Friday , April 16 2021
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Econbrowser – James Hamilton

The WSJ April Survey: Accelerating Growth Prospects

The survey results are out, and once again, the outlook improves. Figure 1: GDP actual (bold black), WSJ April survey mean (blue), February (red), December (green), October (light blue), CBO estimate of potential GDP (gray), all in billions Ch.2012$, on log scale. Forecasted levels calculated by cumulating growth rates to latest GDP level reported. Source: BEA (2020Q4 3rd release), WSJ surveys (various), CBO (February 2021), and author’s calculations. The implied output gap by 2022Q2 is...

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When (US) Corporate Tax Rate Reductions Last Bloomed

Under the Tax Cuts and Jobs Act, no enormous surge in capital investment appeared, above and beyond what could be explained by aggregate demand changes. From the conclusion to U.S. Investment Since the Tax Cuts and Jobs Act of 2017, by Emanuel Kopp, Daniel Leigh, Susanna Mursula, and Suchanan Tambunlertchai. In the year following the passage of the TCJA, U.S. business investment grew strongly  compared to pre-TCJA forecasts and outperformed investment growth in other major  advanced...

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The Trade Balance: Macro Dominates Tariffs

Like I said four years ago. By Trump’s own criterion, the trade war was lost. My view – that was a stupid criterion in any case. Figure 1: Annualized trade balance (billions $, SAAR) (blue, left scale), and trade balance to (interpolated) GDP ratio (red, right scale). Orange shading denotes Trump administration. Source: BEA, and author’s calculations. Even if one takes Mr. Trump’s quasi-Marxian view that only goods matter in the trade balance, one finds a similar pattern. Figure 2:...

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The Market’s Expectations of Inflation over the Next Five Years

As of today, the five year constant maturity Treasury yield has stabilized for the last month at about 0.9%. The inflation breakeven implied by the spread between Treasurys and TIPS has plateaued at 2.52%. After accounting for the estimated term premium and liquidity premium, the implied inflation rate is 1.90% . Figure 1. Five year inflation breakeven calculated as five year Treasury yield minus five year TIPS yield (blue), five year breakeven adjusted by term premium and liquidity premium...

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“Re-examining the Effects of Trading with China on Local Labor Markets: A Supply Chain Perspective”

From the paper by Zhi Wang, Shang-Jin Wei, Xinding Yu & Kunfu Zhu: The United States imports intermediate inputs from China, helping downstream US firms to expand employment. Using a cross-regional reduced-form specification but differing from the existing literature, this paper (a) incorporates a supply chain perspective, (b) uses intermediate input imports rather than total imports in computing the downstream exposure, and (c) uses exporter-specific information to allocate imported...

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Infrastructure Investment and Taxes

I talked about infrastructure investment and taxes on WPR  today. Will higher corporate tax rates and closing of loopholes in the taxation of raise prices of goods produced? Given what happened in the wake of the 2017 reduction in corporate tax rates (i.e., lots of stock buybacks, not much higher investment), I think a resulting price increase not likely. On the other hand, the infrastructure spending could have an impact on productivity and hence prices. And infrastructure spending has...

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Employment Surges to 5.5% below Feb 2020

The economy added 916,000 jobs in March, above the Bloomberg consensus of 647,000. Figure 1: Nonfarm payroll employment (dark blue), Bloomberg consensus as of 4/1 for March nonfarm payroll employment (light blue square), industrial production (red),  personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), consumption in Ch.2012$ (light blue), and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. Source: BLS, Federal Reserve,...

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Business Cycle Indicators at the Beginning of April

The Bloomberg consensus is for an increase of 674 thousand jobs in March (GS says 775K). That’s heady news, offsetting the somewhat less upbeat news from the estimate of February monthly GDP released by IHS Markit today – a decrease of 0.9% after upward revision in January’s figure by 0.3% (not annualized). Even if expectations are met, employment will still be 5.8% below that recorded at  the NBER peak in February 2020. In the context of key macro indicators followed by the  NBER Business...

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Did the Lockdown Cause More Suicides?

A common assertion made by those opposed to public health measures such as lockdowns was that suicides were rising markedly – see e.g., Carney/Washington Examiner via AEI, Arthur Laffer and Stephen Moore, and blog commenters like sammy. The data are in. This article indicates suicides actually went down in 2020, 5.6% relative to 2019. Source: Ahmed and Anderson (JAMA, 2021). Figure 1 shows a longer time series – raw statistics (on left log scale) and per million (on right scale). Figure...

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