CERF Blog

Today’s BLS jobs-report indicates the economy added 243 thousand jobs in January, which was about 90 thousand jobs above the consensus forecast of 155 thousand. Our forecast was 150,000. This gain was accompanied by a fall in the unemployment rate from 8.5 percent in December to 8.3 percent in January. The job-gains were pretty broad… Read more

The US savings rate is really low and has been for some time.  For many years this was explained by the argument that people were getting wealthy through appreciation of their homes and stock portfolios, so the need for saving out of current income was low.  And sure enough, household net worth did expand nicely… Read more

Louisiana Congressman Charles Boustany has introduced a bill banning withdrawals of welfare funds from ATMs at liquor stores, casinos, and strip clubs. Politicians do this sort of thing every now and then. It wasn’t that long ago that California’s legislature, in its own spasm of self-righteous Puritanism, was imposing its own, very similar, controls. This… Read more

This morning’s much anticipated fourth quarter GDP release provides a preliminary estimate of real GDP growth of 2.8 percent. To be fair, perhaps the anticipation is experienced mostly by forecasting economists and financial market watchers. I am always particularly interested in fourth quarter as it closes out the year and in this case I forecasted… Read more

Last September, I proposed (“The Warren Buffett Tax”) that the most effective way to extract a lot of tax revenues from Warren Buffett would be to impose a wealth tax.  My tongue-in-cheek proposal was this:  Tally up your assets and liabilities, calculate the difference (net worth) and then pay a tax of 20% on net… Read more

In his book Econoclasts1, historian Brian Domitrovic produces what he believes is the first historically rigorous account of the development of supply-side economics (that is, one that relies on primary sources).  He reviews contributions to supply-side theory by Nobel Prize winning economists Robert Mundell and Robert Lucas, as well as significant contributions from outstanding economists… Read more

In a terrific book published last year,  Antti Ilmanen1 has investigated the drivers of investment returns from a number of angles including asset class (that is, equities, fixed income, commodities), investment strategy (value, growth, momentum, leverage, carry), and risk driver (exposure to economic growth, inflation, liquidity).  The basic idea is that you obtain strong investment… Read more

In a previous article (December 10, Goodhart’s Law and Monetary Policy) we discussed Goodhart’s Law which says that once an observed empirical relationship begins to be relied upon, it will no longer work. In that article we applied the law to monetary policy. Goodhart’s Law also applies to bank capital regulations.  The Basel Committee on… Read more

California has now had three consecutive months of job gains, and the State’s unemployment rate has been declining, albeit slowly.  That’s an improvement, but it’s not time to break out the bubbly. For one thing, those job gains have been pretty darn small, and they haven’t been enough to drive down the unemployment rate.  Outmigration… Read more

Forecasting is always difficult. It is even more difficult when the data keep changing. This year, we’ve been plagued by very large adjustments to GDP data. Most have been downward adjustments, but a few have been upward adjustments. Productivity has been the source of most of the changes. Jobs data get revised too, but we… Read more

Goodhart’s Law (named after economist Charles Goodhart) says that once an observed empirical relationship begins to be relied upon, it will no longer work.   This law, or a variant, comes up in a lot of fields, but especially finance and economics.  Consider the problem of forecasting the rate of inflation.    Price stability is a major… Read more

I’m often asked about how regional forecasts are constructed.  The fact is that different outfits construct regional forecasts differently. At the lowest level of rigor, a forecaster may just discuss broad trends, perhaps referring to historical data, but not provide a numerical forecast.  These forecasts are not without value.  Improved understanding the general sweep of… Read more

The No Child Left Behind Act became law in 2002. Among other things, it required standardized testing of students, beginning in 2003. The scores are used to evaluate the quality of the schools. It sounds reasonable. Congress certainly thought so. It was co-authored in the Senate by Edward Kennedy (D-MA) and Judd Gregg (R-NH), while… Read more

The Taylor Rule The Taylor Rule relates the target federal funds rate with the gap between actual and target inflation and between actual and capacity output.  The higher is inflation or the lower is the output gap, the higher is the target funds rate.  The rule is both descriptive and prescriptive.  It was originally proposed… Read more

I don’t think I’ve ever watched a compete 35 minute internet video.  I haven’t been to a movie for well over a decade and probably less than 10 times over the 40 years I’ve been married.  We have a TV at home, but no cable or antenna.  The kids use it to play Wii or… Read more