The economy grew at a 6.5% annual rate in Q2. That means:

--Real GDP is now above it's pre-pandemic level (but still below its trend)

--Real GDP growth so far in 2021 is substantially outpacing the pre-ARP forecasts (stay tuned for a graphic on this)
Looking at the numbers:

--Extraordinary growth in consumer spending (+11.8%) and business fixed investment (+8.0%). But housing, inventory reductions and reduced net exports subtracted 2pp from the growth rate.
Another Q where demand was very strong: Americans were purchasing a lot of stuff (businesses, consumers, govt). But some of that stuff came out of inventories and imports.

Real Final Sales to Domestic Purchasers up at a 2.1% annual rate since 2019-Q4, same as the pace pre-COVID.
Inventories can't go down much more (are there any left???) So that could mean stronger growth in Q3. BUT, without inventories relieving demand pressures it could also mean more imports and/or higher prices.

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More from @jasonfurman

21 Jul
I don't expect delta to have a large impact on the macroeconomic trajectory for four reasons, but this is all uncertain so should still be vigilant/nervous:

1. We have not seen impacts on mobility so far in European countries affected earlier or in the US.
2. People who are unvaccinated may also be the least likely to make large behavioral changes in the face of resurgent COVID (although hopefully many will make the most important change--getting vaccinated).
3. Ditto on states & localities: the ones who most need social distancing rules are the low vac states that are least likely to implement those rules.

(Moreover, mask rules alone not enough to do much, would need to close restaurants, bars, etc. to move the economic needle.)
Read 5 tweets
13 Jul
Earlier this year most people were forecasting ~2% inflation for the entire year. So far we already have 3.6% inflation (or 7.3%) at an annual rate.

Reupping a thread last month, this massive miss could mean you revise your inflation forecast up or down.

At this point you should almost certainly revise *down* your forecast for inflation for the remainder of 2021. New and used cars have contributed 1pp to the 3.6% inflation so far this year. Could easily subtract something like that over the next six months.
Inflation in the first half of 2021 has been much less bad than it looks when you take out the crazy volatile stuff. Inflation in the second half of 2021 may be substantially higher than the headline numbers.
Read 4 tweets
12 Jul
Have been really enjoying the new @PolicyImpacts website from @nhendren82 & @bsprungkeyser, a great source for evidence-based benefit-cost analysis of govt spending (including tax expenditures) on education, health, nutrition, disability and much more.

policyimpacts.org
The site builds on their research on the Marginal Value of Public Funds (MVPF) which compares *long-run* benefits to long-run net costs, importantly factoring in any savings from higher taxes on higher wages, savings on healthcare, etc. academic.oup.com/qje/article/13…
Policymakers working to prioritize can take advantage of their library of one hundred or so interventions all organized in a reasonably comparable way.

(Caveat: as always, make sure results are robust/applicable, don't run out & make policy on a single paper if you can help it.)
Read 6 tweets
2 Jul
My analysis of the jobs numbers, with Willie Powell. Short version: the pace of job growth picked up as signs continue to point to a tight labor market. A 🧵follows.
piie.com/blogs/realtime…
850,000 was a great jobs number but we're still 9m jobs short of trend. We should be able to narrow that gap relatively rapidly for several more months in a row (assuming no dramatic worsening of the virus situation).
The unemployment rate remains elevated. And the "realistic" unemployment rate, which includes the 2.1m people who have left the labor force above and beyond what one would have expected.
Read 7 tweets
2 Jul
The pace of *nominal* wage growth remains very rapid, although it slowed a little in June.

Over the last 3 months the annualized nominal wage growth was:

Private: 5.9% (or 7.1% adjusted for composition)

Production and nonsupervisory: 6.6% (or 7.8% adjusted for composition)
The compositional issue is that when lower-wage workers are added in larger numbers, like leisure and hospitality, that drives down the average because you are adding some lower-wage workers.

This tries to adjust for that by holding industry shares constant.
The numbers for June are:

Private: +0.3% (or 0.4% adjusted for composition)

Production and nonsupervisory: +0.4% (or 0.5% adjusted for composition)
Read 4 tweets
2 Jul
I wrote this quickly and missed a big point: the "definitional differences" I acknowledged were a possibility were a *much* bigger deal than I had realized--@jdlahart makes this very important point.
So there may be a more coherent story here than I had realized but I'm not sure what it is:

--People shifting from self employed to jobs (BLS says self employment was down but only 165K)

--People getting multiple jobs (but BLS says this was down)

--Farm employment?

--Others?
Hopefully someone has figured this out already so I'll stop speculating, if I see reliable points on it I'll retweet them.

Enjoy the rest of your jobs day!
Read 4 tweets

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