Low inflation and a slowdown in the growth of labor productivity could challenge continuation of expansion.
The Federal Open Market Committee wants its interest-rate decisions to be data-dependent. But until the past several years, much of the statistical information available—not just to the FOMC, but anyone—had come from reports that looked backward at conditions from the previous month or even quarter. New models developed by economists allow for forecasting of conditions in the current quarter as reports arrive on a day-to-day basis—as in now. Hence, “nowcasts.”
Strong job growth, consumer spending and housing activity bode well for the economy this year.
Despite crosscurrents, the U.S. economy showed enough strength in 2015 for the Federal Open Market Committee to raise its benchmark interest rate for the first time since mid-2006.
When investors complain about low interest rates, they are usually referring to the rates on government bonds, particularly TIPS (Treasury Inflation Protected Securities). But such rates should not be seen as proxies for the rates of return on all investments. Real returns to productive U.S. fixed investment in tangible capital have not fallen over the past 25 years.
Despite the volatility in financial markets late this summer, the U.S. economy has continued to expand at a moderate pace.
As happened in the first quarter last year, real GDP contracted in Q1 of this year. In 2014, the weather was largely to blame. This time, four other factors are being cited, all thought to be temporary.
The U.S. economy lost some of its momentum over the winter. But the weakness did not extend to the labor markets, where job gains continued to be strong.
Following the two latest recessions, the growth in high-paying jobs was stronger, on a percentage basis, than was the growth in low-paying jobs. The opposite happened after the previous two recessions.
There are a few negative developments that bode ill for the U.S. economy this year, but they are probably outweighed by recent positive developments. As a result, GDP growth is likely to be stronger this year than in 2014.
In the wake of the crisis, the Fed’s balance sheet increased from the historical 6 percent of GDP to more than 20 percent. As plans are made to return to normal monetary policy, it’s important to be aware of the challenges and potential pitfalls of this transition.
Rising levels of economic uncertainty, which are common following a recession, are reportedly hindering firms from investing and expanding. Monetary policymakers, likewise, are not immune to the challenges economic uncertainty poses.
The St. Louis Fed’s Agricultural Finance Monitor quarterly reports on regional agricultural financial conditions, as well as bankers’ expectations of farmland values, farm loan repayment rates, required collateral, farm loan interest rates and credit supply and demand.
If labor productivity growth continues to decline while the employment-to-population ratio stabilizes at its current position, America’s economy might have a new normal: Real GDP growth could hover around 2 percent rather than 3 percent.
It's often said that small businesses generate the most jobs in the U.S. This is true if one looks at the gross number of jobs. But because small businesses have a high failure rate, they are not the largest producer of jobs at the net level.
In late December 2007, most economists realized that the economy was slowing. However, very few predicted an outright recession. Like most professional forecasters, the Federal Open Market Committee (FOMC) initially underestimated the severity of the recession.
On the plus side, low interest rates can spur spending by businesses and households. But low interest rates discourage saving and encourage people to take more risks when investing.
Community banks seem to have the most to fear about the state of commercial real estate today. The problems with these loans, however, shouldn’t derail the entire economy.
Although some think it’s too soon to worry about high inflation, there are risks for that to happen in the medium term. Besides the obvious risks, a new bubble might be brewing in asset prices as investors search for higher returns, and the gap between actual output and potential output might be smaller than most think.
Is the nation's infrastructure really in such bad shape? Should we be spending more on the Internet and less on interstates? And what of competing needs—health care, education, wars?
Corn-based ethanol can make a dent in demand for oil, but at what price? Food costs go up. Environmental damage worsens. If oil prices fall, ethanol production will probably collapse—as it did 20 years ago.
Globalization can be defined as a phenomenon of increased economic integration among nations, characterized by the movement of people, ideas, social customs and products across borders. This phenomenon has a long history, dating back to the trade routes developed during the Roman Empire, as well as those pioneered by Marco Polo or ocean voyagers like Columbus and Magellan.
Support for free trade seems to be waning, even though history has shown that globalization has produced large benefits for most parts of the world. How far—if at all—should policymakers go to appease those who hold a different view?
Baby boomers will start retiring in droves in January. Coupled with the slowdown in productivity and the near-zero saving rate, growth in GDP could fall to levels not seen in 25 years.
The next energy crisis may not involve oil or natural gas, but electricity. The amount available during peak periods of demand is shrinking, and the reliability of bulk transmission lines is being questioned.
The Fed’s triennial Survey of Consumer Finances found that median household debt rose almost 34 percent between 2001 and 2004, while net worth rose just 1.5 percent.
Economist Kevin L. Kliesen discusses why business, government and personal saving rates are important drivers for the U.S. economy.
Theoretically, the decline in saving jeopardizes our economy because savings are lent to businesses for investment. In reality, the U.S. economy is doing better than the economies of countries where saving is much higher. Can this continue?
In those countries where a large percentage of the population believes in hell, there seem to be less corruption and a higher standard of living.
One employment survey said 800,000 jobs were lost in the two years after the recession ended in November 2001. Another survey said 2 million more people were working. Can anyone account for this huge gap?
After each of the past two recessions, the recovery has been lackluster, with little economic growth and job creation. Historically, the rebound has been much stronger. Is the economy changing fundamentally?
In the cover story, find out why the federal government’s days of scaling back are over. Fueling the buildup are corporate accounting scandals, the war on terrorism and demands for a Medicare prescription drug program.
Increased spending on the war, domestic security and Medicaid could slow the rebound in government budgets.
The development of the microchip sparked another industrial revolution. But will this revolution yield the long-term surge in productivity that the First and Second industrial revolutions produced?
When oil prices jump, people get jumpy--especially when the Fed is bumping up interest rate targets at the same time. Why? Because these two events have accompanied virtually every recession since World War II. At least until now.
We're less susceptible to energy price hikes.
Fed critics have charged the central bank with relying on an outmoded economic indicator to predict inflation. But the charge doesn’t suit the evidence.
While economies worldwide falter, the United States remains steadfast. How did our nation get to be the land of milk and honey?
After prospering at record rates in 1996 and ’97, farmers experienced a sobering setback last year. Will the future on the farm be grim or grand?
It has been said that, ‘”Forecasters may never be right, but they are never in doubt.” Not with a good model by their side, that is.
With too many retirees and too few funds expected, the future of the country’s Social Security and Medicare programs is likely to be in peril. Can 401(k)s save the day?
The financial maladies that have afflicted East Asian nations recently have let many policymakers feeling ill at ease. But is there true cause for concern?
Most economists and policymakers are positively giddy about the current state of the economy. But is their bubble about to burst?
According to some, the saying, “Everybody complains about the weather, but nobody ever does anything about it” could be just as easily applied to the consumer price index. But what should be done?
Figuring out how to equalize the tax burden across generations is easy. Deciding who’s going to pay for it is the hard part.
Eighth District farmers are living high off the hog after last year’s generous yields.
Concocting a credible monetary policy is far from easy, especially with the number of ingredients there are to choose from.
Most economists agree that the current U.S. tax system requires reforming. How to go about it, though, is open to debate.
Move over Michigan, the Eighth District’s accelerating automobile production may leave you in the dust.
A retired Navy admiral once said that one accurate measurement is worth a thousand expert opinions. The Commerce Department is counting on just that with its new method of calculating GDP.
Thanks to belt-tightening, states are in the best shape they’ve been in since the 1980s. The fat they’ll need to absorb from unfunded federal programs, though, could weigh them down.
The numbers are in: Low unemployment and brisk sales made for a healthy Eighth District economy last year. But what’s in store for the rest of 1995?
The Humphrey-Hawkins legislation directs the Fed to achieve numerous goals, inviting it to respond to current events with a change in policy direction. Why a long-term, single-goal strategy is a better idea.
In today’s global marketplace, countries can’t help but feel drawn into the hype of international competition. But should cross-country comparisons hold such sway with policymakers? And more important, are they in the best interests of a country’s economy?
As the national economy sours, so typically goes the economy of the Eighth District. Today, the national economy looks sunny. But clouds are looming on the District horizon. Will they go away?
Commodity prices often provide valuable information about future inflation. But commodity price indexes can’t predict inflation by themselves.
Natural disasters like Hurricane Andrew or the Great Flood of ’93 can cause a lot of devastation. And the resulting problems aren’t always localized—at times, even the national economy is affected.
The early money is on a good year for farmers in 1994. But if we have weather like we did in 1993, all bets are off.
Ross Perot thinks so. So do a host of government officials, including Bill Clinton. Talk to an economist, though, and you might get an opposing view.
Restructuring is being blamed for much of the economy's sluggish growth. But what do we mean when we say restructuring? Is it all bad news? Is it even news at all?
Though the economy is expanding once again, employment continues to grow slugglishly in many parts of the country. In comparison, parts of the Eighth District look pretty good.
Analysts differ about whether the Fed should attempt to smooth out the business cycle. But one thing's for sure: It's not an easy thing to do.
