President-elect Joe Biden put forward an ambitious $1.9 trillion fiscal aid plan to address the public health crisis, the damage caused to the economy by the pandemic and the rollout of a national vaccination program. If enacted as proposed, which is highly unlikely, the plan would imply $2.9 trillion in aid pumped into the economy in the near term, ... 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.
CHART OF THE DAY: OPEC’s response to a drop in demand
The price of gas continued to decline in December, falling 15.5% lower than a year earlier. According to recent data from the Bureau of Labor Statistics, gas prices for consumers peaked in late 2018 as the global manufacturing recession took hold and as Americans began to feel the effects of a slowing economy. As shown in the figure below, Americans' ... READ MORE >
Initial jobless claims: Long shadow of the pandemic hangs over labor market
Initial jobless claims surged by 965,000 for the week ending Jan. 9, which almost surely captures the 498,000 individuals in the leisure and hospitality sector who lost their jobs in December and the remarkable churn in the labor market amid lockdowns by state and local governments. The increase, reported by the Labor Department on Thursday, was most ... READ MORE >
Updating U.S. GDP forecast: Fiscal firepower to bolster growth
A confluence of recent events has set the stage for a significant increase in fiscal outlays this year that will boost growth in the American economy to 5.4% for the year, with risk to the upside. The upward revision comes after the Democrats captured control of the Senate by winning two runoff elections in Georgia, which has increased the freedom of ... READ MORE >
CHART OF THE DAY: Inflation poses little risk to the U.S. economic outlook
The inflation rate ticked up to 1.4% in December and the yield on 10-year Treasuries remained above 1% for the sixth straight day on Wednesday. These levels should be considered small victories in the normalization of the economy after a rough nine months of the pandemic. At this point, rent for shelter continues to deflate and a variety of core metrics ... READ MORE >
The case for assistance to state and local governments
More than 1.3 million state and local government jobs have been lost since December 2019. While this is the result of a broader economic shock across industrial sectors, we expect additional furloughs in state and local governments unless federal aid is quickly put in place to offset the collapse in tax revenues. Although a windfall from capital gains ... READ MORE >
CHART OF THE DAY: Longer-term stagnation in the labor force
The December labor report and the overall decrease of 140,000 jobs was, by most accounts, a pause in the progress made during the past six months. The composition of the report released on Friday was almost all determined by the loss of 498,000 employees in the leisure and hospitality sector, with a majority of sectors experiencing modest to strong ... READ MORE >
CHART OF THE DAY: Estimating unemployment during the pandemic
Friday’s headline U3 unemployment rate of 6.7% for December is probably an undercount of the number of out-of-work people in the United States, not by design, but because of the peculiar circumstances of the pandemic. If one adjusts the estimate to account for these circumstances, the unemployment rate would be substantially higher — 8.1% at a ... READ MORE >
U.S. December employment report: Temporary stall in hiring
Hiring in the American economy declined by 140,000 in December as firms felt the effects of the six-month delay by the political sector in providing fiscal aid to the public, and the subsequent pulling back in economic activity. This data, released by the Labor Department on Friday, will tend to affirm the Federal Reserve’s policy path that implies a ... READ MORE >
CHART OF THE DAY: 10-year Treasury yield pushes above 1%
It’s been an eventful first few days of trading in the new year. Most notably, the yield on 10-year Treasuries moved above 1% for the first time since the economic collapse in March, and following the runoff elections in Georgia on Tuesday that gave control of the Senate to Democrats. Yields broke past 1% overnight and traded in a range on Wednesday. They ... READ MORE >