CBO released an Update to its Budget and Economic Outlook, while the IMF released a mission concluding statement for its Article IV review of the United States. Here are the implied GDP levels for year-end 2021 [and updated CBO potential GDP, h/t Paweł Skrzypczyński]
Figure 1: GDP as reported (black), Atlanta Fed nowcast (thin black line to 2021Q2), Administration (red square), Survey of Professional Forecasters (blue triangle), FT-IGM (pink circle), CBO as projected in June (orange *), IMF Article IV (green inverted triangle), potential GDP as estimated by CBO in February 2021 (thin gray line) and potential GDP as estimated by CBO in July 2021 (thick dark gray line). NBER recession dates assuming trough at 2020Q2. Dates indicated denote when the forecasts were “locked down”. Source: BEA, Atlanta Fed as of 6/25, OMB FY’22 Budget, Philadelphia Fed SPF (May), and FT-IGM survey (June), CBO (February, July), IMF (July), and author’s calculations [updated 7/2].
The IMF forecasts 8% q/q growth, while CBO projects 7.4% (compare to 3.7% in February).
Using the CBO’s February July 2021 estimate of potential GDP and the CBO’s July projection, the output gap at year’s end will be about 2% 1.4%; using the IMF’s estimate of output, it’ll be about 2.6% 2%. There is no reason why either the CBO’s or IMF’s estimates of potential as of today will be the same as what CBO estimated in February. In fact, The CBO notes:
As the pandemic eases and demand for consumer services surges, real (inflation-adjusted) GDP is projected to increase by 7.4 percent and surpass its potential (maximum sustainable) level by the end of 2021.
Potential GDP has been revised up about 0.6% going from the February 2021 to July 2021 reports. That statement seems to indicate that its current estimate of potential GDP is considerably higher than what it indicated in the February report. That would be consistent with assessments that the extent of scarring in the business sector has been less profound than previously feared.
Yellen announced that 130 nations have agreed to the 15% global minimum tax with 9 holdouts which were Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria, Peru, Saint Vincent and the Grenadines, and Sri Lanka.
Outside of notorious tax haven Ireland, the other 8 are not exactly major players.
They will be though. Thats what they are hoping.
Funny! Someone emailed me a pile of rubbish written by an international tax lawyer for Tax Notes International how the economy of Barbados would be headed for ruin if we had sensible tax reform. Page after page of boring whining from the arrogant tax cheat which basically said his cushy practice might dry up if he could not help rich people dodge taxes.
Now I get that tourism may be a big deal in Barbados but sensible tax reform is not going to hurt that sector. But this poor dude might have to get a real job if this global minimum tax catches on.
This is actually a huge thing that has gotten much less press than it deserves. Finally an effective squeeze on tax evading corporations.
Most of the holdouts are looking at serious losses and damage to their economy if they just jumped in at 15%. We will need to apply a combination of stick and carrots to get them slowly moved up to where everybody else are.
Will 15% be a floor, or a ceiling?
@ Princeton”Kopits
Go have a poorly sourced steak at Mar-a-Lago. The IQ level of Mar-a-Lago patrons roughly mirrors your own and they’ll have all the international tax policy updates for you. Cross your fingers and the orange creature may pass on his porn girl leftovers to you. Careful….. the Florida high humidity can cause a large rash in certain regions of the body.
My God that is a stupid question even for you. Minimum means floor. Do you need the preK kids to spell this out for you in crayons?
“That statement seems to indicate that its current estimate of potential GDP is considerably higher than what it indicated in the February report. That would be consistent with assessments that the extent of scarring in the business sector has been less profound than previously feared.”
Good news as it does seem we are not going to have a lack of aggregate demand problem.
“That would be consistent with assessments that the extent of scarring in the business sector has been less profound than previously feared.”
Would this include a slower than expected increase in employment??~~i.e. permanent unemployment caused by Covid-19 not yet substantiated by the official numbers??
If we take IHS data as correct, growth has flattened out in the past couple of months, right around the prior output peak. The forecasts represented in the chart seem to anticipate very little interruption in growth. IHS does post sizable revisions at times (see March for a recent example) and the recentt lack of volatility in the IHS series seems out of place given prior volatility; growth may not have flattened out as much as IHS indicates. Consumer spending may have caught back up in June.
Still, consumption seems fairly sensitive to transfers and a big chunk of transfers end in September. The student loan payment moratorium and the eviction moratorium are also sending soon. The Delta variant is catching fire a couple of months before school resumes. The IMF and CBO forecasts seem mighty optimistic. Based on IHS monthly GDP for May, the CBO forecast is for nearly 0.7% m/m growth for the remainder of the year? Blazing fast. I’ll check my may.
My math. I’ll check my math.
And yeah, CBO is looking for nearly 2% growth (not annualized) in Q3 and Q4, an acceleration. Doesn’t sound like a scarcity of labor to me.
I’m all for government taking care of families, the environment and (non-CO2-emitting) infrastructure, but at eome point government will be grabbing resources away from the private sector. To the extent the private sector is amoral, I’m all for government diverting resources to moral aims. But a some point, fiscal stimulus will run into diminishing returns. I’m guessing it happens in Q4.
@ macroduck
Going to be interesting to watch. Picked up half a tank of gasoline today. $2.65 a gallon, I would guesstimate the local average is around $2.77. Hoping to get around to all of these great links Menzie is sharing. Reading up on Weisselberg, and being spread thin on reading materials. I’m more curious on the IMF stuff than the CBO to be honest. I got my boots stuck in the concrete on being way more negative on some of these numbers than most people, I mean growth and inflation are pretty well tied to each other, and I’m not seeing the inflation numbers some people are quoting. I’m guessing your inflation forecasts are slightly higher than mine. As honestly weirdly seems to be the case I think we are seeing pretty close to eye-to-eye on this stuff. Although this “agreement” should probably be frightful to yourself, I find it semi-comforting.
And gotta catch up on my statistics text and WSJ and and and and and and and…………………..
I don’t have cable TV, and I’m sure a lot of this is being bandied about there on the cable. but the most interesting part to me of all this is that Weisselberg’s daughter in law has been helping the DA’s office, Now certainly I can understand having strong/intense emotions after a break up, but how fascinating is that?? You lose your BF and then help in getting your former father in law put into prison?? Wouldn’t there have to have been a lot of interpersonal friction or feel a huge part of blame in ending a relationship rested with that person/in-law to do that?? For example, I mean….. well let’s just say depending on the situation I don’t think a person would automatically “pull the trigger” or “set off the detonation” for their in laws’ prosecution etc after a relationship ended. I’m talking about EVEN a bitter/resentful ending. I mean I don’t think you “blanket them in” with bad feelings to your Ex unless they were somehow directly involved in the break-up.
Am I making sense here?? Now if you feel there was in-law invoked sabotage of the relationship (which isn’t even near to being “always the case”), that’s another story.
I agree that inflation follows growth. Pretty hard to argue otherwise. But…, there’s the stuff you push into the system and there is the system itself. We are pushing a good bit into a system which doesn’t seem very good at producing inflation at the consumer level.
The Fed responds to cyclical risks, with an eye on secular factors. Hikes amounting to 25 basis points in 2023, as suggested in the latest FOMC dots, are matched with nearly 1% more core inflation over the 2021-2023 period than the FOMC median estimate in March. That amounts to the Fed accomplishing some of its goal of catching up on price increases and so returning toward a “normal” 2.5% funds rate. If the Fed doesn’t expect to be at 2.5% in 2023, that implies the whole job of inflation catch-up will be far from done in Q42023. The Fed also expects core inflation of only 2.1% in both 2022 and 2023 even with strongly above trend growth. So the FOMC, at least, seems to think we remain in a low-inflation regime. Who am I to disagree?
I’m going to be focused on Brainard’s comments more than the overall boards. As much as it kills me to concede it as a “sexist”, Brainard is the sharpest one in the group.
Well, the Atlanta Hawks lost by eleven points tonight in game 5. Some of you may have been wondering about the vicious vicious injury Trae “The Flopman” Young suffered in Game 3 which has kept him out of two games of the NBA Eastern Conference finals series. You’ll remember pgl told us that Trae “The Flopper” Young is an all-star player (well, not really….. he didn’t make the NBA All-Star team this year, because fans get bored watching free throw shots after a player flops on the ground, but pgl says watching Trae Young flop “is exhilarating”). You be the judge.
Anyways…… It is an ugly ugly injury, and I suggest to parents out there, if you have an infant child under the age 2, please please…….. please, please please……. for the love of God and all that is Holy, do not let any infant, under the age of 2 years old watch this video of Trae “The Flopper” Young’s vicious vicious foot injury (some have compared it to a McDonald’s worker getting a paper cut handing a customer their receipt, or possibly worse). If any infant child under the age of 2 watches this video, neither I nor Menzie can be held responsible (because you were warned of the gruesomeness of the injury in the video link) for the possible damaging effects to cognitive development.
https://twitter.com/BleacherReport/status/1409336114549170176
As you can see the officials toe (on the court-side, out of bounds) was involved in this horrific horrific injury to Trae “Flop City” Young’s foot. Somehow, defying all of the odds and weathering immense immense pain, the NBA game official “played on” in the Game 3 of the Eastern Conference Finals. How he did that, after having his shoe flopped on by Trae “Flopman” Young, will be one of the eternal mysteries (and greatest illustrations) of the indomitable spirit of humankind.
Your silly little sick parade continued. I hope you captured those emails on this from Don Jr’s girlfriend. Oh wait – you subscribe to the basketball analysis by Stephen Miller’s wife. Sorry for the confusion.
@ pgl
No, I don’t, but if I did, that wouldn’t be a worse choice than your real personal choice for “basketball analysis” Stephen “Women Provoke Violence Against Themselves” Smith and his twin Stephen “Keep Your Wifey Quiet” Smith. Only unlike you, I don’t fabricate nonsense to attribute to people who disagree with me. You actually stated on this blog you enjoyed Stephen A. Smith’s analysis.
https://econbrowser.com/archives/2021/06/everything-is-relative#comment-254230
https://econbrowser.com/archives/2021/04/the-fed-and-the-international-financial-system#comment-252201
https://www.washingtonpost.com/news/early-lead/wp/2016/06/17/stephen-a-smith-mansplains-how-to-be-a-good-nba-wife-to-ayesha-curry/
https://www.theatlantic.com/culture/archive/2014/07/stephen-a-smith-is-sorry-you-thought-he-said-women-provoke-domestic-abuse/375093/
https://deadline.com/2014/07/espn-suspends-stephen-a-smith-domestic-violence-abuse-comments-812001/
Just like your love for Andrew Cuomo, the death count hiding, molesting, corrupt self-dealing New York Governor, it’s on the record
But it’s like your friend Barkley Junior has had to learn the hard way, and has often muttered to the walls of his office “Permalinks are a b*tch!!!!”
Do you get paid by Trump by the word or what? You dismiss a real injury which is pretty funny since I hear that even a slight bruised pinkie has you whining to bring the ambulence. Yes – I will say it. You are a little pu$$y who has never been on a basketball court.
BTW Trae has 777 points attributed either scoring or via assists during these playoffs – highest in the league. OK you are too stupid to know what that means but I’m sure Stephen Miller’s wife will mansplain it to the little weasel who could not even lift a basketball.
http://www.xinhuanet.com/english/2021-07/02/c_1310039827.htm
July 2, 3021
Over 1.26 bln doses of COVID-19 vaccines administered in China
BEIJING — More than 1.26 billion doses of COVID-19 vaccines had been administered in China by Thursday, the National Health Commission said Friday.
[ Chinese vaccines are being administered domestically at a rate above 20 million doses daily. Internationally, more than 450 million doses of Chinese vaccines have been distributed. ]
June Employment Report is released by BLS:
https://www.bls.gov/news.release/empsit.nr0.htm
Payroll survey says employment rose by 850,000.
Wow – the people on LinkedIn are stooopid. Jobs up 850 thousand – yea. But unemployment inched up – fake news? Whatever.
I can these business nutcases do not know that the 850K was the payroll survey while the household survey showed a small decrease in employment. I’m sure Dean Baker will later provide the details.
And of course your usual business nutcase does not know about something called the labor force participation rate (LFPR). But here’s one thing that might require a little explanation. LFPR has flat lined since October.
https://www.nytimes.com/2021/07/01/opinion/republicans-incompetence.html
July 1, 2021
Only the Incompetent Need Apply
By Paul Krugman
I wrote * a few days ago about how ignorance — ignorance about history, about science, about economics and more — has become a core conservative value. This exaltation of ignorance naturally goes hand in hand with disdain for expertise: A vast majority of scientists may agree that greenhouse gas emissions are warming the planet, but hey, it’s all just a gigantic hoax.
But wait, there’s more. On the right, expertise isn’t just considered worthless, it’s viewed as disqualifying. People with actual knowledge of a policy area — certainly those with any kind of professional reputation — are often excluded from any role in shaping policy. Preference is given to the incompetent — often the luridly incompetent.
I’m currently reading “Nightmare Scenario,” an account by Yasmeen Abutaleb and Damian Paletta of the Trump administration’s catastrophic mishandling of the coronavirus pandemic. Much of what they report falls into the category of “shocking but not surprising.” One thing I didn’t know about, however, was the special destructive role played by Stephen Moore, an outside economic adviser.
It was Moore, the authors report, who walked into Donald Trump’s office just days after America went into lockdown to urge reopening by Easter. While an immediate lifting of pandemic restrictions didn’t happen, Trump’s growing insistence that the pandemic was no big deal helped inspire armed protests against social distancing and mask-wearing, and it contributed to a public health disaster that has so far claimed 600,000 American lives — with 95 percent of the deaths happening after Easter 2020.
It goes without saying that Moore isn’t an expert on epidemiology. But he isn’t an expert on economics, either. In fact, he has a reputation among many economists for being wrong about almost everything. I don’t mean that he has made some bad forecasts — that happens to everyone (although some of us admit it when we were wrong and try to learn from our mistakes). I mean it is unusual for him ever to get the facts right, or even manage to land in the remote vicinity of the truth….
* https://www.nytimes.com/2021/06/28/opinion/tucker-carlson-general-milley-republicans.html
“It goes without saying that Moore isn’t an expert on epidemiology.”
Now come on Paul. It is Dr. Stephen Moore. More expert than Dr. Fauci. A Nobel Prize in macroeconomics with a special expertise on monetary policy. So what do you know Paul?!
The local news last night had a bunch of New Yorkers whining that the cost of gasoline had soared to 2014 levels. OK – NYC drivers are a bunch of spoiled idiots but I decided to check with FRED and it seems WTI prices of oil past $74 a barrel last Friday:
https://fred.stlouisfed.org/series/DCOILWTICO/
This still does not vindicate the usual nonsense from Princeton Steve but gasoline prices may go above $3 a gallon in some places. And bagels are still not free.
https://fred.stlouisfed.org/graph/?g=r2H7
January 4, 2018
United States Employment-Population Ratio, * 2017-2021
* Employment age 25-54
https://fred.stlouisfed.org/graph/?g=sxWm
January 4, 2018
United States Employment-Population Ratios for Men and Women, * 2017-2021
* Employment age 25-54
https://fred.stlouisfed.org/graph/?g=sxNb
January 4, 2018
Employment-Population Ratios for White, Black and Hispanic, * 2017-2021
* Employment age 16 and over
https://fred.stlouisfed.org/graph/?g=sxz6
January 4, 2018
Employment-Population Ratios, * 2017-2021
* Bachelor’s Degree and Higher, Some College or Associate Degree, High School Graduates, No College; Employment age 25 and over
Does Exxon pressure politicians to fight against reasonable climate change policies? Of course they do even as they play deny, deny, deny. Oh wait one of their executives has admitted they do:
https://www.cnn.com/videos/business/2021/07/01/keith-mccoy-exxonmobil-greenpeace-climate-mc-orig.cnn-business/video/playlists/around-the-world/
Princeton Steve has been jumping up and down with his hair on fire on how housing prices are up but not a peep about the value of farmlands. I’ve been reading some excellent discussions from the USDA’s Economic Research Service and it seems values are three times what they were in 1994. OK – that’s nominal but even in real terms values have doubled. So why is Stevie’s hair not on fire over this? In fact what is CoRev’s hair not on fire since he claim to be the expert in agricultural economics?
Of course anyone with any knowledge in finance would consider real rents over time and the cost of capital. ERS provided a series on rent to value ratios for croplands through 1994 when this ratio was 6%. It is now only 3.4%. Why the drop? Just take a look at the interest rate on long-term government bonds and one might have a clue. Of course the same factors apply to housing valuation but of course Princeton Steve’s hair is so on fire he is clueless.
https://www.ers.usda.gov/topics/farm-economy/land-use-land-value-tenure/farmland-value/#:~:text=Rental%20rates%20measure%20the%20value%20of%20using%20land,States%20%28up%202.8%20percent%20to%20%24115%20per%20acre%29.
Suppression, not recession.
You love to write those words. Too bad you are incapable of articulating WTF these words mean. Oh you are babbling about things you never understood – as usual.
@ “Princeton”Kopits
You’ve made me involuntarily chuckle again. You ever thought about being a comedy sidekick?? You could be like Menzie’s version of Jimmy Kimmel’s Guillermo.
Funny! Someone emailed me a pile of rubbish written by an international tax lawyer for Tax Notes International how the economy of Barbados would be headed for ruin if we had sensible tax reform. Page after page of boring whining from the arrogant tax cheat which basically said his cushy practice might dry up if he could not help rich people dodge taxes.
Now I get that tourism may be a big deal in Barbados but sensible tax reform is not going to hurt that sector. But this poor dude might have to get a real job if this global minimum tax catches on.
“While an immediate lifting of pandemic restrictions didn’t happen”
Remember when Mike Pence walked out with that glossy brochure called the 15 day plan to defeat the virus? Well in two weeks it was all edited to be the 30 day plan as if no one was supposed to notice.
MTP Daily just put up an interesting tidbit. Of the states where vaccinations exceed 70% of the population, all of them went for Biden. Those state where this statistics is less than 60%, these were Trump states.
So which hypothesis explains this?
(a) Wearing a MAGA hat insulates one from the virus; or (b) Wearing a MAGA hat rots one’s brain.
https://jabberwocking.com/chart-of-the-day-net-new-jobs-in-june/
Kevin Drum sees the same thing a saw – while the payroll survey saw a large increase in employment, the household survey saw a slight decrease.
So one of his readers linked to FRED to insist over a longer time frame than this month, there is little difference. While this is generally a good point, here’s the problem. Since October, the household survey increase is only 2 million while the payroll survey increase exceeds 3 million.
I hear Econned is busy auditioning for Jeopardy. A sample from his audition tape:
Alex – I’ll take Economics for $400.
Q: “It is dangerous always to associate the easing or the tightening of monetary policy with a fall or a rise in short-term nominal interest rates.”
A: What did Ben Bernanke say in 2003 during his tribute to Free to Choose?
Isn’t this exciting boys and girls? One would think the ratings would go through the roof. What – they took Aaron Rodgers over Econned? Go figure!
I just noticed the “old school” gentlemanly blog host’s hat tip to our good pal Paweł Skrzypczyński. Shame on me for not taking mental note earlier Thanks Pawel!!!!! Blessings to Pawel from trump stained America.
https://cepr.net/jobs-2021-07/
July 2, 2021
Economy Adds 850,000 Jobs in June; Unemployment Edges Up to 5.9 Percent
By DEAN BAKER
Black teen unemployment falls to another record low, falling to 9.3 percent.
The June employment report showed very strong employment growth in the establishment survey, while the household survey showed little improvement from May. The 850,000 gain was the largest since an increase of 1,583,000 last August. By contrast, the household survey showed no change in the employment-to-population ratio or labor force participation rate. The unemployment rate edged up slightly, as employment in the household survey slipped by 18,000.
It is not unusual to see sharp monthly divergences between the two surveys. Over a longer period, they tend to show a similar picture of the labor market, but the household survey can have erratic movements that don’t seem to correspond to anything in the economy. For example, in October 2017, the household survey showed a drop in employment of 633,000, and then in August 2018 it showed a decline of 619,000. In both periods the economy was growing at a healthy pace and there was no evidence of weakness in other economic data. These drops were preceded and/or followed by months with large gains.
Establishment Job Gains Driven by Growth in Hard Hit Sectors
The biggest job gains were in state and local education (229,700), restaurants (194,300), and hotels (75,100). The gains in state and local education indicates schools returning to in-class teaching, although employment is still down by 583,000 from the pre-pandemic level. The arts and entertainment category also showed a large gain of 73,600, as many venues that had been closed due to the pandemic were able to reopen in June.
The retail sector added 67,100 jobs as large gains in general merchandise stores and clothing stores more than offset losses in food stores. Manufacturing added 15,000 jobs, but is still down by 481,000 from the pre-pandemic levels. Growth in the sector was slowed by a loss of 12,300 jobs in the auto industry, the result of continuing shortages. Construction jobs fell by 7,000, the third consecutive decline. This likely also reflects shortages of materials.
Airlines added 7,800 jobs, leaving employment 83,400 (16.1 percent) below the pre-pandemic level. The motion picture industry continues to be the hardest hit. While it added back 5,400 jobs in June, it is still down 149,400 jobs (33.8 percent) from the pre-pandemic level. Nursing homes lost another 3,600 jobs in June, continuing a pattern of job loss since the pandemic hit. Employment in nursing care facilities is now down 210,500 (13.3 percent) from February, 2020. This may reflect a drop in the number of residents due to the pandemic.
Wage Growth at the Bottom Remains Strong ….
https://fred.stlouisfed.org/graph/?g=tLZu
January 4, 2018
Unemployment rate 25 to 54, 2017-2021
https://fred.stlouisfed.org/graph/?g=tMGg
January 4, 2018
Unemployment rates for men & women, * 2017-2021
* Employment age 16 and over
https://fred.stlouisfed.org/graph/?g=syon
January 4, 2018
Unemployment rates for Whites, Blacks and Hispanics, * 2017-2021
* Employment age 16 and over