Tracking the Economy

This has been a busy week for economic news; I thought I would give an update for the week:

• 2002Q4 GDP growth revised up to 1.4% annual rate (from a previously estimated 0.7%). Better, but not great.
• Hubbard out, Mankiw in at the CEA. His nomination shouldn’t have been controversial – he is an accomplished and respected academic macroeconomist (and a fellow MIT PhD), but some right-wing supply-side economists are unhappy about what he wrote in his Principles book about Reagan’s policies.
• Oil Prices are hitting 12-year highs and getting close to 40$ a barrel.
• Consumer prices rose 0.3% in January and wholesale prices (the PPI) jumped 1.6%. The increases were due in part because of rising energy prices. The core CPI and PPI (which exclude food and energy) increased by 0.1% and 0.9%, respectively. If the PPI increases continue and make their way to consumer prices, it will cause the Fed to think twice before reducing interest rates in the case of a “double dip” recession. On the bright side, the increases should lessen deflation fears.
• Consumer confidence fell to 9-year lows. The link between the Conference Boards’ index and spending is weak, so we shouldn’t be too worried; however, if consumer spending fails to hold up, expect a second recession.
• On the bright side, it was announced that durable goods orders jumped 3.3% in January.

Filed under: Data, Economics, Economy, Policy, Recession

More Letters for Economists to Sign

It’s been a while since I have seen so much political activism from the economics profession. This past month, there have been three major sign-this-statement pushes trying to get economists to speak out.
Currently circulating is an anti-war Statement by US Economists on Iraq by ECAAR. (Over 100 have already signed).
Two statements on Bush’s economic proposal were also presented this past month.
Economists’ Statement Opposing the Bush Tax Cuts, Feb. 10 (Around 450 signers.) For a critique of the letter (but not the substance), see Don Luskin’s comments.
In response, a short letter to Bush was drafted: Economists Endorse President Bush’s Jobs and Growth Plan Feb. 12 (Around 250 signers.) For a critique, see DeLong’s Thoughts on the Republican Economists’ Letter.

Filed under: Economics, Economists, Economy, Fiscal Policy, Policy, Politics, Recession

Quarter Million Page Views

I just wanted to make a traffic report on ArgMax.com. The site recently hit the 250,000 page-view mark, according to the counter at the top right of the page.
Sitemeter is tracking over 400 visits and over 1,000 page-views a day.
My system logs show a total of 91,000 visits and 1.6 million hits since June 2002.
Lingo:

Page-view: one download of a full webpage, such as the one you are reading now

Visits: one online session by a viewer (may include many page-views)

Hits: one download of any kind of a file, for example one page may have several images and thus several “hits”.

Filed under: Website

States’ Troubles

A recent article by the Christian Science Monitor highlights some of the measures states are taking in response to their budget problems.
According to the Center on Budget and Policy Priorities, deficits are estimated to be between $70 and $85 billion for the upcoming state fiscal year (2004). Since most states have a balanced budget requirement, these states face immediate cuts in expenditures or increases in taxes.
The article above highlights some of the measures being taken, which include raising college tuition, closing libraries and other services early, and even unscrewing ever third light bulb in the Governor’s office (Missouri). In addition, almost half of the states have “raided tobacco settlement funds.”
Of course, there are more serious consequences as well. Since Medicaid is administered at the state level, several states are considering reducing health care aid to lower income individuals and families (see the CBPP report for details). Cuts in education, welfare, childcare, and even jury trials have also been enacted.
Is there a solution?
In the short term, states are in trouble without aid from the federal government. At the federal level, the government is allowed to borrow, and thus reduce the effects of a recession on spending and taxes. In fact, Bush has proposed increases in spending and decreases in taxes, the exact opposite of most states.
It makes sense that the federal government could play a roll in easing the states’ problems by providing aid in the form of grants, loans, or an increase in the federal share of certain services such as Medicaid.
In the longer-term, perhaps after the economy has recovered, there are several reforms that might help ease the impact of future budget shortfalls.
Alice Rivlin of Brookings suggests several reforms:

• Enact counter-cyclical revenue sharing, i.e. federal assistance triggered by national or state economic indicators.
• Accumulate larger “rainy-day funds” at the state level.
• Insure that tax base includes less volatile revenue sources, such as sales taxes. (For example, a Virginia government economist posted that Virginia state revenue is more volatile than GDP, in part because of a reliance on capital gains and corporate tax revenues.)

State governments will face a test after the recession ends – will they be able to make hard choices in a boom to prevent another crisis from happening, or will they forget the lessons from the 2001 recession?

Filed under: Economy, Fiscal Policy, Policy, State Economy

Valentine’s Day

I’ve been meaning to announce some personal news on this site for some time. And I think Valentine’s Day is the perfect time.
Last November, I was engaged to the intelligent, beautiful, and kind Ms. Jessica Bay Jones. We’re scheduled to be married this coming September!
We’ve set up an Irons-Jones Wedding WebSite.
Anyone know any good wedding-planning books?
Happy Valentine’s Day!

Filed under: Other

Economists on Proposed Economic Policy

The Economic Policy Institute has coordinated a statement by economists on the Bush approach to economic stimulus.
The signers include 10 Nobel Prize winners, as well as several hundred academic and non-academic economists.

Economists’ statement opposing the Bush tax cuts
Economic growth, though positive, has not been sufficient to generate jobs and prevent unemployment from rising. In fact, there are now more than two million fewer private sector jobs than at the start of the current recession. Overcapacity, corporate scandals, and uncertainty have and will continue to weigh down the economy.
The tax cut plan proposed by President Bush is not the answer to these problems. Regardless of how one views the specifics of the Bush plan, there is wide agreement that its purpose is a permanent change in the tax structure and not the creation
of jobs and growth in the near-term. The permanent dividend tax cut, in particular, is not credible as a short-term stimulus. As tax reform, the dividend tax cut is misdirected in that it targets individuals rather than corporations, is overly complex, and could be, but is not, part of a revenue-neutral tax reform effort.
Passing these tax cuts will worsen the long-term budget outlook, adding to the nation’s projected chronic deficits. This fiscal deterioration will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure, and basic research. Moreover, the proposed tax cuts will generate further inequalities in after-tax income.
To be effective, a stimulus plan should rely on immediate but temporary spending and tax measures to expand demand, and it should also rely on immediate but temporary incentives for investment. Such a stimulus plan would spur growth and jobs in the short term without exacerbating the long-term budget outlook.

Filed under: Economics, Economy, Fiscal Policy, Policy, Recession

Unemployment to 5.7 percent

The unemployment rate dropped to a seasonally adjusted rate of 5.7 percent in January. This seems to be good news (at least it’s not bad news) on the status of employment growth in the US.
However, it does look like this number is slightly misleading due to the seasonal adjustment process. See Delong’s report of Henwood’s explanation. The best interpretation is that employment situation is roughly unchanged from last month.
(Basically, the seasonal adjustment is meant to rid the data of regular effects that occur every year. This can be a good idea if we want to compare, say, January unemployment data with July unemployment data and interpret the result as a real shift in real economic activity. If we didn’t do this, a difference in the unemployment number would be a combination of real economic activity as well as some weather-caused change. For you statisticians out there, the CPS is now using X-12 ARIMA adjustment; an update from X-11 used since 1980.)

Employment Situation
Unemployment (Household Survey Data)
The unemployment rate fell to 5.7 percent in January; the number of unemployed persons was 8.3 million. The jobless rates for the major demographic groups were as follows: adult men (5.4 percent), adult women (4.7 percent), teenagers (16.8 percent), whites (5.1 percent), blacks or African Americans (10.3 percent), Asians (5.6 percent, not seasonally adjusted), and Hispanics or Latinos (7.8 percent). (See tables A-1, A-2, and A-3.)
Total Employment and the Labor Force (Household Survey Data)
Total employment in January was 137.5 million. The employment-population ratio–the proportion of the population age 16 and older with jobs–was 62.5 percent. The civilian labor force in January was 145.8 million and the labor force participation rate was 66.3 percent. (See table A-1.)

Filed under: Data, Economics, Recession

Economic Report of the President

An email from Bruce Bartlett alerts me to the recent release of the Economic Report of the President.
Looks like I have some weekend reading to do!

Filed under: Economics, Economy, Fiscal Policy, Policy, Politics, Recession

No IPOs

Interesting factoid of the day:
“For the first time since 1974, last month saw no initial public offerings (IPOs) – those new stock offerings that sometimes resemble Roman candles.”
New CEO motto: think profitable, not big | csmonitor.com
Why not?
Looming war with Iraq? Better market environment ahead? Lagging effect of the stock market bust? Corporate scandals? Increased accounting scrutiny?
Anyone have any good ideas on this one?

Filed under: Economics, Finance

Site Back up

Lost email! If you sent an email on tuesday prior to 9PM EST, I probably did not receive it. Please try again!
ArgMax was down briefly this morning. My site host is undergoing an email server update and I think something went wrong.
Just about every page on the site accesses a database to, for example, pull up a headline, a post, a link, or keep count of visitors. So, when the database goes down, so too does the vast majority of the site. That is what happened sometime this morning, but it looks like everything is working now.
Everything, that is, except for email which is still not reaching me!
Looks like time to back everything up again just in case… And time to make things die more gracefully in case it happens again.

Filed under: Website