It bears repeating that this business cycle has been like no other. The COVID shock produced the steepest contraction in output but the shortest recession on record. Spending on nearly everything except food purchased from grocery stores dropped precipitously. In the face of the lockdown, production of nearly everything also dropped off sharply. In a … Continue reading Placing the Expansion in Perspective
Restraints on the supply of goods and services continue to hold back economic expansion and boost inflation. Ongoing restraints on supply were confirmed by the employment report for September which showed overall job gains of only 194 thousand in contrast to expectations of 475 thousand. To be fair, private payroll increased 317 thousand in September … Continue reading Supply Restraints Continue to Bedevil the Economic Expansion
The Consumer Price Index (CPI) for August was greeted with relief. Headline inflation slowed to 0.3 percent from 0.9 percent two months earlier while core inflation (with volatile food and energy prices removed) slowed to only 0.1 percent in August. The moderating of inflation is illustrated in the table below. Note that the increase in … Continue reading Has the Inflation Dragon Been Slayed?
The economy has decelerated in the current quarter from the 6 percent plus rate of growth in the first half of the year. This slowdown has been most evident in spending by consumers. As shown in the chart below, growth in personal consumption expenditures—which account for nearly 70 percent of total output—has ground to a … Continue reading The Pause in the Expansion
Source: Merriam-Webster Dictionary Infrastructure is the set of fundamental facilities and systems that support the sustainable functionality of households and firms, serving a country, city, or other areas, including the services and facilities necessary for its economy to function. (Source: Wikipedia) The term infrastructure entered the vocabulary of public policy discussions in the 1970s when … Continue reading Infrastructure: Time for a Fresh Look
The employment report for July was widely hailed as a strong report. Total nonfarm employment rose nearly 1 million (943,000, the blue bar in the chart below) and the unemployment rate dropped 1/2 percentage points to 5.4 percent. However, as in June, a sizable portion of the gain in employment occurred in the state and … Continue reading Supply Restraints Continue to Hold Back the Economy (Revised)
The second quarter turned out to be something of a disappointment. Output was expected to grow at nearly a double-digit pace over much of the quarter, but came in at a 6-1/2 percent rate—little different from the first quarter. This is illustrated in the chart below produced by the staff of the Federal Reserve Bank … Continue reading The Economy: What Have We Learned from the Second Quarter?
The June establishment survey jobs report showed gains of 850 thousand new jobs, following increases averaging half that amount over the previous two months. It was hailed as good news. Furthermore, new claims for unemployment insurance have been declining over recent weeks—more good news. We should note, however, that 190 thousand of the 850 thousand … Continue reading The Economy: Lots of Demand, Not So Much Supply
The pickup in inflation in recent months has spurred worries about whether we are entering an uncomfortable new era beset by large price increases. The chart below illustrates that core inflation (which excludes volatile food and energy prices) has spiked recently. For nearly a decade before the pandemic, core inflation ran at a 1-1/2 to … Continue reading The Economy: Will Inflation Be Contained?
The recent news on the economy confirms that the labor market continues to tighten, even though 7-1/2 million fewer people were employed in May than at the onset of the pandemic. Strains in the labor market are holding down gains in employment and growth in output and placing upward pressure on inflation. Indeed, hiring problems … Continue reading The Economy: Greater Strains Have Become Evident