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.
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.
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?
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?
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?
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.
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?
Figuring out how to equalize the tax burden across generations is easy. Deciding who’s going to pay for it is the hard part.
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 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.
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?
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.