Tag: Economic Growth

Algorithm Finds No “Trump Effect” on the US Economy, at Least Not Yet

 

So imagine an alternate reality where Hillary Clinton campaigned a bit more vigorously in supposedly safe Big Ten blue states and eked out a narrow Electoral College victory. So, no President Donald Trump. And also no tax cuts, no deregulation, no trade war. How would the US economy — which Trump describes as “stronger than ever before!” —  be performing right now? Or to put it another way: Is there an economic Trump Effect?

Well, not so much, according to “Stable genius: Estimating the ‘Trump effect’ on the US economy” by researchers Benjamin Born, Gernot Müller, Moritz Schularick, and Petr Sedlácek. Their conclusion: “The impact of President Trump on the macroeconomic performance of the US economy has been negligible so far. We measure neither an acceleration of growth nor increased job creation in the US economy relative to an appropriate benchmark.”

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Maybe the Innovation Boom Is Here, It’s Just Not Evenly Distributed

 

Check out these two charts from a great Wall Street Journal piece, “The Problem With Innovation: The Biggest Companies Are Hogging All the Gains,” on global productivity growth:

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Things Are Getting Boomy: The Economy Is Jumping, and Worker Wages Might Soon Follow

 

I wrote yesterday about the upturn in Wall Street forecasts for second quarter GDP growth. Maybe the first 4% quarter since 2014 (5.2% in Q3). JPMorgan, for example, now estimates “real GDP is expanding at a 4.0% annual rate in Q2, up from our prior estimate of 2.75% and almost twice the 2.2% growth rate experienced in Q1.”

Sounds like welcome news to me.

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For First Time Ever, US Has More Job Openings Than Unemployed Workers

 

While the DC press corps worries whether Trump was booed at a White House event and curates elaborate conspiracy theories about Melania, a slightly more important story isn’t getting enough pixels. The economy is doing so well that, for the first time ever, there are now more job openings in the US than unemployed Americans:

With employers struggling to fill openings, the number of available jobs in April rose 1 percent to 6.7 million from 6.6 million in March, the Labor Department said Tuesday. That’s the most since records began in December 2000.

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The US Remains the World’s Most Competitive Big Economy, By Far

 

Nearly nine years into an economic expansion, most Americans continue to believe their country is headed in the wrong direction. Now that attitude probably reflects more than just economic perceptions. And even feelings about the economy’s vigor seem influenced by political leanings.

That said, there’s some evidence that economic pessimism is unfounded. There is, of course, the continued expansion. And the American jobs machine keeps generating gobs of jobs, resulting in the lowest unemployment rate since 2000.

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Jobs Are Booming, and Democrats Are Puzzled

 

Is it overstating things to say the US economy is, well, booming? After all, the May jobs report was pretty impressive, including a) 223,000 new jobs, b) an uptick in average hourly earnings growth to 2.7% from a year ago, c) a downtick in the jobless rate to 3.8% — at 3.755% unrounded, the lowest since 1969 — and d) a two-tenths decline in the U6 underemployment to 7.6% — its lowest level since 2001. JPMorgan economist Michael Feroli titled his Jobs Friday report this way (while alluding to President Trump’s controversial pre-report tweet): “The secret’s out: job growth is booming.” And some economists think a jobless rate with a two-handle is hardly out of the question.

True, overall economic growth is still stuck in Two Percentland. That’s the other, less-encouraging two-handle. But maybe not for much longer. GDP estimates for the second quarter are rising across Wall Street, and this report may boost that momentum. “Nearly all aspects of this report were positive and consistent with solid growth of wage-and-salary income in the second quarter,” notes the IHS Markit econ team. “The details in this report added one-tenth to our forecast of Q2 GDP growth, which now stands at 4.1%.”

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A Rescue Plan for America’s Heartland That’s About Work, Not Cutting Checks

 
Via: The New York Times.

What does America look like to an economist? In the new working paper “Jobs for the Heartland: Place-Based Policies in 21st Century America,” Benjamin Austin, Edward Glaeser, and Lawrence Summers neatly outline the problem of “left behind” places in the US economy (bold by me):

We divide the U.S. into three regions: the prosperous coasts, the western heartland and the eastern heartland, divided based on year of statehood. The coasts have high incomes, but the western heartland also benefits from natural resources and high levels of historical education. America’s social problems, including non-employment, disability, opioid-related deaths and rising mortality, are concentrated in America’s eastern heartland, states from Mississippi to Michigan, generally east of the Mississippi and not on the Atlantic coast. The income and employment gaps between the three regions are not converging, but instead seem to be hardening into semi-permanent examples of economic hysteresis.

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Another Way Driverless Cars Might Boost Economic Growth

 

One person can only know so much. And one person can only create relatively simple products on their own. Complex products require networks of people, sometimes called companies, and even networks of networks, such as supply chains. And one way of evaluating an economy is by its ability to create complex products.

In his book, “Why Information Grows,” Cesar Hidalgo writes about economies as “collective computers” whose computational capacity is either expanded or limited by the size of social networks. (I reviewed the book recently.) And the ability to create denser networks is helped or hindered by communication and transportation technology, among other things. All of which came to mind when reading the new working paper “The Role of Transportation Speed in Facilitating High Skilled Teamwork” by Xiaofang Dong, Siqi Zheng, and Matthew Kahn:

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The Rise and Fall (and Rise?) of American Growth

 

Northwestern University economist Robert Gordon is one of the foremost tech/productivity/growth pessimists — he might prefer the term “realist” — with his views most fully expressed in his 2016 book “The Rise and Fall of American Growth.” It’s an excellent book. And if you read it and like it, then you might want to check out Gordon’s new NBER working paper, “Why Has Economic Growth Slowed When Innovation Appears to be Accelerating?”

It’s a compelling headline question given the apparent disconnect between economic statistics and what you read in the business media or hear from Silicon Valley. Now Gordon’s answer to that question is what you would expect if you’ve read his book or more generally followed his work. (Indeed, the paper provided a pretty good summary of his thinking.) His claim is that the “great inventions” of the Second Industrial Revolution — including electrification, the internal combustion engine, public sanitation, advances in chemicals and plastic — were really something, especially compared against subsequent waves of progress. These inventions, Gordon writes,

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The Potential Downside and Upside in Washington’s New Stimulus Experiment

 

So are we really going to do this? Is the United States, the world’s most important economy, really going to thoughtlessly stumble into a novel experiment in fiscal policy? Massive fiscal stimulus at this point in the business cycle?

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What’s Been the Economic Impact of Trump’s Deregulation Push?

 

“Pro-growth” economic policy is about more than just tax reform. Smart deregulation also has the potential to boost growth. Indeed, the Trump administration is counting on deregulation as a key lever for turning a 2% economy into a 3% (or higher) economy. In a report last October, the White House’s Council of Economic Advisers declared that “deregulation will stimulate US GDP growth” and favorably cites research finding that “excessive regulation” suppressed US growth by an average of 0.8% per year since 1980.

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Amity Shlaes joins Seth Barron to discuss the competing goals of economic growth and income equality, and to take a look at how American presidents in the twentieth century have approached these issues.

Polls show that support for income redistribution is growing among younger generations of Americans, but such policies have a poor track record of achieving their goals. As Shlaes writes in her feature story in the Winter 2018 Issue of City Journal: “Prioritizing equality over markets and growth hurts markets and growth and, most important, the low earners for whom social-justice advocates claim to fight.”

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The Healing US Job Market and How We All Forgot About the Great Recession

 

The January jobs report suggests the nearly nine-year-old economic expansion remains plenty capable of generating solid job growth: 200,000 last month and an average of 192,000 over the past three months. More interesting, it provided fresh evidence that a tightening labor market is also capable of accelerating wage growth. The 0.3% monthly rise in average hourly earnings, following an upwardly-revised 0.4% in December, pushed the 12-month rate up to 2.9%, the highest reading in nearly eight years.

All good enough for Capitol Economics to declare, “the acceleration in average hourly earnings isn’t an outlier.” And JPMorgan thinks it “now looks like the tightness in labor markets is showing through to a gradual acceleration in wage growth.” Indeed, it seems the Wall Street consensus is that before long, we’ll start seeing month-after-month of 3-handle jobless rates. And hopefully even stronger wage growth.

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The Trump Growth Machine

 

I discovered my genuine confidence in the sustainability of the current economic growth cycle when I recommended to my 27-year-old Uber driver that he invest some portion of his wages in a diversified index fund. Although the stock market will surely ease off its current pace, it nevertheless should prove far more profitable than standard money market funds with their puny returns. The good news is that the current trend likely will not fizzle out anytime soon thanks to several key factors, including lower taxes and deregulation.

Igniting economic growth, as the Trump administration’s policies are doing, is not as straightforward as it sounds because it is easy to make spectacular mistakes in judgment if caught in the grip of Keynesian economic theory. A day after Barack Obama’s 2008 election, the Dow plunged by almost 500 points. On the day of Trump’s election, the economist Paul Krugman wrote with his legendary overconfidence: “If the question is when markets will recover, a first-pass answer is never.” The Federal Reserve, he added, could not cut rates again to forestall the anticipated recession—and the Trump administration would only make matters worse because it was “ignorant of economic policy.” But the Dow soared by 250 points.

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Taking a Look at the State of Trump’s Deregulation Efforts

 

When the Trump White House talks about boosting economic growth, it’s not all tax cuts, tax cuts, tax cuts. Officials also mention the administration’s ongoing deregulatory push as a big part of why Trumponomics will turn a Two Percent Economy into a Three Percent or Four Percent Economy. President Trump himself has cited deregulation as one of his biggest accomplishments so far.

But a new analysis by Bloomberg gives reason for skepticism, at least if you define “deregulation” as actually, you know, removing regulations currently in effect. Not much of that seems to be happening yet. “Only a handful of regulations have actually been taken off the books,” Bloomberg finds.

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Can US Economic Growth Rise Again? A New Study Gives Reason for Optimism.

 

In the magisterial The Rise and Fall of American Growth, Northwestern University economist Robert Gordon describes a “special century” of fast productivity growth from roughly 1870 to 1970. But the apogee of that period was really the 1920–1970 “golden age” period when the economy really felt the impact of the Second Industrial Revolution of the second half of the 19th and early 20th century.

The second IR was a time that produced important and “unrepeatable” inventions flowing from the following five technology clusters: electrification, the internal combustion engine, chemicals, modern communication, and urban sanitation infrastructure. Compared to these “great inventions,” in Gordon’s view, the impact of information technology pales. And since you can only electrify once or widely install indoor plumbing once, another golden age of productivity ain’t happening.

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3% or Bust: Fanciful Forecasts and the GOP Tax Plan

 

It keeps happening. The latest member of Team Trump to offer overly optimistic takes on the GOP tax plan is Ivanka Trump. Here she is on “Fox & Friends” this morning:

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Just How Risky Should US Policymaking Be Right Now?

 

“Risky scheme” used to be a popular pejorative in American politics. It’s been used by Democrats and Republicans, though my clearest recollection is Al Gore attacking Jack Kemp and the Dole-Kemp tax cut plan during the 1996 vice presidential debate. Gore used “risky” some eight times. Example:

The plan from Senator Dole and Mr. Kemp is a risky, $550-billion tax scheme that actually raises taxes on 9 million of the hardest pressed working families. It would blow a hole in the deficit, cause much deeper cuts in Medicare, Medicaid, education and the environment and knock our economy off track, raising interest rates, mortgage rates and car payments. We stopped that plan before. We will stop it again. We want a positive plan for growth and more jobs. . . . The conservative business journal, “Barron’s,” says this is the strongest economy in 30 years. We’ve got good solid growth. Let’s don’t risk it on some $550-billion risky scheme.

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Numbers Matter

 

Wayne Allyn Root put some of his high energy into describing the numerical effects of Trump’s fiscal derring-do. After reading primarily subjective disquisitions, discussions or diatribes about the successes and policies of the Trump Administration, it’s certainly refreshing to see some objective measures hit the news. There is a degree of winning occurring in our […]

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We Need Flatter Taxes, Cleaner Rules

 

The Trump administration released a thumbnail sketch last week of its much anticipated tax plan, which has generated opposition and support from all the usual suspects. The critics of the plan take the view that the program will generate windfall subsidies for the rich and increase deficits while doing nothing for growth. Its defenders, including Treasury Secretary Steven Mnuchin, claim that the anticipated growth from lower tax rates will override any objections about increasing income inequality.

It is, of course, difficult to make predictions on matters such as economic growth. The overall effect of any tax plan depends not only on the plan itself, but on other government actions, such as spending rates, which have risen inexorably since the end of World War II, and interest rate increases by the Federal Reserve. It puts the cart before the horse to think about growth and deficits before getting the right tax structure into place. Once that is done, the needed response to changes in economic and financial conditions can be handled solely by changes in tax rates. The enhanced stability of the tax structure itself should be positive for growth. And on tax design, the Trump plan offers a mixed bag.

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