David Wessel of the Wall Street Journal reports that President Obama will re-appoint Ben Bernanke as Chairman of the Federal Reserve.
Excellent decision.
P.S. Don’t let this good news distract you from the much-less-good economic news on Tuesday: CBO and OMB are releasing new budget projections that will show trillions upon trillions of coming deficits.
Yesterday’s report on residential construction provided more evidence that step one of a housing bottom is underway — and that step two may be beginning.
Total housing starts fell slightly in July because of weakness in multi-family. But starts of single-family homes increased to 490 thousand (at an annual rate), the fifth straight monthly increase and the highest level since last October.
As the chart shows, this rebound is off of extremely low levels, so we shouldn’t get too excited. But it does appear that single-family starts bottomed last January and February (at 357 thousand).
That’s the first step of a housing bottom.
As I’ve noted in previous posts, however, that isn’t enough to declare a bottom in housing activity. Housing activity depends on the number of houses under construction, which depends on both housing starts and housing completions. Completions have exceeded starts for more than three years. As a result, the number of houses under construction has fallen for 41 straight months.
For me, the big news in the July data is that this decline may be ending.
In her recent speech about the impact of the stimulus effort, Christina Romer, Chair of the President’s Council of Economic Advisers, noted that “as of the end of June, more than $100 billion had been spent.”
If you visit the government web site tracking the stimulus (Recovery.gov), however, it will tell you that the government had paid out only about $60 billion by July 3. (You can find this figure in the chart at the lower right hand corner of the home page.)
Why does Christi report a figure so much larger than the one reported on the official website? Because Recovery.gov isn’t tracking all of the budget effects of the stimulus.
Christi’s figure includes the $60 billion of spending reported on Recovery.gov plus an internal estimate, prepared by Treasury, of the tax reductions resulting from the stimulus effort through June 24. Those tax reductions are obviously a big deal, totaling $40 billion or slightly more through the end of June.
Based on conversations with friends and journalists, I get the sense that some users of Recovery.gov do not realize that its figures cover only the spending side of the stimulus story, not the tax side.
As a result, I think Recovery.gov is (unintentionally) confusing people into thinking that the stimulus effort to date is smaller than it has actually been.
I have two suggestions for how to fix this:
Step 1: Reduce Confusion: Recovery.gov should slap a warning label on the home page chart (and everywhere else it reports aggregate figures) that says something like: “These figures reflect only the new Federal spending that has resulted from the recovery act. The act also included significant tax reductions that aren’t reflected here.”
Step 2: Provide the Information: Of course, it would be even better if Treasury would release official estimates of the week-by-week or month-by-month tax reductions flowing from the recovery act. These figures would obviously be estimates — and thus not able to be audited to the same degree as the spending programs — but would be invaluable to analysts trying to track the impact of the stimulus effort.
P.S. As I noted last week, the Congressional Budget Office recently estimated that the total budget impact of the stimulus effort reached about $125 billion through the end of July.
Everyone who follows the U.S. economy closely knows that the unemployment rate was 9.4% in July, down 0.1% from June.
Everyone, that is, except Google.
If you ask Google (by searching for “unemployment rate United States“), it will tell you the unemployment rate in July was 9.7%.
What’s going on? Well, it turns out that Google is directing users to the wrong data series. As I discussed last month, almost everyone who talks about unemployment is using (whether they know it or not) data that have been adjusted to remove known seasonal patterns in hiring and layoffs (e.g., many school teachers become unemployed in June and reemployed in August or September). Adjusting for such seasonal patterns is standard protocol because it makes it easier for data users to extract signals from the noisy movements in data over time.
For unknown reasons, Google has chosen not to direct users to these data. Instead, Google reports data that haven’t been seasonally adjusted and thus do not match what most of the world is using.
This is troubling, since I have high hopes for Google’s vision of bringing the power of search to data sets. The ability of users to find and access data lags far behind their ability to find and access text. I am hopeful that Google will solve part of this problem.
But data search is not about mindlessly pointing users to data series. You need to make sure that users get directed to the right data series. So far, Google is failing on that front, at least with unemployment data.
P.S. As I discussed in a follow-up post last month, Wofram Alpha has an even more ambitious vision for making data — and computation — available through search. I like many of the things Alpha is trying to do, but they are lagging behind Google in several ways. For example, as I write this, they haven’t updated the unemployment data yet to reflect the new July data. (Click here for Alpha results.)
In a series of posts (most recent here), I’ve documented that Americans are getting an increasing portion of their income from the government.
BEA released new data on incomes a couple weeks ago, including revisions back to 1995. These data reinforce the story I’ve described in my previous posts:
The Business News Network in Canada interviewed me last week about the gigantic amount of excess reserves being held by U.S. banks.
Here’s a link to the video of the interview. (We had a small technical glitch at the start, but then got rolling.)
Going into the interview, I was focused on the following talking points:
I didn’t manage to get all of that into the interview, of course, but I tried to hit some of the high points.
At the TED conference in Oxford last month, Paul Romer put forward a big idea: charter cities. His basic vision is that the best way to promote growth in developing countries may be to start over. Of course, you can’t just sweep away the existing system of economic and political institutions; they may be killing growth, but they are well-entrenched. So do the next best thing: clear some ground and build new charter cities.
Those cities will have rules — indeed, economic history teaches that they must have rules — but they will be focused on providing an environment that promotes economic growth. In short, property rights and the rule of law are in, corruption and political patronage are out.
His provocative example: If the U.S. gives up on Guantanamo, Raul Castro should invite the Canadians to help manage the area as a charter city. Over time, perhaps Guantanamo could become the Hong Kong of the Caribbean.
To illustrate how prosperity varies around the globe, Romer uses the increasingly popular approach of showing night time satellite photos. North Korea is a sea of darkness next to South Korea, illustrating the perils of too much government control. The darkness of Haiti, as compared to its neighbor the Dominican Republic, similarly illustrates the perils of too little government or, at least, too little governance.
As Romer frames it, development is a classic Goldilocks problem of finding the right set of rules — not too hot, not too cold — and then allowing people to make the choices that eventually lead to prosperity.
The headlines in today’s jobs report were better than expected:
If you dig into the numbers a bit further, you find some other encouraging nuggets:
Losing 247,000 jobs is not a good month in the job market. But it is the best month since last August, before the fall of Lehman.
The Treasury released its quarterly update on its borrowing needs yesterday. The headline is that Treasury expects to borrow $406 billion during July, August, and September. That’s a gigantic figure, but it is down from the roughly $530 billion that Treasury borrowed during those three months last year.
When combined with $1.4 trillion in borrowing during the previous nine months, the $406 billion will bring total borrowing to $1.8 trillion during this fiscal year (Oct. 2008 to Sept. 2009).
The Treasury release includes a number of fascinating charts about the size and composition of our nation’s debt. One that particularly caught my eye was this chart showing the percentage of outstanding debt that is scheduled to mature in the next 12, 24, or 36 months:
Students of financial crises, past and present, will recall that over-reliance on short-term debt is a classic precursor of financial distress. Think, for example, of the major financial firms that had to roll over significant fractions of their financing every week … or even every day.
Continue reading “Treasury: More Borrowing, Less Short-Term”
One of my first posts cautioned against comparing the current economic downturn to the Great Depression. Our economy is certainly in terrible shape, as Friday’s GDP data confirmed. Indeed, it’s the worst downturn since World War II. But it still pales in comparison to the horror of the Great Depression.
Since we received fresh data on Friday, it seems like an auspicious time to present a new version of my chart making this point:
The green bar is the current recession. Most forecasters expect the economy to grow, albeit tepidly, in coming quarters. If they are right, the estimated peak-to-trough GDP decline in this downturn is 3.9%. (If you believe that forecasters are too rosy, feel free to add on your own estimate of further declines in the quarters ahead.)
The chart has three main messages:
