Wednesday , October 27 2021
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Econbrowser – James Hamilton

Be Careful with Simple Treasury-TIPS Spreads

The five year Treasury-TIPS spread has, inarguably, shot up: Figure 1: Five year inflation breakeven calculated as five year Treasury yield minus five year TIPS yield (blue), five year breakeven adjusted by inflation risk premium and liquidity premium per DKW (red), all in %. NBER defined recession dates shaded gray (from beginning of peak month to end of trough month). Source: FRB via FRED, Treasury, KWW following D’amico, Kim and Wei (DKW) accessed 10/7, NBER and author’s calculations....

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The Relative Price of Oil – Levels vs. Growth Rates

I hear a lot about “records”. Not so remarkable in levels, but very remarkable in growth rates. Figure 1: Price of WTI oil, deflated by Core CPI (blue), price of oil (10/25) deflated by nowcast Core CPI (sky blue square). NBER defined recession dates shaded gray. Source: FRED, Cleveland Fed, NBER and author’s calculations. The September 24 1982-84$/bbl price of 26 is a little over the 1967-2021 mean of 21; the October 25th guesstimated relative price is 30, still less than a standard...

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The Extent and Implications of the China Slowdown

According to official data published by the National Bureau of Statistics, China’s growth q/q seasonally adjusted slowed considerably in Q3, to 0.2% (not annualized), below the Bloomberg consensus of 0.5%. The four quarter growth rate was 4.9%, vs consensus of 5.2%. Figure 1 depicts real GDP over the period NBS reports it: Figure 1: Chinese real GDP, in 100 mn 2015 CNY (blue), seasonally adjusted using Census X-12/X-11 seasonal filter (black), and IMF WEO forecasts applied to seasonally...

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Energy Futures and Future Energy Prices

The IMF blog (Andrea Pescatori, Martin Stuermer, and Nico Valckx) predicts: “Surging Energy Prices May Not Ease Until Next Year”. This assertion is based upon the following graph of futures: Source: Pescatori, Steurmer, Valckx (2021). Futures are pointing downward. How much faith should we put into these market indicators? Remember, only under the assumption of risk neutrality should the basis be an unbiased predictor of future spot rates. This characterization is certainly untrue for...

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The Price of Bitcoin

Over seven and a half years ago, Jim remarked about Bitcoin: Hard to know where this is all going to lead. But one thing is clear– we have added a very interesting new chapter in the history of money. In my course on the financial system, I’ve had to update the material to include cryptocurrencies and central bank digital currencies (CBDC). Here’s some pictures of cryptocurrencies. Figure 1: Price of bitcoin (blue), ethereum (brown), litecoin (green), in USD, in logs, 2017M01=0. NBER...

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Different CPIs

A recent exchange [1] on regarding forecasts of CPI reminded me that — even among the official series — there’s more than one CPI. Figure 1: CPI-all urban (blue), and CPI-wage earners and clerical workers (red), s.a., in logs 2020M02=0. NBER defined recession dates shaded gray. Source: BLS, NBER and authors calculations. Figure 2: Year-on-year inflation rates for CPI-all urban (blue), and CPI-wage earners and clerical workers (red), s.a., calculated as log-differences. NBER...

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Guest Contribution: “How far to full employment? – An update”

Today, we are fortunate to present a guest contribution written by Paweł Skrzypczyński, economist at the National Bank of Poland. The views expressed herein are those of the author and should not be attributed to the National Bank of Poland. Back in July 2021, when How far to full employment? was posted on , nonfarm payroll employment, as of June 2021, was 4.4% below pre-pandemic peak level. Since that time the U.S. economy added nearly 1.8 million jobs (including revisions),...

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Wisconsin Employment in September

DWD released September figures today. Nonfarm payroll employment trends sideways, as manufacturing and high contact services employment like leisure and hospitality services resume a divergence. The release makes a few points. Here are my key observations. The establishment survey indicates stall in total and private nonfarm payroll (NFP) employment (Figure 1). The zero gain in NFP compares to neighbor Minnesota’s 0.6% m/m gain. Household survey indicates much faster growth (Figure 1) – but...

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Treasury Ten Year Yield Forecasts

Little changed from July, at least from the Wall Street Journal’s survey of economists: Figure 1: Interest rate on 10 year Treasury bond actual (black), mean forecast from November 2020 WSJ survey (salmon inverted triangle), from July 2021 (green triangle), from October 2021 (pink square), and August 2021 Survey of Professional Forecasters. Source: Federal Reserve Board via FRED, WSJ (various surveys), and Philadelphia Fed. Unlike the forecasts of the GDP level (see this post), interest...

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Recession before the Leaves Fall?

From Blanchflower and Bryson: It seems to us that there is every likelihood that the US is entered recession at the end of 2021. The most compelling evidence is from the Conference Board expectations data for the eight biggest states. Well, that’s certainly provocative. Here’s the abstract: Economic shocks are notoriously difficult to predict but recent research suggests qualitative metrics about economic actors’ expectations are predictive of downturns. We show consumer expectations...

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