last Week
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?
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.