The official release of the advance estimate of Q2 GDP today was actually greeted with a sigh of relief. What does it say about the economy when at 1.7% rate generates relief? The relief of course is because it is not worse, but this number is subject to significant revision and so it may only be a temporary stay. I get asked on the radio all the time about economic recovery. The answer remains the same: there is recovery, but it is wholly inadequate to make people “feel” like recovery has taken hold.
The Census Bureau released a paper (citation below, link here) attempting a correction of sorts for the poverty level in counties and cities with a university. Specifically, the paper looks at the poverty rates with and without college students living without their families and off campus. What they find is a significant difference for some communities. That is, for some of the communities, when you exclude these students you get a significantly lower poverty rate. This is not too surprising really when you consider the rationale for many attending college is to increase their lifetime income. » Read more
The Wall Street Journal did an analysis of comments by Federal Reserve members and judged the accuracy (article). “Hawks” are thought to be more aggressive anti-inflation policy authorities than “Doves”. I find it interesting that they go so far as to judge a winner in this situation. Long run outcomes are still not known and would be an important part of scoring who was “right”. But there are a few other issues here as well.
Before the data is released I felt it important to get my take on GDP revisions out there. There will be the standard outcries about political manipulation of the numbers and this is really not the intent, nor the outcome, of this process. This article from Bloomberg.com explains the process a bit. This article does a little better (especially on the R&D front and it mentions economic history). The U.S. economy is dynamic and constantly changing. We can call it innovation or entrepreneurship or development, but at its root it is change. Change in the products and services made and changes in the processes used to make them. These changes require us to change how we account for different aspects of the economy over time.
In the last month, I have fielded many questions regarding Federal Reserve monetary policy and financial markets. Not a surprise since so much happened in that sphere. The Fed announced a change in policy. No wait, they didn’t. In fact,all they said at some point in the future we may see the U.S. economy strong enough that massive monetary stimulus may no longer be necessary. We should really file this under a non-story type of title, akin to saying at some point the sun will rise, but I am not sure when.
For anybody paying even a modicum of attention pension math has been a source of significant debate in the last decade. There are many aspects of pension math worthy of discussion and this recent New York Times article points out many of these issues in light of the Detroit bankruptcy filing and the public sector employee pensions. To put it bluntly, most pensions assume their result.