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Article Archive: Economy

Far from perfect
05/18/24   Economy
"Looking closer at that time frame highlights that in any 6 month period following yield curve inversion the chances that a recession comes are much closer to 50/50 than 100%. It's a coin flip. As the period moves further out beyond 18 months, the probability of predicting a recession falls closer to the long-term average U.S. recession probability (15-20% of months)."

Different this time?
03/17/24   Economy
"Hence, I join Cam Harvey (who brought to prominence the yield curve as recession predictor) who says it's too early to drop the recession call."

Good economic news
11/12/23   Economy
"Hourly wages for production and nonsupervisory workers (who make up about 80 percent of the American workforce) rose 4.4 percent year-on-year in the third quarter of 2023, for instance, ahead of the pace of inflation. And this was not anomalous: Arindrajit Dube, an economist at the University of Massachusetts at Amherst, crunched the numbers and found that real wages for that same sector of workers are not just higher than they were in 2019, but are now roughly where they would have been if we'd continued on the upward pre-pandemic trend."

Americans are getting richer
10/29/23   Economy
"Americans saved a lot of money since 2019, and the value of their houses and retirement accounts went up in spite of rate hikes. That's great news, and it suggests that much of the pessimism Americans are feeling about their finances is really more about the general unrest in American society and the scary stuff on the news."

Household balance sheets
09/17/23   Economy
"The average debt-to-asset ratio historically has been around 13% (currently 12%), getting as high as 20% in 2009 at the depths of the financial crisis and as low as 6% in 1952 before consumer credit exploded higher in this country."

The red superball
07/16/23   Economy
"The current environment for stocks continues to remind us of 2007 when investors also appeared undeterred by developing cracks in the economy and earnings. Based on normalized earnings of many of the businesses we analyze, we believe most stocks are overvalued and have significant downside risk. As investors shrug off slowing earnings growth, sticky accumulated inflation, competitive risk-free rates, and expensive valuations, we believe the future returns of equities are very uncertain, and in our opinion, remain inadequate relative to risk assumed."

When will interest rates matter?
07/09/23   Economy
"There are all sorts of crazy things going on here when you consider how inverted the yield curve is, the speed of the rise in rates and the absolute level of yields that we haven't seen - at least on the short end of the curve - in decades. So when is it all going to matter?"

Recession probabilities
06/25/23   Economy
An update to Recession Probabilities based on Multiple Financial Measures

Lawrence Summers speaks
06/11/23   Economy
Rethinking fiscal policy by Lawrence H. Summers [video]

Make less make more
05/07/23   Economy
"Like many of the drivers of the current market and profit cycle, we believe the strategy of making less to make more is unsustainable. The willingness and ability of certain customers to pay higher prices should not be confused with a healthy economy. It's not. As prices increase and volumes decline, economic activity is shrinking. Further, as more companies crowd into the higher-end segment, the risk of becoming overly dependent on volatile and inflated asset prices is growing. While revenue growth from price increases and serving the wealthy may camouflage the decline in economic activity in the near-term, ultimately, to grow organically, the economy must make more, not less. If it doesn't, we'll eventually just be buying and selling empty boxes."

Price over volume
04/22/23   Economy
"Those are good excuses to raise pricing and not care about volume. And that is the world we are living in. Volume doesn't matter. Price does."

04/16/23   Economy
"One month ago, I 'officially' took the position that inflation had been conquered, and that, properly measured, the economy had actually been experiencing deflation since last June. This morning's report only confirmed that position."

The economy and the market
04/08/23   Economy
"the US economy and stock market showed a high correlation throughout most of this period. Correlations only fell off considerably four times: during the Great Depression, World War II, the 1990s, and the global pandemic. All of which suggests the S&P 500 was a good proxy for the US economy for much of the last 120 years."

Historical CPI based on current practices
04/02/23   Economy
"we find that current inflation levels are much closer to past inflation peaks than the official series would suggest."

Good on 200k
02/19/23   Economy
"If you had an income of $200,000, that would put you in the top 10% of household incomes or the top 5% of individual incomes in 2021."

Jabba the Mutt
02/19/23   Economy
"Based on our bottom-up view, we do not believe economic activity, net of inflation, is as robust as recent economic reports indicate. And while it's too early to determine if we're heading into a lethargic and ugly Jabba the Mutt recession like 2008, current economic conditions certainly aren't the award-winning purebred investors appear to be pricing into risk assets."

Late shift
12/11/22   Economy
"we've spent recent decades inching toward a world where we have too few workers and too many retirees dependent upon their labor. Have we finally reached the tipping point?"

Not enough workers
12/11/22   Economy
"The bottom line remains that a robust economy, pent-up post pandemic demand and massive fiscal stimulus have combined with a shortage of workers to be supportive of ongoing job creation."

Leisure and sleeping
10/23/22   Economy
"The findings lend credence to the various reports on employees. preferences for flexible work arrangements, given that cutting the commute enables people to spend their time on other activities, such as childcare or leisure."

Recession: earlier, harder, and longer
10/09/22   Economy
"We had so much of a boom in the last couple of years, especially the housing market. Now, we're dealing with the aftermath"

What about the Dufresnes
08/27/22   Economy
"Like the Dufresnes, concerns related to inflation and lost purchasing power have gone missing. While investors have moved on to the next party, until our bottom-up indicators suggest otherwise, we believe the risk associated with accumulated inflation remains elevated."

Remote work working
07/24/22   Economy
"Despite concerns at the outset of the pandemic, working from home had a positive impact on productivity."

Larry Summers: recession soon
06/22/22   Economy
"There is no historical precedents for inflation at the rate we now have to come down to the target the Fed has set of 2% without a recession." [video]

BoC Financial System Review
06/14/22   Economy
"In Canada, elevated levels of household debt and high house prices remain two key interconnected vulnerabilities. Many households have seen an improvement of their net worth and liquid asset holdings over the course of the pandemic. At the same time, the share of highly indebted households has risen. Those with high debt are more vulnerable to a decline in income and will face more financial strain when they renew their mortgages at higher rates."

The inflation headshake
03/13/22   Economy
"While we acknowledge the year-over-year inflation rate may eventually moderate, we must ask, how much purchasing power will be lost by the time the inflation fire subsides? The U.S. dollar has already lost considerable purchasing power relative to most necessities, such as shelter. Over the past three years, the median price of homes sold in the U.S. has increased 30%. Even if shelter inflation moderates, past increases have made home ownership unaffordable for millions of Americans."

Good enough?
02/13/22   Economy
"Based on the amount of inflation that has occurred and is in the pipeline, we believe the Federal Reserve has gotten inflation terribly wrong. For the Fed to regain credibility and achieve its price mandate, we believe a meaningful tightening in monetary policy or sharp decline in asset prices will be necessary. Although central bankers have certainly conditioned investors otherwise, whether they like it or not, we believe a large serving of vegetables is on the way."

Employment recession close to an end
02/04/22   Economy
"The current employment recession was by far the worst recession since WWII in percentage terms. However, the current employment recession, 23 months after the onset, is now significantly better than the worst of the "Great Recession"."

A counterintuitive recession
08/09/20   Economy
"Outstanding credit card debt fell from March to June as did the percentage of credit card bills that were past due. No one could have predicted this would happen during one of the worst economic contractions ever. Or how about the personal savings rate which briefly shot up to well over 30% and remains exceedingly high"

Off the charts
08/01/20   Economy
"I would bet that when FDR created these bureaus whose divisions employs 1000s of economists, statisticians and mathematicians, none of them would have ever imagined off-the-chart economy like the one we are living through today."

U.S. economy is in a recession
06/12/20   Economy
"The bureau's Business Cycle Dating Committee - the fat lady of economic opera - said the expansion peaked in February after a record 128 months, and we've been sliding into a pandemic-driven recession since."

The death of a small business
05/23/20   Economy
"Parker had been spending $3,000 a month to keep the shop closed as the pandemic spread. Selling a few cups of 'no touch takeout' coffee on weekends would not be enough to make up those costs, let alone the additional expense of rehiring employees and buying supplies."

Decline in restaurant traffic
03/15/20   Economy
"There are some sectors that will be hit hard over the next several months: hotels, airlines, restaurants, movie theaters, sporting events, and convention centers. People will probably avoid these places as part of social distancing."

Superstar economy lacks superstars
03/04/19   Economy
"Imagine that in the 1960s you were to double the productivity of GM - that would clearly have a huge impact on the economy. If you were to double the productivity of Facebook overnight, it wouldn't even move the needle. Nothing would happen. You would get slightly better targeted ads, but zero impact on the economy"

Declines in hours worked
01/08/19   Economy
"Declines in hours worked per person are among the least-sung benefits of economic development. In the late 19th century workers in industrialised economies knew labour and little else. In 1870 full-time work generally meant between 60 and 70 hours of labour per week, or more than 3,000 hours per year. Over the century that followed rising incomes were accompanied by a steady drop in weekly hours, which had fallen to about 40, on average, by 1970. Though less conspicuous a boon than larger pay packets or higher living standards, the drop was a gift to working people of a thousand or so precious hours of free time each year."

Middle on brink of ruin
06/26/17   Economy
"Why we'd rather binge on cheap credit than live within our means"

Marc Andreessen interview
06/04/17   Economy
"The kicker to the whole thing, back to your question, is the sectors where prices are crashing by definition are shrinking as a percentage of the economy and the sectors where prices are rising are growing as a percentage of the economy, and so what's actually happening is the sectors where tech is not having a big impact are growing and will eventually be the entire economy. So TVs are going to cost $10 and healthcare is going to cost $1 million. This is where this is all headed. As a consequence, jobs, the answer is we are all going to employed in healthcare and education which is actually what's happening."

Too much versus too little dynamism
02/05/17   Economy
"Of course, the too much versus too little dynamism diagnoses aren't mutually exclusive; there are probably elements of truth in both. Maybe the economy really isn't working for many Americans because globalization, automation and changing labor practices have thrown them to the wolves. But maybe there are also deep-seated structural shifts preventing communities and individuals from tapping the great opportunities the modern economy offers."

Productivity slowdown
03/06/16   Economy
"In mature economies, higher productivity typically is required for sustained increases in living standards, but the productivity numbers in the United States have been mediocre. Labor productivity has been growing at an average of only 1.3 percent annually since the start of 2005, compared with 2.8 percent annually in the preceding 10 years."

How does your salary stack up?
12/05/15   Economy
"According to StatsCan, the median income (plus our 10 per cent factor) in Canada in 2013 was $35,200. This means that half of Canadian tax filers have incomes over that number and half are under that number. What about the high income? Based on 2013 income data and our 10 per cent added factor, the top 10 per cent make $97,000 or more per year, the top five per cent make $137,000 or more and the top one per cent make $245,000 or more. Where are you?"

Should the Fed tighten?
08/30/15   Economy
"If I were at the Fed, I would consider a 'dare' quarter point increase just to show the world that zero short rates are not considered necessary for prosperity and stability."

Autonomous cars will reshape the economy
05/23/15   Economy
"Most people - experts included - seem to think that the transition to driverless vehicles will come slowly over the coming few decades, and that large hurdles exist for widespread adoption. I believe that this is significant underestimation. Autonomous cars will be commonplace by 2025 and have a near monopoly by 2030, and the sweeping change they bring will eclipse every other innovation our society has experienced."

The underground recovery
04/27/13   Economy
"Ordinary Americans have gone underground, and, as the recovery continues to limp along, they seem to be doing it more and more."

Deposit insurance may increase bank risk
03/31/13   Economy
"The argument for deposit insurance is that banks are inherently unstable, by virtue of their economic function they borrow money in the form of deposits (which can be instantly withdrawn) and lend to businesses on a longer-term basis. They are thus vulnerable to destabilising and self-fulfilling bank runs. But the counter-argument is that of moral hazard depositors have no incentive to choose between banks on grounds of riskiness, and bank executives can take risks knowing that they are underwritten by the insurance scheme."

Financial stress index back down
03/10/13   Economy
"According to yesterday's press release, the Kansas City Financial Stress Index (KCFSI) for the month of February continues to indicate that financial stress in the U.S. financial system remains low. The KCFSI fell to -0.61 in February, the lowest reading since June 2007, well before the Great Recession and financial crisis"

Not enough Canadian content
12/16/12   Economy
"Every one of the ailments we imagine ourselves to be suffering is a reality in the United States: where our incomes are growing, theirs are stagnating; where poverty here is at record lows, there it is at record highs; where inequality in Canada has not grown in recent years, in the United States it has surged."

Should we worry about rising interest rates?
10/19/12   Economy
"But the Fed has only limited power to control interest rates. And sharply higher yields would be far from unusual. For instance, 30-year Treasury bond yields are currently under 3 percent. As recently as last year, they topped 4.5 percent, and in early 2000 they briefly exceeded 6.5 percent. Because of the long maturity, a single percentage point rise in rates would translate into roughly a 20 percent decline in the value of long bonds."

Inevitable slow recoveries?
08/18/12   Economy
"If a slow recovery is the inevitable result of a financial crisis, why was the Administration forecasting the "normal" fast recovery all along? The natural conclusion is that the administration thought, as I thought, that the economy should have grown quickly, as it typically has in the past. The "slow growth after financial crises" isn't a fact in the first place. And to the extent that it is a fact (it's a "fact" over a sample of countries not very representative of the US now), slow growth is not the inevitable result of a financial crisis itself, but a result of the mismanaged policy that typically follows a financial crisis, such as bailouts, close-the-barn-door-after-the-horse leaves banking regulation, trampling of property rights that scare creditors away, high taxes and so forth."

Just how bad is the economy?
08/01/12   Economy
"The second-quarter GDP numbers came out. The newspapers and Republicans pounced on low growth and anemic job growth. The Democrats rebut growth is growth and tell us of the steady job gains. How bad is the economy?"

The future is more than Facebook
05/23/12   Economy
"The debate about whether America will own the global economy in the 21st century or else become a dude ranch for rich Chinese and Brazilians hinges on whether innovation can break out of the box. Can it go mainstream and transform the really big things: transportation, energy, electricity, food production, water delivery, health care and education? If it can't do that - or if it is thwarted by high taxes and complex regulation - then welcome to the new normal of 2% annual growth. Our future will become sadly familiar. Just follow Spain, France and Great Britain down history's sinkhole of lost status and influence. But America can do better than that, and it will. In fact, the seeds are being planted now."

Have wages stagnated?
02/01/12   Economy
"Prof. Don Boudreaux responds to 'The Truth About the Economy', a recent video featuring former Labor Secretary Robert Reich. In the video, one of Reich's key points is that most people's wages have barely increased since 1980. However, when Reich's numbers are examined in greater detail, his claim does not hold up."

More 2011 charts
12/21/11   Economy
"What is it about graphs and economics? In a discipline where facts are murky and certainty is elusive, graphs offer a bright light of information and a small confidence that the world can be summed up between two axes."

2011 in charts
12/21/11   Economy
"We asked economists, economic policymakers and investors for their favorite charts of 2011. Here's what they gave us."

Dead Suit Walking
04/23/11   Economy
"In New York City, men in the 35-to-54 kill zone have lost jobs faster than any other group, including teenage girls, according to new data from the Fiscal Policy Institute."

Canada is 'a purely random success story': Shiller
02/09/11   Economy
"Robert Shiller, the Yale professor who correctly predicted the 1987 stock market collapse and the recent U.S. housing market meltdown, said Canada's robust financial health compared to other nations is largely due to a random run-up in oil prices in the midst of the global financial crisis. "It's a major export for Canada and it went to US$140 a barrel in 2008, right when Canada needed it," Prof. Shiller said in an interview Tuesday. Canada's economic output fell roughly 4.2% from its peak in 2007 to its trough in 2009 - even with the oil price surge, while the U.S. saw a near-identical decline. "It seems that if the country didn't have that boost from oil, it would have done worse than the United States," Prof. Shiller said."

The jobs crisis
01/02/11   Economy
"Why have new jobs been so hard to come by? One view blames cyclical economic factors: at times when everyone is cautious about spending, companies are slow to expand capacity and take on more workers. But another, more skeptical account has emerged, which argues that a big part of the problem is a mismatch between the jobs that are available and the skills that people have. According to this view, many of the jobs that existed before the recession (in home building, for example) are gone for good, and the people who held those jobs don't have the skills needed to work in other fields. A big chunk of current unemployment, the argument goes, is therefore structural, not cyclical: resurgent demand won't make it go away. Though this may sound like an academic argument, its consequences are all too real. If the problem is a lack of demand, policies that boost demand - fiscal stimulus, aggressive monetary policy - will help. But if unemployment is mainly structural there's little we can do about it: we just need to wait for the market to sort things out, which is going to take a while."

Strucs vs. Cycs
08/25/10   Economy
"So in the interest of peace between the camps - and of lowered unemployment - here's a plea to each. Strucs: You've got to be more specific about exactly how much of current unemployment you think is structural, and explain what those structures are, so that those who believe that government might be able to help fix it can at least offer some ideas. And Cycs: You can start by acknowledging what is different about unemployment in this recession and so-called recovery, and give us targeted policy proposals, instead of vague exhortations to pump up demand."

The rise of unemployment
08/23/10   Economy
"This disturbing graphic, by Latoya Eguwuekwe, charts the rise of unemployment across the U.S. from 2007 on."

Probability of recession
02/23/10   Economy
"The Fed's model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then in almost every month. For January 2010, the recession probability is only 0.82% (less than 1%) and by a year from now in January 2011 the recession probability is only .043%, the lowest reading in more than 26 years (since September 1983)."

When do smart prices get dumb?
02/17/10   Economy
"Tomorrow's power will come from renewables via a $7-billion deal with Samsung to install wind turbines in the Great Lakes, and to provide solar energy as well. Many will applaud the addition of this clean and renewable source of power to the grid. Fewer will applaud the 19-cent-per-kilowatt-hour price tag that'll come along with it. As they say in stock brokerage, find a strong enough wind, and even pigs can fly. Pay 19 cents per kilowatt hour for power, and you can let the wind turn on the lights. But at that price, how long will you leave them on?"

Canadian family finances
02/16/10   Economy
"Average debt loads climbed to $96,100 in 2009 - In contrast to past recessions, households continued to borrow more this time. The debt to income ratio jumped to a new high of 145%."

The disposable worker
01/09/10   Economy
"When employment in the U.S. eventually recovers, it's likely to be because American workers swallow hard and accept lower pay. That has been the pattern for decades now: Shockingly, pay for production and nonsupervisory workers - 80% of the private workforce - is 9% lower than it was in 1973, adjusted for inflation."

A map of vanishing employment
01/03/10   Economy
"The economic crisis, which has claimed more than 5 million jobs since the recession began, did not strike the entire country at once. A map of employment gains or losses by county tells the story of how those job losses first struck in the most vulnerable regions and then spread rapidly to the rest of the country."

Job losses mount, enduring and deep
11/14/09   Economy
"The overall unemployment rate, which reached 10.2 percent on a seasonally adjusted basis last month, remains below the post-World War II peak of 10.8 percent, reached in late 1982. But the proportion of workers who have been out of work for a long time is higher now than it has ever been since the Great Depression."

Recession is over
10/18/09   Economy
"The worldwide recession appears to have ended, with surveys showing manufacturing activity is on the rise nearly everywhere."

Overmighty finance levies a tithe on growth
08/27/09   Economy
"The protracted debate over how to clean up after the financial crisis - and how to reform our accident-prone financial system to prevent another such episode - is stuck on the problem of how to regulate markets without undermining the benefits they bring. What is sorely missing is any real discussion of what function our financial system is supposed to perform and how well it is doing that job - and, just as important, at what cost."

America's disappearing millionaires
08/03/09   Economy
"It hasn't been a good recession for the rich. The late boom was extraordinarily top-heavy, with the overwhelming majority of economic gains seemingly defying gravity and flowing to the top rung of the economic ladder. Now those with the most assets and income have the most to lose. Add together the declining markets, an imploding finance sector, a real estate rot that has eaten its way up from the ground floor to the penthouse, and the predations of Bernie Madoff and Sir Allen Stanford, millionaires who ripped off other millionaires, and, as my Newsweek colleague Robert Samuelson notes, these are tough times for the wealthy."

Help desperately wanted
07/23/09   Economy
"Here's a suggestion for people with a death wish. Stroll through Windsor, Ont., or a Newfoundland outport, and chat up the older residents about their employment prospects. After you've listened to their tales about massive layoffs in the automotive sector and dried-up opportunities in natural resources, tell them that Canada is facing a labour shortage. Then start running."

Using garbage to measure consumption
07/23/09   Economy
"The equity premium puzzle has been festering unsolved in economic circles since the 1980s. The puzzle is this: economists can.t adequately explain why investors demand such high-risk premiums to own volatile stocks over relatively steady bonds. The risk premium for stocks over bonds in the long term is about 6%. But 6% seems like too big a premium to economists. In theory, one way to explain the premium would be to look at consumption, a broad measure of wealth. People should demand a premium from an investment that goes down when consumption goes down."

Exit ahead? not so fast
06/24/09   Economy
"Notwithstanding the so-called green shoots that appear to be popping up in various series of economic statistics, other numbers show things to be withering, if not rotting outright. What's more these data are not seasonally adjusted or otherwise fudged. They're tax receipts, and nobody pays taxes on phony, phantom jobs or earnings."

A lost decade for jobs
06/23/09   Economy
"Without a decade of growing government support from rising health and education spending and soaring budget deficits, the labor market would have been flat on its back."

February economic summary in graphs
03/02/09   Economy
"A collection of 20 real estate and economic graphs from February"

Investors cannot rely on mainstream media
02/18/09   Economy
"Anyone who does not follow the dynamics of the labor market is only telling part of the story. This is important. The net job loss understates the perceived impact. It also overstates the actual impact, since the job creation is ignored. Most people react to actual gross job loss and layoff announcements. The new jobs get no publicity."

This isn't your grandfather's recession
02/13/09   Economy
"Adherents of the tax-cuts-only strategy are suspicious of free-spending Democrats, old-fashioned Keynesians, and big government. They believe - no, they know - that tax cuts are more efficient than government spending, since people and businesses make better and quicker decisions about spending than government does. And the way they read the relevant data, history, and experience, permanently reducing long-term tax rates has historically provided the best possible incentives to invest and spend. They may be right. But there are also reasons to think that what worked or made complete sense in the past may not be as effective today. The current, somewhat extraordinary circumstances, and the nation's changing economic geography, should make us wonder how effective tax cuts will be in stimulating new spending and investment."

Beggar thy children
01/30/09   Economy
"Individuals and businesses invest more wisely than governments. If Obama wants to lead from the center, he needs to reassure us that entrepreneurialism will not be discouraged and risk bearing will not be punished. The capital markets will react well if the Obama administration unleashes the power of human innovation; they have reacted badly after the election, and again with the inauguration, because the markets fears that this is not in the cards. To borrow another quote from Jefferson, 'I predict future happiness for Americans, if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.'"

Yes, bankers are overpaid
01/29/09   Economy
"The authors argue that the wage increases are related to greater skill requirements: in both the 1930s and the 1980s, there was a higher demand in financial services for employees that could handle complex transactions involving credit risk, for example. In support of that, the authors map metrics for the average educational attainment of financial services employees over the excess wage results and show that there is a fairly good relationship between the two."

The bias in reporting job losses
01/29/09   Economy
Each day's news brings more stories about layoffs at major companies. The stories get a big play in mainstream media. The leading bloggers also cite the stories and encourage readers to keep a summation of job losses. This is quite misleading. Job losses occur in highly visible chunks, as we can readily see. New jobs are created a few at a time, both in existing businesses and in new businesses. Even sophisticated observers do not recognize the ongoing job creation from the invisible hand of the market.""

The unreality of the 'real' business cycle
01/22/09   Economy
"In classic business-cycle theory, a boom is initiated by a clutch of inventions - power looms and spinning jennies in the 18th century, railways in the 19th century, automobiles in the 20th century. But competitive pressures and the long gestation period of fixed-capital outlays multiply optimism, leading to more investment being undertaken than is actually profitable. Such overinvestment produces an inevitable collapse. Banks magnify the boom by making credit too easily available, and they exacerbate the bust by withdrawing it too abruptly. But the legacy is a more efficient stock of capital equipment."

The economy is bad, but 1982 was worse
01/21/09   Economy
"You often hear that we are now living through the worst recession since the early 1980s, and the comparison is not wrong. But it's ultimately unsatisfying, because it is a little too vague to be useful. Is the economy only a little worse than it was in the last couple recessions, as some have said, and still a long way from the dark days of 1982? Or are we instead on our way toward something that may even approach the severity of the Great Depression?"

Zombie debtors
01/16/09   Economy
"Zombies. Seen one lately? If not, you may soon, because they are about to menace the U.S. economy. In financial lingo, zombies are debtors that have little hope of recovery but manage to avoid being wiped out thanks to support from their lenders or the government. Zombies suck life out of an economy by consuming tax money, capital, and labor that would be better deployed in growing companies and sectors. Meanwhile, by slashing prices to generate sales, zombie companies can drag healthier rivals into insolvency."

U.S. holiday sales tumble
12/26/08   Economy
"Consumers spent at least 20 percent less on women.s clothing, electronics and jewelry during November and December, resulting in what may be the biggest holiday-shopping sales decline in four decades."

Unemployment: worse than it looks
12/15/08   Economy
"As U.S. jobs disappear at a rapid clip, the official unemployment figure seems understated. While November's 6.7% rate is a full 2% higher than the same time last year, the rate remains well below the 10.8% postwar peak, reached in November 1982. One issue is that the official unemployment number captures only a slice of the total joblessness in the U.S. To be counted as unemployed in this statistic, a worker must not have a job, be currently available for work, and have actively sought employment within the last four weeks. In other words, a lot of the jobless are left out of the government's tally."

The 2008 male recession?
12/05/08   Economy
"According to today's BLS report, the U.S. economy has lost 2.352 million jobs in the last year (Nov. 2007 to Nov. 2008). Further analysis shows that 82% of the job losses (1.932 million) were jobs held by males, and only 18% of jobs losses (430,000) were jobs held by females (see top chart above). Further, the November unemployment rate for men is 7.2% vs. only 6% for women, and the gap in jobless rates between men and women has been increasing for the last six months (see bottom chart above). What's going on?"

The economic fight of the year
12/03/08   Economy
"In one corner stands Amity Shlaes, senior fellow at the Council on Foreign Relations, Bloomberg columnist, and author of The Forgotten Man, a history of the Great Depression. She points out that federal spending during the New Deal did not restore economic health. Unemployment stayed high and the Dow Jones Industrial average stayed low. In the other corner stands Nobel laureate Paul Krugman, a professor at Princeton University and a columnist of The New York Times. He believes that the New Deal didn't spend enough."

Holes in our socks
12/01/08   Economy
"Right about now, most businesses are trying to work out how their customers are likely to respond to the recession. Looking back to the last really nasty recession - the early 1980s - isn't much help for low-cost airlines, cell-phone companies, Internet retailers, producers of organic and fair-trade food, and many other businesses barely imagined at the dawn of the Reagan era. The economy has simply changed too much since then for experience to be a reliable guide."

It's official: recession since Dec. '07
12/01/08   Economy
"The National Bureau of Economic Research said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy."

Pain spreads as credit vise grows tighter
09/19/08   Economy
"Lenders of all types had already been raising the bar for borrowers, turning away all but the best customers. This week, they became even less willing to part with their money, further crimping budgets and family spending. An economy propelled by easy credit for more than a decade is fraying as credit disappears. American Express, to take one striking example, is reducing the maximum credit limit for half of its tens of millions of cardholders."

How are we doing?
07/07/08   Economy
"When a presidential election year collides with iffy economic times, the public's view of the U.S. economy turns gloomy. Perspective shrinks in favor of short-term assessments that focus on such unpleasant realities as falling job counts, sluggish GDP growth, uncertain incomes, rising oil and food prices, subprime mortgage woes, and wobbly financial markets. Taken together, it's enough to shake our faith in American progress. The best path to reviving that faith lies in gaining some perspective - getting out of the short-term rut, casting off the blinders that focus us on what will turn out to be mere footnotes in a longer-term march of progress."

Grim expectations
06/27/08   Economy
"Mr Taylor described how the low and stable inflation of the previous two decades emerged from a more disciplined monetary policy, inspired in part by Friedman's analysis. 'In the United States when the inflation rate approached 4% in 1968, the federal funds rate was about 5%. When the inflation rate approached 4% in 1989, the federal funds rate was about 10%, clearly a much larger response.' Once again, America's inflation rate is at 4% but the fed funds rate is just 2%. With inflation high and interest rates low, many are worried that the lessons set out by Mr Taylor and by Mr Friedman before him are being ignored."

Is income volatility really rising? For whom?
06/26/08   Economy
"The key driver of rising average levels of income risk is that life among the already risky has become even riskier. Indeed, you really need to look to the riskiest 5 percent of the distribution to find the rise in income risk. And this rise in risk among the already risky is so great as to be responsible for nearly all the rise in average income volatility. And who are these riskiest 5 percent? Jensen and Shore find that they are particularly likely to be self-employed."

Don't rerun that '70s show
02/22/08   Economy
"Will the next president be the second coming of Jimmy Carter? Given Thursday's economic headlines, full of dire warnings about the return of 1970s-style stagflation, you might think so. Realistically, though, the parallels between the problems facing the U.S. economy now and those of the late-1970s aren't that strong. That's the good news. The bad news is that the economy probably will look similar to, but worse than, the economy that undid the first President Bush. And it's all too easy to see how the next president could suffer a political fate resembling that of both the elder Mr. Bush and Mr. Carter."

Why your wallet feels thinner
02/17/08   Economy
"The U.S. Federal Reserve has been slashing interest rates to stave off a recession. One potential risk to that strategy: inflation. The bad news is that prices for many everyday items had already been ticking up, according to data from December 2004 and December 2007 collected by the U.S. Department of Labor. During that period, the Consumer Price Index, which measures the average change in prices over time for a basket of consumer goods and services, grew at a 3% annualized clip. But prices for many everyday items are rising even faster--and that's making everyone's wallet feel a little thinner."

Why hard work doesn't pay
09/29/07   Economy
"If you look at the averages, the statistics give a simple message: Hard work does not equate to economic progress. It hasn't for decades. We may need hard work to keep body and soul together -- not to mention pay the Visa bill -- but average-worker paychecks clearly show that inflation continues to trump wage gains for most American workers."

Why these good times feel so bad
02/16/07   Economy
"In essence, the idea boils down to this: Whether it's the job or stock markets, the official numbers report a "net" figure -- the final plus or minus after all the messy adding and subtracting is done. But we live our lives in that messy world of the gross numbers before the final calculations. The reality that we experience is in the gross and not in the net numbers."

Personal savings rate falls to 74-year low
02/01/07   Economy
"People once again spent everything they made and then some last year, pushing the personal savings rate to the lowest level since the Great Depression more than seven decades ago. The Commerce Department reported Thursday that the savings rate for all of 2006 was a negative 1 percent, meaning that not only did people spend all the money they earned but they also dipped into savings or increased borrowing to finance purchases. The 2006 figure was lower than a negative 0.4 percent in 2005 and was the poorest showing since a negative 1.5 percent savings rate in 1933 during the Depression."

Car-sales indicator suggests a recession is near
08/19/06   Economy
"If things are miserable for America's new-car dealers, can a recession be averted? History says it cannot and suggests a downturn may have already begun."

The uses of adversity
08/18/06   Economy
"In 1871 America added about 6,000 miles of track to its railways, an endeavour that occupied a tenth of its industrial labour force. But by 1875 track-building had fallen by more than two-thirds, and employed less than 3% of America's workers. According to Brad DeLong, an economic historian at the University of California, Berkeley, the violent ups and downs of the railway industry help to explain the popularity, before the Great Depression and John Maynard Keynes, of a fatalistic view of the business cycle. Recessions, however unpleasant, were cathartic, and therefore necessary. They released capital and labour from profitless activities (such as laying the year's 6,000th mile of track) as an essential prelude to redeploying them elsewhere. "Depressions are not simply evils, which we might attempt to suppress," wrote Joseph Schumpeter. They represent "something which has to be done"."

Lean and unseen
06/29/06   Economy
"But someone forgot to tell American manufacturers the bad news. Most of them have enjoyed roaring success of late. Net profits have risen by nearly 9% a year since the recession in 2001 and productivity has been growing even more rapidly than is usual during economic expansions (see chart). The country's various widget-makers, moreover, show no sign of losing their innovative edge."

When protecting jobs only destroys them
06/07/06   Economy
"I like France. The language is beautiful. The food is inspiring. And I appreciate topless beaches as much as the next guy. Still, I sometimes wonder if eating snails doesn't somehow dull one's ability to make sensible economic policy."

Debunking one of the worst ideas in economics
06/07/06   Economy
"Economist Arthur Laffer made a very interesting supposition: If tax rates are high enough, then cutting taxes might actually generate more revenue for the government, or at least pay for themselves. (In one of life's great coincidences, he first sketched a graph of this idea on Dick Cheney's cocktail napkin.) If the government cuts taxes, then Uncle Sam gets a smaller cut of all economic activity -- but reducing taxes also generates new economic activity. Laffer reasoned that, under some circumstances, a tax cut would stimulate so much new economic activity that the government would end up with more in its coffers -- by taking a smaller slice of a much larger pie. In fairness to Mr. Laffer, there's nothing wrong with this theory. It's almost certainly true at very high rates of taxation."

Searching for the invisible man
03/10/06   Economy
"The French, according to George Bush, have no word for them, economic theory has surprisingly little room for them, and it is a mystery why anyone would choose to be one of them. Entrepreneurs are the leading men of capitalism, the venturesome protagonists who move the plot forward. But economic theory gives them few if any lines to read."

39 jobs where women make more than men
02/28/06   Economy
"In the 39 jobs listed below, women's median earnings exceeded men's by at least 5 percent and in some cases by as much as 43 percent."

The land of leisure
02/03/06   Economy
"Over the past four decades, depending on which of their measures one uses, the amount of time that working-age Americans are devoting to leisure activities has risen by 4-8 hours a week. (For somebody working 40 hours a week, that is equivalent to 5-10 weeks of extra holiday a year.) Nearly every category of American has more spare time: single or married, with or without children, both men and women. The only twist is that less educated (and thus poorer) Americans have done relatively better than more educated ones (see chart). And that is not just because unemployed high-school drop-outs have more free time on their hands. Less educated Americans with jobsthe overstretched middle class of political lore - do very well."

The middle class on the precipice
01/28/06   Economy
"During the past generation, the American middle-class family that once could count on hard work and fair play to keep itself financially secure has been transformed by economic risk and new realities. Now a pink slip, a bad diagnosis, or a disappearing spouse can reduce a family from solidly middle class to newly poor in a few months."

Marriage builds wealth and divorce destroys it
01/19/06   Economy
"A study by an Ohio State University researcher shows that a person who marries - and stays married - accumulates nearly twice as much personal wealth as a person who is single or divorced. And for those who divorce, it's a bit more expensive than giving up half of everything they own. They lose, on average, three-fourths of their personal net worth."

Man versus machine
11/03/05   Economy
"Both the automated parking and the automated ticket machine were new since the last time I'd been to that theater, no more than a few months ago. And that is why America's low-skilled workers are taking it on the chin. Forget the guy on the phone in Bangalore telling you how to use your new computer. He's a red herring. The job loss statistics tell the same story as they always have: Technology replaces far, far more low-skill jobs than foreign workers do. Think voice mail, ATM machines, automated customer service lines, self-serve gas, online bill paying, automated package tracking, and on and on."

Consumer-confidence data useless
02/21/05   Economy
"Consumer confidence indexes help move stock markets, influence corporate decisions and alter governments' economic outlooks. But a study says they're essentially useless for forecasting Americans' spending patterns."

Extreme commuting
02/15/05   Economy
"More workers are willing to travel three hours a day. But what is the long-term cost?"

Corporate profits: Breaking records
02/11/05   Economy
"Most analysts still expect American profits to grow by an annual 10% over the next couple of years. With nominal GDP growth of around 5%, that implies the proportion of GDP going to profits growing still larger. But this looks unlikely, and if so, share prices are overvalued. Both economic theory and historical experience argue that, in the long run, profits grow at the same pace as GDP. Such long-standing rules deserve more respect."

The economics of sharing
02/06/05   Economy
"Technology increases the ability of people to share, but will they share more than just technology?"

Doing the math on the have and have-not provinces
11/23/04   Economy
"It's time again for the annual tally of some numbers that Ottawa and many provincial governments love to hate. Who gains and who loses from the federal government's getting and spending? Which provinces send more money to Ottawa than they get back in spending, and which get more from the federal treasury than they chip in?"

That Taco Bell boycott
10/04/04   Economy
"Staging a boycott against Taco Bell does not change the guided self interest of taco eating teenagers. In the short run it has the exact opposite effect of its intended purpose. Boycotting Taco Bell lowers the demand for tacos, which in turn lowers the demand for the inputs required to make them, which in turn lowers the prices for wages paid to migrant workers needed to pick tomatoes. A more effective method of raising the wages of Immokalee migrant workers would be to stage the exact opposite activist campaign. If college students were to buy more tacos and ask for extra tomatoes on those tacos the demand curve would be moved in the appropriate direction, raising migrant workers wages."

The evolution of everyday life
08/18/04   Economy
"The human capacity for calculation allowed this potential to be fully exploited because humans were able to design rules and institutions that, as Mr Seabright puts it, "make reciprocity go a long way". Much of the book is concerned with the trust-enhancing character of economic institutions such as money. Building on humans' inherited instincts, these rules and institutions allow people to treat strangers as "honorary friends"."

Bush's jobs deficit
08/09/04   Economy
"According to the latest figures, American companies added far fewer workers to their payrolls last month than economists had forecast. This comes a week after the equally unexpected news that growth slowed significantly in the second quarter. How worried should George Bush be?"

There's been a huge shift in how consumers spend
07/07/04   Economy
"Yet the shifts can be quite remarkable. In 1961, almost 53 per cent of all consumer spending went to what most of us might consider the necessities of life -- food, clothing and shelter. By 1981, that trio accounted for only 46 per cent of spending and by 2000, its share had dropped to just over 40 per cent."

Profits do not cause high prices
05/24/04   Economy
"To put it another way, the current rise of profitability in the oil industry is temporary. At the same time, the U.S. Government, through environmental and tax policies, is doing all it can to make gasoline artificially scarce. As noted in a previous article, it has been about 30 years since an oil refinery was built in this country. Furthermore, environmental laws both encourage the importation of gasoline into the USA, but also discourage foreign producers from making the products that must comply with a crazy quilt of air quality regulations. That is nothing less than a prescription for very limited supplies of gas, with substantially higher prices becoming the norm."

Oil: Still at its mercy
05/23/04   Economy
"The world economy remains vulnerable to the price of oil"

CPI doesn't reflect the world we live in
05/18/04   Economy
"In science fiction, the device of the parallel universe is often used to explore fanciful ideas about alternative realities. Something similar seems to be going on these days with Statistics Canada's consumer price index, which is the definitive inflation measure in this country. The CPI is widely quoted by the media, an essential tool for economists, a key factor in establishing annual pay increases and an integral element of sensible financial planning. But these days, the CPI reflects a world that doesn't look much like the one many of us live in."

Arnold's big chance
05/06/04   Economy
"The result is a miracle of private enterprise. In 2002, some 35m Californians generated a gross state product of $1.4 trillion, making theirs the sixth-largest economy in the world. If Los Angeles County, home to 10m people, were a separate country, it would be the 16th-biggest economy in the world, just above Russia (see chart 1). And it is not just a question of size, but of influence."

Why Las Vegas is a geezer magnet
04/24/04   Economy
"Nevada is still young. Only 11.7% of the population is 65 and over. That's under the national average of 12.7%. Florida tops the list at 18.1%. Arizona clocks in at 13.2%. Are all the new arrivals here young? Some, yes. But Nevada is a geezer magnet. By definition, Las Vegas is as well, since it accounts for three-quarters of the state's population. How big a geezer magnet? The biggest. Nevada topped the list for states with net migration of people 65 and over from 1995 to 2000. Arizona placed second. Florida third."

The economics of outsourcing
04/21/04   Economy
"For all of the popularity of their arguments at this time ssical fallacy of goods deriving their value from the costs of production. Should they succeed in forcing their views into law, we can be sure that the ultimate outcome will that which befalls any society that gives into protectionism: a lower standard of living and, in the end, even more joblessness."

Who says inflation is down?
04/14/04   Economy
"The U.S. is supposed to be in a low-inflation environment, but my experience doesn't reflect that. Gas prices are high, home prices are out of sight, medical expenses are rising...I just don't see that inflation is all that low. What gives?"

The reserve army
02/13/04   Economy
"Flawed though they may be, the employment numbers are of fundamental importance. Two crucial questions for economic output and for the suffering caused by unemployment are: what portion of the working-age population does not work and how many of those that do not work want to do so?"

The loonie flies too high
01/25/04   Economy
"Economic misfortune of one kind or another struck almost every corner of Canada in 2003, from the SARS virus in Ontario and mad-cow disease in Alberta to hurricanes in the Atlantic provinces and forest fires in British Columbia. But by far the sharpest brake on growth has been the soaring Canadian dollar."

A Christmas letdown
12/31/03   Economy
"Retailers overall may have fared better than expected this holiday season, but it still looks like Santa Claus couldn't make all the merchants merry this year."

Vanishing jobs
12/18/03   Economy
"Structural change in the economy means many jobs are never going to come back."

Spending our way to disaster
10/03/03   Economy
"The consumer debt bubble in the United States could make the stock bubble seem like nothing."

The misery of manufacturing
09/26/03   Economy
"One minor obstacle, then as now, is the awkwardness of facts. Manufacturing has only recently, and with unusual lethargy, emerged from a global recession. (From a peak in June 2000 to a trough in December 2001, manufacturing output shrank by 7.6% in America.) But, on a longer view, rich-world manufacturing is in terrific shape (see chart). Amicus may have a point that Britain under-performs its peers in manufacturing. But that is only because Britain's competitorsparticularly Americahave done so well. Since 1970, America's manufacturing output has more than doubled. Even after the recession, American manufacturing output is almost 50% higher than in 1992."

G7 household finances
09/25/03   Economy
"Two questions are posed in this brief paper. The first one speaks to short-term sensitivities by asking whether household finances and consumer spending in some countries are more affected, positively or negatively, by expectations for rising bond yields, possible future monetary tightening, strengthening stock markets and a slowing pace of property market gains than others. The second question speaks to longer-term sensitivities by asking what longterm risks aging populations pose to aggregate household finances and financial markets going forward."

Isabel blew fallacy ashore
09/23/03   Economy
"Hurricane Isabel roared onto eastern North Carolina shores in mid-day, September 18, 2003, continuing on into Virginia and north from there. While Isabel was no Hurricane Hugo, the monster storm that demolished Charleston, S.C. back in 1989, it washed up the usual economic fallacies."

Are you worse off than Mom and Dad?
09/12/03   Economy
"If you feel like it's harder to provide the kind of middle class upbringing for your kids that your parents gave you, you may be right."

This job market would depress optimists
09/01/03   Economy
"Thousands of good-paying jobs are moving overseas. Nearly 5 million workers who are working part time need full-time hours to make ends meet. Another half-million have dropped out of the job market due to lack of prospects. Wages have fallen by 1 percent in the past year for both low- and high-wage earners. And despite a limited extension of federal benefits starting in May, more than two-thirds of the long-term unemployed have run out of unemployment insurance benefits."

What is wealth inequality?
05/22/03   Economy
"Nowhere is this convergence more apparent than at the grocery store and in restaurants. For virtually every high-end item, be it a fine cut of meat, specialty spaghetti sauce, whole-grain bread, fresh-ground coffee, or fine liquor, there is invariably a cheaper substitute with almost identical physical, temporal, and spatial characteristics. The list of high-end goods for which we can find cheaper substitutes of virtually identical quality is endless; and the common man of today enjoys fineries of which the most powerful kings of yesteryear couldn't dream."

Debt levels could leave us with hangover
02/03/03   Economy
"When central banks have attempted to regulate the supply of money, they have all too often failed."

Of debt, deflation and denial
10/11/02   Economy
"The risk of falling prices is greater than at any time since the 1930s."

Shocked and angry
07/06/02   Economy
"This surely is the hour of John Kenneth Galbraith, grand old man of American economics. But those who travel to the leafy suburbs of Boston in the expectation of a giant and gloating "I told you so" will come away disappointed."

An economy singed
06/21/02   Economy
"Almost 1,000 American companies have now restated their earnings since 1997, admitting in effect that they had previously published wrong or misleading numbers. As the Securities and Exchange Commission cracks down on creative corporate accounting, more such admissions lie ahead, even among household names. Phoney accounts mean that much of the profit growth of the late 1990s, the ostensible justification for Wall Street's bubbling up to its ephemeral heights, was equally phoney. It is hardly surprising that investors are so anxious."

Wasting time on productivity
05/10/02   Economy
"The underlying stability in productivity has been obscured by large year-to-year fluctuations reflecting the economic cycle and other shocks. Such fluctuations have been much less in the last eight or nine years than in earlier periods."

Terrorism insurance: pray as you go
02/12/02   Economy
"In fact, in the past weeks, thousands of companies whose commercial-property, commercial inland marine, farm, crime, and business-owners insurance policies expired on January 1 have received letters stating that the policies will not be renewed as written. While the standard property policy, for example, will still guard against the perils of fire, explosion, smoke, theft, and wind, it will not cover them if terrorism caused the problem."

Ranking the economic forecasters
01/20/02   Economy
"Only lawyers are the butt of more jokes than are economists. A recent report by Sweden's central bank, Sveriges Riskbank, drills down into the dismal track record of the dismal science with what the authors claim is uniquely comprehensive scope."

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