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Jason Furman Profile picture
@jasonfurman
Jan 7, 2022 • 6 tweets • 3 min read • Read on X
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Willie Powell and my new @PIIE blog on the latest employment numbers--and looking back at 2021 and the COVID recession and its aftermath.

Short version: very rapid progress, still not all the way there, uncertainty looking forward.

A 🧵.

piie.com/blogs/realtime…
The economy added 6.4 million jobs in 2021, a 4.5 percent increase in jobs. that makes 2021 the seventh fastest year for job creation since the aftermath of World War II.
The unemployment rose very rapidly in March & April 2020 but then it has fallen rapidly ever since. Cumulatively the unemployment rate was 6.5 point-years above it's pre-recession value. That is about typical for postwar recessions and much better than the financial crisis.
The unemployment rate is falling much faster than forecast. Now is well below what the Survey of Professional Forecasters expected in every forecast they have made since the pandemic hit. BUT, labor force participation would likely be worse than what they would have forecasted.
Employment rates are still down relative to pre-pandemic for most age-sex groups. A larger fraction of men than women have stopped working with larger employment declines for the prime-age population than for younger people (whose employment has gone up) or retirement age.
Overall employment is 2.7 million workers short of what CBO forecast prior to the pandemic while jobs (based on surveying employers) are 4.4 million short. This indicates that there is still work to do. FIN.

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More from @jasonfurman

Jason Furman Profile picture
Mar 28
Core PCE inflation came in a little above the already high expectations in Feb. The pattern is the opposite of what you want to see--the shorter the window the higher the annualized rate (and still high at 12 months):

1 month: 4.5%
3 months: 3.6%
6 months: 3.1%
12 months: 2.8% Image
Here are the full set of numbers. They were uniformly ugly in February. Image
If you're looking for some slivers of reassurance, market-based core (which excludes imputed items like portfolio fees) was only up 2.4% over the last 12 months. And "only" 3.0% annualized over the last three, less than the regular core. Image
Read 7 tweets
Jason Furman Profile picture
Mar 18
Income taxes are distort trade by reducing purchases of imports. At least they do so as much as VATs do. Which is to say not any more than they reduce purchases of domestic goods.

A hopefully irrelevant thread.
A simple toy example.

Consider a person in Spain with 100€ in income that they use to buy oranges. Absent taxes oranges cost 1€. They must spend all their income this year.

In this case they could buy 100 total oranges--imported plus Spanish.
Now assume there's a 25% VAT.

VAT raises the cost of imported oranges to 1.25€, this is the way it is supposed to be like a tariff.

Of course, also raises the cost of Spanish oranges to 1.25€. This is not a tariff & is trade neutral.

The person can now buy 80 total oranges.
Read 6 tweets
Jason Furman Profile picture
Mar 3
The Atlanta tracker is predicting GDP growth of -2.8% in Q1.

S&P, which I generally trust a lot, is at 1.6%. Goldman is also at 1.6%.

Atlanta likely wrong. And regardless doesn't say what you think it does.

So continue your deep breathing.
To understand what I think is going wrong with Atlanta you need to understand that imports show up twice in the national accounts--cancelling out.

You might know that GDP = C + I + G + X - M

If you import a Japanese car then M goes up. You might think that lowers GDP but...
The imported car also shows up as a + in GDP, cancelling out the - import.

If it is imported for use by a family, business or government then it shows up in C, I or G respectively.

If a business imports it & no one buys it then it is increased inventory, which shows up in I.
Read 12 tweets
Jason Furman Profile picture
Mar 3
Given the renewed interest in national income accounting a brief primer on the role of government spending in GDP.

Short version: (1) critical to include govt for accounting identities but (2) can debate welfare-relevant metric or best forecasting "signal".

A 🧵. Image
Three identical ways to think about the size of the economy:

1. Final expenditures (including consumers, businesses and government)

2. Incomes (including wages and profits)

3. Production (value added or final production) khanacademy.org/economics-fina…Image
If a consumer, business or govt buys a US-made car that counts in the expenditure portion of GDP as C, I or G.

The wages of the auto worker or the profits of the auto company show up in the income version.

And the auto companies making a car shows up in the production version.
Read 12 tweets
Jason Furman Profile picture
Feb 28
Core PCE inflation in January, annual averages:

12 months: 2.6%
6 months: 2.6%
3 months: 2.4%
1 month: 3.5%

This was as expected, consistent with a very gradual slowing, and ~2.5% underlying inflation. Image
Here are the full set of numbers. Image
On the favorable side of the ledger, market-based core inflation--which is a better predictor of future inflation than regular core--has been somewhat lower. This excludes things like implied price of portfolio management fees. Image
Read 7 tweets
Jason Furman Profile picture
Feb 23
COVID ripped apart economies around the world. Amazingly most rich countries snapped back almost completely very quickly. By the end of 2021, 12 of 27 advanced OECD economies had unemployment rates below pre-COVID forecasts. The US did not. In fact, it was the fourth worst.

A 🧵 Image
This🧵looks at unemp rates cross countries. I'll do another w/ GDP growth across countries which tells a similar story.

But unemp rates preferable because a cleaner answer speed/fullness of RECOVERIES. Growth differences can be more structural (e.g., productivity & demography).
My aim in this and the thread that I'll post later is to be much more systematic than @Noahpinion was in his response to my @ForeignAffairs piece. He had some good arguments there but his international macro comparisons were, at best, unsystematic. noahpinion.blog/p/anti-anti-ne…
Read 15 tweets

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