Plunging Productivity: The Worst News of All

In the glory days of the New Paradigm Economy in the late 1990’s, sustained, above-average productivity growth powered the virtuous cycle of faster output, input and employment growth with lower unemployment and inflation rates. Healthy increases in output per hour worked permitted higher wages for employees without comparable increases in unit labor costs for employers. […]

Wage Inflation?

“Economists, all or most of us consent If wage rates rise by 10 percent It puts the choice before the nation Of unemployment or inflation.” I learned that little rhyme in undergraduate money and banking class from Professor James Waller. As I recall, he gave credit for it to a friend of his, probably from […]

The FOMC’s Low-Inflation Worries

The minutes of the March FOMC meeting released yesterday, April 9, showed a heightened concern about the low and falling inflation rate. The FOMC’s favorite price index, the Personal Consumption Expenditure price index, increased only 0.9 percent over the past year. The Consumer Price Index increased only 1.1 percent in that time. The inflation rate […]

Two Percent Inflation: A Good Thing Or A Bad Thing?

Maybe it’s just me, but it seems like every time Janet Yellen speaks publicly she goes out of her way to call attention to the FOMC’s two percent inflation target and remind us that she takes that target very seriously. She sincerely wants higher inflation for the good of the economy and she may be […]

Lies, Damed Lies, and GDP

Back in the day, I was being only partly facetious when I suggested that the government stop compiling foreign trade statistics. Once you know the numbers, some countries will have trade surpluses while others have deficits. Left alone and unobserved, those imbalances would resolve themselves one way or another, and their automatic resolutions would almost […]

The Slow Recovery, Simplified & Rounded

Not everybody waits like me every morning for the latest stat on how the economy is doing or every straw in the wind. Most people are more likely than I am to have a life. When I speak to such people in audiences, I have the uneasy feeling that sharing the detailed results of my […]

Illusory Wealth

The Federal Reserve recently reported that the net worth of American households grew by $9.8 trillion, or 14 percent, last year. $5.6 trillion of this increase came from the stock market and $2.3 trillion came from rising home prices. The increase in household net worth is also called an increase in household wealth. This increase […]

The Fed Transcripts

The hullabaloo over the 2008 FOMC transcripts, released yesterday after a five year lag, stirs some new thoughts along with old memories. My first FOMC year was 1991, before they had transcripts—or, more accurately, before we knew they had transcripts. Then, the big secret came out, probably sometime in 1993, and all hell broke loose. […]

Is Obamacare the New Gasoline Price Tax?

A friend of mine recently told me that he knew his insurance premium would rise from about $6,000 now to over $15,000 in 2015. He wondered what such increases would do to consumer spending and the weak economic recovery given the already low saving rate. I think he expected me to minimize the danger and […]

A Good GDP Tradeoff: Net Exports Up; Government Spending Down

When I look under the hood of GDP reports, the fly in the ointment I usually find is inventories. In the third quarter last year, for example, removing inventory accumulation reduced the headline real GDP number of 4.1 percent to 2.5 percent in final sales. The estimate for real GDP in the fourth quarter also […]