The US Recovery

[tankie]

That's çuz The Trumpet drained the swamp ...

Not yet .

[GVChamp]

GVChamp,

Just because Scott Sumner finds it provocative to claim that no one knows what inflation is doesn’t make it true. Just ask that mom shopping at the store. She knows what inflation is.

Back to the point: How’s that iMac similar to a 1970 HP calculator? Both will do certain calculations, but the iMac will also send the results to the call center in India. It's like comparing BBQ sauce to Apples.

Ever heard of a chain-type price index? It takes into account the price change from Year 1 to Year 2, and the change from Year 2 to Year 3, and so forth, until you come to the most recent period. The only flaw is substitution: because of the more frequent measurement of price changes, substitutions are captured more quickly, which may slightly overstate inflation.

This slide show is a pretty good explanation: https://bea.gov/papers/pdf/Moulton0603.pdf

Inflation is not “impossible to figure out.” If you slice it finely enough, yes, it gets very difficult to juxtapose the cab driver's cost of car care from the plumbers cost of wrenches (both being necessary for the person to work). But, that’s not what we use inflation data for, nor what it is designed to show.

You pay a premium for walk able, safe neighborhoods in the price / rent of your accommodation. Schools are largely a combination of location and tax base, so again, you’re paying for it and it can be measured. The rest of your list are already in the CPI.

= = = = =

Dazed,

I’m a macroeconomist, so I rarely look at (US) sub-national data. It tends to be slowly released and easily skewered by things such as grocery shopping or working out-of-area.

Thanks for the link, DOR, I'll take a look at it later.

Actually saw this pop up this weekend regarding differences in inflation rates, related to bargain-hunting, which is directly related to folks grocery shopping:
http://www.nber.org/reporter/2017number2/kaplan.html

... there is tremendous inflation heterogeneity across households... This implies huge differences across households in realized inflation — an order of magnitude larger than the time-series variation in the Consumer Price Index... Moreover, inflation heterogeneity seems also to be related to bargain hunting: we found an increase in the number of shopping trips to be associated with a decrease in inflation, and vice versa.

There's obviously an inflation rate, which is definitely an important part of guessing whether or not the economy is close to full employment or spiraling off into recessions. Trying to gauge living standards over decades? Tougher proposition. How does that imac relate to an all old HP calculator? But it's not even necessary to go that far, because even the loaves of breads we buy today aren't comparable to the loaves of bread we bought 25 years ago, before folate was added to them...to say nothing of the bread that was purchased 50 or 100 years ago.

Hedonistic adjustment for things like walkable, livable neighborhoods is not a straight-forward exercise. It's not as easy as simply comparing the price of a car between two different dealerships, or the price of eggs between two different stores. You have to sort out a lot of factors and always have residual, and that residual isn't insignificant if you are trying to objectively compare living standards between periods that are literally decades apart. But I might be biased, because my profs said I was never very good at doing it.

[DOR]

Thanks for the link, DOR, I'll take a look at it later.

Actually saw this pop up this weekend regarding differences in inflation rates, related to bargain-hunting, which is directly related to folks grocery shopping:
http://www.nber.org/reporter/2017number2/kaplan.html


There's obviously an inflation rate, which is definitely an important part of guessing whether or not the economy is close to full employment or spiraling off into recessions. Trying to gauge living standards over decades? Tougher proposition. How does that imac relate to an all old HP calculator? But it's not even necessary to go that far, because even the loaves of breads we buy today aren't comparable to the loaves of bread we bought 25 years ago, before folate was added to them...to say nothing of the bread that was purchased 50 or 100 years ago.

Hedonistic adjustment for things like walkable, livable neighborhoods is not a straight-forward exercise. It's not as easy as simply comparing the price of a car between two different dealerships, or the price of eggs between two different stores. You have to sort out a lot of factors and always have residual, and that residual isn't insignificant if you are trying to objectively compare living standards between periods that are literally decades apart. But I might be biased, because my profs said I was never very good at doing it.

The key question to ask is, "Why do we care what the inflation rate is?"

If we are trying to decide whether to raise or lower inflation-linked payments (interest, welfare, wages), then a simple measure covering the useful universe is needed. Say, CPI-U.
If we are trying to figure out if the economy is up, down or flat, then a broad, rapidly available measure is needed. Say, GDP or PCE deflators.
If we are trying to publish a paper on 14th century Chinese living standards vis-a-vis 17th century British standards, a snapshot of a point in time is useful. Maybe hours of labor for a day's food requirements.
If we are trying to prove that "they" manipulate data we don't understand, so that our followers will mistrust real news and be more susceptible to fake news and propaganda, we might try attacking boring, necessary and periodic revisions to both data sets and methodologies. Say, Fox News.

Define the need, and the measure will probably suggest itself.

[Double Edge]

That's the kind of logical, useful observations that never make it into reality for the simple reason that economists understand such things and politicians don't care.

But the administration does want to show it is creating jobs and that overall economic indicators are decent. That last part tends to be missed in the media. Or are they attributing it to the previous administrations policies.

[kato]

... why did they pick a background for the greenbox that looks like it was recycled from the election campaign?

Also, since i'm sure this question will pop up at some point in US politics: How much does Trump charge "Real News" in rent for using the Trump Tower?

[tbm3fan]

An interesting article on CNN about the differences between Asia and America vis a vis economic approach. Makes me think that my opinion on what the world would look like in 2030 is far more likely to happen and possibly happen sooner.

http://www.cnn.com/2017/08/08/opinio...ion/index.html

(CNN)Much has been made recently of how the policies of the Trump administration clash with the global conventional wisdom -- and how these contrast with the new spirit of global leadership emanating from China.

As Trump touted protectionism and "America First," Chinese premier Xi Jinping defended globalization at Davos. While Trump was bashing the stinginess of the US' NATO on defense, China convened the "One Belt, One Road" summit of dozens of Eurasian nations to ratify the largest coordinated cross-border infrastructure spending initiative in human history.

And no sooner had Trump pulled the US out of the Paris climate agreement than China and the EU signed a raft of new partnerships around clean energy.

With or without Trump, it is undeniable that a deep and broad strain in American society and leadership is skeptical about trade liberalization, multilateralism and binding global norms. Whereas once America was the missionary driver of all three, right now it formally rejects them.

This gap between America's preferred approaches and other stakeholders extends very strongly into the geopolitical arena as well.
Consider the latest developments in the standoff with North Korea. After it demonstrated long-range ballistic missile capability and the potential to send nuclear warheads on a much further trajectory than previously estimated, Asian neighbors are ever more vocal that diplomacy with Pyongyang -- even recognition of the regime in exchange for a moratorium on further nuclear tests -- is the obvious path forward.

Yet still, America's national security adviser H.R. McMaster and UN ambassador Nikki Haley continue to insist that military options are on the table, including pre-emptive strikes.

Then there is Russia. Germany's liberal FDP party leader Christian Lindner caused a stir last week by stating what was already on most Germans' minds: Antagonistic relations with Russia are not in Europe's interest, and reconciling may require accepting its 2014 seizure of Crimea.

Indeed, the German government is irate about new US sanctions that are as much about promoting American LNG exports to Europe as they are about punishing Russia.

And with respect to Iran, new sanctions in response to the country's expanding ballistic missile program have the immediate effect of pushing Iran and Russia closer together -- with Russia eager to expand its sales of tanks, jets and surface-to-air missiles to Tehran.

Additionally, of course, not removing sanctions on Iran would only give it greater incentive to accelerate its nuclear program, since its compliance with the Joint Plan of Action will have not been rewarded.

America's allies and partners don't just disagree with Washington's policies due to differences of opinion, but because US policies are backfiring nearly everywhere. America's abdication of credible global leadership is already resulting in significant shifts in how major domains of global activity are being managed by other powers.

Consider that China is now the top trading partner of 124 countries, more than twice as many (52) for whom the US is the most significant trade relationship, according to IMF data.

The more than one decade long "supercycle" in which voracious Asian consumption fueled peak commodities prices and enabled Latin America and Africa to notch sustained high growth rates is attributable to Chinese and Indian demand, not America's open markets.

Now that commodities have slumped and Asian demand growth decelerated, to whom are emerging markets turning for investment capital? Japan and China (with Hong Kong) are the largest sources of outbound investment capital in the world today, with Germany next in the ranking.

The Asian Infrastructure Investment Bank (AIIB), one of the principal multilateral platforms underwriting the new Silk Roads connecting Europe and Asia, is largely Chinese financed.

The AIIB is one major example of how Asian countries are aggressively reaching out across the world's major population centers to share their development models and establish partnerships for the long-term.

With this in mind, "leadership" needs to be defined as more than the American Navy patrolling the high seas, America's army boots on the ground in hotspots and American heads of state giving speeches at the Brandenburg Gate
.
Leadership today is about who provides the infrastructure financing, technical assistance, construction equipment and other essential underpinnings of the modernization most of the world still needs to achieve. Commentators who spend too much time inside the Beltway echo chamber and too little time out in the real world have been missing this irrefutable fact for the better part of the post-Cold War era.

But from the financial crisis to the election of Donald Trump, the past decade has delivered the rude awakening needed to spark a reinterpretation of this period.

Western democratic liberalism won't win 21st century admirers on the back of 20th century accomplishments unless they continue to bring the large-scale benefits heavily populous emerging markets need.

This is, of course, precisely what is no longer happening as America in particular becomes a land of a few "haves" and many "have-nots." No doubt rising powers want to import or steal Silicon Valley technology and creative mindsets, but there is precious little else that suits their current needs.

Asian leaders such as Xi or India's Narendra Modi now have the authority, longevity and consistency of agenda on their side. Economist Tyler Cowen recently wrote of China's governance model reaching "mimetic" levels of recognition, while India is poised to be the world's fastest growing major economy for at least the next decade.

And both China and India have long been inspired by Lee Kuan Yew's Singapore, the first world city-state now overseen by the great statesman's technocratic son Lee Hsien Loong.

Bear in mind that even the charismatic former US President Barack Obama did not fundamentally enhance America's global standing or reverse its relative decline. Personalities are a transient way to measure power -- and Trump proves how they are more likely to do lasting damage than memorable good.

Despite Emmanuel Macron's victory in France and Angela Merkel's likely re-election in Germany, the West as a whole lacks any singular figure commanding global admiration or nation beckoning global followership.

Even the emergence of a competent and compelling new face in Western politics -- not that there is one to speak of at the moment -- could not reverse these Eastern gains in the leadership arena.

The most powerful force in history is not American empire, but the law of supply and demand. In the marketplace for global order, today already it is the East that delivers what the world needs more than the West.

[DOR]

While it’s probably true that China is the top trading partner with more economies than is the US, the first thing that popped into my mind was, “So, what?”

Yes, two-way trade is important. If you don’t import, you won’t be able to export.

But, for those economies that are among China’s top trading partners, how many have China as one of their top export destinations? China imports 10% of the world’s merchandise (including commodities), and 9.6% of its commercial services. The US figures are 14.3% and 10.3%. Financial services and insurance? The US accounts for 21.3%, China 3.8%. IPR? US: 12.4%; China 6.9%. And, the US “imports” 17.2% of global tourism services, and China 3.7%.

In 2010-16, China imported more (nominal US$ basis) than the US from 78 economies around the world.
The total during those 7 years was $8.4 billion (and, for the US, $3.8 billion bought from those same economies).

China imported 22.5% of those 78 economies’ total exports.
For the rest of the world, China imported 4.4% of their exports, and the US 14.0%.

[tbm3fan]

I'm not thinking today. I'm thinking 2030. While China is busy doing business the U.S. is screwing around with ultimately are inconsequential issues.

[DOR]

But the administration does want to show it is creating jobs and that overall economic indicators are decent. That last part tends to be missed in the media. Or are they attributing it to the previous administrations policies.

As many here will know from my past critique of the economic performance of US Administrations, the standard measures for various indicators tend to start from Inauguration Day +1 year. Nothing gets turned on a dime in macro-economics.

The Trumpet can claim credit for the acceleration, deceleration or flat-lining of the indicators after another six months. Up until then, and for better or worse, this is still Obama’s economy.

[Double Edge]

As many here will know from my past critique of the economic performance of US Administrations, the standard measures for various indicators tend to start from Inauguration Day +1 year. Nothing gets turned on a dime in macro-economics.

The Trumpet can claim credit for the acceleration, deceleration or flat-lining of the indicators after another six months. Up until then, and for better or worse, this is still Obama’s economy.

Very good, as with all things Trump, the saying, too early to call applies

[Albany Rifles]

While it’s probably true that China is the top trading partner with more economies than is the US, the first thing that popped into my mind was, “So, what?”

Yes, two-way trade is important. If you don’t import, you won’t be able to export.

But, for those economies that are among China’s top trading partners, how many have China as one of their top export destinations? China imports 10% of the world’s merchandise (including commodities), and 9.6% of its commercial services. The US figures are 14.3% and 10.3%. Financial services and insurance? The US accounts for 21.3%, China 3.8%. IPR? US: 12.4%; China 6.9%. And, the US “imports” 17.2% of global tourism services, and China 3.7%.

In 2010-16, China imported more (nominal US$ basis) than the US from 78 economies around the world.
The total during those 7 years was $8.4 billion (and, for the US, $3.8 billion bought from those same economies).

China imported 22.5% of those 78 economies’ total exports.
For the rest of the world, China imported 4.4% of their exports, and the US 14.0%.

I used to say the same thing in 1981 when everyone was trumpeting Reagan for the pay raises and the new weapons being bought.

I had to remind them that the JUNE 81 pay raise was in Carter's FY 81 Defense Budget as was all of the weapon's purchases.

To your point, unless you are talking reacting to a cataclysmic economic event (see 1933 & 2009) it is tough for an incoming president to have enough impact overall to the country until at least +1.

[zraver]

I used to say the same thing in 1981 when everyone was trumpeting Reagan for the pay raises and the new weapons being bought.

I had to remind them that the JUNE 81 pay raise was in Carter's FY 81 Defense Budget as was all of the weapon's purchases.

To your point, unless you are talking reacting to a cataclysmic economic event (see 1933 & 2009) it is tough for an incoming president to have enough impact overall to the country until at least +1.

However, rump came into office when a lot of people had been playing a far more conservative game in investment in hiring due to fears of the regulatory burden. Trumps promise and actions to reform the tax code, reduce regulatory burdens and a couple of well timed economic events unleashed a lot of pent up energy. He does deserve credit for that.

[astralis]

However, rump came into office when a lot of people had been playing a far more conservative game in investment in hiring due to fears of the regulatory burden. Trumps promise and actions to reform the tax code, reduce regulatory burdens and a couple of well timed economic events unleashed a lot of pent up energy.

[tbm3fan]

Trumps promise and actions to reform the tax code, reduce regulatory burdens and a couple of well timed economic events unleashed a lot of pent up energy. He does deserve credit for that.

LOL. Promises is one thing he does very well. His delivery on them leaves a lot to be desired. Thank god!

[DOR]

However, rump came into office when a lot of people had been playing a far more conservative game in investment in hiring due to fears of the regulatory burden. Trumps promise and actions to reform the tax code, reduce regulatory burdens and a couple of well timed economic events unleashed a lot of pent up energy. He does deserve credit for that.

Not sure where you found the date to support that …

Private Real Fixed Capital Investment, Percent Change Year-on-Year
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2014 _ _ _2015 _ _ _2016 _ _ _1/2 2017
Manufacturing: _ _ _ _ _ _ _+12.9% _ _ +35.6% _ _ -6.3% _ _ _-7.9%
Power/Communications: _ _+17.3% _ _ -2.0% _ _ +4.9% _ _ _ -0.8%
Transport equipment: _ _ _+11.8% _ _ +10.5% _ _ -7.3% _ _ _ -5.1%
www.bea.gov, Table 5.3.6

Since 1947, the average duration from peak to trough in real non-residential
private fixed capital investment is 20 quarters. Since 1975, it is closer to 27 quarters.

The last peak was Q-1 2012, 21 quarters ago.
The last trough was Q1 2014, six quarters back.
https://fred.stlouisfed.org/series/A008RA3Q086SBEA

Investment in hiring?
Still can’t find the data to back it up.

https://fred.stlouisfed.org/series/JTSHIR

Hiring expectations 6-12 months out also don’t support that notion.
https://fred.stlouisfed.org/series/CFSBCHIRINGEXP

Nonfarm payrolls in July were up 1.49% YoY, lowest since +1.45% in March 2013.
https://fred.stlouisfed.org/series/PAYEMS#0