WASHINGTON—Most private economists see the Federal Reserve raising short-term interest rates two more times this year, once in September and again in December, according to The Wall Street Journal’s monthly survey of forecasters. Of the 57 economists who responded to the survey, 88% expect two more quarter-percentage-point increases to the Fed’s overnight lending target this year, to a range between 2.25% and 2.5%. That is up from 84% of economists in last month’s Journal survey.... … [Read more...] about Economists See Two More Fed Rate Increases This Year
A colleague recently sent me a commentary by Stephanie Flanders, head of Bloomberg Economics, headlined: “Economists have lost the trust of politicians.” Is that true, and, if so, is it a plus or a minus? Let’s first dispense with President Trump (there’s a thought …), whom the piece describes as “the extreme case” who takes “pride in doing the exact opposite of what mainstream economists would prescribe. … But if the economics profession were being honest with itself, it would have to admit that the problem goes deeper than … Trump.” It is not hard to marshal facts as to why this might be the case. Queen Elizabeth II spoke for many when, after a deregulated finance sector helped inflate a housing bubble that ushered in a global downturn, she asked British economists, “Why did nobody notice it?” In fact, a precious few, notably economist Dean Baker, explained what was happening vividly and in real time, but … [Read more...] about Have politicians stopped listening to economists?
Macroeconomics tends to advance — or, at least, to change — one crisis at a time. The Great Depression discredited the idea that economies were basically self-correcting, and the following decades saw the development of Keynesian theory and the use of fiscal stimulus. The stagflation of the 1970s led to the development of real business cycle models, which saw recessions as the efficient working of the economy, and central bank meddling as likely only to cause inflation. The painful recessions of the early 1980s saw a shift to so-called New Keynesian models, in which monetary policy is the central stabilizing force in the economy. The housing bubble that peaked in 2006, the financial crisis of 2008, and the Great Recession that followed constitute another crisis. So far, however, it has produced mostly evolution, rather than revolution, in economists’ conception of the business cycle. The bubble and the following crisis convinced macroeconomists that recessions often … [Read more...] about What economists still don’t get about 2008 crisis
U.S. The United States economy grew by a whopping 4.1 percent last quarter, and President Donald Trump took to the podium Friday morning, giving a speech in the White House South Lawn where he took credit for the growth and promised that the high numbers would be sustained throughout his presidency. Leading economists, however, are not so sure. “This isn’t a one-time shot,” Trump told reporters. “I happen to think we’re going to do extraordinarily well in our next report, next quarter.” “I don’t think that’s right,” Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and former chief economist to Vice President Joseph Biden, told Newsweek. “Exports got a boost from farmers who were selling their agricultural products to our trading partners ahead of the tariffs, and government spending that we put on the national credit card is producing growth as well. But the underlying trend is closer … [Read more...] about Donald Trump Touts 4.1 Percent Economic Growth but Economists Say It’s Not Unusual or Sustainable
Editor’s note: Commentary from PNC chief economist Gus Faucher on this morning’s jobs report. • So far this year, job growth has averaged 215,000 per month, well above last year’s pace of 182,000. Job growth slowed a bit in July to 157,000, but that followed two straight months of very strong gains, and the job market is in great shape in the middle of 2018. There were big upward revisions to job growth in May and June. So far this year, job growth has averaged 215,000 per month, well above last year’s pace of 182,000. Private-sector employment rose by 170,000 in July, with most major industries adding jobs. Despite concerns about the impact of tariffs, manufacturing employment rose by 37,000 over the month. The unemployment rate dropped 0.1 percentage point in July to 3.9 percent; except for May, this is the lowest the unemployment rate has been since late 2001. Average hourly earnings rose 0.3 percent in July from June, and were up 2.9 percent from one … [Read more...] about PNC chief economist says slower job growth in July not a concern