Select blogs from this morning, one way to look for ideas: ponder the macro issues each raises. Remember the resources are at the left: EconPapers, EconLit, blogs…this is a very, very quick sampling.

  1. Oil & gas & the US economy also the global perspective
  2. Argentine economy as viewed through wine
  3. Canadian inflation
  4. growth economics papers (think Solow…!)
  5. the US growth sector
  6. Switzerland and the SFranc
  7. US labor markets (cf. my presentation)
  8. consumers and the US (lack of?) recovery


PPI All Commodities

PPI less food & energy

Here are 4 graphs that give an overview of inflation from the perspective of both producers and consumers. Data are percent change from the same month of the previous year.

On the left is the overall movement, on the right data that excludes food and energy. In other words, if we ignore the recent drop in commodity prices, which is a one-time event rather than a trend, what does inflation look like?

Click on the graphs to enlarge them.

Winter 2015

I have posted the schedule and syllabus: no texts, just readings, and more readings.

Alongside your capstone project, this term I emphasize three overlapping themes. One is an overview of “modern” macro theory, begining with the Solow growth model, then overlapping generations models, then (rational) expectations and endogenizing policy (a Taylor Rule). A second is how we can know things in macroeconomics, empirics.The third is how these come together in a practical policy issue, the size of the fiscal multiplier.

Your output on this formal component will consist of blogging, short papers and presentations. This is paired with a “capstone” research paper 20-30 pages in length of text, plus bibliography, tables & graphs.

The Law of Accelerating Returns

Robert Gordon sees the absence of significant growth prior to 1750 as evidence that “the rapid progress made over the past 250 years could well turn out to be a unique episode in human history (Gordon 2012).” However, another interpretation of the same data has led people like MIT professors Erik Brynjolfsson and Andrew McAfee to predict long run-growth. They interpret technological advancement as an exponential function. Exponential growth functions are not exceptional in their early stages, but in time they yield dramatic results. Google engineer and author Ray Kurweil made the bold prediction in 2001 that the exponential nature of technological change will result in 20,000 years of progress (at the 2001 rate of technological progress doubling every decade) over the course of the 21st century.
Techno-optimists look toward evolution as a precedent for the exponential growth. The development of DNA dramatically increased the rate of evolution, and it led to the relatively rapid development of complex organs like the brain(Kurweil, 9). However, unlike exponential growth in nature technological progress on the digital frontier will not be be as susceptible to scare resources.

“When businesses are based on bits instead of atoms, then each new product adds to the set of building blocks available to the next entrepreneur instead of depleting the stock of ideas the way minerals or farmlands are depleted in the physical world (Brynjolfsson, 4).”

“It took two centuries to fill the U.S. Library of Congress in Washington, D.C. with more than 29 million books and periodicals, 2.7 million recordings, 12 million photographs, 4.8 million maps, and 57 million manuscripts. Today it takes about 15 minutes for the world to churn out an equivalent amount of new digital information. It does so about 100 times every day, for a grand total of five exabytes annually. That’s an amount equal to all the words ever spoken by humans, according to Roy Williams, who heads the Center for Advanced Computing Research at the California Institute of Technology, in Pasadena. (Moran 2008).”

European Central Banks Poised to Implement QE

Several weeks ago, a major impediment to implementing a quantitative easing policy by the ECB was removed when the head of the typically conservative Bundesbank’s, Jens Weidmann, publicly announced his support for unconventional monetary policies if deflation continues to threaten the economy. The Bundesbank Chief’s change of heart seems to have had a significant influence on the remaining conservative members of the ECB policy board.

In the strongest signal yet, ECB president Mario Draghi declared that the 24 member governing council was united in its support for unconventional quantitative easing policies if inflation rates continue to decrease. Mr. Draghi went on to say “All instruments that fall within the mandate, including QE, are intended to be part of this statement.” However, the council did note that they have yet to exhaust conventional methods to combat low inflation and that unconventional monetary policies would only be implemented after trying additional rate cuts.

Mr. Draghi statement reveals that the ECB is willing to implement a quantitative easing policy not only if prices begin to fall but also if inflation remains low. Given that inflation rates in the Eurozone remain at 0.5%, less than a quarter of the ECB’s 2% target, and the near absence of price pressures in the economy, a quantitative easing policy in the Eurozone seems to be more and more likely.

Payrolls in U.S. Rose 192,000 in March, Unemployment 6.7%

Companies powered the U.S. job market past a milestone in March as private employment exceeded the pre-recession peak for the first time, showing the kind of progress Federal Reserve officials look for to maintain their current policy course.

Payrolls excluding government agencies rose by 192,000 workers after a 188,000 gain in February that was larger than first estimated, the Labor Department reported today in Washington. That brought the job count to 116.1 million, beating the January 2008 high of 116 million. The jobless rate held at 6.7 percent even as almost half a million people entered the workforce.

“The Fed doesn’t need to do anything at this point, it’s in a bit of a sweet spot,” said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts, and the top payrolls forecaster in the last two years, according to data compiled by Bloomberg. “Growth looks like it’s back on track. Equally good news is that inflation is not a threat right now.”

All of March’s gains came from the private sector. That brought total private payrolls to 116.09 million, surpassing the former peak of 115.98 million in January 2008. Still, the gains haven’t kept pace with population growth. The civilian labor force has grown by roughly 2 million over the past six years.

Read more at:
Wall Street Journal

US Economy Job Growth Remains Slow and Steady

In the most recent jobs report, the US economy is said to have added 192,000 jobs in March. While, slightly below the expectation of 206,000 jobs, the report was slightly disappointing, with unemployment rates remaining stagnant at 6.7%.

However, the report shed a positive light on the US employment market by demonstrating the winter slowdown in job growth was likely due to bad weather. Furthermore, with revisions to previous reports adding 37,000 jobs to previous months, the overall message is that underlying growth is strong and the unemployment rate will continue to slowly, steadily decrease. In another positive sign for the labor market, there was an increase in labor force participation rates, which increased from 63 to 63.2 percent reaching the highest participation rates since last autumn. Most of this job growth came from the service and business service sector, the health and education sector, the leisure sector, and the construction sector.

Given that the job growth is in line with Fed forecast for economic growth, the Fed is likely to continue to slowly taper its expansive monetary polices over the next year, with interest rates expected to begin to rise sometime in 2015.