Yes, I saw the discouraging headlines. But I also see signs of hope in last week’s economic news.
Estimated Impact of “American Recovery and Reinvestment Plan”
By way of Paul Krugman, here is the estimated impact on employment provided by C. Romer and J. Bernstein.
Is the Implementation Lag for Infrastructure Investment a Problem?
There’s been a lot of discussion about how the lack of “shovel-ready” infrastructure projects puts a constraint on government investment spending as a mode for delivering stimulus, since most infrastructure projects take a long time to plan and build. But what if the negative output gap is going to be deep and long-lived? Is this concern so pertinent? I don’t think so.
Employment and Output in December
From Bloomberg:
The U.S. lost more jobs in 2008 than in any year since 1945 as employers fired another 524,000 people in December, indicating a free-fall in the economy just days before President-elect Barack Obama takes office.
CBO’s Projected Output Gap
The CBO released its Economic Outlook today. Here’s its projection of the output gap, under current law.
December auto sales
On a seasonally adjusted basis, U.S. light vehicle sales remained deeply depressed in December. But at least things don’t seem to be any worse than they had been the previous month.
Forecasted GDP in the New Year
The description of the consensus that growth will resume around mid-year — while accurate — does not convey much information about what is the consensus regarding the depth of the recession. Nor does it convey the degree of disagreement regarding the timing and strength of the recovery. To provide some insight , here is the mean forecast for GDP into the new year, according to the WSJ’s December survey.
The oil shock and recession of 2008: Part 2
In my previous post, I presented evidence that the oil price increase over 2007:H2-2008:H1 made a significant contribution to the slowdown in consumption spending in general and decline in spending on domestic automobiles in particular. Here I discuss why this should be regarded as a key development that turned the slowdown in growth into a recession.
“Trade finance is collapsing”
…said Victor K. Fung, the chairman of the Li & Fung Group, the giant supply chain management company that connects factories in China with retailers in the United States and Europe. “We’ve got orders we can’t ship right now.”
Source: “As Trade Slows, China Rethinks Its Growth Strategy,” NYT Jan 1, 2009.
The oil shock and recession of 2008: Part 1
This is the first in what I’m planning will be a series of posts discussing the contribution that the energy price spike of 2008 made to our present economic difficulties. In this first installment, I revisit a very interesting research paper on the response of consumer spending to energy price increases written by Lutz Kilian (Professor of Economics at the University of Michigan), and Paul Edelstein (Senior Economist for Decision Economics). I first brought this paper to the attention of Econbrowser readers in the spring of 2007. I thought now would be a good time to take a look at how well the equations in Edelstein and Kilian’s paper can describe what we saw happen in the later part of 2007 and first half of 2008.