Econbrowser | Analysis of current economic conditions and policy

Time 2020-07-15 23:02:35

Web Name: Econbrowser | Analysis of current economic conditions and policy

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EconbrowserAnalysis of current economic conditions and policyIndustrial production numbers are out today. Here are five key indicators referenced by the NBER s Business Cycle Dating Committee.Figure 1: Nonfarm payroll employment (blue), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink), all log normalized to 2019M02=0. May observation for manufacturing and trade sales projected using log-linear regression of sales on retail sales ex.-food services over the 2019-20M04 period. Source: BLS, Federal Reserve, BEA, via FRED, Macroeconomic Advisers (6/26 release), NBER, and author’s calculations.If one were convinced that these indicators (along with many others) were going to continue to trend upwards, one could imagine a recession declared as starting in 2020M02 (NBER peak) and ending in 2020M04 (trough). However, if there were to be a relapse in some of the indicators in July-August (see discussion here), one could imagine a longer contraction eventually being declared (some accounts say there s an increasing view in the Fed along these lines).Two observations: (i) recessions do not necessarily coincide with negative output gaps (although they do seem to coincide with the beginning of periods of negative output gaps); and (ii) recoveries do not always coincide with positive output gaps. [This is an update of a 2008 post.] Continue reading From Scholars Strategy Network, an open letter:Economists Letter on Recovery PolicyDear National Lawmakers,As you consider a new package of aid to support the nation during the ongoing COVID-19 pandemic, now is an appropriate time for the federal government to consider economic research carefully in order to provide well-targeted, significant relief to state governments and to individuals experiencing economic hardship. Support for state budgets, and for safety net programs, most notably funding for the Supplemental Nutrition Assistance Program (SNAP) and for Unemployment Insurance, are wise ways to do this. Continue reading The Wall Street Journal s July survey results are out. The forecasted level of GDP is higher despite the deteriorating Covid-19 infection and fatality numbers. Continue reading Remember austerity and expansionary contraction stories? Well, if you don t, then gird yourself for another round of claims (primarily by non-macroeconomists) about how state and local governments need to tighten up their finances, by cutting spending (and cutting taxes to necessitate further spending cuts). Perhaps, we should consider expanding federal transfers to the states and localities From the fourth round survey of the IGM/Fivethirtyeight Covid-19 panel: Continue reading A reader defends the Trump administration s implementation of public health policies in the face of the Covid-19 pandemic:Trump never dismissed the pandemic, if you look at his full quotes rather than dishonest snippets. He has always followed the advice of his senior health policy officials. And Trump did a tremendous amount to manage the pandemic. Unfortunately, he gets little credit for that, since the media has actively suppressed the Administration’s accomplishments. Continue reading Why do reported growth rates differ for the same variable? Refer to the last three years of GDP data to see [this is an updated version of this 2018 post]Figure 1: Quarterly GDP, SAAR, FRED series GDPC1 (black line), annual, FRED series GDPCA (blue bars), in billions of Chained 2012$. 2018 annual (quarterly) growth rate (pink arrow); annual 2018 y/y growth rate (orange arrow); 2020Q1 annual quarterly growth rate (red arrow); 2020Q1 q/q SAAR growth rate (green arrow). Source: BEA, 2020Q1 3rd release via FRED, and author s calculations.Note: SAAR denotes Seasonally Adjusted at Annual Rates.Conventions in the US are to cite q/q SAAR or y/y quarterly data (i.e., 4 quarter changes). In Europe, q/q growth rates are typically not annualized.So, there are several ways to calculate the growth rate over the course of the year. They will almost invariably differ, perhaps substantially, when GDP is either growing very rapidly or shrinking very rapidly. And there is no right way. If one wants to calculate the most recent growth experience, one might stress q/q. If one wants to look at a longer horizon, then one might want to use the quarterly y/y. If one thinks quarterly series are very noisy, one might want to look at annual y/y.Additional Note: One could average the q/q annualized growth rates over the four quarters of 2017 to try to get 2017 q4/q4 growth rate. This calculation leads to an approximation, which gets worse the more variable growth rates are (unless growth rates are calculated as log-differences which is part of the reason economists like to express variables in logs and log differences ).By the way, 10% decline combined with a 10% rise does not bring you back where you started unless you calculate growth rates in logs. Here s Jim Hamilton s take (for some reason, people start calling me names when I try to defend the use of logs.)

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