Are we at full employment? Here are some estimates:
Figure 1: Output gap, from CBO (blue), from OECD (tan), from IMF (green), from Fleischman/Roberts-FRB (red), all in % of potential GDP. NBER defined recession dates shaded gray. Source: CBO February 2024, OECD November 2023, IMF October 2023, Atlanta Fed Taylor rule utility February 2024, NBER.
Higher frequency estimates are available for the CBO and one version of the FRB gap series:
Figure 2: Output gap, from CBO (blue), from Fleischman/Roberts-FRB (red), both in % of potential GDP. NBER defined peak-to-trough recession dates shaded gray. Source: CBO February 2024, Atlanta Fed Taylor rule utility February 2024, NBER.
Interestingly, post-pandemic this particular FRB measure has been consistently higher than the CBO measure — until 2023Q4. (Note that the members of the FOMC are not all going to rely on this specific measure.)
Update, 9:30pm Pacific:
Additional discussion here, and here.
I’m biased, extremely biased (fill in the blanks on your thoughts about me here please). I just keep wondering who thinks any man doesn’t want to work to prove his worth on this Earth??? Do you really know men or people like that?? Can’t we assume they’d work if given that chance?? My Dad remembered WPA under Roosevelt, My Dad remembered the “G.I. Bill” under Roosevelt. Are we doing that now?? These people are dying in the streets and people are saying “You stopped looking for a job X days ago, We don’t count you as existing” REALLY!?!?!?!?
So how do they decide what is the neutral output? Is this like NAIRU which some economists insisted for years was 6%, no 5%, no 4%, no 3.5%? Is it a real thing or just a lack of imagination that constrains the economy. Or a bias against labor? As you can imagine, I’m a bit skeptical when some economists say we need to raise unemployment because output is too high or unemployment is too low, according to their seemingly arbitrary figures.
A good bit like NAIRU. Big overlap.
Take any well constructed depiction of the Phillips Curve, look at the change over time. Something like a point estimate from the most recent point is needed for NAIRU and the output gap. The most recent point is the least certain, as it doesn’t have subsequent readings to tell you whether you got it right.
And still, making policy without some idea of the output gap is an even bigger crap shoot that taking an educated guess about the gap. That’s why economists get the big bucks.
Still time for a rate cut, Ducky?
so Johnny is still advocating for the impossible. Johnny wants a high rate of return on a risk free asset, savings. Johnny believes in Ponzi schemes! he is clueless about the real economy.
baffling thinks that the Fed should privilege stock speculators over savers by reducing interest rates to eliminate positive, real, after tax returns on bonds and CDs…
as I said, Johnny wants a high rate of return on a risk free investment. Ponzi schemes are what you advocate.
you live in a fantasy land Johnny. your rate of return should be correlated to risk. not dreams.
You think a single monthly reading from a single inflation report is evidence of a change in trend, boy?
What’s the trend you’re referring to, Ducky? The one that says that the economy is booming? Or the Wall Street, “time to cut rates” scenario (crying wolf) that the economy is fast running out of steam?
Jonny boy goes from saying we are in a recession to saying z recession is not possible
JohnH
February 16, 2024 at 11:29 am
Jonny boy’s little question strikes me as more evidence that this moron cannot bother to read or understand Dr. Chinn’s post. We know Jonny boy was cheerleading RECESSION back in 2022 even as the economy never fell below full employment (if Jonny boy does not believe this may we suggest that this moron look more closely at Dr. Chinn’s second graph).
But now little Jonny boy (always the flip flop artist) is declaring a 2024 or 2025 recession is not even possible. Seriously? Again take a look at what Dr. Chinn’s second graph is suggesting about the next year or two.
Now I get little Jonny boy has a serious case of Mr. Magoo disease but the adults in the room will get my point.
Pgl insists on perpetuating the lie that I was cheering recession two years ago. The real takeaway was that economic growth was bordering on recession. But rather than simply acknowledge the obvious, some economists and partisan hacks here insisted on obscuring that fact and wasting an inordinate amount of time and effort trying to prove there was NO recession, despite two quarters of negative GDP growth.
It’s the usual “with us or against us” thinking…pointing out ambiguity was not an acceptable “with us” choice.
JohnH
February 16, 2024 at 6:39 pm
I figured little Jonny boy would not get my point about this post. And sure enough – he does not even have a clue what any of this is about. Typical.
Menzie, you know one of many things I like about this blog?? I remember the “golden days of the internet. When this blog was under a different format, and you used to respond to multiple commenters in the same underneath post comment. That’s like 1930s radio Menzie, It’s golden and I love it.
The IMF’s estimate of the gap has switched from bottom of the bunch to top from the middle of the prior cycle till now. It would be interesting to know what caused that.
The time it took to close the output gap after the recent Covid recession is much shorter than the time required after the housing recession. There are a few obvious reasons. One is that the financial structure of the economy didn’t need as much rebuilding. Another is that nobody said “a trillion dollar stimulus is bad politics” this last time. Instead, the same guy said this time that we’d need years of recession to get inflation under control. Good thing he never ended up on the Fed.
Anyhow, that difference amounts to a sloppy natural experiment into how policy can best support public welfare.
So, the four output gap estimates are evenly divided around zero. That suggests risks are pretty evenly split between excess inflation and inadequate employment and/or wage gains. Now, imagine a creature given the opportunity to dictate monetary policy to the Fed. If that creature were inflation-averse, it might require tight monetary policy right now. On the other hand, if the creature were driven by a desire for the highest public welfare, it might require easy monetary policy right now. Only if inflation was running at or near a welfare-destroying rate would the welfare-favoring version of the creature demand tight monetary policy now, and there isn’t much evidence that inflation below 5% is a serious problem for welfare.
There is one exception to this view, of course. If the creature is, in fact, a troll, it might claim to support public welfare, but actually be inflation averse. Or maybe the creature is actually welfare averse. Trolls are known to be averse to human welfare.
Here’s a little something from Alessandro Roncaglia, emeritus professor of economics from Sapienza University in Rome on the very issue of thinking that every basis point of inflation is a nail in need ofa monetary policy hammer:
https://www.ineteconomics.org/perspectives/blog/inflation-and-power
Roncaglia’s argument should make sense to anyone who has ever argued that monopsonists or speculators are responding for some increment of inflation.
“Higher frequency estimates are available for the CBO and one version of the FRB gap series:”
This graph makes an important point. The strong economic growth of 2021 not only eliminated any output gap from Trump’s 2020 incompetence but may have pushed output to temporarily beyond what we normally call potential output. So a slowing of growth for a couple of quarters way likely a good thing to avoid an overheated economy. I say this in light of the nonsense we get from the troll choir about some alleged 2022 recession.
So pgl has had a change of heart from his position of the past two years that a rate cut is no longer urgent? ROFLMAO!
As of this writing, the S&P 500 is up 5.6% YTD, so you would think that Wall Street speculators would be happy as can be.
Are you really this stupid? I just noted my view here which comes from the fact that I bothered to look at Dr. Chinn’s second graph and think about its implications. Of course little Jonny boy will never understand what these graphs suggests as he is beyond mentally retarded.
Pgl thinks that the Fed should lower rates based on hypotheticals…sounds to me like he’s getting desperate for a rate cut and a rise in asset prices—manna from heaven!
There was a contest between Trump and little Jonny boy who could post more pathetically stupid lies in a day. Jonny boy won this hands down. Congrats little Jonny boy. You are a lock for 2024 troll of the year.
BTW LIAR – I never said “urgent” regarding interest rate reductions. Advised maybe but not urgent. A little homework assignment for my mentally retarded stalker. Find the comment where I said “urgent”. If not – get the eff off this blog as you trash is beyond revolting.
Raw data: Wage growth at top and bottom
https://jabberwocking.com/raw-data-wage-growth-at-top-and-bottom/
For most of the economic expansion following the Great Recession, wages grew about the same for everyone. In 2019 that changed. Over the past five years, incomes of the poor have increased 10% while incomes of the rich have stagnated:
Kevin Drum does the real work that contradicts a constant theme from little lying JohnH. Oh wait – Kevin picked 2019 rather than Jonny boy’s preferred cherry picked 2020. Take a look at Kevin’s graph to see the difference. Oh my – little lying Jonny boy is about to scream “you moved the goal posts” After all, Jonny boy wanted the Super Bowl goal posts placed at the 30 yard line.
So pgl has had a change of heart from his position of the past two years that a rate cut is no longer urgent? ROFLMAO!
As of this writing, the S&P 500 is up 5.6% YTD, so you would think that Wall Street speculators would be happy as can be.
This is what you got from Kevin Drum’s informative, smart, and honest post? Damn you are mentally retarded.
No doubt that wages of the bottom 10% have increased significantly, driven in large part by increases in the minimum wage. In California, for example, the minimum wage has increased by 45% since 2019 and now covers about a third of all workers.
However, average workers have not fared nearly so well, as their real wages have only recently risen above their pre-pandemic levels, due in large part to inflation’s drop below the usual and customary annual wage increases granted by Corporate America.
Naturally you can count on corporate shills like pgl to scour the blogosphere for evidence to show how great workers are doing, even if they’re not…
Wow – did you contradict the stupid lies of your past comments massively! Hey Jonny boy – do you have an effing clue what NO ONE takes your trash seriously? It seems even YOU cannot defend your previous pieces of trash.
Trump’s unhinged speech may explain why MAGA moron Bruce Hall could not distinguish between EU loans to Ukraine v. grants. Take a listen to the many lies and utter stupidity:
https://www.msn.com/en-us/money/companies/spacex-relocates-state-of-incorporation-to-texas-following-elon-musk-s-controversy-with-delaware-court/vi-BB1ilyQu#details
First of all – who believes Trump when he claims he is not fat or when he claims he is a great golfer. But a loan that one does not have to pay back if one does not do well? Now I get there is the slimy tax evasion dodge call profit participation loans but no real world lender does that – right? Oh wait – people who loaned money to Trump often do not get their money back.
The effort of House Republicans to get Joe Biden through his son just blew in the faces:
Special counsel charges FBI informant with lying to the bureau about Hunter and Joe Biden
https://www.msn.com/en-us/news/politics/special-counsel-charges-fbi-informant-with-lying-to-the-bureau-about-hunter-and-joe-biden/ar-BB1ilAIm?ocid=msedgdhp&pc=U531&cvid=2e5abdf3dceb43e0aa255740de7b0335&ei=6
An FBI informant has been indicted on two counts of allegedly feeding the bureau false information about President Joe Biden and his son Hunter Biden during the 2020 presidential campaign. Alexander Smirnov, 43, disliked Joe Biden and was arrested in Las Vegas after returning from a trip overseas, according to the Justice Department. The case grew out of the special counsel investigation being led by David Weiss, who is also leading the case against Hunter Biden. Weiss had been appointed by then-President Donald Trump as the top federal prosecutor in Delaware. The 37-page indictment alleges that Smirnov had been a confidential human source for the FBI since 2010 and “provided false derogatory information to the FBI” about both Bidens after Joe Biden became a candidate for president in 2020. Smirnov allegedly told the FBI — falsely — that officials with Burisma, the Ukrainian energy company that Hunter Biden worked for, had told him they hired Hunter Biden because he would “protect us, through his dad, from all kinds of problems.” Smirnov allegedly told the FBI — again, falsely — that Burisma officials had told him they paid Hunter Biden and Joe Biden $5 million and that it would take investigators 10 years to find the illicit payments to Joe Biden.
Could be whistleblower retaliation?
I could ask if you ha e a clue what you just said but we know you never do
From the guy who is charging Hunter Biden for things that nobody else would ever have been charged with?