US industrial production has grown at least twice as fast as GDP since the start of the recovery.
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Hugh Small is an independent economic analyst and management consultant, who was formerly with US-based firms Arthur D. Little and A. T. Kearney. He blogs at mature economy.org, and has a running thesis that mature economies must be assessed differently to developing economies because they share very different strategic goals.
Furthermore, once you factor in the subtle differences that apply to developed economies, things like the UK productivity puzzle begin to look a little less mysterious. Read more
Yep, China again.
Here’s a table from a fresh IMF paper pondering the country’s Lewis Turning Point, the moment when people streaming into cities from farms will be fully absorbed, industrial wages will take off, and — an estimated 350m jobs later after it began — the era of cheap Chinese labour will end. Click to enlarge. Read more
The preliminary UK GDP estimate for the fourth quarter is out and it looks like there’s been a return to err.. contraction.
Via the ONS:
GDP was estimated to have decreased by 0.3% in Q4 2012 compared with Q3 2012. Output of the production industries was estimated to have decreased by 1.8% in Q4 2012 compared with Q3 2012, following an increase of 0.7% between Q2 2012 and Q3 2012.
What’s to blame for the sluggish pace of jobs growth in the US economic recovery?
Citi economists Nathan Sheets and Robert Sockin have found evidence that the woes of small businesses might have something to do with it. Read more
Capital Economics put out a cracker of a note on UK output this week. It’s taken us a while to get through it but we wanted to do it justice. Here’s the key extract:
‘Supply pessimists’ point to high inflation and growing employment as evidence of a small output gap. But inflation was pushed up by temporary factors and has eased recently, while domestically generated inflation has remained low.
If you’re seeking a counter view to the one expressed on Thursday by a Bear in a Bath, look no further than the latest note from Stephen King’s team at HSBC.
Some great stuff from the global head of economics today, including thoughts about the UK’s productivity puzzle, the US jobless recovery, the pointlessness of QE and whether a structural shift may under way. Read more
Felix Salmon at Reuters has picked up on the following chart from Margaret Jacobson and Filippo Ochhino at the Cleveland Fed:
The minutes to the Bank of England’s September meeting are out, and we can’t help being drawn to the following comments about the UK’s labour productivity puzzle (our emphasis):
The labour market had remained surprisingly resilient in the face of the contraction in activity. The unemployment rate had fallen to 8% in the second quarter, its lowest level for around a year, and employment was estimated to have risen by more than 200,000, with a rise in permanent employees accounting for more than half the increase. Read more
Something of a puzzle is emerging in the UK’s labour market.
The overall employment picture is definitely improving. According to the latest figures from the Office of National Statistics, the economy added more than 431,000 new jobs in the past year and the employment rate is now considered to be relatively high. At the same time, however, there’s no doubt that labour productivity has been falling — quite the opposite to the picture in the US, where productivity has been rising sharply. Read more
Robert and Edward Skidelsky, emeritus professor of political economy at the University of Warwick and lecturer on moral and political philosophy at the University of Exeter respectively, have penned what FT Alphaville feels is a must read essay on the impact of abundance and post-scarcity dynamics on price stability and the nature of labour, and work itself.
A chart and table via CreditSights, click to enlarge:
The sweet spot — you’re young, Hispanic, have a college degree, work in mining, are married and live in North Dakota.
It’s a rare combination, of course, but these are the characteristics commonly found among people who have found jobs in the difficult US labour market since February 2010, according to ConvergEx analysts. Read more
That’s the title of the Citi research note on US managed care where we came across this chart:
Consensus expectations were for 9 per cent and 125,000.
But don’t be deceived by the eye-catching drop in the unemployment rate: this report was good but not great. Read more
Rising Chinese labour costs are changing the economics of global manufacturing and could contribute to the creation of 3m jobs in the US by 2020, according to a study being released on Friday, the FT reports. The Boston Consulting Group analysis says the new jobs will be generated by a “re-shoring” of manufacturing activity lost to China over the past decade. “Re-shoring is part of a broad trend that will emerge as … production gradually swings back to the US,” Hal Sirkin, a senior partner at the consultancy, told the Financial Times. The Boston Consulting Group estimates that the trend could cut the US’s merchandise trade deficit with the rest of the world, excluding oil, from $360bn in 2010 to about $260bn by the end of the decade. The shift would also reduce its soaring deficit with China, which reached $273bn in 2010 and has triggered an intense political controversy over China’s exchange rate policies.
A decent review of a theme we’ve been exploring recently, courtesy of Moody’s Analytics:
Several important demographic trends will influence US activity for some time. They include (i) the slower growth of Americans aged 15 to 49 years, which is a population cohort that shows a comparatively strong correlation with the growth of real consumer spending, (ii) the record slow growth of the working age population, (iii) the much faster growth of older workers relative to younger workers, and (iv) the breakneck growth of those 65-and-over vis-à-vis the number aged less-than-65. Read more
Wednesday’s UK jobs report is a stark reminder of the inadequacy of government policy — past and present — to reduce unemployment, and in particular youth unemployment.
The number of unemployed people in the three months to the end of June was 2.49m, up 38,000 from March and up 32,000 from twelve months ago. This total is only 17,000 shy of the peak during the recession (2.511m), according to Citigroup’s Michael Saunders, who expects next quarter’s release to show a further increase. Read more
Even as it was becoming clear that first-quarter growth had decelerated, there were plenty of signs that the manufacturing sector remained an exception.
Factory production in the first three months of the year grew by 9.1 per cent (annualised), freight and rail volumes grew, jobs growth in the sector has been steady, the monthly ISM surveys have been positive, and earnings by companies like Caterpillar and the Detroit carmakers have beaten consensus handily. Read more
For the commute home, or while rocking out to Paradise City, or while shielding yourself from the November Rain, or while chasing your Rocket Queen, or while exercising Patience; and because you Don’t Cry, you Live and Let Die,
If policy wonks had their way, the publication date of the IFS Green Budget would be a national holiday.
We exaggerate — slightly — but for an arid testament to the prose potential of Excel spreadsheets, it’s a good read. Not least because across its twelve chapters it meticulously meanders through the high stakes game the UK economy is currently in. Read more
The cyclical vs structural debate raised a lot of heat and not a great deal of light during the summer. But in the last week or so wise minds have returned to the issue.
Another day then and another round of jobs numbers to put the cautiously into cautiously optimistic.
Payrolls are out Friday and with them a better idea of the extent and pace of improvement — Reuters reports that nonfarm payrolls are expected to have increased 175,000 last month, up from 39,000 in November. Read more
UK chancellor George Osborne is resisting pressure for a new tax on bank bonuses or an increase in revenue raised by the planned £2.5bn bank levy as he seeks to normalise relations between the government and the City, reports the FT. Liberal Democrats including Vince Cable, business secretary, are pushing to leave open the option of a new tax on bonuses if bank chiefs fail to show restraint in February and March bonus payments. Meanwhile Osborne has faced calls from the Labour opposition to increase the bank levy, details of which will be published by the Treasury before Christmas. But the chancellor believes the City is facing enough uncertainty at present, and David Cameron, prime minister, has told colleagues it is time to ‘stop beating up on the banks’.
George Osborne is planning further big cuts in welfare spending this week, as part of an audacious drive to prove that the coalition can match Labour’s pre-election pledge to protect key frontline services, the FT reports. The chancellor wants to squeeze the welfare budget, releasing cash for spending on those areas that Labour had promised to protect from the cuts: hospitals, schools, overseas aid and the police. Mr Osborne believes he can neutralise Labour’s attacks on the £83bn cuts package – to be published on Wednesday – by “targeting waste and welfare” and shifting resources into the coalition’s priority areas. He has already protected the NHS and overseas aid from the cuts and on Sunday confirmed that the schools budget – boosted by a £2.5bn pupil premium for poorer students – would go up in real terms. He also promised to “improve the policing that we get” through workplace reforms.
An estimated 100,000 top earners will face big tax bills on a chunk of their pension savings in a Treasury crackdown that will also hit some long-serving members of defined-benefit schemes on more modest salaries, reports the FT. Most of those affected earn more than £100,000 a year but about 20,000 people earning less than that will also suffer from the measures designed to help close the country’s gaping budget deficit. The new rules won broad approval from employers and pensions experts because they were much less swingeing than the Treasury had initially suggested. But pensions experts questioned whether the move would raise the £4bn projected by the government. The previous Labour administration had passed rules aiming to raise revenue from those earning more than £150,000 a year. The coalition agreed to review those measures in response to an industry outcry.