The sharp sell-off across financial markets on Monday is linked to fears about a global resurgence of the pandemic. Nowhere is that more evident than in the U.K., where R – the reproduction rate of COVID-19 – is approaching 1.7. That is akin to a nuclear event in terms of public health. An R at that reading could conceivably result in another round of ... READ MORE >
Economics
The middle market economy—often overlooked in the wake of large public companies and emerging Wall Street darlings—is the backbone of U.S. economic growth, accounting for the majority of new U.S. jobs and some 40 percent of the nation’s GDP.
Tracking the spread of COVID-19: A resurgent virus, and a grim milestone
Following a late-summer lull in the coronavirus pandemic, the rate of infections has resumed its increase in the United States and is poised to intensify in the coming weeks, RSM’s modeling shows. This comes as the number of coronavirus deaths will soon pass a grim milestone: 200,000 in the United States since the first death was recorded in February. ... READ MORE >
Initial jobless claims remain elevated at 860,000
The pace of firings in the U.S. economy remains well above anything observed during the Great Financial Crisis as 860,000 workers filed for first-time jobless claims for the week ending Sept. 12, a reflection of the deep scarring in the domestic labor market and economy. An additional 658,737 filed for federal Pandemic Unemployment Assistance, bringing ... READ MORE >
Monetary policy and inflation in the modern era
The Fed is embarking on a new era in monetary policy, switching from its point target of 2% inflation to a target range of 1% to 3%. This change is predicated on longer-run structural changes in the economy that are inherently disinflationary, a real neutral interest rate near zero and much slower growth in the economy, all of which have reduced the ... READ MORE >
FOMC comment: Fed follows through on its policy shift
The Federal Reserve followed through on its update of its long-run monetary framework, stating quite transparently on Wednesday that the policy-setting Federal Open Market Committee “will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time and longer-term inflation expectations remain well anchored at 2%. The ... READ MORE >
CHART OF THE DAY: Retail sales rise amid soft back-to-school spending
Retail sales grew for the fourth month in a row in August, but the expected lift from back-to-school spending was not as great as anticipated. Retail sales rose by 0.6% from July to August, and by 0.1% compared to a year ago, the Commerce Department reported on Wednesday. Analysts had expected a 1% monthly gain. The muted bounce was most likely, in part, ... READ MORE >
CHART OF THE DAY: U.S. industrial production expansion was smaller than expected in August
After three months of sharp increases, U.S. industrial production growth was smaller than expected in August, according to a Federal Reserve report released Tuesday. Industrial production expanded by 0.4% on a monthly basis following July's increase of 3.5% (revised from 3%), and is a sign that the economic recovery is starting to moderate. Analysts had ... READ MORE >
Tracking the spread of COVID-19: A summer so foul
There have been more than 6.7 million coronavirus cases and more than 198,000 deaths in the United States, according to the WorldoMeters database. Despite improvement in recent weeks, the rate of infections remains elevated heading into the fall. All of this has occurred in the eight months since the first case was reported in January, with 74% of all ... READ MORE >
Savings, the money supply and inflation during a pandemic-induced recession
During the dark ages of economics, the quantity theory of money held forth that the amount of money swooshing through the economy determined everything from inflation to economic growth. An excess supply of money available to the public would chase a limited supply of goods, inducing higher inflation and thereby limiting growth. The changing structure ... READ MORE >
CHART OF THE DAY: The velocity of money and recession
One long-held nostrum in economics is that inflation is always and everywhere a monetary phenomenon. For years, some economists focused on growth in the money supply and the velocity of money, which is the ratio at which money changes hands, to ascertain the direction of growth and risks to the outlook from inflation. Over the past three decades, the ... READ MORE >