Saturday , June 15 2019
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Econbrowser – James Hamilton

Guest Contribution: “A Tale of Two Surplus Countries: China and Germany”

Today we are fortunate to present a guest contribution written by Yin-Wong Cheung (City University of Hong Kong), Sven Steinkamp (Universität Osnabrück) and Frank Westermann (Universität Osnabrück). This contribution is based on a paper forthcoming in the Open Economies Review. In recent years, large and sustained current account imbalances have been a focus of research in international economics. While there is a large literature on deficits and their economic implications, there is only...

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CEA Chief Economist Casey Mulligan on the Eve of the Great Recession

(Well, actually, the recession had been underway for nearly ten months, and after Lehman Brothers, on October 26th, 2008). Or why I worry about the White House economic policy management team. NO DEPRESSION; NO SEVERE RECESSION The medium term fundamentals point toward more real GDP, more employment, and (to a lesser degree) more consumption. Some employment and real GDP declines may occur in the short run, but they will be small by historical standards. Professor Cooley recently explained...

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How Trade Uncertainty Is Crushing Economic Optimism

Or, Trumpian Winning, edition 3,010,524. From Torsten Sløk/Deutsche Bank today: And here is the Baker, Bloom and Davis categorical policy uncertainty index for the US, plotted against the 5yr-3mo Treasury spread highlighted by Campbell Harvey. The EPU-trade index jumps as the spread accelerates its decline. Figure 1: Trade policy uncertainty categorical index (blue, left scale) and 5yr-3mo Treasury spread, % (red, right scale). Source: policyuncertainty.com and Fed via FRED.  For more...

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CEA Leadership, January 2001 vs. June 2019

I was reminded as I found a photo of the January 2001 CEA and staff, of how economic analysis has evolved over time in the White House. In 2001, Martin Baily was an expert on productivity, including a path-breaking paper on implicit contracts in labor. Robert Z. Lawrence had written Can America Compete? Kathryn Shaw had written numerous studies of labor management and productivity. Chad Stone had  coauthored an Urban Institute book on Reagan era economicc policies, and had been on CEA...

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10yr-3mo Treasury Spread Continuously Inverted since May 23rd

5yr-3mo spread continuously inverted since March 7th; let’s hope Cam Harvey‘s estimated probits are wrong this time around…(although I doubt they are). Figure 1: Treasury 10yr-3mo spread (blue, left scale), 10yr-2yr (red, left scale), 5yr-3mo (teal, left scale), in % and Economic Policy Uncertainty index (black, right scale). Source: Fed via FRED, US Treasury, and policyuncertainty.com, accessed 6/12/2019. On the other hand, economic policy uncertainty has dropped back into normal levels...

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Scary and Scarier: CFNAI

Chicago Fed National Activity Index (CFNAI) for April (May comes on June 24th). First the scary: Then the scarier: The 3 month moving average for production and income component of the CFNAI is now at 2016 levels. Of course 2016 did not coincide with a recession. But the term spread was solidly upward sloping then, and most NBER BCDC key indicators were rising.

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Manufacturing Peak?

With trade volumes flat or trending down worldwide, what to make of US manufacturing? Figure 1: Manufacturing employment (blue), aggregate hours of production and nonsupervisory workers (red) and production (teal), in logs 2019M01=0. Source: BLS, Federal Reserve via FRED, and author’s calculations. Now, trade does not weigh on manufacturing equally. Durables are particularly worrisome — and here the drop (in production) is more pronounced than in manufacturing overall. Figure 2:...

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Why We Are Letting Children Die In, and Building Bigger, Detention Camps

…as well as threatening an all out trade war with Mexico. It’s purportedly to deal with the “migration crisis” on our Southern border. The “crisis” is illustrated below. Source: Gzeromedia. Update, 9:45PM Pacific: Several commenters have called for a wall. I suspect they would prefer machine gun posts, a few dozen tanks each mile, some antipersonnel mine fields, and a “shoot-to-kill” order from Trump to accompany the wall. Here is some reasoned analysis of the southern Wall, from EconoFact....

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Guest Contribution: “How Solar Energy Became Cheap”

Today, we’re fortunate to present a guest contribution written by Greg Nemet, Professor at the University of Wisconsin–Madison in the La Follette School of Public Affairs and the Nelson Institute’s Center for Sustainability and the Global Environment. He has also been a contributor to the Intergovernmental Panel on Climate Change and the Global Energy Assessment.  I have a book coming out on June 10, “How Solar Energy Became Cheap: A Model for Low-Carbon Innovation.”  I’ve summarized the...

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Recession Anxieties, June 2019

Different forward looking models show increasing likelihood of a recession. Most recent readings of key series highlighted by the NBER’s Business Cycle Dating Committee (BCDC) suggest a peak, although the critical indicator — nonfarm payroll employment — continues to rise, albeit slowly. Predictions from Financial Markets Figure 1: Probability of recession in indicated month, based on spreads 12 months prior, from 10yr-3mo term spread (blue), 10yr-3mo term spread and Moody’s Baa-10yr...

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