11/16/2017

Inflation is Still in Check

Earlier this week, the BLS released the Consumer Price Index Report for this past month. The CPI grew at just 0.1 percent in October and 2.05% over the past 12 months.

InflationChart11-17

The low overall inflation was accompanied by a 3.2% increase in shelter and a sharp 6.4% increase in energy prices. Together, shelter and energy amount to over 40% of the CPI basket weight that the BLS uses. The spike in energy prices is due to the 10.8 percent rise in energy commodities which is constituted by fuel oil and motor fuel. Since last October, gasoline prices have increased 10.8% and 39% since February of 2016.

The table below shows October price changes in different CPI categories.

InflationTable11-17

11/03/2017

Unemployment Rate Falls to 4.1%

According to the Employment Situation Report released by the BLS this morning, unemployment for the month of October was at 4.1%, the lowest since December 2000.

PayrollEmployment11-17

The good news was accompanied by revisions in the number of payroll employees for the past two months which means that the US has had positive job gains for every month since October 2010.

On a less positive note, 765,000 people left the labor force this month which caused the labor force participation rate to dip 0.4 percentage points to 62.7%.  We will continue to monitor this measure.

LFPR11-17

10/27/2017

Second Consecutive Quarter of Solid Growth

For the first time since 2014, real GDP in the U.S. grew at 3% or better for two consecutive quarters.  This is based on the advanced estimate for real GDP growth for the third quarter of 2017 released today by the BEA. This is a positive sign especially considering that real GDP per capita since the end of the Great Recession had only been growing at a slow 2.1%.

GDPGQ32017

Unlike the last quarter, where growth was mainly driven by a spike in personal consumption, this quarter showed a much more leveled growth across the different factors that comprise GDP. One change worth mentioning is that for the third time since 2014, there has been a decrease in imports which may be result of a weakening dollar.

GDPTable2017.III

10/13/2017

Hurricanes Drives CPI Up

Consumer prices in the U.S. rose 2.2% over the past year, according to the latest Consumer Price Index (CPI) data released today by the BLS.  While inflation hovered around 1% for much of 2016, 2% seems to be the new normal in 2017. 

InflationTable10-17

The CPI was up 0.5% in September alone, with about half of this due to the 13.1% increase in gas prices.  We spend a lot on gasoline (about one out of every thirty dollars for the typical consumer).  Hurricanes Harvey and Irma are certainly to blame for much of the rise in gas prices because they caused the closure of many refineries.   

The table below offers some examples of goods or services with price increases and decreases in September.

CPI Table 1017

 

 

10/06/2017

New Jobs Report Brings Good and Bad News

The U.S. unemployment rate fell to just 4.2% in September, the lowest rate since 2001, according to the latest Employment Situation summary published by the BLS today.  Additionally, the labor force participation rate increased to 63.1%. The highest level since March 2014. Even though the labor participation rate is still 3 percentage points lower than before the Great Recession, its steady numbers coupled with low unemployment rate, suggests that the US might be operating near full employment.

LFPR10-17

On the other hand, the seven year streak of positive job gains ended, at least temporarily, as the BLS reports 33,000 fewer jobs in September.  Probably, the main causes are Hurricanes Harvey and Irma. In the first week of September, when Hurricane Harvey hit, jobless claims spiked from 62,00 to 298,000.

Capture

 

09/01/2017

First Jobs Report of the Semester

This morning the BLS released its monthly Employment Situation Summary, the first jobs report of this academic year.  These reports are released on the first Friday of each month and they report U.S. labor market data for the previous month.  During this year, we will follow monitor at least three data series from these reports.  The first is the national unemployment rate, shown in the graph below.  The graph goes back to 2006 which is prior to the Great Recession.  Unemployment peaked in October 2009 at 10% but is now down to just 4.4 percent.

Unemployment9-17

We will also watch to see how many new net jobs are created each month.  For this, we watch the series called Total Nonfarm Employment.  In August of this year, Nonfarm employment grew by 156,000 jobs.  That is a lot of jobs, but not necessarily in comparison to more than 153 million total nonfarm jobs in the U.S. economy.  In fact, this increase is below the average over the past five years (see graph below) of more than 200,000 per month. 

Employ0817

Finally, we will often report the labor force participation rate (LFPR).  This is the portion of the working age (non-institutionalized civilian) population that is either working or actively looking for work.  It has become important recently, as more workers are retiring and opting to stay out of the labor force for other reasons.  The graph below shows LFPR data since 2006.

 LFPR9-17

You can see that the LFPR has been hovering below 63% for almost four years.  This is very low by historical standards and you can see that it was 66.4% back in January of 2007.  This difference represents millions of workers that are now out of the labor force. 

04/28/2017

The U.S. Economy is Muddling Along

This morning, the BEA released its advance estimate of GDP data for the first quarter of 2017.  Real GDP growth is estimated at just 0.7 percent.   Remember that this first estimate is rough and has lately been subject to upward revisions.  Still, this estimate implies that the U.S. economy is really just sputtering along. 

GPD2017.I

None of the four main components of GDP increased much.  The table below shows how each contributed to the overall growth rate. 

GDPTable2017.I

The meager increase in consumption spending is particularly worrisome in historical context: this is the smallest increase since the fourth quarter of 2009.  This is a bit surprising due to the recently high estimates of consumer confidence.   And remember that consumption makes up about 70% of total GDP spending. 

 

 

04/07/2017

Unemployment Rate Drops to Lowest Level since 2007

The March jobs report was released by the BLS this morning.  The real news is that the economic recovery continues.  In terms of data, the unemployment rate dropped to 4.5 percent, the lowest level since May 2007 (nearly ten years!).  That is the good news.

Unemp0317

But while the unemployment rate dropped, the number of jobs added was less than recent trends.  In March, 98,000 new jobs were added, but this is significantly below the average of 202,000 for the past five years.

Employ0317

Two words of caution are in order.  First, we don't want to draw significant conclusions from a single jobs report.  On a month-to-month basis, there is a lot of noise in the data.  It is best to consider long-run trends.  In this case, the long-run trend on employment is certainly positive. 

Second, it is still to early to credit or blame our new government leaders for any economic economic conditions that may show up in the data.

 

 

02/03/2017

January Jobs Report Brings Good News and a Data Lesson

Earlier today, the BLS released the jobs report for January 2017 and the news is not bad.  While the unemployment rate ticked up slightly to (a still low) 4.8 percent, other indicators came in very strong.  Nonfarm employment increased by 227,000 jobs in the month.

Unemp0117

Labor force participation edged up to 62.9 percent and this offers us another teachable moment.  Students may be confused as to how 227,000 new jobs were created and yet the unemployment rate increased.  One reason is that the labor force increased by 76,000 workers.  Therefore, many new workers entered the labor force and many of these found jobs - all of this is positive.  But the unemployment rate still climbed because some of these new labor force participants did not find work (yet). These workers are probably frictionally unemployed: they may find work eventually but it takes some time to match workers with available jobs.  

Lfpr0117

01/27/2017

2016 GDP Report: Weak and also Misleading

The advance GDP estimate for 2016 is sobering but also an opportunity to learn a little about the details of how we measure GDP. Let's look at the headline data first and then circle back for a quick lesson in GDP accounting. 

Overall, GDP in the fourth quarter grew at just 1.9 percent, according to this first estimate.  This estimate will be revised over the next three months, but it is not encouraging.  The figure below shows real GDP growth by quarter back to 2006.  The last quarter of 2016 caps off an anemic year of 1.8% growth overall.  2016 pales in historical context, since average real GDP growth over the past 50 years was about 3 percent. 

GPD2016.IV

Now, let's dig a little deeper into the fourth quarter figures to see the contribution to growth from the four major categories of GDP expenditures: consumption, investment, government and net exports.  The table below shows how each of these components contributed to the overall growth rate of 1.9 percent.

GDPTable2016.IV

Growth in private spending on consumption and investment goods and services was strong.  But net exports (exports minus imports) pulls down the final number by 1.7 percent.  This is largely due to an increase in imports of $65.7 billion during the fourth quarter.  Now we get to the (boring) details of national income accounting.  Imports don't make us worse off - more imports mean we get more stuff from around the world.  But when we tally up gross domestic product (GDP), we subtract imports because they weren't produced here. 

Bottom line: the fourth quarter wasn't great, but the large increase in imports skews measured GDP downward some. 

 

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