Markets on Tenterhooks for Fed Policy Decision, But Many Households Aren’t Paying Much Attention

At 1:59 p.m. EDT Wednesday, investors and analysts around the world will be poring over their computer and television screens in anticipation of the Federal Reserve’s latest policy decision, which could influence U.S. interest rates as well as stock, bond and currency markets around the world. Yet a new survey suggests that many U.S. households don’t follow Fed actions that closely. Almost half of Americans surveyed, 44%, said they didn’t know when the Fed most recently short-term interest rates, according to the survey by the personal finance website WalletHub. For the record, the Fed has raised its benchmark federal-funds rate twice this year, in March and in June, bringing it to a range between 1% and 1.25%. It is likely to leave the rate unchanged Wednesday. That’s not to say that people don’t have an opinion about the expected impact from an increase in interest Continue reading "Markets on Tenterhooks for Fed Policy Decision, But Many Households Aren’t Paying Much Attention"

Mortgage Interest Tax Break Has ‘No Effect’ on Homeownership, Study Finds

The mortgage interest deduction, a sacred cow in the U.S. tax code, does nothing to promote homeownership, according to an academic paper released Monday, a finding that undermines one of the core justifications for the tax break. Letting taxpayers deduct mortgage interest encourages them to buy bigger homes and more expensive homes – but it doesn’t change that fundamental decision about whether to buy in the first place. “Over multiple time periods, and considering multiple empirical strategies, we find no effect of the tax policy change on whether households own or rent,” wrote the authors, Jonathan Gruber of the Massachusetts Institute of Technology, Henrik Kleven of Princeton University and Amalie Jensen of the University of Copenhagen. The paper uses data from Denmark in the 1980s, where the combination of a tax policy change and available housing data allowed the authors to observe a sort of natural experiment. Denmark Continue reading "Mortgage Interest Tax Break Has ‘No Effect’ on Homeownership, Study Finds"

Eating Fresh Fruits and Veggies Is Easy When They’re Relatively Cheap

In the fresh versus processed food wars, fresh fruits and vegetables are winning, thanks in part to their relatively cheap price tags. Since November 2008, the consumption of fresh fruits has grown 16.2%, while consumption of fresh vegetables is up 20.6%. Consumption of processed fruits and vegetables increased only 9.9% during the same time period, notes Eugenio J. Alemán, Wells Fargo senior economist, in a new report. “Consumers have rationally reacted to much higher prices on the processed side in relation to the fresh side,” Mr. Alemán said in an interview. “In relative terms, fresh fruits and fresh vegetables are cheaper today than processed fruits and vegetables are.” Processed fruits and veggies are in the “freezer aisle,” while fresh are not frozen, according to the Bureau of Economic Analysis. Prices of fresh fruits and fresh vegetables were on an upward trajectory leading up to the 2008 Continue reading "Eating Fresh Fruits and Veggies Is Easy When They’re Relatively Cheap"

These Eight States Still Haven’t Regained All Their Lost Jobs

Rhode Island hit a long-awaited milestone this year. The Ocean State finally has more jobs than it did before the nation tumbled into recession last decade. But nonfarm payrolls in June still lagged high-water marks set in 2008 or earlier in eight states struggling against headwinds like population loss and the manufacturing sector’s long-term decline: Alabama, Connecticut, Illinois, Michigan, Mississippi, New Mexico, Ohio and Wyoming. At the same time, unemployment rates were at all-time lows in six states, a mix of regions that are experiencing strong growth and other places with slower job gains and possible worker outflowsArkansas, California, Colorado, North Dakota, Tennessee and Washington. Records for state unemployment rates go back to 1976. The U.S. as a whole appears to be at or near what economists consider full employment. But the latest data highlight the uneven state of local labor Continue reading "These Eight States Still Haven’t Regained All Their Lost Jobs"

These Eight States Still Haven’t Regained All Their Lost Jobs

Rhode Island hit a long-awaited milestone this year. The Ocean State finally has more jobs than it did before the nation tumbled into recession last decade. But nonfarm payrolls in June still lagged high-water marks set in 2008 or earlier in eight states struggling against headwinds like population loss and the manufacturing sector’s long-term decline: Alabama, Connecticut, Illinois, Michigan, Mississippi, New Mexico, Ohio and Wyoming. At the same time, unemployment rates were at all-time lows in six states, a mix of regions that are experiencing strong growth and other places with slower job gains and possible worker outflowsArkansas, California, Colorado, North Dakota, Tennessee and Washington. Records for state unemployment rates go back to 1976. The U.S. as a whole appears to be at or near what economists consider full employment. But the latest data highlight the uneven state of local labor Continue reading "These Eight States Still Haven’t Regained All Their Lost Jobs"

Gold Standard Didn’t Really Tame Inflation, New Research Says

Fixing the U.S. dollar’s value to gold or silver is not the inflation-controlling panacea advocates claim, according to new research from the Federal Reserve Bank of St. Louis. Inflation was on average lower before World War I, the report finds. Those were the years before the creation of the Federal Reserve, when the value of money was generally tied to a gold or silver standard. In contrast, the U.S. has seen average inflation rise since World War II, when the dollar was largely free of such metallic constraints. The main difference between the two periods is that deflation, or sustained declines in the overall price level, disappeared after World War II. St. Louis Fed economist Fernando Martin says inflation in the pre-Fed period was highly volatile as elected leaders periodic took the dollar off the gold standard and then re-established it. That created surges of inflation that Continue reading "Gold Standard Didn’t Really Tame Inflation, New Research Says"

Think a Strong Currency Hammers Trade? Don’t Tell Switzerland

A big chunk of Switzerland’s trade surplus during the first half of the year came from what would seem an unlikely source given the Swiss franc’s strength: the U.S. The dollar dropped 6% against the franc during the first six months of the year. That’s supposed to have juiced U.S. exports to Switzerland while making Swiss products more expensive in the U.S. But the opposite happened. Switzerland’s overall trade surplus through June was 19 billion francs ($19.8 billion), the customs office said Thursday. Half of that, 9.5 billion francs, came from the U.S., thanks to a 7% rise in exports from the same period in 2016 and a 14% drop in imports. Switzerland runs a big deficit with the eurozone, which makes more sense given the franc’s strength against the euro. So while it appears that weak currencies don’t necessarily have the stimulative effect Continue reading "Think a Strong Currency Hammers Trade? Don’t Tell Switzerland"