Guest Contribution: “Tenth birthday of the June 2009 recovery “

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared in Project Syndicate on June 14th, and in The Guardian. This month marks the 10th birthday of the US economic recovery.  June 2009  saw the […]

Down, Down, Down: 10 Year Yields in Advanced Countries

Perusing the last issue of the Economist, I noted that among advanced economies, only Greece (180 bps), Spain (87 bps), Australia (133 bps), South Korea (112 bps) and Chile (108 bps) had larger declines in the ten year yields than the US (81 bps). Of these, one could argue Greece and Spain declines were attributable […]

Guest Contribution: “Remembering Martin Feldstein”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers.  Remembering Martin Feldstein June 13, 2019 — Here in Cambridge, we are reeling from the passing of Martin Feldstein on Tuesday.  He was tremendously influential both […]

“[L]et’s have Bretton Woods again.” Arthur Laffer 1982

And maybe other folks, up for the Fed? Well, Judy Shelton says gold might be the way to go… That’s from an interview Erik Brynjolffson, Tod Loofbourrow and I conducted back in 1982 for the Harvard International Review. So, if Obama’s November 2008 election could’ve caused the Great Recession that started in December 2007 (and […]

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 […]

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 […]

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) […]

CEA Leadership, January 2001 vs. June 2019

I was reminded as I found a photo of the January 2001 CEA and staff. I thought it was a useful reminder of how economic analysis has evolved over time. 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 […]

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 […]

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, […]

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 — […]

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 […]

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 […]

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 […]

“Exchange rate models for a new era: Major and emerging market currencies”

That’s the title of a forthcoming special section in the Journal of International Money and Finance. Here’s the introductory article to the special section. Disruptions to financial markets, elevated risk levels, and unconventional monetary policies pursued by central banks have altered the landscape of international finance. The near zero and negative interest rates in several […]

Bleg: Puzzles in the Hassett Economic Report of the President, 2019

In the wake of the discussion of Figure 1-6 in the ERP, I thought it might be useful for me to collect up questions about puzzling or misleading graphs/tables or conclusions in the Report. The entire document is here. I don’t think I have ever made a similar request. However, I don’t think I’ve ever […]

More Widening Spreads

Spreads relative to 3 months continue to decline. Source: BondSuperMart.com. On the run yields. In other words, despite interruptions, key term spreads are declinining even as economic policy uncertainty increases (constant maturity yields): Figure 1: Treasury 10yr-3mo spread (blue, left scale), 10yr-2yr (red, left scale), 5yr-3mo (teal, left scale), in %; and Economic Policy Uncertainty […]

Deciphering Figure 6-1 in the 2019 Economic Report of the President

What the heck? Here’s what the Trump-Hassett CEA reports in February. Source: ERP, 2019. If you look at the data for equipment investment in real terms, 2009Q3-2019Q1 (2nd release), one obtains the following graph. It’s hard to see how the pre-TCJA trend growth rate is negative. Figure 1: Equipment investment, in bn Ch.2012$, SAAR (blue, […]

Seven (Business) Days in May

Undervalued currencies as countervailable subsidies, tariffs on Mexico, flash mfg PMI drops, Drumpf again insists China pays US tariffs…so the yield curve inverts! 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, […]

The Left Coast Ensemble Presents “Artemisia”

The world premiere (in chamber version) of the opera composed by Laura Schwendinger, libretto by Ginger Strand with the Left Coast Ensemble. Laura Schwendinger’s opera, Artemisia, will be given its chamber version premiere on June 1st and 2nd at Z Space (450 Florida Street) in San Francisco (notes at Operawire, SF Chronicle Datebook, and SF Classical […]

Why I Am Shopping for Clothes (I Hate Shopping!)

From Spencer Hill/Goldman Sachs “US Daily: Company Views on the Return of the Trade War” [not online]. …we see multiple reasons to expect higher pass through rates on the upcoming rounds of tariffs on Chinese imports (relative to those of 2018). First, company commentary indicates that the first 10pp tariff on $200bn of Chinese goods […]

The “Blip” Continues! Soybean Edition

A year ago, the July 2019 futures were $10.46, compared to $8.296 today. Reader CoRev writes on July 9th: …no one has denied the impact of tariffs on FUTURES prices. Those of us arguing against the constant anti-tariff, anti-Trump dialogs have noted this will probably be a price blip lasting until US/Chinese negotiations end. We are […]

Guest Contribution: “The Trade War Resumes “

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared in Project Syndicate on May 23rd. Donald Trump on May 5 suddenly revealed that a trade agreement with China was not […]

National Security Motivations for Protection, and Agricultural Policy Determinants

Given recent developments in the use of Section 232 in steel, aluminum, possibly uranium and automobiles, as well as the increasingly expensive bailouts of the ag sector, it behooves us to see some earlier perspectives on the use of such protectionist and interventionist measures, as provided by Peter Navarro. From Peter Navarro, The Policy Game (Wiley, 1984), p.82, […]

A Primer on Misalignment (You’ll Need It If Peter Navarro Has His Way)

Today’s Bloomberg article notes that my one-time coauthor Peter Navarro has pushed to have countervailing duty (CVD) investigations augmented with assessments of currency unvervaluation. A prominent target of CVD investigations has been China. Figure 1: USD/CNY bilateral nominal exchange rate (blue, left inverted scale), and real trade weighted (broad) value of the CNY (red, right […]

Inversion (Again)!

Figure 1: Treasury 10yr-3mo spread (blue), 10yr-2yr (red), 5yr-3mo (teal), in %. Source: Fed via FRED, US Treasury. Figure 2: Treasury 10yr-3mo spread (blue), 10yr-2yr (red), 5yr-3mo (teal), in %, in 2019. Source: Fed via FRED, US Treasury. Over the last month, the 10yr-3mo spread has averaged 4 bps — so not quite inversion on […]

Yet More Scary Graphs of Manufacturing: Midwest Edition

In every single state in the Great Lakes region, save Michigan, manufacturing employment has either peaked or (charitably) gone on a growth hiatus. Figure 1: Manufacturing employment by state, in logs, 2019M01=0. Source: BLS, and author’s calculations. While national manufacturing is still rising (albeit very slowly, essentially flat), it remains less than 0.1% above January […]

Some Scary Graphs: Manufacturing

Some NBER BCDC key indicators have peaked, as noted in this post. The more volatile manufacturing sector is showing stress as well. Figure 1: Employment in manufacturing (blue), aggregate hours of nonsupervisory and production workers in manufacturing (teal), and manufacturing production (red), all in logs, 2019M01=0. Source: BLS, Federal Reserve via FRED, and author’s calculations. […]

Assessing the Business Cycle, Mid-May 2019

Several key series look like they have peaked; nowcasts indicate slowing growth. Forward looking indicators look “iffy”. Figure 1: Nonfarm payroll employment (blue), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink), all log normalized to 2019M01=0.  Source: BLS, Federal Reserve, […]

Driving to War in a Ford Fiesta!

That’s the rationale, according to the Association of Global Automakers, as quoted in Car and Driver! Mr. Trump declares Section 232 tariffs for automobiles. Thus, the Secretary found that American-owned automotive R&D and manufacturing are vital to national security.  Yet, increases in imports of automobiles and automobile parts, combined with other circumstances, have over the past […]

Guest Contribution: “How East Asia Could Confront the Trade Wars”

Today, we’re fortunate to have Willem Thorbecke, Senior Fellow at Japan’s Research Institute of Economy, Trade and Industry (RIETI) as a guest contributor. The views expressed represent those of the author himself, and do not necessarily represent those of RIETI, or any other institutions the author is affiliated with. How can a basketball team guard the […]

Phill Swagel to Head CBO

That’s the news, according to The Hill: Senate and House budget leaders have chosen Phillip L. Swagel, a University of Maryland economist and former Treasury official in the George W. Bush administration, as the next director of the Congressional Budget Office, according to several sources with knowledge of the discussions. Phill and I both served […]

A Modest Proposal: “Victory Tofu”

America needs all-tofu school lunches, subsidized tofu pizza, a Tofutti ice-cream substitute campaign… and more. I figure 205.4 pounds of tofu per American should do the trick. The situation facing American soybean farmers is dire, as shown below. Figure 1: PPI for soybeans, by calendar year (blue, left scale), end-of-crop year soybean stocks, in millions […]

Inversion! Close-of-Trading 5/13/2019

According to constant maturity rates reported by US Treasury, the 10 year-3 month yield curve was inverted as of today’s close (-0.01%). The 10 year-2 year spread is -0.22%, and the 5 year-3 month spread favored by Cam Harvey is -0.23%. On the run yields are depicted below: Source: BondSuperMart. For discussion of inversions and […]

Home Before the Leaves Fall – The US in Trade War

Here is the state of play for US tariffs. We’re a developing country! As Mr. Trump’s trade war lumbers on, with American consumers bearing the bulk of the burden thus far, it’s useful to review the facts regarding the war. Here are the EconoFact articles on trade policy. Overview Technology Sectors Legal Aspects and International […]

“White House Considers Economist Judy Shelton for Fed Board”

That’s the title of an article in Bloomberg: Shelton, who’s served as an informal adviser to Trump, holds a Ph.D. in business administration with an emphasis on finance and international economics from the University of Utah. Here is a recent writing advocating return to “sound money”  in Cato Journal: The United States is the world’s […]

Caligula Trump Asks Who Will Rid Me of These Troublesome Economists

I have been remiss in not bringing people’s attention to this purge. From Politico: Economists in the Agriculture Department’s research branch say the Trump administration is retaliating against them for publishing reports that shed negative light on White House policies, spurring an exodus that included six of them quitting the department on a single day […]

If Campbell Harvey’s Specification Is Right, We’re (Still) in Trouble

Robust GDP growth, employment rising on pace, perceived recession risk declining… as in this headline. The latest issue of the Economist has an article entitled Fears of recession have faded. But I’m reminded that Campbell Harvey, who wrote early papers on the subject of yield curve predictors, relies on the 5yr-3mo spread (for growth, not […]

Winning: US Agriculture Edition

Figure 1: Real proprietor farm income with inventory valuation adjustment and capital consumption allowance (dark blue), and 4 quarter trailing moving average (red), both in billions of Ch.2012$, SAAR. Deflated using GDP deflator. Source: BEA 2019Q1 advance release, and author’s calculations. 

March Monthly GDP Growth at 0.1%

That’s from Macroeconomic Advisers today. Turns out a bunch of monthly indicators have recently been released, including today’s employment report. Here are some key ones followed by NBER’s Business Cycle Dating Committee (BCDC). Figure 1: Nonfarm payroll employment (blue), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), […]

Demented Things People Write

From reader JBH today: Trump may well be Patton reincarnated as he was born ½ earth revolution after Patton nearly to the day. Enemies of America off balance and greatly confused by Trump’s classic Art of War style. Massive infrastructure rebuilding project coming. Trump will build that… along with the Wall. I have seen this abbreviation […]

Of Chinese Swine, US Hog Exports, Soybean Prices, and News

Soybean prices continue to plunge (July ’19 futures). Some have argued that decreased demand for soybeans, due to the ongoing African swine fever epidemic in China. The April 9th USDA FAS report contained information on both this, and soy market conditions. If decreased demand for soybeans was due to news about Chinese swine stocks, we […]

Guest Contribution: “No Moore Golden Era for Monetary Policy”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared in Project Syndicate on April 27th. Of the two men whom Donald Trump had intended to nominate to empty seats on […]

Crazy Things People Write

Reader Zi Zi writes: Higher short rate actually precedes better [US GDP] growth (not lower): GBP3M I … don’t … think…so. Figure 1: Libor 3 month based on British pound (dark blue, left scale), four quarter growth rate of US real GDP (red, right scale), both in %. NBER defined recession dates. Source: IBA, BEA […]

The Risk Adjusted Real Long Term Real Rate

One argument against the secular stagnation thesis is that the risk-adjusted real rate is not particularly low. I’m dubious. In Figure 1, I depict the real ten year Treasury yield, adjusted by survey-based inflation expectations (from the Cleveland Fed, Survey of Professional Forecasters), and the TIPS yield. Figure 1: Ten year constant maturity Treasury yield […]