Title of an article a few days ago: The problem is the economy isn’t crashing and burning — just the opposite. The pandemic lockdowns flattened the economy earlier this year, and there’s lots of heavy lifting to do to get all the jobs back. But they are coming back, and Trump will be bequeathing to […]
And the recovery is well under way.
Real gross domestic product (GDP) increased at an annual rate of 33.1 percent in the third quarter of 2020 (table 1), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 31.4 percent.
This is from a news release from the U.S. Department of Commerce’s Bureau of Economic Analysis, October 29, 2020.
A 33.1 percent annual rate of increase means that that would be the rate if the rate of increase of the summer quarter continued for 3 more quarters. Of course, that won’t happen. To put it in perspective, a 33.1 percent annual increase implies that real GDP in the summer quarter increased by 7.4 percent. That’s a record increase for a quarter.
Of course it comes after the huge decline of 31.4 percent (annual) in the spring quarter, which happened due to Covid-19 and the lockdowns.
That doesn’t make it even. If a number falls by 31.4 percent, then to get back to where we where, we need an increase of 45.8 percent.
To help with the math on the second point a little, here’s how I put it after a tutorial during which I watched myself on video in prepping for my first distance-learning class way back in 2002: “The camera loses 1/4 of my energy; therefore I need to increase my energy by 1/3.”
Here’s the math on both if you’re interested and, for that matter, even if you aren’t interested.
Let x be the quarterly rate of growth.
Then (1+x)^4 = 1.331.
4 ln(1+x) = ln(1.331) = 0.2859
ln(1+x) – 0.2859/4 = 0.07148
1+x = e(0.07148) = 1.074
Therefore x = 0.074. Growth rate = 7.4 percent.
On the second one.
If a number falls by 31.4 percent, it falls to 68.6 percent of what it was.
To get from 68.6 percent to 100 percent, it must rise by 1/0.686 = 45.8 percent.
Just in time for the module on fiscal policy in my macro policy course, multipliers in a time of Covid-19. From a CBO working paper by Selsiki, Betz, Chen, Demirel, Lee, and Nelson, “Key Methods That CBO Used to Estimate the Effects of Pandemic-Related Legislation on Output”. Table 2 reports the ranges for a period […]
Given apparent gridlock in Washington – that is the gap between the administration and Senate Republicans on phase 4 recovery package – Wall Street economists and academics see the recovery somewhat differently. From the Initiative on Global Markets/FiveThirtyEight Covid panel round 10 survey (released October 12). Figure 1: GDP actual (black bold), WSJ October survey […]
Deceleration continues, according to some key indicators noted by the NBER’s Business Cycle Dating Committee (BCDC). Figure 1: Nonfarm payroll employment (dark blue), Bloomberg consensus for September as of 10/1 (light blue square), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ […]
ADP and Bloomberg consensus says don’t expect surge, don’t expect decline… Figure 1: Private nonfarm payroll employment from BLS (black), Bloomberg consensus (blue circle), ADP (red). Source: BLS, ADP via FRED, Bloomberg and author’s calculations. The pattern sort of matches the mobility and engagement index the Dallas Fed produces (thru 9/26). Source: Federal Reserve Bank […]
IHM/Markit (aka Macroeconomic Advisers) releases July GDP: Figure 1: Nonfarm payroll employment (dark blue), Bloomberg consensus for August employment as of 9/1 (light blue square), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink), all log normalized to 2019M02=0. Source: BLS, […]
The IGM/Fivethirtyeight Round 7 survey is out, with discussion here. The poll results are here. Below are some forecasts and nowcasts to consider. Figure 1: GDP as reported (black), IGM/Fivethirty Covid-19 panel median (teal), Survey of Professional Forecasters mean (blue), and Atlanta Fed GDPNow of 18 August (red). Source: BEA 2020Q2 advance, IGM/Fivethirtyeight round 7, […]
In these times? Among other reasons, it’s: (1) An indicator of household consumption behavior; (2) An indicator of conditions for business – including small/medium size enterprises. Hence, the recovery of retail sales has been much lauded. But if you thought the recovery was in brick-and-mortar retailers, you’d be somewhat misguided. First, for retail sales and […]
Consumer sentiment declines; economic policy uncertainty on the rise; real interest rates declining. It’s all in the graph below. Figure 1: University of Michigan consumer sentiment (top), Economic Policy Uncertainty Index (middle), TIPS 10 year constant maturity yield, % (bottom). U Mich sentiment is preliminary for July, EPU in July is thru 7/25/2020, TIPS in […]