• slow_4

    Lower Level

    Since 1947 real GDP growth has averaged 3.26%/year. Since 1/1/10 it’s averaged 2.3%. Economists think that some of the decline will persist for a while because of both slower productivity gains and population growth. Therefore, the neutral Federal Funds rate, the rate that’s neither expansionary nor … [Read More...]

  • TR007241

    Wonky Wages

    Seattle’s decision to boost its minimum wage to $15/hour, the highest anywhere, is bad policy. Unlike a rise in the federal minimum wage which affects all employers, this increase only applies inside the city. Thus, employers in low-wage industries in Seattle will be at a distinct financial … [Read More...]

  • The newspaper  GOOD NEWS  and coffee

    Nice News!

    On Monday we learned that existing home sales in May jumped 4.9% to a rate of 4.89 million/year, the best pace since last October. Better yet, yesterday we learned that new home sales jumped from a rate of 433,000/year in April to 504,000/year in May, the best activity level since 5/08 and that … [Read More...]

  • euro

    Mediocre Monetary Meddling

    Rather than using a cannon, last week the ECB used a popgun. By reducing the rate it charges banks on loans and by charging banks on deposits held at the central bank, the ECB hopes to spur lending. It won’t happen. Separately, it’s also finally injecting liquidity into the banking system. What … [Read More...]

  • percentage-dice

    Rotten Returns

    Why are rates so low? Let me count the reasons: flight to quality due to rising geopolitical risk, the Fed’s promise to keep short-term rates low for a long time, Japan’s massive monetary stimulus, the ECB’s decision to start printing money, weaker than expected US growth, no evidence of commodity … [Read More...]

Oct
30

Great Gasoline

oil derek

Oil’s price decline is due to relentless increases in supply and slightly declining demand due to weakening global growth. It’s also because Saudi Arabia hasn’t cut production. That’s because the Saudi’s are squeezing their enemies, Iran, Iraq and Russia which all heavily depend on oil revenues. … [Read more...]

Oct
29

Borderline Banks

euro

The ECB’s stress test of the largest Eurozone banks found that 25 of 150 failed. Hardly inspiring. Moreover, there’s no indication any of these banks will soon boost lending. That said, if these results raise confidence enough to begin to pave the way for a single Eurozone banking union where banks … [Read more...]

Oct
28

Predictable Policy

yellen

Tomorrow the Fed will announce that tapering has ended, closing the books on QE3 which began in late 2012. Therefore, the carefully scrutinized policy statement they release will change. However, it will still include the phrase “…maintain the current target range for the federal funds rate for a … [Read more...]

Oct
27

Rising Revenues

budget

The FY2014 federal budget deficit fell 29% to $483.35 billion or 2.8% of GDP, the lowest percentage since FY2007. Revenues rose 9% to $3.021 trillion, due to higher incomes and higher tax rates that went into effect 1/1/13. Outlays rose 1% to $3.504 trillion. While good news, don’t celebrate. We … [Read more...]

Oct
24

Miraculous Mississippi

Mississippi Bulldogs

The Friday File: One of only three undefeated college football teams, what separates the #1 ranked Mississippi Bulldogs from other top programs is school spending on football totals just $15.3 million/year. Alabama spends the most; $41.6 million/year, with $11.8 million for coaches’ salaries alone! … [Read more...]

Oct
23

Republican Reversal

McConnell

Should the Republicans regain the Senate (which seems likely), expect them to reverse the Democrats’ rule enabling confirmation of cabinet appointees and most judges from a simple majority back to a super majority of 60 votes. With a simple majority, President Obama would only need to get one or two … [Read more...]

Oct
22

Poor Potential

potential

The unemployment rate declines when an economy grows faster than its potential. This usually happens coming out of recessions when an economy makes up for economic growth that didn’t occur during the recession. The problem is, while the unemployment rate is falling nicely, it’s occurring with GDP … [Read more...]

Oct
21

Good Going

work

Last week, first-time claims for unemployment fell to their lowest level since May 2000 and population-adjusted, you have to go back to the week of May 17th 1969 to get a lower number! In addition, industrial production jumped one percent, the largest gain in two years, and consumer sentiment hit a … [Read more...]

Oct
20

Mighty Multifamily

multifamily

While housing starts were up 6.3% in September compared to August, the increase was led by an 18.5% rise in multifamily and a 1.1% rise in single-family. YTD single-family starts are up just 4%; multifamily are up 23%! Single-family permits now stand at 624,000 seasonally-adjusted, essentially … [Read more...]

Oct
17

Negative Nuptials

divorce

The Friday File: Economists studying marriage find that the more lavish the wedding the shorter the marriage. To be precise, the chances of getting divorced are 60% higher if the wedding cost more than $20,000 compared to less costly nuptials. Similarly, all else equal, the chances of getting … [Read more...]