Economists React to the December Fed Decision: ‘We Wish Jay Powell the Best of Luck’

The Federal Reserve said it would increase its benchmark interest rate for the third time this year and remained on track to follow a similar path next year. The central bank’s two-day policy meeting concluded with new economic forecasts, a policy statement and Fed Chairwoman Janet Yellen’s last scheduled press conference. Here’s how economists and analysts reacted to Wednesday’s Fed news. “History will likely treat (Janet Yellen) kindly, not because she was the first female chair, but because she navigated the rough shoals of policy normalization following the Bernanke era. Perhaps her greatest achievement was that she resisted the temptation and tantrums of those that called for a premature end to her lower for longer policy that waited for significant improvement in the labor force and growth.” —Joseph Brusuelas, RSM US LLP “The surprise is that, despite that stronger economic growth, the inflation and interest rate projections were left almost Continue reading "Economists React to the December Fed Decision: ‘We Wish Jay Powell the Best of Luck’"

Parsing the Fed: How the December Statement Changed from November

The Federal Reserve releases a statement at the conclusion of each of its policy-setting meetings, outlining the central bank’s economic outlook and the actions it plans to take. Much of the statement remains the same from meeting to meeting. Fed watchers closely parse changes between statements to see how the Fed’s views are evolving. This tool compares the latest statement with its immediate predecessor and highlights where policy makers have updated their language. This is the December statement compared with November. [wsj-responsive-sandbox id = "0" ] RELATED Fed Raises Interest Rates, Sees Continued Path of Increases in 2018

Is Bitcoin a Bubble? 96% of Economists Say ‘Yes’

The soaring price of bitcoin is likely the result of an unsustainable speculative bubble, according to the vast majority of private-sector economists surveyed by The Wall Street Journal. “If it looks like a duck, and quacks like a duck, it’s a duck,” said Diane Swonk, founder of consultancy DS Economics. Fifty-one out of 53 forecasters, or 96%, said bitcoin has been experiencing a speculative bubble. Just two forecasters said its recent gains weren’t a bubble. The price of bitcoin has surged this year, especially in recent weeks, drawing attention from mainstream investors and warnings from regulators about its risks. Bitcoin advocates have argued that the digital currency, while volatile, has rapidly increased in price due to increasing recognition of its value as a decentralized global currency and the potential for its underlying blockchain technology. Mark Nielson of MacroEcon LLC predicted the price of bitcoin would likely increase to $45,000 over Continue reading "Is Bitcoin a Bubble? 96% of Economists Say ‘Yes’"

Millennials, Gen-X’ers and Boomers Are Still Poorer Than Before the Recession

If you’re younger than 75, chances are the long recovery from the 2007-2008 recession has left you poorer than you would have been at the same age a decade ago. If you’re older, you may be better off. The recovery has opened up a wealth gap between the oldest households and younger ones, a divergence that could make it difficult for younger families to benefit from the rebound in home sales and stock prices, according to new data from the Federal Reserve’s Survey of Consumer Finances. The median net worth for households headed by somebody under age 75 is lower than it was for comparable households in 2007, with the biggest declines among those aged 45-64. The net worth of older people, on the other hand, has risen. The figures are adjusted for inflation. Net worth takes into account a household’s assets such as property, bank accounts or retirement funds and Continue reading "Millennials, Gen-X’ers and Boomers Are Still Poorer Than Before the Recession"

How the Hampton Roads, Va., Job Market Became the Most Troubled in the U.S.

The latest U.S. jobs report shows robust hiring and historically low unemployment, though not all parts of the country are enjoying such sturdy growth. The Hampton Roads area of Virginia has posted some of the steepest job losses in the country this year. The figures stand in sharp contrast to the broader U.S. economy, which has added jobs each month for more than seven years and watched the unemployment rate hold at at a 17-year low of 4.1% for two consecutive months. As of October, the Virginia Beach-Norfolk-Newport News metropolitan area shed 9,100 jobs over a 12-month span, more than any other metro area in the country, according to Labor Department data. The defense industry, long an economic mainstay for Hampton Roads, is the main drag on the region’s labor market. “People are leaving, the ships aren’t there and there’s been a decline in active duty people,” said Continue reading "How the Hampton Roads, Va., Job Market Became the Most Troubled in the U.S."

Hiring Doesn’t Break Out, Even With Historically Low Unemployment

The unemployment rate has fallen to a 17-year low, but the rate at which employers are hiring has yet to break out. The hiring rate, or the share of newly filled jobs to total employment, has remained remarkably steady for three and a half years. The rate improved to 3.8% in October from 3.6% in September, the Labor Department said Monday. That increase matched a postrecession high achieved three previous times since late 2015. The rate has yet to match prerecession peaks. October’s hiring pick-up could suggest employers are finally acting more aggressively to fill a near-record number of job openings in the U.S. But the month’s data is also likely skewed by a posthurricane rebound. The pace of hiring improved swiftly in the leisure and hospitality category, a sector that experienced mass, but temporary, layoffs when hurricanes struck the U.S. in late summer. More broadly, the Continue reading "Hiring Doesn’t Break Out, Even With Historically Low Unemployment"

Economists Think Potatoes Helped Promote World Peace

The humble potato may have caused a dramatic and lasting decline in bloodshed during the 18th and 19th centuries in parts of the Old World, according to new research by three economists. The study found areas of Europe, North Africa and the Middle East that were better suited to growing potatoes—a hardy, high-calorie crop native to South America—saw significant reductions in deadly fighting after 1700, when the tuber was entering widespread cultivation. It’s not clear exactly why, though the economists speculated potatoes may have reduced the need to fight over territory by raising agricultural productivity—with implications for some modern conflicts in parts of the world. “In really poor countries that still rely on agriculture, I think the development lesson here is that stabilizing the food supply is paramount for establishing peace,” said University of Colorado, Boulder economist Murat Iyigun. “We’re really talking about fundamentals here.” The working paper was Continue reading "Economists Think Potatoes Helped Promote World Peace"

Economists React to the November Jobs Report: ‘Wage Growth Remains Muted’

U.S. employers hired workers at a strong rate in November and the unemployment rate held at 4.1%, a 17-year low. Here’s how economists and analysts reacted to Friday’s report. “For an expansion that began in mid-2009, no negative surprises are welcome. The lingering impacts of recent hurricanes and flooding have reverted back to relative calm in the statistics, meaning that this is a ‘cleaner’ number.” —Mark Hamrick, “The gain in payrolls last month was driven partly by a strong 31,000 increase in manufacturing and (rising Lazarus-like from the dead) an 18,000 increase in retail. The latter suggests that bricks-and-mortar stores had a good Black Friday….The slight increase in average weekly hours worked…also good news. Nevertheless, despite the strength of employment and the unusually low level of unemployment, wage growth remains muted.” —Paul Ashworth, Capital Economics [wsj-responsive-sandbox id = "0" Continue reading "Economists React to the November Jobs Report: ‘Wage Growth Remains Muted’"

The November Jobs Report in 9 Charts

Employers added 228,000 workers in November, and the unemployment rate held at a 17-year low, signs the economy is on its firmest footing in at least a decade. Despite a strong November, the pace of job creation has slowed gradually over the past year as the expansion has aged. Weekly wages were up about 3% over the past year, while hourly they rose about 2.5%. Both figures are above the current rate of inflation. The number of Americans in the labor force has changed little in recent years, and the number of Americans with jobs has hovered a little bit above 60% this year. Both rates remain far away from their levels at the turn of the millennium. Among workers ages 25 to 54, where decisions to work are less affected by school or retirement, the share of the population employed has continued to climb. While the headline unemployment rate has fallen Continue reading "The November Jobs Report in 9 Charts"

November Jobs Report – The Numbers

Lucy Nicholson/Reuters
Unemployment Rate 4.1% The jobless rate in November was unchanged from a month earlier at 4.1%. The rate matched the lowest level since December 2000. Though the November unemployment rate is unlikely to change Federal Reserve officials’ expected decision to raise interest rates at their December meeting next week, it could influence how aggressively the central bank decides to pursue rate increases in 2018. Payroll Growth 228,000 The U.S. economy added 228,000 jobs in November, marking the 86th consecutive month employers added to payrolls. Leisure and hospitality, the sector most affected by late-summer hurricanes, added 14,000 jobs last month, a sharp pullback from the 104,000 the sector recovered in October. Employment in construction, manufacturing and health care continued to trend upward. Wages 2.5% November’s 2.5% year-over-year increase in average hourly earnings remained subdued, despite a historically low unemployment rate. On the month, wages rose Continue reading "November Jobs Report – The Numbers"

5 Things to Watch in the November Jobs Report

The Labor Department releases its November employment report Friday. Economists surveyed by The Wall Street Journal expect employers added 195,000 jobs last month and see the unemployment rate holding steady at 4.1%. Here’s what else we’re watching.
1. Calm after the storms
Hurricanes caused a large swing in job-creation numbers, with a sharp slowdown in September followed by a strong rebound in October. Those effects should have washed out, giving a fairly clear look in November at the state of the labor market. If job creation comes in near economists’ expectations, it would signal that job creation, and the broader economy, are on firm footing.
2. Record low rates
The unemployment rate touched its lowest mark in 17 years in October. It wouldn’t take a big slip to fall below 4% for the first time since the last days of the dot-com bubble. Prior to 2000, the rate hadn’t been Continue reading "5 Things to Watch in the November Jobs Report"

Are There Workers Left on the Sidelines?

A long economic recovery and historically low unemployment pulled many Americans back into the labor force in recent years—and now there are few left on the sidelines. Economists expect the  unemployment rate to hold at 4.1% in November, matching the lowest level in nearly 17 years. But perhaps more telling, a broader measure of unemployment and underemployment—known as the U-6—fell in October to match the lowest level recorded since 2001. The Labor Department will release the November figures for both measures Friday as part of the jobs report. That U-6 measure, which includes Americans stuck in part-time jobs and those too discouraged about their prospects to look for work, had remained elevated since the recession ended relative to a falling unemployment rate. But the spread between the two measures narrowed in October to 3.8 percentage points. It was the smallest difference recorded since the recession began in 2007. The gap is Continue reading "Are There Workers Left on the Sidelines?"

Low Food Prices Are Hurting Farm State Economies

Farmers are producing too much food, holding down prices and holding back economies in states with big agricultural industries. South Dakota and Iowa are the only two states in the country where gross domestic product fell in the second quarter. Ultra-low crop and livestock prices stemming from a global oversupply have squeezed farm incomes, pulling down Iowa’s GDP 0.7% and South Dakota’s 0.3% from the prior quarter. Elsewhere, low farm prices dented growth in 23 other states but not enough to tip them into decline, the Commerce Department said in a recent report. Overall, U.S. GDP advanced 2.8% nationwide during the same period. (These GDP figures exclude federal military and civilian activity located overseas, making the U.S. tally slightly lower than the more widely reported 3.1% growth rate for the second quarter.) Despite low prices, farmers in the U.S. and globally keep producing, suggesting that agriculture Continue reading "Low Food Prices Are Hurting Farm State Economies"

Corporate CEOs Say Increased Capital Spending Rests on Tax Reform

Leaders of America’s largest companies expressed strengthening confidence in plans to ramp up capital investment and ultimately productivity over the next six months, contingent on Congress’s ability to pass tax reform. Chief executives’ plans for capital investment rose to their highest level since the second quarter of 2011, according to the Business Roundtable’s fourth-quarter survey of CEOs. Jamie Dimon, chairman of the Business Roundtable and chief executive of J.P. Morgan Chase & Co., said business confidence in economic growth is dependent on actions from economic policy makers. “To continue this momentum, it is critical that we enact pro-growth tax reform that will level the playing field for U.S. business to be globally competitive,” Mr. Dimon said. The Senate passed a bill with sweeping revisions to the U.S. tax code after midnight Saturday, and House and Senate Republicans will now attempt to reconcile the competing tax bills Continue reading "Corporate CEOs Say Increased Capital Spending Rests on Tax Reform"

Want a New Job? This Is What Employers Require From Their Workers

Most Americans don’t need a college degree to get a job. Many do need to spend a lot of time on their feet and get some post-employment training if they want to keep it, according to a new Labor Department report detailing occupational requirements for American workers in 2017. Despite the growing share of Americans with a bachelor’s degree, less than 20% of workers actually need one for their job, employers told the Labor Department. The vast majority of jobs require a high school education or less. Even so, the prospects for workers with a college degree remain brighter: The unemployment rate for college graduates dropped to 2% in October, while registering at 4.3% for those with a high school degree and 5.7% for those with less than a high school education. The manager at McDonald’s might have more time on the job than the typical nurse Continue reading "Want a New Job? This Is What Employers Require From Their Workers"

Why Aren’t More Women and Minorities Studying Economics?

The economists guiding policies on everything from housing to health care disproportionately hail from one demographic group: white men. The pipeline that feeds the field is still proportionally lacking women and minorities, according to new research from the Federal Reserve. The imbalance is potentially harmful to the broader economy, the field of economics and students themselves. Women made up about 30% of the nation’s economics majors, while minorities represent just 12%, according to the Fed study. Both numbers are significantly lower than the share of women and minorities who attend college. Women make up almost 58% of the student body and minorities represent about 21%. If women and minorities majored in economics at proportional rates, there would be more than 18,000 additional women and another 6,000 minority economics majors graduating every year. Without more diversity, “we as a profession are likely to see one particular set of problems as most Continue reading "Why Aren’t More Women and Minorities Studying Economics?"

Trigger Warning: How a Tax Measure Could Worsen the Next Recession

The Senate Republican tax plan making its way toward a vote today could include a poison pill that worsens a recession somewhere down the road: a so-called trigger that reverses tax cuts or imposes spending cuts if federal revenues come in lower than expected. Though the details of the provision haven’t been laid out, Republican lawmakers have agreed in principle to such a provision as a way to address worries that tax cuts now might lead to revenue losses and deficit increases in the years to come. The trigger would partially reverse some tax cuts if revenues come in below expectations. The problem is what happens in an economic downturn. Revenues tend to go down in a recession because business and household income declines, reducing taxable income. A trigger could impose tax hikes or spending cuts on the economy at a moment when it is already weak, a step that economists Continue reading "Trigger Warning: How a Tax Measure Could Worsen the Next Recession"

Why Are People in Red States Dropping Out of the Labor Force?

For further evidence of a divided nation, look no further than state-level job markets. Though the labor market has grown robustly nationwide this year, progress has been uneven across blue states and red states. An increasing number of people in red states have stopped looking for work, while a larger share of people in blue states are actively in the workforce. The participation rate, which shows the number of people who are employed or are looking for work, fell in red states to 62% in September from 62.6% in April, while notching up in blue states  to 63.9% from 63.8% over the same period, according to research from the Institute of International Finance. The report categorized a state red if it voted for President Donald Trump in 2016′s presidential election and blue if it voted for Hillary Clinton. The kinds of jobs available to workers in red states and Continue reading "Why Are People in Red States Dropping Out of the Labor Force?"

Maybe American Students Are Bad at Standardized Tests Because They Don’t Try Very Hard

U.S. students’ mediocre standing in many global performance rankings may in part reflect a failure of effort rather than a lack of aptitude, according to a new study by economists in the U.S. and China. In an experiment last year, a group of Massachusetts 10th graders got a surprise at the beginning of a math test: Money in exchange for correct answers. Those students left fewer questions blank and answered more correctly compared with students who weren’t offered a reward, suggesting the cash was an incentive for greater effort resulting in higher scores. But a similar cash reward had no significant effect on test scores when the experiment was conducted with students in Shanghai. That suggested students from different cultures may show different levels of motivation when it comes to taking low-stakes assessment tests, the researchers said, complicating comparisons across national borders. “These tests are usually interpreted as Continue reading "Maybe American Students Are Bad at Standardized Tests Because They Don’t Try Very Hard"

Why The Oil Bust Is Still Troubling Southern Louisiana’s Economy

When oil prices tanked in 2014 and 2015, cities situated along the Gulf of Mexico’s rim lost tens of thousands of jobs, but southern Louisiana may have seen the worst of the economic trouble. One of Louisiana’s largest and southernmost metropolitan areas, Houma-Thibodaux, has shed almost 20,000 jobs since 2014, almost 10% of the area’s population, according to data recently released by the Labor Department. At the same time, the economy contracted, wages fell and some of the area’s residents left. “One word: Oil. Houma has [previously] been one of the fastest growing areas in Louisiana until 2015 for decades,” said Stephen Barnes, an economics professor at Louisiana State University. “It’s a region that has played a central role in the development of oil and gas resources in the Gulf.” The area’s proximity to the Gulf coast made it prime real estate for oil exploration, driving job creation and Continue reading "Why The Oil Bust Is Still Troubling Southern Louisiana’s Economy"