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Jared Bernstein

Jared Bernstein

Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, Executive Director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute, and between 1995 and 1996, he held the post of Deputy Chief Economist at the U.S. Department of Labor.

Articles by Jared Bernstein

Links: Recessions risks; the really, really bad Senate GOP health plan; see ya later…

2 days ago

A few links to check out, both over at WaPo.
First, no one knows when the next recession will hit though it’s closer now than when I started writing this sentence. But I’ve got two recessionary concerns: one, fiscal policy, both discretionary and automatic will be thoroughly insufficient due to the toxic mix of Congressional dysfunction and austerity; two, financial deregulation will raise the likelihood of another bubble.
Second, the Senate health care plan is worse than the House plan. Specifically, it’s pretty much the House plan but with much deeper Medicaid cuts over the long term.
Finally, I’m outta here, headed for the far-east for a few weeks, and I’m gonna do my best not to cast my gaze westward. You know what that means, right? It means that you, OTE’ers, have to keep the forces

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Here’s an idea: let’s have Congress micromanage the Fed…what could go wrong?

5 days ago

Over at WaPo. In preparing for something, I was reading the text of the Choice Act–that’s the financial deregulation bill the House recently passed (there’s a link in the piece). I knew the Act included some pretty invasive Fed oversight but when I actually read the legislation (Title X), the old jaw dropped. It writes down the ’93 version of the “Taylor rule” (read the piece for details), and makes the Fed have to jump through hoops if they use any discretion in its application.
My piece focuses on why such rigid rules-based policy making is a terrible idea, as it would undermine both the Fed’s analytic flexibility and their political independence. The latter is particularly toxic given the relative functionality of the Fed versus the Congress.
But there was one point I left out of the

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Is the Fed fighting an old war?

10 days ago

As expected, as their meeting concluded yesterday, Federal Reserve Chair Janet Yellen and company decided to raise the benchmark interest rate they control by one-quarter of a percentage point. The question is: why?
She was, of course, asked about this in lots of different ways in her press conference. [Pause here for a moment and consider the substantive difference between a Yellen press conference and a Spicer press conference. Kinda makes you shudder.] Specifically, journalists reasonably wanted to know what was up with the rate hikes given how low inflation has been. Sure, we’re closing in on full employment, but the Fed’s preferred inflation gauge, the core PCE, is below their 2 percent inflation target and slowing. It’s decelerated from 1.8 percent in the first two months of this

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What’s the Fed Up to? Podcast version.

11 days ago

Sure, you can read the posts here at OTE, and be [choose as many as apply: better informed, entertained, annoyed, put to sleep]. And/or, you can listen to the latest episode of OTE podcast while you’re exercising, cooking, chilling, etc. Get it on SoundCloud, iTunes, Stitchr, Google Play, or TuneIn.
This episode is all about the Federal Reserve, which is meeting as we speak, and will almost certainly decide to bump up the interest rate they control. Ben and I talk to Kate Davidson (from the Wall Street Journal) about the Fed’s rationale for its interest-rate-raising campaign and to Ady Barkan (from the Fed Up Campaign) about what the Fed should do to up-weight the interests of those who’ve been left behind, even as we close in on full employment.
Given how obscure this sort of conversation

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One more point about the KS legislature’s KO (Kansas Override) of supply-side tax cuts

12 days ago

I’ve been citing the KO–the Kansas legislature’s override of Gov. Brownback’s veto, thus pulling the plug on the state’s failed experiment with supply-side tax cuts–ever since I heard about it, as have many others. The story raises welcome hopes that moderate R’s might be waking up to the fiscal reality that many constituents value public goods more than regressive tax cuts.
Not to be a downer, but I’ve been pessimistic that DC R’s will learn from KS R’s. That’s partly because facts clearly can’t kill trickle-down mythology. The party’s donors want their tax cuts, and they’ll continue to sell snake oil to get them, facts and KS be damned.
But there’s another dynamic in play here which I haven’t seen mentioned: states have to balance their budgets while the federal government does not. So,

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Recycling an oldie/goodie: You wanna whack this and future recoveries? Get rid of Dodd-Frank

16 days ago

Sorry to recycle, but with the Comey hearings sucking up all the air, folks may have missed that today the House today passed that fahrblunget bit of chazari known as the Choice Act, which largely repeals Dodd-Frank financial reform (it requires D votes in the Senate, so a much heavier lift over there, thankfully). Back in February, I wrote this defense of “finreg” (for WaPo) and while I insert a few updates [in brackets], I think I was as right then as now on this.
[From Feb 2, 2017]
There are two important pieces of economic news out this morning, and while it might not seem so, they’re intimately connected.
First, we got another in a stream of solid reports on the U.S. job market. Payrolls were up 227,000, and while the jobless rate ticked up to 4.8 percent, that was for a good reason:

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This word “deregulation.” I don’t think it does what you think it does.

16 days ago

A quick note on “deregulation,” which is the other half of the mantra, i.e., the phony growth recipe–“tax cuts and deregulation”–you hear endlessly repeated in uninformed DC conversations.
I’ve been in these conversations for decades and I have no idea what these people are talking about and neither do they. What, specifically, do they want to “deregulate?” What evidence do they have that to do so would be pro-growth? Obviously, they’re just hand waving.
To take a timely example, the House is about to vote on the “Choice Act” today, designed to repeal most of the regs in Dodd-Frank. The bill will likely clear the House but needs D votes in the Senate where, hopefully, it is likely to come up short.
Now, consider this, from yesterday’s WSJ, touting favorable conditions in financial and

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KS legislature for the win!

16 days ago

Really happy to see the Kansas legislature reject the predictably failed supply-side tax cut “experiment” that’s been whacking the state’s coffers since 2012. Over at WaPo but one extra note here.
I’ve heard some supporters of the cuts–and there are surprisingly few, which I consider another gain for humanity–argue: “But KS is adding jobs; GDP is up; just give it a chance!”
This is absolute gibberish. It is a completely meaningless defense. We are in year eight of an economic recovery. Job growth is up most everywhere, in places that have raised their taxes and lowered them. In fact, if you want to get technical, economic indicator in KS look like nothing special compared to the nation.

The only thing you can be sure of re tax cuts is the first order effect: revenue losses. Beyond that,

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Politically motivated attacks on the CBO from team Trump?! I’m shocked…

19 days ago

Over at WaPo, but I suspect OTE readers will have thoughts to add on this one. I myself often mix it up with CBO re assumptions/results. Recall a set of pieces on both their minimum wage and overtime rule scores. But I very much value their integrity and their critical role as our non-partisan score keeper.

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Reax to NYT oped

19 days ago

I’ve got an oped in this AM’s NYT on four big ideas that I see Democrats, and not just traditional progressives, but also centrists, converging around.
–a universal child allowance;
–a $15 minimum wage;
–a large expansion of the EITC;
–direct job creation.
Here are some responses and pushbacks. Much of what folks raised are policy ideas omitted from the piece, which is partly a function of space. For reasons I can’t explain, the NYT insists that other opeds have to be on the page today too:
That’s too redistributive an agenda!: This one doesn’t bother me. Read Dean Baker’s “Rigged,” which documents the extent of upward redistribution embedded in today’s operative policy agenda, and add on top of that the Ryan/Trump fiscal/tax agenda.
What about payfors?!: Yep–didn’t have space to get into

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Jobs report: Some softening in May. Should the Fed hold off on next rate hike? I say…[read on]

22 days ago

Employers added only 138,000 jobs last month, well below expectations for 175,000. Revisions to payrolls for the prior two months reduced employment gains by 66,000. The unemployment rate fell to 4.3 percent, its lowest level since 2001, but for the wrong reason: labor force participation fell by two-tenths of a percent. In other words, this is a considerably weaker-than-expected jobs report.
Given the noise in the monthly data, the question is: does this report signal a real downshift in job growth or is it a blip? Also, if we’re really at full employment, we should expect some slowing in payroll gains as employers bump up against supply constraints. And what does this all mean for the Federal Reserve when they meet in a few weeks to consider another rate hike that is firmly priced into

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Wherein I admit that a Trump gaffe and tweet actually advanced economic thinking

23 days ago

Just a quick note to say I was very glad and a little surprised to see quite a number of articles and commentaries on the problem of Germany’s large trade surplus. I was out of the box early on Trump’s “Germans are bad” rant, as I’ve long inveighed against the dominant DC notion that trade deficits of any persistence and magnitude are always and everywhere benign. So it’s a very positive development to see others recognizing that there are important ways in which persistent imbalances can be very problematic.
The problem—and with Trump and trade there’s always a problem—is that to team Trump, bilateral trade deficits are scorecards: if we have a deficit with you, you’re bad, bad, bad. Besides being totally undiplomatic, that’s bigly wrong, and in fact, as I argued here, citing Michael

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Lose the “H” and you’re back to the ACA: Why, contrary to A. Roy, the AHCA is not fixable.

24 days ago

Avik Roy, to his credit, had some appropriately harsh words for at least parts of the first version of the American Health Care Act, the House bill to replace the Affordable Care Act. He was particularly critical of those parts that would make coverage much more expensive for low-income and older persons. And yet, given that AHCA v. 2.0 is considerably worse than the original, I found a lot wrong with Roy’s claim in an NYT oped today that the House bill is “fixable.”
Roy claims that the CBOs score of the new version—the one that showed it to reduce coverage by 23 million—is “overly pessimistic” and that the bill can be fixed by raising premium subsidies to provide more help to those who can’t afford coverage (Roy wrongly dings the CBO, which has actually gotten much of this right).
Put

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The ACA, the myths and flaws of Republican reforms, and single payer

25 days ago

Over at WaPo.
The piece was already too long so, while I didn’t have time to get into another germane point: the role of single-payer coverage in this debate.
A key point of my analysis is that the problem facing private insurers in the exchanges was that they initially underpriced premium costs, leading to high medical-loss ratios and thin to non-existent profit margins. They’ve since been recalibrating and are in the process of returning to profitability, though now they’re in a race with team Trump’s sabotage.
A reasonable response from progressives would be: the problem isn’t price calibration. The problem is this part of the ACA depends on profitable private insurers in the delivery of a partially non-market good (see my “fundamental flaw” point in the WaPo post). A single-payer plan

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Trump, trade, and Germany

29 days ago

So, at a meeting in Brussels yesterday, President Trump appears to have told leaders of the European Union that “the Germans are bad, very bad.” I’ll let those with foreign diplomatic chops figure out how to clean that up—and good luck: When I plug the Spiegel Online headline—“Die Deutschen sind böse, sehr böse”—into Google translator, it spits back: “The Germans are evil, very evil.”
I’ll handle the economics, which actually are interesting. When Trump talks about trade, he sometimes gets a piece of it right, and it’s often a piece about which establishment politicians and the economists that support them are in denial: Germany’s trade surplus of over 8 percent of GDP really is a problem for the other countries with whom they trade.
That’s not just my view. Both Ben Bernanke and more

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A quick comment on GDP growth

29 days ago

Revised GDP came out this morning for the first quarter of 2017, and the headline number was 1.2%, revised up from 0.7% in the preliminary report. That’s quarterly growth, annualized. But OTE’ers know I’m all about the bass year-over-year trend, which came in at 2%. Same as last quarter. Same as the average growth rate since the expansion began in the second half of 2009.
I raise this only to point out that when folks say the Trump administration’s plug-in of 3% is off-trend, that’s what we mean. I heard his budget director argue that their “forecast” is based on the power of tax cuts, deregulation, and optimism. Neither tax cuts (which they themselves can’t coherently explain) nor deregulation has any such growth track record; re optimism, the more I hear from Mulvaney, Mnuchin, and

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Catching up on some links…

May 25, 2017

…to stuff in faraway lands.
EG, here’s a piece in the NY Daily News wherein I argue that for all the voices proclaiming that Trump’s really nasty and thoroughly mathematically challenged first budget is “dead-on-arrival” in the Congress, that’s unfortunately not quite accurate. Why not? Because “virtually every priority in Trump’s budget is one that Republicans have been trying to legislate for years. That by itself should tell you that this budget, though it won’t become law, is far from dead.”
Second, in today’s WaPo, I argue that no question, progressive must play defense to preserve what we’ve got, but it’s walk-and-chew-gum time. We also must craft and elevate a true, progressive alternative.
That’s going to involve higher minimum wages, more labor protections (especially increasing

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I’ll have more to say about stuff soon, but…

May 23, 2017

I can’t just ignore this Manchester suicide bombing and go about my business. There’s so much negativity and horror in the world right now, including terror, of course, but also a level of greed, inequality, and power-abuse that just keeps growing.
There is much beauty as well, and a growing, robust resistance such that I feel increasingly connected to others who feel as I do about things, so I’m definitely not saying all is lost.
The other day, I gave this commencement speech to the graduates of Columbia University School of Social Work (which was where I got my PhD lo these many years ago). To be in the same room with all of those graduates and their professors, all of whom are part of the solution, was tremendously uplifting, and that’s a very real part of life too.
Buddhism teaches us

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ICYMI–WaPo posts

May 22, 2017

First, Trump’s first full budget is out tomorrow and man, what a mess. Just a massive shift in resources from the poor and middle class through vicious spending cuts to the wealthy in tax cuts. And partially “paid for”–those scare quotes are very important–by a bullsh__ growth assumption of 3%. It’s standard issue, Ryan’esque fare, but goes after not just discreationary–there’s just not that much left there they can plausibly cut–but also mandatory programs, including Medicaid (on top of AHCA cuts), food stamps, EITC, CTC, more…
Second, it took too long, but these interesting figures suggest the stock market may have woken up to the fact that the market-friendly Trump agenda won’t exactly be forthcoming. To be clear, I still think a big, wasteful, regressive tax cut is coming, but probably

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Jump on the productivity merry-go-round!

May 18, 2017

That’s the new game all the nerds are playing. You just write down all the reasons why people say productivity isn’t growing as fast as it was 15 years ago, and you ask noted productivity expert John Fernald: “Whussup with that?”
That’s what Ben and I do in the latest episode of the On the Economy podcast, which you can listen to on Soundcloud, iTunes, Stitchr, Google Play, and TuneIn.
Of course, while podcasts are fun and convenient, they don’t support graphs, so here’s a graph of year-over-year changes in productivity growth. Fernald points out how noisy the series is, so I’ve added a slow-moving trend which captures the important facts of the data: productivity was growing at around 3% until the mid-1970s. Since then, it’s grown a lot slower than that, though that hump in the latter

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Potential growth and phony budgeting

May 16, 2017

The WSJ has a piece out this AM making an argument that’s become common from economists who think about growth, myself included: there’s no good reason to expect team Trump to achieve their 3 percent GDP growth goal. Many previous pieces have made this case, based on the limits we observe to the two additive components of GDP growth: labor force and productivity growth.
I’ll get to those in a moment, but to me, the important and timely line in the WSJ piece wasn’t so much the analysis of why 3 percent is probably an unrealistic goal (though good for the Journal for amplifying this point). It’s this one sentence, with a factoid you need to know (my bold): “If the economy expands at around a 3% rate over the next decade—a projection Mr. Mnuchin says the administration will make in its budget

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Housing, justice, jobs, and the flat Phillips Curve: Racial discrimination and a possible role for the Fed

May 15, 2017

Over at WaPo. One attribute of the post is the link to Richard Rothstein’s important new book documenting the “unhidden policies” responsible for racial residential segregation. The rigor of his research creates a bullet proof case for a) the laws, covenants, and zoning practices that kept African-Americans in high-poverty areas, and b) the difficulty unwinding those impacts today. I predict this book is going to be a big deal. At least I hope so.
Here’s the figure showing the constant ratio where black unemployment rates are 2x those of whites. This may be one of the most consistent relationship in economics, which is why I argue for lower overall unemployment in the piece, to tap this powerful elasticity to disproportionately push down the black rate.
Source: BLS

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Reflections on Trump et al’s weirder than weird economics interview

May 12, 2017

Yes, there was probably a bit more than the usual dose of cray-cray in President Trump’s interview with The Economist yesterday. But I just can’t muster the energy to crack wise about all that, other than to point out than the bit about how China stopped managing their currency the day Trump won is over-the-moon ridiculous, as one mouse click reveals.* What galled me (and Matt Yglesias) was to hear Sec’y Mnuchin chime in right after Trump made that claim: “Right, as soon as the president got elected they went the other way.”
There are profound, existential questions about the consequences of being governed by people with such a tenuous grasp on reality, but I cannot deal with those questions right now.
Instead, I’d like to contemplate a bit of what Max Ehrenfreund writes about here,

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Flat Phills, all around

May 7, 2017

I’ve got a piece coming out in tomorrow’s WaPo on the diminished correlation between the tightening labor market and wage and price growth. This is evidence of the well-known flattening of the “Phillips Curve,” the statistical relationship between nominal wages, prices, and tightness in the job market.
The figure below shows annualized growth rates of a) core PCE inflation and b) nominal wages of blue-collar factory workers and non-managers in services over numerous periods of falling unemployment. Since the 1980s, those growth rates have been falling. In the current episode of falling unemployment, price growth has been particularly slow. Those familiar with this phenomenon will recognize this observation as the flipside of the question we were asking when unemployment was 10 percent:

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April jobs report: Have we reached full employment??!!

May 5, 2017

April showers–it’s pouring in DC today (are the skies crying after the health care vote?)–brought job-market flowers, in the form of another solid jobs report. I’ll get to the topline numbers in a sec, but this note is going to be about the fundamental, Talmudic question: is the US job market at full employment?
Payrolls were up 211,000, well above March’s downward revision of 79K. Such jumpiness invokes the need for JB’s patented jobs smoother. It shows average monthly job growth in a very healthy 175-185 range in recent months, which is fast enough to pressure the unemployment and underemployment rates down.

The overall jobless rate, at 4.4%, is the lowest since May 2007; the underemployment rate, at 8.6%, is about at the level I consider to be consistent with full employment. Long-term

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My jobs analysis slightly delayed today

May 5, 2017

Going on CNBC this AM at 8 to discuss jobs report until after the 8:30 release so my analysis will be slightly delayed. Consensus is for about 190K on payrolls, unemp to tick up to 4.6%. My forecast comes in a bit lower than consensus and I’ll be watching for an upward revision to March’s low 98K initial print. Also, wage growth/LFPR/manufacturing/retail–much to discuss! See you on TV.

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Inflation, earnings, and spending: a review of recent trends

May 5, 2017

I need a serious break from the ugliness of DC health-care politics, so let’s talk about three interesting and related economic questions: inflation, labor demand, and consumer spending.
First, why does inflation continue to respond so weakly, if at all, to the tightening job market? The traditional response is “because the Phillips curve (the relationship between unemployment and inflation) is flat” but that’s just saying “who knows?”
There are several links in this causal chain, all of which deserve scrutiny. First, the tight labor market leads to faster wage growth. That squeezes employers profit margins and thus leads them to pass as much of those increased labor costs forward to consumers, thus lifting inflation.
Well, the figure below shows:
–Unemployment has indeed fallen to levels

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The very bad House health care replacement plan just keeps getting worse.

May 4, 2017

Over at WaPo, with many useful links to facts, all of which are being willfully ignored in the political process. EG, the House R’s are unsurprisingly pushing ahead without a CBO score of the impact of their amendments to their already toxic American Health Care Act. Facts, of course, are not their friends.
I don’t like it anymore than you do when economists veer into political punditry, but I can’t resist a few observations. If the amended bill passes the House, and the word on the street is that it may well do so, then:
—It shows that so-called Republican moderates provide no buffer at all against the hard right. They were bought off in this case by a fig leaf that they surely know won’t prevent the loss of affordable coverage. Why that is the case, I don’t know, but it suggests they do not believe their constituents will hold them accountable.
—Part of that calculus might represent their belief, if not hope, that whatever comes out of the Senate will be less draconian than the House bill. Then, there’s some sort of reconciliation of the two.
—A few people have asked me: if the House passes this bill, what happens in the Senate? I’ve got no idea, but I can’t imagine they want to spend a lot of time fighting about the impact of this bill over there, especially once CBO scores it.

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Odds and ends: taxes, Kansas, GDP, residual seasonality…

May 2, 2017

Just a few links folks might find worth perusing.
First, a few thoughts about President Trump’s tax “plan:”
–I don’t think it makes sense to discuss corporate or business taxation anymore without including pass-through businesses, which comprise most businesses and about half of business income. And Trump’s plan opens up a fat, new loophole in this part of the code.
–The criticism of the Trump tax outline–it’s like 200 words!–has been both fulsome and pretty bipartisan. It’s actually hard to find anyone who’s not completely on the take to accept the administration’s claim that the tax cut will pay for itself.
–I’ve got one word for the tricklers: Kansas!
On an unrelated topic–I mean, it’s all related, but…–I posted this tweet the other day which is a followup on this earlier post re the 2017Q1 GDP release (the figure below should say “and” not “are”). There’s some evidence, including from BEA itself, that the seasonal adjustment procedures are not successfully extracting all the seasonality out of the non-adjusted data. So I just ran the SA data through the SA software again and got the results below. The readjusted Q1 real growth rates tend to be above the reported ones (which means other quarters must go the other way, since the annual change shouldn’t be affected).

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Quick note re GDP Q1 report: Keep your eye on the trend

April 28, 2017

The economy grew at a slow rate of 0.7 percent in the first quarter of this year, according to this morning’s GDP report. But that low number–headlines stressed that it’s the slowest rate in three years–should be largely discounted. The underlying trend growth rate of the economy remains a moderate, and pretty steady, 2 percent.
There’s been a problem with seasonality in Q1 data of late, and growth rates for the quarter appear to be somewhat biased down. Also, January and February were unseasonably warm, so people spent less on heating (otoh, there was more building than we’d have expected).
The best way to control for this problem, as well as smooth out some of the noise in the annualized quarterly data, is to look at year-over-year trends. That way, if GDP levels in Q1s are biased down, this approach will factor that bias out (since they’ll be biased in each Q1). As you see in the figure, we’re right on trend.
Source: BEA
A few observations:
–Business investment growth was strong last quarter, but part of that was driven by a huge 22% (quarterly, annualized) jump in buildings, which may be a weather effect, as noted above.
–I’m putting consumer spending, which comprises 70% of GDP, on my watchlist. Nothing dramatic, and the 0.3% annualized rate in Q1 is not going to stick, but it has decelerated a bit of late.

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