Polled in March 2012, top academic economists overwhelmingly agreed that “freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.”
This academic consensus has penetrated popular opinion to the extent that some people believe increasing cross-border trade flows is unambiguously good for everyone. Likewise, there is a relatively common — and wrong — belief that the Hawley-Smoot tariffs were a significant factor in the severity of the Great Depression.
We don’t want to suggest that trade is bad, but it is worth highlighting that the actual views of the experts who study these issues are much more nuanced than what the “pop internationalists” often spew out.
For example, a new paper by Daron Acemoglu, David Autor, David Dorn, Gordon H Hanson, and Brendan Price estimates that the sharp increase in bilateral trade between China and the US cost somewhere between 2 and 2.4 million jobs between 1999 and 2011 — about 1 percent of the entire civilian population in 2011. Less than half of those jobs were in manufacturing sectors that directly competed with Chinese businesses. Read more
Janet Yellen’s thoughtful speech on labor markets last week has already received a lot of attention. One passage, which highlighted some recent research from her former colleagues at the Federal Reserve Bank of San Francisco, was particularly noteworthy, in part for its implications about the path of future wage growth:
The sluggish pace of nominal and real wage growth in recent years may reflect the phenomenon of “pent-up wage deflation.” The evidence suggests that many firms faced significant constraints in lowering compensation during the recession and the earlier part of the recovery because of “downward nominal wage rigidity”– namely, an inability or unwillingness on the part of firms to cut nominal wages.
Credit Suisse’s global demographics research team came out with a new note on Friday featuring some enlightening charts about the US economy. It provides a handy way of evaluating the country’s lackluster performance since 2000, as well as a few longer-term trends.
As the CS team notes, GDP growth can be decomposed into three distinct forces: growth in the population of working-age people, growth in the number of hours worked by each working-aged person, and productivity growth. Read more
Does the secular deflation of computers and related equipment skew the macroeconomic data on investment in the direction of irrelevance? Read more
The Federal Reserve has just released its first “Report on the Economic Well-Being of U.S. Households“. It provides some useful context for the ongoing debates about the income distribution and excess savings.
A few particularly dispiriting highlights: Read more
This morning’s Employment Situation report coincided with the release of the latest Personal Income & Outlays report, bringing to a close this busy week of economic indicators and activity.
What did we learn? Here’s a brief roundup: Read more
Much is being made of China being about to pass the US as the world’s biggest economy — and of China’s fight to massage down the figures.
We hate to side with Chinese statisticians, but at the very least Beijing may well be right to play down the comparison in its local media.
Here are a couple of surprises which come out from using similar adjustments to the PPP calculations used to show China’s economy is bigger (using the IMF’s World Economic Outlook database)…
- In 1980, Greece and Gabon (which was in default on its debt from 1999 to 2005, but has lots of oil) were ranked above the UK for PPP-adjusted GDP per person. Before adjustment they were about a third poorer.
- East Timor, on the IMF’s 2014 estimates, is ranked as richer on PPP-adjusted GDP per capita than Poland, Estonia or Hungary – and is ranked only 1.4 per cent poorer per person than Portugal, its former colonial master. It has discovered oil, boosting GDP. But before the PPP adjustment, GDP per capita is put by the IMF this year at $4,669 vs $14,166 a head for Portugal.
Like other parts of the US economic recovery — housing, the labour market — capital expenditures by companies have been a letdown recently, even accounting for the weather.
The latest example came in Wednesday’s durable goods report, in which the “nondefense capital goods orders excluding aircraft” component fell. (That figure is a proxy and obviously doesn’t capture everything that normally counts as capex, which also includes investment in property and structures, imported capital goods, and certain intangible assets. Capex is often poorly or loosely defined in discussions about it.) Read more
A chart from Credit Suisse (click to enlarge for a clearer picture):
The strategists add:
Later on Friday comes the US employment situation report, the first major economic indicator to give a sense of how strongly the American economy finished 2013.
Before obsessing over its details, we wanted to first set down our broader thoughts on what happened last year, and what we’ll be paying attention to this year. Read more
BUY (The shutdown didn’t wreck everything, the jobless rate’s still weak)
NO, SELL (Tapering sooner) Read more
Two charts to nurture some hope this morning.
First, a reminder that when long established trends turn, they can do so very quickly. And second, if there is a real turn in the US, there is plenty of scope for activity to pick up. Read more
From Steven Englander of Citi, a list of US data releases possibly now subject to delay because of the shutdown:
And those unlikely to be delayed:
You’ve seen those who were (ahem) surprised by the US central bank’s decision not to start tapering this month… now read the words of one who got it right: BNP Paribas’ Julia Coronado, the bank’s chief North America economist and ex-forecaster at the Fed.
And interestingly, BNP think even December is in doubt: Read more
Oped pages in recent months have been regular hosts to pieces extolling some of the unsung benefits of the US shale-gas revolution. Some of these have gone so far as to proclaim that shale gas is, or will be, a significant benefit for the country’s entire economy.
Lately, though, the narrative is beginning to sound hollow. Read more
Self-explanatory, and they come via RBC Capital Markets:
From a note Wednesday morning by ConvergEx (emphasis ours): Read more
Welcome to see such punchy prose from an executive, surely.
“Have you ever had one of those weeks where your best- prepared plans weren’t good enough to accomplish everything you set out to do?” Geiger asked in a Feb. 1 e-mail to executives. “Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?” Read more
A h/t to Mark Dow for the spot. That’s Citi’s US Economic Surprise Index threatening to turn negative after a decent run in positive territory.
As the festive season draws nearer, Albert Edwards brings us good cheer:
Expect the New Year to bring nothing but disappointment.
Yes, our favourite bear argues that even though we’re getting relatively decent US economic data, it’s falling corporate profits to come we should be concerned about. In short, he argues the US is already entering another recession. Read more
Well we’re no longer off 300 points on the Dow. (Off 265, as we went to pixels.) But what went on here?
The estimates of $10bn to $20bn for damage caused by hurricane Sandy fall well short of the costs incurred by hurricane Katrina ($113.4bn) and 1992′s hurricane Andrew ($58.6bn), Goldman Sachs’ Jan Hatzius says. But it’s difficult to know how much to rely on the cost estimates so early on, as Hatzius highlights:
These numbers are likely to strike many readers as surprisingly small given the scale of the devastation in several mid-Atlantic states. It is certainly possible that they are too small, as initial cost estimates for natural disasters have sometimes proved too low in the past. For instance, the damage from Tropical Storm Irene was about twice as large as the initial estimates had suggested, and the damage from Hurricane Katrina was about four times as large. However, it is also likely that the concentration of the impact in the area between Washington and New York has magnified its media impact, even relative to the population density and the value of the real estate in this part of the country.
(Ouch – the media card? Really?) Read more
In attempts to explain why companies (particularly in the US) are so reluctant to invest and hire of late, the word “uncertainty” will usually make an appearance. “Policy uncertainty” is generally seen as the enemy of business confidence, and the combination of post-crisis regulatory reforms and ever-increasing partisanship in the US Congress make it a very big theme of late. Intuitively it makes sense that uncertainty would affect business decisions, but can that be separated from the effect of actual economic activity itself? Read more
Says this guy here with our paraphrasing, naturally (click through for the full paper):
It is less than a month away from the next FOMC meeting (September 12-13), and Bernanke’s speech at Jackson Hole is at the end of August.
Check this week’s posts at Calculated Risk or this series of charts from Joe Weisenthal for detail, but the short story is that quite a few economic indicators have outperformed expectations in the last couple of weeks. Read more
It’s GSEs. It’s a guilty pleasure of sorts in housing recovery indicators. It’s also – arguably – the future of US housing reform.
Freddie Mac posted $3bn of net income in the second quarter. That means it has positive net worth (well a pat on the back for you, Freddie) and hence, it’s paying far more back to the US Treasury this year than it’s taking out, in dividends on the government’s preferred stock. (See also Fannie, earlier.) Read more
Since we found it a useful exercise, here’s a quick, simpli
sticfied snapshot of the US recovery. Or non-recovery, whatever it is. Not all of these carry equal weight, naturally:
Stuff that looks good Read more
Another notable increase in US consumer credit, this time for May…
We already discussed at length the evolving and (yet again) disappointing relationship between jobs and profits growth, along with the not-so-anomalous-in-context swings in productivity growth these past few years.
But it’s worth mentioning one more time given this morning’s crapadocious jobs report and the start of earnings season on Monday. Read more
A few notes on the report as we make our way through it:
– This sentence caught our eye: Read more