Real Time Economics: How the Supreme Court Affects Inflation; the Latest On Tariffs and the Dollar

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning! Today we look at what’s moving inflation, Alcoa bid to let more aluminum into the U.S., supply and demand in food and energy markets, the latest on the dollar’s ascent, and how owning a TV may not be the best thing for your sex life. INFLATION WATCH Inflation is back in the spotlight this week with release of July producer and consumer prices. Everyone wants to know how tariffs are affecting costs for business and consumers. But you know what may be an even bigger deal (for now)? The Supreme Court decision authorizing states to make online retailers collect sales tax. The government estimates the decision will generate $8 billion to $13 billion in additional taxes. Morgan Stanley economists figure that will feed into the Federal Reserve’s preferred Continue reading "Real Time Economics: How the Supreme Court Affects Inflation; the Latest On Tariffs and the Dollar"

Links (8/6/18)

Real Time Economics: U.S. Companies Look for Higher Prices to Offset Rising Costs

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning! Today we look at strong profits and rising prices, a Canadian boycott and other fallout from trade tensions, and the booming U.S. labor market. PROFITS, PRICES AND INFLATION America’s biggest companies are reporting some of the strongest earnings growth since the recession, boosted by lowered tax rates and a robust U.S. economy that is fueling demand. Profits at S&P 500 companies jumped an estimated 23.5% in the three months through June, Thomas Gryta reports. What could go wrong? Investor are wary of rising interest rates, trade tension and increasing costs for labor and supplies. Companies ranging from Kraft Heinz to Winnebago Industries are trying to push through price increases, which will help determine how the rest of the year shakes out.  Inflation watch: Continue reading "Real Time Economics: U.S. Companies Look for Higher Prices to Offset Rising Costs"

Economy Adds 157,000 Jobs in July, Little Evidence of Pick-up in Wage Growth

Dean Baker:
Economy Adds 157,000 Jobs in July, Little Evidence of Pick-up in Wage Growth: Unemployment rates for workers without a high school degree hit a record low as less-educated workers continue to be biggest job gainers in recovery.
The Bureau of Labor Statistics (BLS) reported the economy added 157,000 jobs in July. With upward revisions to the data from the prior two months, the average gain over the last three months was 224,000. The unemployment rate edged down to 3.9 percent as most of the rise in unemployment in June, which was due to increased labor force participation, was reversed. The employment-to-population (EPOP) ratio rose to 60.5 percent, a new high for the recovery.
In spite of the healthy pace of job growth and the low unemployment rate, there continues to be little evidence of accelerating wage growth. Over the last year, the average hourly wage
Continue reading "Economy Adds 157,000 Jobs in July, Little Evidence of Pick-up in Wage Growth"

The July Jobs Report in 8 Charts

U.S. employers added 157,000 jobs and the unemployment rate fell back to 3.9% in July. Over the past year, the number of jobs increased by 1.6%. That’s down slightly from last month, and the rate has gradually been trending downward since 2015. Hourly wages rose 2.7%, while weekly wages rose 3%. Both figures are down somewhat since last month. With inflation picking up, hourly wages are running below the rate of inflation, meaning that real wages are slipping. After climbing last month, the primary measures of unemployment all fell slightly this month. The broadest measure of unemployment, which includes discouraged workers who’ve stopped searching for work as well as part-time workers who want full-time work, fell to a new 17-year low. The overall labor-force participation rate, defined as the share of the adult population either working or looking for work, has been little changed over the past four years. Continue reading "The July Jobs Report in 8 Charts"

July Jobs Report – The Numbers

Lynne Sladky/Associated Press
Payroll Growth 157,000 Nonfarm payrolls rose by 157,000 in July. It was the smallest gain, but comes after large upward revisions to the prior two months of data. Incorporating revisions for May and June, which increased employment by a net 59,000, monthly job gains have averaged a very healthy 224,000 the last three months. Unemployment Rate 3.9% The unemployment rate, 3.9%, fell back below 4% in July. After touching an 18-year low earlier this year, the rate had edged up in June, reflecting more jobseekers entering the labor market. Another 105,000 people joined the civilian-labor force in July, but that was nearly exactly matched by the increase in Americans reporting they’re not in the labor force. Wage Growth 2.7% July’s 2.7% year-over-year increase in average hourly earnings remained sluggish, despite a historically low unemployment rate that should put pressure on employers to ratchet Continue reading "July Jobs Report – The Numbers"

Real Time Economics: Employers Are Hiring, the Trade Deficit Is Widening and the Feds Want More Taxes From Your Bottle of Wine

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning! Today we look at another month in the longest U.S. hiring streak on record, widening trade deficits and stockpiles of kidney beans, and the Trump administration’s latest battlefront: a tax loophole enjoyed by the wine industry. CAREER OPPORTUNITIES It’s jobs day! The U.S. employment report for July is expected to show a net gain of 190,000 jobs and an unemployment rate at 3.9%. Those are undeniably good numbers. Can they get better? Last month the unemployment rate ticked up to 4% for the right reasons: more people started looking for work. But the participation rate for prime-age workers remains below historical norms, suggesting the labor market has further to run—if employers can entice people off the sidelines.
HOW TO GET MORE WORKERS? 1.) Pay up. Continue reading "Real Time Economics: Employers Are Hiring, the Trade Deficit Is Widening and the Feds Want More Taxes From Your Bottle of Wine"

Macroeconomic Research, Present and Past

This is "a work in progress, with follow-ups on the way":
Macroeconomic Research, Present and Past, by P.J. Glandon, Ken Kuttner, Sandeep Mazumder, and Caleb Stroup, August 1, 2018: Abstract We document eight facts about published macroeconomics research by hand collecting information about the epistemological approaches, methods, and data appearing in over a thousand published papers. Macroeconomics journals have published an increasing share of theory papers over the past 38 years, with theory-based papers now comprising the majority of published macroeconomics research. The increase in quantitative models (e.g., DSGE methods) masks a decline in publication of pure theory research. Financial intermediation played an important role in about a third of macroeconomic theory papers in the 1980s and 1990s, but became less frequent until the financial crisis, at which point it once again became an important area of focus. Only a quarter of macroeconomics publications conduct falsification
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Summer 2018 Journal of Economic Perspectives

Tim Taylor:

Summer 2018 Journal of Economic Perspectives Available On-line: I was hired back in 1986 to be the Managing Editor for a new academic economics journal, at the time unnamed, but which soon launched as the Journal of Economic Perspectives. The JEP is published by the American Economic Association, which back in 2011 decided--to my delight--that it would be freely available on-line, from the current issue back to the first issue. Here, I'll start with Table of Contents for the just-released Summer 2018 issue, which in the Taylor household is known as issue #125. Below that are abstracts and direct links for all of the papers. I may blog more specifically about some of the papers in the next week or two, as well.

Jep summer 2018_________________

Symposium: Macroeconomics a Decade after the Great Recession

"What Happened: Financial Factors in the Great Recession," by Mark Gertler and Simon Gilchrist

Continue reading "Summer 2018 Journal of Economic Perspectives"

5 Things to Watch in the July Jobs Report

The Labor Department releases its monthly snapshot of the nation’s labor market Friday. Economists surveyed by The Wall Street Journal expect it to show employers created 190,000 jobs in July and that the unemployment rate fell to 3.9% from 4.0% a month earlier. Here are five things to look for in the report. 1. Lower jobless rate Watch for the unemployment rate to tick down after a jump to 4.0% in June. Jobless claims, a proxy for layoffs, have remained at historically low levels, supportive of strong labor market conditions. Further, concerns that tariffs will cause companies to hold back hiring have yet to materialize in a widespread way. The question is, how low can unemployment fall without sparking overheating? 2. Hiring hits sweet spot Through the first half of the year, employers added an average of 215,000 a jobs a month, an unexpected acceleration from last year’s first-half Continue reading "5 Things to Watch in the July Jobs Report"

Real Time Economics: U.S. Ratchets Up Pressure On China; What to Watch in the July Jobs Report

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning! Today we look at Washington’s tougher stance toward China, what to look for in Friday’s U.S. jobs report, and what spiraling deficits may mean for the economy. HEAT WAVE The U.S. is turning up the heat on China. The Trump administration threatened to more than double proposed tariffs on imports while Congress passed a defense bill designed to restrict Beijing’s economic and military activity. The moves come as Beijing and Washington have failed to ease an escalating trade dispute, prompting the administration to seek additional leverage, Bob Davis and Lingling Wei report. China’s Commerce Ministry responded to the tariff threat, saying the country was “fully prepared” to retaliate to defend its interests. Key takeaway: President Trump has sparred with some Republicans in Congress over trade conflicts with allies Continue reading "Real Time Economics: U.S. Ratchets Up Pressure On China; What to Watch in the July Jobs Report"

Rulers of the World: Read Karl Marx!

From The Economist:
Rulers of the world: read Karl Marx!: ...The chief reason for the continuing interest in Marx, however, is that his ideas are more relevant than they have been for decades. The post-war consensus that shifted power from capital to labour and produced a “great compression” in living standards is fading. Globalisation and the rise of a virtual economy are producing a version of capitalism that once more seems to be out of control. The backwards flow of power from labour to capital is finally beginning to produce a popular—and often populist—reaction. No wonder the most successful economics book of recent years, Thomas Piketty’s “Capital in the Twenty-First Century”, echoes the title of Marx’s most important work and his preoccupation with inequality. ...

The 2018 Fields Medal and its Surprising Connection to Economics!

From Kevin Bryan at Updated Priors:
The 2018 Fields Medal and its Surprising Connection to Economics!: The Fields Medal and Nevanlinna Prizes were given out today. They represent the highest honor possible for young mathematicians and theoretical computer scientists, and are granted only once every four years. The mathematics involved is often very challenging for outsiders. Indeed, the most prominent of this year’s winners, the German Peter Scholze, is best known for his work on “perfectoid spaces”, and I honestly have no idea how to begin explaining them aside from saying that they are useful in a number of problems in algebraic geometry (the lovely field mapping results in algebra – what numbers solve y=2x – and geometry – noting that those solutions to y=2x form a line). Two of this year’s prizes, however, the Fields given to Alessio Figalli and the Nevanlinna to Constantinos Daskalakis, have a
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Parsing the Fed: How the August Statement Changed From June

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 August statement compared with June. [wsj-responsive-sandbox id = "0" ] RELATED Federal Reserve Holds Rates Steady, Says Economy Is Strong Federal Reserve Likely to Keep Rates Steady Fed Looks for Goldilocks Path as Jobless Rate Drops (July 29)

Race, and the Race Between Stocks and Homes

"Black-white economic inequality remains large and persistent, and recent wealth inequality trends for all Americans are explained by assets, not income":
Race, and the race between stocks and homes, by Douglas Clement, The Region: Most research on long-term U.S. inequality focuses on income; relatively little examines wealth, largely due to lack of good asset data. But a June 2018 working paper from the Opportunity & Inclusive Growth Institute addresses that imbalance with a new data set developed from historical surveys, and it shows that wealth—specifically, ownership of stocks and homes—has been a central force behind U.S. inequality trends for 70 years. ...Their analysis begins by confirming the findings of other scholars: increased income polarization since the 1970s, with particular damage to the relative position of the middle-class. It also sheds new light on economic inequality between blacks and whites by quantifying vast differences in wealth as
Chart(1)
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How BBC Balance and Bad Think Tanks Discourage Evidence Based Policy

Simon Wren-Lewis:
How BBC balance and bad think tanks discourage evidence based policy:
The Knowledge Transmission Mechanism (KTM) is how knowledge produced by academics and other researchers is translated into public policy. Evidence based policy is the result of this mechanism working. The media is, in theory, an important conduit for the KTM...
The rigid application of political balance in the broadcast media is in danger of negating the KTM, and therefore evidence based policy. The moment an issue (call it issue X) is deemed ‘political’ by the media, balance dictates that any view expressed on issue X is an opinion rather than knowledge. As a result, when the media want to talk to non-politicians (‘experts’) about issue X, the imperative of balance remains.
Now suppose that in the knowledge world there is in fact a consensus on issue X. That would be a problem for balance broadcasting, because
Continue reading "How BBC Balance and Bad Think Tanks Discourage Evidence Based Policy"

Real Time Economics: Trump Advisers Push for Higher Tariffs on China

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning! Today we look at Trump administration deliberations on tariffs, how the U.S. economy is growing while others are slowing, signs of stronger wages and rising inflation, and what to expect when the Federal Reserve’s policy meeting concludes today. LET’S TALK Some White House advisers are pushing President Donald Trump to apply tariffs as high as 25% on $200 billion of Chinese goods, up from an original proposal for 10%. The hope is that the harsher measures would bring Chinese negotiators to the table. The White House won’t make a final decision until at least late August, Bob Davis and Lingling Wei report. Meanwhile, the administration is split internally on the best way forward. Hawks and doves: U.S. Trade Representative Robert Lighthizer pushing for more tariffs. Treasury Secretary Steven Mnuchin Continue reading "Real Time Economics: Trump Advisers Push for Higher Tariffs on China"

High-Speed Rail Expansion and German Worker Mobility

Morgan Foy at the NBER Digest:
High-Speed Rail Expansion and German Worker Mobility: Starting in the late 1990s, Germany expanded its high-speed rail network (HSR), connecting outlying locales to large urban areas. In The Effect of Infrastructure on Worker Mobility: Evidence from High-Speed Rail Expansion in Germany (NBER Working Paper No. 24507), Daniel F. Heuermann and Johannes F. Schmieder study how this large-scale infrastructure investment affected commuter behavior. They find that the expansion reduced travel times and increased commuting, as workers moved to jobs in smaller cities while keeping their places of residence in larger urban areas.
Until the late 1990s, the HSR system connected the largest cities of Germany. The connected cities were located in just three of the 16 German states. Areas between the large cities, through which the tracks ran, campaigned for stations, and in a second wave of expansion, the government added stops in many
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