Also in town for last week’s International Symposium on Forecasting was Bill Gavin from the Federal Reserve Bank of St. Louis. I had an interesting discussion with him about changes over time in U.S. employment dynamics that I wanted to share with our readers.
Author Archives: James_Hamilton
EIA: The China Syndrome
We’re pleased to feature another post from Steven Kopits of Douglas-Westwood, this time on the EIA’s oil demand outlook.
Identifying business cycles
The 30th Annual International Symposium on Forecasting was held in San Diego last week. Among the many interesting presentations was Princeton Professor Mark Watson’s discussion of estimating business cycle turning points using a large number of indicators.
Links for 2010-06-23
Tim Duy thinks the fanfare about a new Chinese currency policy is overdone:
The PR overload suggests the Administration is desperately in need of a “win,” no matter how trivial….
While China appears willing to adjust the parity rate, changes are likely to be more window dressing than anything else. The industrial base shifted from the US to China over the past twenty years, a transition aided by the Clinton Administration’s commitment to a strong dollar, and it is not going to come rushing back for a few percentage points of currency value. The structural shift has happened, and it won’t reverse easily.
When Bill McBride says he expects house prices to decline, I pay attention:
When months-of-supply is below 6 months, house prices are typically rising– and above 6 months-of-supply, house prices are usually falling…. We are much closer to the price bottom now than in 2008, and I don’t expect that severe of a price decline. But I do expect house prices to fall in the 2nd half of 2010 and into 2011– probably another 5% to 10% for the major house price indexes (Case-Shiller and CoreLogic).
A federal judge overturned the moratorium on new deepwater offshore drilling:
“An invalid agency decision to suspend drilling of wells in depths of over 500 feet simply cannot justify the immeasurable effect on the plaintiffs, the local economy, the Gulf region, and the critical present-day aspect of the availability of domestic energy in this country,” [U.S. District Judge Martin] Feldman wrote….
The temporary injunction by [Judge] Feldman appears unlikely to bring a swift resumption of deepwater drilling: Oil companies say they’re reluctant to start new ventures as an uncertain appeals process unfolds.
Inflation or deflation?
For the last year and a half my assessment has been that the near-term pressures on the U.S. economy were deflationary, while long-term fundamentals involve significant inflation risks. It’s time for a look at the data that have come in over the last 6 months, and time to say that I still see things exactly the same way.
More on BP
The Christian Science Monitor details 5 decisions by BP on the Deep Horizon drilling that saved costs but added to risks: (1) foregoing section casing and tiebacks, (2) using only 1/3 the recommended number of stabilizers, (3) failure to test the cement seal, (4) implementing only partial mud circulation, and (5) failure to secure the wellhead. And they don’t even mention the acoustic shut-off switch.
Links for 2010-06-16
Three interesting figures on fuel consumption, job creation, and prospective interest rates.
Gold and inflation
Federal Reserve Chair Ben Bernanke last week dismissed the suggestion that the recent surge in gold prices signals some kind of inflationary pressures:
So gold is out there, doing something different from the rest of the commodity group. I don’t fully understand the movements in the gold price, but I do think that there is a great deal of uncertainty and anxiety in financial markets right now and some people believe that holding gold will be a hedge against the fact that they view many other investments as being risky and hard to predict at this point.
I think Bernanke has this exactly right.
Toxic assets and toxic oil
In some ways the Gulf of Mexico oil spill seems like a replay of the subprime lending disaster. Clever technological innovations blew up in a mess that nobody knew how to control, wreaking devastation on those innocently standing by. The actors and the scenes have changed, but you can’t shake the feeling you’ve been through this nightmare before.
Current economic conditions
Yes, we’re still in the economic recovery phase, and yes, it still looks pretty sluggish.