August Unemployment Numbers Released

The Bureau of Labor Statistics released employment statistics this past Friday.  The statistics released by the BLS have shown that the unemployment rate rose from 4.3% to 4.4%.  While this may be a rise in unemployment many economists are not worried, Joe Brusuelas chief economist at RSM said: "This report is all noise and no signal."  Jed Kolko the chief economist at Indeed.com said: “We’re actually at a point of unusual stability.”    There are however some who are concerned about the next few months of unemployment.  Carl Tannenbaum the chief economist at Northern Trust said that "The next one or two months are going to be colored by the impact of Hurricane Harvey."  While this concern may only be a brief shock to the economy but the full effects are not yet known and as such may be more long lasting than they may be presently perceived to be.  This is because the survey used to determine these numbers was conducted before the Hurricane.

       
https://www.washingtonpost.com/news/wonk/wp/2017/09/01/government-to-release-august-job-growth-and-unemployment-report/?utm_term=.6b50105a0cf6
http://www.businessinsider.com/us-jobs-report-nonfarm-payrolls-august-2017-9
https://www.cnbc.com/2017/09/01/nonfarm-payrolls-august-2017.html

Is Los Angeles Regretting Olympic Host Bid Due to Possible Debt?

Back in 1984, Los Angeles was the only city to step up and bid to host the Olympics, despite Montreal and Lake Placid plunging into debt from hosting the games in prior years.  Los Angeles decided to rely on private investment and corporate sponsorship to fund the events rather than state finances and became the first city to profit from hosting the Olympics since 1932.  Seoul announced a profit in 1988 from hosting the Olympics, but excluded $1.5 billion in government spending on stadiums, transportation, roads, and other facilities, causing Seoul to nearly break even.

More than 30 years later, the city of Los Angeles is faced with a similar proposition.  The city has considered using sponsorship, broadcast rights, and merchandising for addressing the expenses.  However, the city has designed a contingency budget of a little under half a billion dollars.  If the Olympic Games exceed the budget, which has been a common occurrence with large events, then the city would have to cover unpaid debts.  One problem with this tactic is that private industry tends to reap the benefits of the plan whereas the risk and responsibility is shifted to the state.

The big question is why does Los Angeles believe that they can do it despite past hosts going into debt or barely breaking even?  The city expects to do it cheap since a lot of the significant infrastructure already exists.  In an article from time.com, the author writes that if the summer Olympics’ most recent past is anything to go by, Los Angeles’s proposal seems about as bulletproof as an Olympic plan can get, which might not be saying much.

http://time.com/money/4034909/los-angeles-olympics/

http://fortune.com/2017/07/17/los-angeles-hosting-summer-olympics/

https://www.manning-napier.com/Corporate/Insights/Blogs/MarketsEconomy/Article/tabid/313/Article/537/The-Economic-Impact-of-the-Olympics.aspx

Trump's view on U.S. economy growth

Currently, the economy is in its ninth year of recovery. This year, during the first quarter, the economy expanded at a very low rate of 1.2%. However, during the second quarter, the economy grew at 3%; which is the highest the rate has been in two years.

President Trump acknowledges the increase of the expansion rate throughout this year, but is not yet totally satisfied. Trump's original goal for the economic growth rate was 4%. He still believes this is very achievable. In his latest speech in Springfield, Montana, Trump said, "we can go much higher than the 3 percent." Trump also stated that countries overseas are unhappy with growths of 7, 8, and 9 percent. On the contrary, no major economy is actually growing at those rates. Last year, the fastest-growing economy was China, with 6.7% growth.

President Trump's goal of 4% economic growth is probably unattainable anytime soon. Currently, the workforce in the United States is aging. Less people in the workforce could cause less overall expenditure. Also, productivity growth is low right now. Although, if the economy does continue to grow at the rate it did last quarter, then Trump's goal will be met.


 https://www.nytimes.com/2017/08/30/business/economy/gdp.html

Why Hurricane could hurt the US economy

According to USA Today, Hurricane Harvey could be causing a halt to the Houston region in Texas. A region that has a vital part in the US economy. The Houston region was recently making a recovery from the oil crash in 2014-2016.

Moody's Chief Economists, Mark Zandi says that the property damage of the storm, which was estimated at 30 to 40 billion dollars, could take up to two years to fix. With that, the Houston region had a projected gross output of about 441 billion dollars, which covers roughly 2.4% of the nations economy. This storm has caused many problems in the region of Houston and in many other regions around it. But, since Houston was such a big part of the United States economy and the state of Texas economy, Hurricane Harvey will definitely be felt months after the Hurricane is done in the region of Houston.

One of my final observations about this article is the fact that since the oil halt in 2014-2016, about 77,000 jobs were lost in many different industries. Some of the industries include, mining, manufacturing, and wholesale trade. Of those jobs lost only about 7,000 jobs were recovered and this was before the Hurricane hit. This could pose some problems for those who have lost their jobs due to the oil halt, and now due to the recent Hurricane that hit.

This article also touches on the regions major major industries. Some of these industries such as, Energy, Automotive, and Airports all use oil in some way. Which looks to be a common theme when in comes to Houston.

Overall, this hurricane could hurt our economy for some time. With that, there is no reason that the region of Houston cannot recover as it was doing since 2016. The question that remains is how long until Houston and the state of Texas starts to recover again?

https://www.usatoday.com/story/money/2017/08/28/harvey-deals-blow-houston-key-gear-u-s-economic-engine/609798001/

Why Is the Fed So Scared of Inflation?

According to the NY Times, The Feds meeting this week can be viewed two different ways. Both cases are extremely reasonable when it comes to the state of our economy, and the direction it could go.

As we know, unemployment is extremely low at 4.3%. Which in most cases should drive up wages and prices. More people are making money, so goods would become more expensive. At this point, most assume that inflation will rise again simply because of the rising product prices and higher wages. Inflation would follow suit of the low unemployment rate and its affects on wages/prices.

The second and final thought is quite simple. Since interest rates are so low, the economy may be more fragile than some want to admit, and in the end the inflation rates must be helped.

In recent times, the Fed has pulled back from inflation projections and may need to do so in this case. Considering pay raises have been rare and Core Inflation has fallen short of the Fed's 2%.

Although the Fed doesnt control it all, better drug treatment, sentencing reform and health care could all help in all of this. They also cannot help control emigration to combat an aging labor force.


https://www.nytimes.com/2017/08/22/opinion/fed-inflation-interest-rates-workers.html?rref=collection%2Ftimestopic%2FInterest%20Rates&action=click&contentCollection=timestopics&region=stream&module=stream_unit&version=latest&contentPlacement=2&pgtype=collection

Good for the economy?: Inflation is finally perking up

Since the recession, the Federal Reserve has been trying to do something that may seem counterintuitive: push inflation higher. Sure, flat to modest price increases are better for consumers, leaving them more money for discretionary purchases. But little or no inflation over a prolonged period is a sign of a weak economy and gives shoppers little reason to buy stuff today since they know it won't be much more expensive in the months ahead. That can hurt consumer spending.

The good news for economists is inflation is finally picking up a bit, largely because of moderately rising oil and gasoline prices. That helped push overall annual inflation rate to 1.6% in October, up from 1.1% in August, according to the Labor Department's consumer price index.Core inflation, which excludes volatile food and energy items, dipped to 2.1% in October from 2.2% the previous month as airline fares fell sharply. The Fed’s inflation target is 2%.

More significantly, bond yields have risen lately on anticipation of stronger inflation ahead. President-elect Donald Trump's fiscal stimulus proposal -- including tax cuts and infrastructure spending -- along with the prospect of rising oil prices on OPEC production cuts have fueled expectations of more rapid price increases in coming years.

http://www.usatoday.com/story/money/2016/12/10/good-economy-inflation-finally-perking-up/95211388/

Long-Term Implications of Trump's Carrier Deal

Although they might not like to admit it, the media is having a field day covering the post-election world now that Trump has won. Every minor move he makes drives tons of traffic and increases the readership of the media outlets. With so much coverage it is interesting to read different perspectives of the moves he makes.

As Trump looks to make due on his promise to keep factory jobs in America, he's set up some sort of vague arrangement with Carrier (owned by United Technologies Corporation). The lack of details and the presentation make it look more like a political ploy and less like an actual victory. Trump worked out a deal that would give Carrier $7 million in tax incentives over a decade and the company would thus invest $16 million in keeping the company in state. Arguments have been made as to the merit of this deal in terms of the quantity of jobs saved or the stress on the defect, however, an article from the Washington Post delivers a deeper perspective.

Lawrence Summers, of the Washington Post, outlines why "Trump's Carrier deal could permanently damage American capitalism." Instead of focusing on the numbers involved in the deal, his piece poses questions about the deal's impact on the overall economic system. He discusses how these government deals might distort the free market by straying away from the rule and law based system. As we've discussed in class, the overall production function in America, comprised of the legal system and technology among other factors, is what drives our high standard of living. It will be interesting to see if these deals-based policies harm us in the long run, especially with economies around the world catching up.




https://www.washingtonpost.com/news/wonk/wp/2016/12/02/why-trumps-carrier-deal-is-bad-for-america/?utm_term=.600546527a18

What Donald Trump’s election means for government-bond markets

After Donald Trump was elected for presidency, the yield on the two-year bond rose from 0.78% to 1.12% and the ten-year treasury bond rose from 1.73% to 2.36%.  The thought behind these jumps is because of the belief that Trump will "push through a fiscal stimulus, in the form of tax cuts and infrastructure spending.  Not only will that boost the American economy but it will allow the Federal Reserve to return monetary policy to more “normal” levels by pushing up rates from the current 0.5%. It could also lead to higher inflation in the medium term. Forecasts for American inflation in the early 2020s can be derived from the bond market. In July, they pointed to 1.4%; now they imply 2.1%. All three factors—faster growth, rising short-term rates and higher inflation—are usually drivers of higher bond yields." 

So far this year, The thoughts of deflation and a quick slowdown in the Chinese economy has gone away.  Because of this, it is less likely that people will want to won government bonds.  Investment is becoming less popular. 

"The rise of extremist politicians brings with it the risk of extreme outcomes. The problem for investors is that the implications of such shocks are not uniform. The Brexit vote was followed by a fall in bond yields (as cautious investors opted for the safety of bonds), but the election of Mr Trump caused yields to rise. Had the president-elect made a swift promise to pursue his protectionist agenda, however, bond yields might have fallen, since a tariff war would hurt economic growth. The election of Marine Le Pen as French president would probably cause European government bonds to sell off; yields in America and Japan might fall."


http://www.economist.com/news/finance-and-economics/21711036-recent-falls-bond-prices-and-rises-yields-may-not-signal-end-low

Elderly people are holding Japan's Economy together

There is an interesting phenomenon happening in Japan right now.  According to Japan's Ministry for Internal Affairs and Communications and Cabinet office data, young workers in Japan (individuals under 60) have declined in their consumer spending since 2002 while those individuals (60 and older) have increased in their percentage make-up of consumption since 2002.  It is believed that young people are saving for retirement but so much so that it is hurting the Japanese economy.  Within the article cited, it is stated that, "Though they account for more than a third of the population, those over 60 contribute nearly half of consumer spending, according to government data. Spending by seniors is offsetting falling consumption among younger generations, according to UBS."  Another large reason for this decline among spending from younger communities is attributed, according to a report from Goldman Sachs, from a large decline in spending from consumers in their 40s and 50s because of a lack of change in incomes and a rise in "social insurance premiums." This phenomenon is very intriguing and makes you wonder how the Japanese government could stimulate this decline in consumer spending.    

https://www.bloomberg.com/news/articles/2016-12-04/silver-spenders-are-propping-up-japan-s-economy

Robots won’t kill the workforce. They’ll save the global economy.

There has been a rising concern about how the increase of robots might negatively affect the job market as the human population keeps on increasing . But on the other hand, some economists believe that robots will actually save the global economy as it doesn't depend on the number of people but the rate of population growth. The article talks about how the population growth has seen a decrease as women are having fewer children so the fewer people are entering the workforce and there is a decrease in labor growth worldwide. In the past use of technology has usually proved to be beneficial to growth as the article also states, "After the introduction of supermarket scanners, the number of cashiers grew. Though legal-discovery software appeared to threaten the jobs of paralegals, their ranks increased, too. ". If there was a negative impact of using artificial intelligence or advanced technology in industries we would have seen the decline in  growth already but after 2008 job growth in industrial countries have been more than the other countries. According to the article, "In the Group of Seven, the world’s top industrial countries, unemployment has fallen faster than expected in the face of weak economic growth, and faster than in any comparable period since at least the 1970s". Only time will tell if economists will start including robots in the working age population.

Link :
https://www.washingtonpost.com/posteverything/wp/2016/12/02/robots-wont-kill-the-workforce-theyll-save-the-global-economy/?utm_term=.60cdd1d473c4