Productivity outpaces real wages, deflated using the output deflator, or using the CPI.
The economy is slowly improving.
Today, I gave a presentation in the Wisconsin Alumni Association's Global Hot Spot series, entitled America's Macroeconomic Policies and the Global Economy. One figure from the presentation bears highlighting.
The Philadelphia Fed coincident indices for October are out. Figure 1 presents the log series, normalized to January 2011 = 0.
Inflation and output are up. So too is gross fixed capital investment. The yen is weaker, and the real quantity of net exports is higher.
An interesting new research paper by Princeton Professors Alan Blinder and Mark Watson examines differences in performance of the economy under Democratic versus Republican presidents. The paper begins:
The superiority of economic performance under Democrats rather than Republicans is nearly ubiquitous; it holds almost regardless of how you define success. By many measures, the performance gap is startlingly large--so large, in fact, that it strains credulity, given how little influence over the economy most economists (or the Constitution, for that matter) assign to the President of the United States.
From Torsten Slok at Deutsche Bank:
[F]iscal drag in 2013 is 2.4%, ie if GDP growth in 2013 ends up being 1.7% then if we had not had the fiscal drag then GDP growth would instead have been 4.1% (=1.7% + 2.4%). ..
Two numbers to remember: 84 thousand and 107 thousand
From a statement by the Joint Economic Committee Chairman, October 9th, 2013:
I fear that the Federal Reserve through current policies of Quantitative Easing and maintaining extraordinary low interest rates may be providing the fuel for igniting high inflation.
That's the title of CEA Chair Jason Furman's presentation at the University of Wisconsin at Madison on Monday. Introduced by UW Chancellor Becky Blank, his discussion covered a wide range of issues. From WisBusiness:
Jason Furman, chairman of Obama’s Council of Economic Advisers, said Congress should invest in infrastructure at today’s low borrowing rates, reform the tax code, approve an immigration reform bill projected to cut the deficit and agree on long-term debt reduction, instead of implementing short-term cuts like sequestration that impede economic growth.
From an opinion piece by Sean Fieler in USAToday:
If easy money delivers what it always has throughout history — growing inflation, growing inequality and growing government — a Republican embrace of sound money will offer America a way back to prosperity and the GOP a way back to a governing majority.
Consider this statement:
"Borrowing and spending by the public sector will crowd out investment and growth in the private sector." Paul Ryan, “Path to Prosperity” (April 2012).
1.1 In a standard IS-LM model, where investment spending is given by:
(7’) I = b0 - b2i
Will higher government spending crowd out investment? Use a graph to help explain your answer.
Before 2008, U.S. monetary policy was primarily conducted in terms of a target set by the Federal Reserve for the fed funds rate, which is the interest rate a bank pays to borrow funds overnight from other banks. A large academic literature used the fed funds rate as a summary of monetary policy, looking at its correlations in dynamic regressions with other variables of macroeconomic interest. But the fed funds rate has been stuck near zero for the last 5 years, and will likely be replaced by an alternative policy focus even once we exit the zero lower bound. Economic researchers face not just the difficulty of summarizing what the Fed has been doing in the current and future environment, but also the practical challenge of how to update their historical regressions to try to describe the full set of historical data along with the new experience in a coherent way. Here I describe a new research paper that suggests one solution to these problems.
Yesterday the BEA finally reported GDP numbers for the third quarter, a month later than originally scheduled owing to the earlier shut-down of federal operations. The U.S. economy is estimated to have grown at an annual rate of 2.8%. That's below the historical average, but better than the previous three quarters.
I'm here today: