Module 3 Extra Credit Posts for Spring 2024

For March 18

I announced in class that I would skip this one because I couldn't get the article link I wanted to use to open properly. I'll see if I can get it ready for Friday.

So that make this one the last one that will appear on Test 3.

For March 15

A month ago we looked at the big 4 recession indicators. I was worried because we had 2 reds in January, and I said we should keep on eye on the other two.

Well, now it looks like this:

Those 2 missing ones for January both came in as green. Plus another green one for February. So it's kind of more of the same: some troubling data, but most of it ... isn't. That's been the story for almost 2 years now.

For March 13

Yesterday, the BLS announced the CPI and its inflation rate for February. The number came in right around expectations: an increase of 0.4% in prices in February, and an increase of 3.2% over the past year. Here's the press release.

On the surface, those seem like pretty small numbers. 

BUT, if you ask people if they're still worried about prices going up, what's their answer? Most people would say yes. So that tiny number IS the number that tracks this, and thus what we need to be paying attention to is small changes in the small number.

In that context, 0.4% in a month isn't great. What we'd like to see is mostly 0.1% in a month, with the occasional 0.2% thrown in. And, of course, like all data, they can bounce around a little, as long as the big bounces get balanced with smaller ones.

But we're getting a little worried about inflation again. Don't get me wrong, it's fantastic that it's come down from what it was 2 years ago. But, it also hasn't returned to rates we'd like just yet. So everyone wonders whether it will go back up or not.

This graph summarizes. You don't have to understand the 4 different variations on inflation that are shown. But what you should absorb is that all of them are still higher than they've been in 30 years.

The takeaway here is that incumbent politicians will tell you that the inflation problem has been licked (because they want your vote). But the reality is that 1) not yet it hasn't, and 2) it started after many of them took office, so it's on their watch.

Now, we're covering the Fed and monetary policy this month. And the Chair of the Fed isn't facing re-election, and so might be a better source of information. And in stuff like that statement before Congress last week. Chair Powell made it clear that the Fed is watching these numbers very warily, and is not in a rush to lower interest rates (which is expansionary, and might fuel worse inflation).

For March 11

As remarked earlier in the semester, the early forecasts of real GDP growth for 2024 IV were much lower than the official number turned out to be.

But ... you weren't in this class in the Fall to be following those. So when I write that we're surprised, it may not mean as much to you.

They're also tracking real GDP growth rates for the current quarter. This is of more interest for you in this class. BUT, the official number to compare it to won't come out until Final Exam week when the class is over. All I can do is tell you to try and pay attention at that time.

Anyway, the forecasts for the current quarter are very similar to those for last quarter: something around 2%/year annualized.

For March 8

The jobs report is out for February.

The unemployment rate increased to 3.9%. That's bad, but bouncing around by a few tenths of a point is normal. Worry more if it goes up again next month.

You should run a little math in your head here: UR = U/(U + E). The unemployment rate is the number of unemployed (U) divided by the sum of the unemployed and employed (E). How could the UR on the left go up? It could be because U got larger, but it could also be because E got smaller (or both, or some other combination).

So we dig a little deeper, and the BLS report says that the unemployed went up by a lot (334K), and the employed went up by a bit (275K). There's two reasons that might have happened: 1) the obvious one is that people lost their jobs, but it can also be 2) people who were out of the labor force thought it seemed like a good time to start looking for work again.

The labor force participation rate stayed the same, at 62.5%.

Lastly, the news is mostly reporting the big increase in the number of jobs, because that's positive news for Biden (and our media tends to support Democratic presidential candidates). But ... remember that aphorism ... "the devil is in the details"? Down towards the bottom of the BLS report it notes that while employment went up last month (at first glance), the revisions to jobs for both January and December were downwards. So maybe it's not such a rosy story after all.

For March 6

As discussed in the videos linked in Module 3, the Federal Reserve was set up to be independent of the federal government. In the sense that no one in the Federal Reserve reports to, or can be fired by, someone in the White House or Congress.

But, the Fed is located in D.C. and works in parallel with both the White House and Congress. So it's a tight and amicable relationship.

As part of this, the Chair of the Fed is required to appear in a hearing before Congress twice a year. It always makes the news. The law requiring this appearance is called the Humphrey-Hawkins Act, and sometimes you'll hear that mentioned in the news too.

But it's not too big of a deal. The Chair reads a prepared statement without much new information in it. Then they have a little Q&A. Members of Congress are in a bully pulpit for these hearings, so they sometimes do berate the Chair, and/or ask probing questions for which they don't get decent answers (remember, the Chair doesn't report to Congress, so what can they do if the Chair avoids answering the question, right?).

This year ... the Chair didn't say much interesting ... and there were no fireworks. If you're interested, you can read the Chair's report, or watch the hearing.

For March 4

The revision of GDP came out last week. Recall that this is the revised or second estimate for 2024 III. It comes out a month after the first/draft/advance estimate.

A month ago economists were stunned that the growth rate in that quarter was so high: 3.3%/year annualized. A big downward revision was expected.

That didn't happen. Here's the press release. The growth rate was revised downward, but only to 3.2%/year annualized. Revisions in the range of a few tenths of a percentage point are common.

So, we still face the same conundrum: it's hard to reconcile the high real GDP growth rate with the mediocre data we're seeing from other sources.

But, for what it's worth, the advance estimates was considered wildly above expectations, but we don't see what the BEA collects until they release it. Now that they have released the data that got them to the 3.3%/year number, the consensus of expectations was that the second estimate would be about the same. And it was.

For February 23

No one remembers me doing this in class that day, so unless someone can clue me in that I did, I'll assume that I just skipped this day.