Archive for August 2015

Given cheap oil, super low interest rates and massively expansionary monetary policy, it’s not surprising the euro-zone is finally growing. What’s surprising is that the Q2 rate was just 0.3%, lower than the dismal Q1 rate 0f 0.4%! With such weak growth, euro-zone unemployment won’t decline and inflation won’t rise. Thus, the ECB won’t terminate…

The Friday File: In 1926, economist George Taylor articulated the Hemline Index. It suggests women wear shorter outfits in good times, longer ones in bad. Thus, the popularity of maxi dresses is terribly troubling. Fortunately, researchers have found that while hemlines are correlated with GDP growth, it’s with a three year lag, meaning today’s fashions…

The US government offers tax credits to promote “good” behavior such as buying an electric car or weatherizing a home. Regrettably, these plans are regressive. The top 20% of earners receive 90% of electric car credits and 60% of weatherization credits. Alternatively, impose a tax on carbon emissions that costs tax payers as much as…

Having spent $300 billion supporting the renminbi over the last year, and with exports down 8.3% Y-o-Y and its economy slowing, China finally capitulated and let its currency depreciate. China may again need to lower interest rates and reserve ratios. Beijing is suffering from industrial overcapacity, a weakening real estate market, overextended banks and an…

Between 1975 and 2005, residential fixed investment (RFI) was about 4.7% of GDP. RFI is composed of single-family construction activity which averaged about 2.25% of GDP, broker commissions of about 0.75%, renovations and improvements of 1%, and multifamily of 0.4%. Today, all subsectors of RFI have largely returned to their historic levels with the sole…

Wage assistance programs aren’t generally a subsidy to low-wage employers. Medicaid, TANF, SNAP and CHP reduce the supply of low wage workers, because the unemployed qualify for benefits thus decreasing their incentive to work. This disincentive raises the wage necessary to attract workers. The exceptions – the EITC and child care subsidies, which are only…

The Friday File: The Bureau of Economic Analysis recently launched a new economic data series called Final Sales to Private Domestic Purchasers (FSPDP). This is awesome! What more could an economist want? This series will exclude the most volatile components of GDP including inventories, exports, imports, and government spending. What is left? That said, it…

While kudos are due to Netflix and Microsoft for dramatically increasing their paid maternity leave policy, this will damage career prospects for woman as they will now probably be out of the labor force longer than before. A better solution; force all employers to require the mother and the father to take equal time off…

Despite a very manageable budget deficit for the next few years, budget hijinks will soon return to DC. A bi-partisan budget agreement that provided substantial sequestration relief through FY15 expires 10/1/15, the debt limit of $18.2 trillion will be reached sometime around the end of October, and if history is any guide, the likelihood of…

The inflation-adjusted median wealth of families headed by someone over 61 rose 40% between 1989 and 2013, from $150,000 to $210,000. For households headed by someone aged 40 to 61, wealth fell 31% from $154,000 to $106,000, while for households headed by someone under 40, wealth declined by 28% from $20,000 to just $14,000. While…