Category Archives: Economy

Why the 2018 Midterms Matter for the U.S. Economy

Source: Bernard Yaros, Regional Financial Review, Vol. 29 no. 2, October 2018
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Though midterms do not have much of an economic impact via policy uncertainty, they can still affect the economy by altering the course of federal fiscal policy. This is exactly what we expect to happen after the 2018 midterms. This article discusses how tax legislation, annual appropriations, and other areas of fiscal policy could change depending on the composition of the next Congress.

Why Are Unemployment Insurance Claims So Low?

Source: Dante DeAntonio, Regional Financial Review, Vol. 29 no. 2, October 2018
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Initial claims for unemployment insurance continue to fall at an impressive rate, and the level of claims is low by any historical comparison. While the timeliness and frequency of UI data make it useful as an early labor market signal, it is important to understand the factors that impact the data. In this paper we show that recent changes in state UI laws have worked to depress new UI filings during the current expansion by as many as 100,000 claims per month.

The Economics of Puerto Rico’s Post-Maria Recovery

Source: Bernard Yaros, Regional Financial Review, Vol. 29 no. 1, September 2018
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A year has passed since Hurricane Maria devastated Puerto Rico. In many respects, the economy is still reeling in its wake. This article looks back at the economic loss during and after the storm and also considers the road ahead for the island’s economic recovery under different policy scenarios.

U.S. Metro Area Cost of Living Index: Update Through 2016

Source: Suzanne Schatz, Regional Financial Review, Vol. 29 no. 1, September 2018
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Living costs give insight into the quality of life, potential migration patterns, and the economic potential of metro areas. This article examines the most recent annual update of the Cost of Living Index to better contextualize recent cost of living trends and their implications for the outlook for U.S. metro areas.

Job Creation and Local Economic Development – 2018

Source: Organisation for Economic Cooperation and Development (OECD), September 2018

From the abstract:
The biennial report Job Creation and Local Economic Development addresses emerging issues for local economic development. It provides guidance on how a range of policies, from employment and training to economic and social policy, can contribute to better job outcomes at the local level and improve the resilience of local economies. The publication also includes country profiles, providing indicators on employment, skills and social inclusion at subnational level, which are essential to understanding the challenges that local economies currently face.

This third edition of Job Creation and Local Economic Development examines the impact of technological progress on regional and local labour markets. It sheds light on widening regional gaps on job creation, workers education and skills, as well as inclusion in local economies. Drawing on new data, it examines the geographical distribution of the risk of automation and whether jobs lost to automation are compensated by the creation of jobs at lower risk of automation. Building on data from labour force surveys, the report looks at the rise of non-standard work, highlighting the main regional determinants of temporary jobs and self-employment. Finally, it considers determinants of productivity and inclusion in regional and local labour markets, as well as policies to foster greater inclusion of vulnerable groups into the labour market. Individual country profiles provide an overview of regional labour markets and, among other things, an assessment of the performance in terms of “quality” jobs created among different regions.

FactCheck: have the Trump tax cuts led to lower unemployment and higher wages?

Source: Fabrizio Carmignani, Saul Eslake, The Conversation, September 2, 2018

….Minister for Finance Mathias Cormann’s statement that corporate tax cuts in the US had “led to stronger investment, stronger growth, lower unemployment rate and higher wages” is not supported by evidence.

Cormann pointed to US economic data from the second quarter of 2018 (shortly after the US corporate tax cuts were enacted) to support his statement.

Cormann correctly quoted the figures about GDP growth and the unemployment rate. His statement on wage growth is debatable, and there are qualifications to be made about his interpretation of the capital investment data.

But the simple observation that some US economic indicators improved in the second quarter of 2018 does not imply that those improvements were caused by the tax cuts.

Even if causation could be established, one quarter of data tells us very little about the effect of tax reform. It takes time for companies and workers to adjust to changed taxation environments. These adjustments happen progressively over time, and this can lead to significant differences in the short term and long term responses.

It’s worth noting that the improvement in economic conditions in the US started in mid-2016, around 18 months before the tax reform…..

Regional Price Parities by State and Metro Area

Source: Bureau of Economic Analysis, May 17, 2018

Across states, Hawaii had the highest all items RPP (118.4) and Mississippi had the lowest (86.4). Across large metropolitan areas – those with population greater than two million – San Francisco-Oakland-Hayward, CA had the highest all items RPP (124.7) and Cincinnati, OH-KY-IN (89.6) had the lowest.

What are Regional Price Parities (RPPs)?
Allows comparisons of buying power across the 50 states and the District of Columbia, or from one metro area to another, for a given year. Price levels are expressed as a percentage of the overall national level.

America’s Real Economy: It Isn’t Booming

Source: Peter Georgescu, Forbes, August 22, 2018

Ostensibly, for the past ten years, our economy has been recovering from the 2008 collapse. During the past few years, our comeback seems to have gained momentum. All the official indicators say we’re back in boom times, with a bull market, low unemployment and steady job growth. But there is an alternative set of data that depicts a different America, where the overlooked majority struggles from month to month.

The Nation recently published a stunning overview of the working poor and underpaid. One of the most powerful data points in the piece described how empty the decline in unemployment actually is: having a job doesn’t exempt anyone from poverty anymore. About 12% of Americans (43 million) are considered poor, and yet they are employed. They earn an individual income below $12,140 per year, and slightly more than that for a family of two. If you include housing and medical expenses in the calculation, it raises the percentage of Americans living in poverty to 14%. That’s 45 million people…..

Related:
The United States Has a National-Security Problem—and It’s Not What You Think
Source: Rajan Menon, The Nation, July 16, 2018

…..For millions of Americans, however, the greatest threat to their day-to-day security isn’t terrorism or North Korea, Iran, Russia, or China. It’s internal—and economic. That’s particularly true for the 12.7 percent of Americans (43.1 million of them) classified as poor by the government’s criteria: an income below $12,140 for a one-person household, $16,460 for a family of two, and so on… until you get to the princely sum of $42,380 for a family of eight. Savings aren’t much help either: A third of Americans have no savings at all and another third have less than $1,000 in the bank. Little wonder that families struggling to cover the cost of food alone increased from 11 percent (36 million) in 2007 to 14 percent (48 million) in 2014…..

…..As a result, though the United States has a per-capita income of $59,500 and is among the wealthiest countries in the world, 12.7 percent of Americans (that’s 43.1 million people), officially are impoverished. And that’s generally considered a significant undercount. The Census Bureau establishes the poverty rate by figuring out an annual no-frills family food budget, multiplying it by three, adjusting it for household size, and pegging it to the Consumer Price Index. That, many economists believe, is a woefully inadequate way of estimating poverty. Food prices haven’t risen dramatically over the past 20 years, but the cost of other necessities like medical care (especially if you lack insurance) and housing have: 10.5 percent and 11.8 percent respectively between 2013 and 2017 compared to an only 5.5 percent increase for food. Include housing and medical expenses in the equation and you get the Supplementary Poverty Measure (SPM), published by the Census Bureau since 2011. It reveals that a larger number of Americans are poor: 14 percent or 45 million in 2016…..

An Update to the Economic Outlook: 2018 to 2028

Source: Congressional Budget Office, publication no. 54318, August 13, 2018

From the summary:
In CBO’s updated projections, real gross domestic product (GDP) grows by 3.1 percent in 2018 and by 2.4 percent in 2019 before slowing in the following years.

CBO regularly updates its economic forecast to incorporate changes in the agency’s methodology and to ensure that the projections reflect recent economic developments and current law. This report presents the agency’s latest economic forecast, which includes the following key projections of real (inflation-adjusted) gross domestic product (GDP) and other factors:
• In 2018, real GDP is projected to grow by 3.1 percent.
• Growth of actual output is expected to outpace the growth of its maximum sustainable amount through the rest of 2018 and 2019, creating excess demand in the economy.
• Excess demand will put upward pressure on prices, wages, and interest rates over the next few years.
• From 2023 to 2028, real GDP is projected to grow by about 1.7 percent each year.