• slow_4

    Lower Level

    Since 1947 real GDP growth has averaged 3.26%/year. Since 1/1/10 it’s averaged 2.3%. Economists think that some of the decline will persist for a while because of both slower productivity gains and population growth. Therefore, the neutral Federal Funds rate, the rate that’s neither expansionary nor … [Read More...]

  • TR007241

    Wonky Wages

    Seattle’s decision to boost its minimum wage to $15/hour, the highest anywhere, is bad policy. Unlike a rise in the federal minimum wage which affects all employers, this increase only applies inside the city. Thus, employers in low-wage industries in Seattle will be at a distinct financial … [Read More...]

  • The newspaper  GOOD NEWS  and coffee

    Nice News!

    On Monday we learned that existing home sales in May jumped 4.9% to a rate of 4.89 million/year, the best pace since last October. Better yet, yesterday we learned that new home sales jumped from a rate of 433,000/year in April to 504,000/year in May, the best activity level since 5/08 and that … [Read More...]

  • euro

    Mediocre Monetary Meddling

    Rather than using a cannon, last week the ECB used a popgun. By reducing the rate it charges banks on loans and by charging banks on deposits held at the central bank, the ECB hopes to spur lending. It won’t happen. Separately, it’s also finally injecting liquidity into the banking system. What … [Read More...]

  • percentage-dice

    Rotten Returns

    Why are rates so low? Let me count the reasons: flight to quality due to rising geopolitical risk, the Fed’s promise to keep short-term rates low for a long time, Japan’s massive monetary stimulus, the ECB’s decision to start printing money, weaker than expected US growth, no evidence of commodity … [Read More...]


Good Going


Last week, first-time claims for unemployment fell to their lowest level since May 2000 and population-adjusted, you have to go back to the week of May 17th 1969 to get a lower number! In addition, industrial production jumped one percent, the largest gain in two years, and consumer sentiment hit a … [Read more...]


Mighty Multifamily


While housing starts were up 6.3% in September compared to August, the increase was led by an 18.5% rise in multifamily and a 1.1% rise in single-family. YTD single-family starts are up just 4%; multifamily are up 23%! Single-family permits now stand at 624,000 seasonally-adjusted, essentially … [Read more...]


Negative Nuptials


The Friday File: Economists studying marriage find that the more lavish the wedding the shorter the marriage. To be precise, the chances of getting divorced are 60% higher if the wedding cost more than $20,000 compared to less costly nuptials. Similarly, all else equal, the chances of getting … [Read more...]


Reluctant Raises


The total value of wages is $7.2 trillion. If we add 2.3 million workers/year to payrolls, the current rate, each of which earns the average wage of $42,498, total wages rise by $98 billion. However, a 1.36% increase in real wages for workers also equals $98 billion and explains why wage increase … [Read more...]


Vast Volatility


With Ebola worsening, Europe suddenly dramatically weakening, ISIS looking strong, China and Japan slowing, commodity prices tanking and QE ending, market stress is unsurprising. The end of QE and the subsequent rise in short-term rates would be sufficient to fuel volatility; now we’re in overdrive. … [Read more...]


Correlated Currencies


The euro’s dramatic fall against the dollar, due to Europe’s economic weakness, will reduce US inflationary pressures, hurt US exports and reduce equity values. Therefore, the Fed may wait longer before raising rates. However, the ECB is hoping the Fed raises rates faster thus weakening the euro … [Read more...]


Terrific Tirole


Today French economist Jean Tirole won the Nobel Prize in Economic Sciences. His research focuses on industries dominated by a few large firms -- like credit cards, banks, cable companies, Internet search -- and how to regulate them. Because there are so few firms, they try to strategically … [Read more...]


Winning Wine


The Friday File: Last week a single lot of 114 bottles of Romanee-Conti burgundy wine sold at auction for $1.6 million, or $14,035/bottle or OMG, $2,550/glass! The price of $1.6 million broke the old record for a single lot of wine of $1.05 million for 50 cases of Chateau Mouton Rothschild 1982 sold … [Read more...]


Depressing Deutschland


German industrial output fell 4% and manufacturing activity dropped 5.7% last month. Italy is back in recession, France’s GDP growth is 0%, the IMF is calling for European officials to “do more” and the risk of Europe entering a recession in the next six months is 38%. Given this bleak tableau, it’s … [Read more...]


Execrable Ebola


Beyond the terrible human toll, Ebola is exacting a huge financial cost. By 12/31/2014 Ebola will cost Guinea, Liberia and Sierra Leone $360 million; 3% of GDP – equivalent to $500 billion here in the US – and all of West Africa $5 billion. Depending on how fast it’s contained, the costs in 2015 … [Read more...]