I'm in @Opinion today talking about three "partial truths" in the US economic narrative. "Partial truths" are not myths--they have more than a kernel of fact behind them--but they demand caution, asterisks, and grains of salt.

1/9bloomberg.com/opinion/articl… @opinion Partial Truth #1: AI is driving a boom in GDP growth.
There's no question business investment in AI has surged. But on the question of **real GDP** effects specifically, it's important to note that a lot of the investment has been imported, which needs to be netted out.
2/9

New @The_Budget_Lab tariff update out tonight, incorporating the heavy truck, furniture, and pharmaceutical tariffs announced by President Trump yesterday. Details are still sparse; we will update in the future as more specifics about the policy are published.
In brief...
1/10 @The_Budget_Lab TARIFF RATE: The September 25 announcement raises the average effective tariff rate by 0.5pp to 17.9% pre-substitution (as of Oct 1), the highest since 1934. After consumers & businesses shift their spending mix, the post-substitution rate is 16.7%, highest since 1936.
2/10

New @The_Budget_Lab tariff analysis incorporating all tariffs through Sept 3. This is a major update. We:

• incorporate higher assumptions about Canada & Mexico tariff-free import shares;
• show 2 scenarios: all tariffs & no IEEPA tariffs after Jun 2026.

In brief...
1/12
@The_Budget_Lab Under our all-tariff baseline, consumers face an effective tariff rate of 17.4%, a 15.0pp increase from 2024 & the highest since 1935. After shifts in spending in reaction to the tariffs, the effective tariff rate will be 16.4%, a 13.9pp increase & the highest since 1936

2/12

We have a new @The_Budget_Lab report out today looking at the short-run effects of tariffs so far. Basically, we asked the questions, "What do we see in actual data to date, and how does it compare to our priors." In brief...
1/13 @The_Budget_Lab REVENUE & TARIFF RATES. New 2025 tariffs have raised ~$88B thru Aug, with $23B in Aug alone. The actual effective tariff rate was ~11.5% in Aug vs 18.2% statutory. The wedge b/t the actual & statutory rates is due to factors that lag revenues & low tariff shares from Canada.
2/13

Headline CPI 0.29% MM/2.70% YY, core CPI 0.32% MM/3.06% YY. Small upside surprise on monthly headline inflation, rest in line with expectations.
Grocery & energy prices declined MM, core goods inflation stayed at a warm 0.2%, & core services inflation picked up to 0.4%. In June, excess monthly core inflation was largely a goods story, in large part driven by tariff price adjustments.
In July, the excess is a bit larger on net but more split between goods & services.

New @The_Budget_Lab tariff analysis incorporating the Administration's new list of "reciprocal" tariffs published last night and going into effect August 7, as well as maintaining the 25% rate on Mexico. In brief...
1/10 @The_Budget_Lab Consumers face an overall average effective tariff rate of 18.3%, a 15.9pp increase from 2024 & the highest since 1934. After consumers & businesses shift spending in reaction to the tariffs, the average tariff rate will be 17.3%, a 14.9pp increase & the highest since 1935

2/10

New @The_Budget_Lab tariff analysis incorporating 1) the 50% copper tariff, and 2) the July 7 & 9 letters to 22 countries with new "reciprocal" tariff rates. Both go into effect August 1. In brief...
1/10 • Consumers face an overall average effective tariff rate of 18.0%, a 15.6pp increase from 2024 & the highest since 1934. After consumers & businesses shift spending in reaction to the tariffs, the average tariff rate will be 16.9%, a 14.5pp increase & the highest since 1935
2/10

New @The_Budget_Lab tariff analysis incorporating 1) the US-Vietnam framework announced July 2, and 2) the July 7 letters to 14 countries with new "reciprocal" tariff rates, which go into effect August 1.

In brief...
1/10 • Consumers face an overall average effective tariff rate of 17.6%, a 15.2pp increase from 2024 & the highest since 1934. After consumers & businesses shift spending in reaction to the tariffs, the average tariff rate will be 16.5%, a 14.1pp increase & the highest since 1936
2/10

Yesterday's US Court of International Trade decision invalidates the recent tariffs imposed under IEEPA, including the "reciprocal" tariffs & most tariffs on China, Canada, & Mexico, leaving only the Section 232 commodity tariffs in place. What are the economic implications?
1/8 • The average effective US tariff rate falls to 6.9% pre-substitution without the IEEPA tariffs, the highest since 1969, down from 17.8% prior. Even after consumption shifts, the average tariff rate will be 7.0%, also the highest since 1969.
2/8

Assuming that the US raised the "reciprocal" tariff rate on the EU from 10% to 50%, what would be the economic effect?

The 1st table takes current tariffs & illustratively raises the EU reciprocal rate to 50% total. For comparison, the 2nd shows w/o the extra EU tariff.
1/7
* The pre-substitution average effective US tariff rate rises from 15.4% now to 19.5%
* Post-substitution, the average rate rises from 14.0% to 18.3%
* Short-run PCE price-level pressures rise by another 0.5pp, from 1.7% to 2.2%.

2/7

New tariff update today from @The_Budget_Lab incorporating

1. Today's announcement of lower US-China tariffs (10% instead of 125% reciprocal tariffs);
2. The May 8 US-UK trade deal; and,
3. The April 29 auto tariff rebate announcement.

Some high level takeaways:
1/13 @The_Budget_Lab • In broad strokes, the lower China tariffs announced today have 2 main effects, assuming they stay in place:
1. They reduce the economic damage of 2025 tariffs by 40% (judged by price & GDP);
2. They raise $300bn *more* over 10Y, showing how suboptimal 145% was.
2/13

@jasonfurman & @ZLiscow have responded to the piece on real infrastructure investment @vannostrand & I wrote in @Briefing_Book. We always learn a ton from J&Z, & this is no exception. They engage w/ thoughtful, data-driven pts. You should read their threads & then come back here (links at end).
1/23 Our bottom line: the official BEA deflator & the NHCCI that J&Z defend tell different stories. But most measures say infra investment has risen. Each real validator we could find (# of h’way contracts, h’way employment, change in lane-miles of h’ways from 2 sources) all grew under Biden.
2/23

Hot off the presses, @The_Budget_Lab just published a preliminary estimate of the economic & fiscal effects of the Trump Admin's 25/25/10 Mexico/Canada/China tariff proposal, with a special lower 10% rate on Canadian crude oil imports. Some high-level conclusions follow...
1/4 1. The proposal raises PCE prices by 0.76% pre-substitution (full retaliation & no Fed offset). That's the equivalent of a $1,250 per household loss in purchasing power on average in 2024$.

2.  The proposal raises $1.4-1.5T over 2026-35 conventionally scored, & ~$150B less dynamically scored.
2/4

Jobs Day, July 2024

This is a treading water jobs report at 114K, which is almost exactly the number of jobs we mechanically need to add to keep up with the labor force.

But it's probably weaker than that since there will likely be future downward benchmark revisions. /1

Today, I have a short @The_Budget_Lab piece on the "No Tax on Tips Act" that puts the bill in the context of today's labor market and tax system. There are three important takeaways. /1 budgetlab.yale.edu/news/240624/no… First, tipped work is not very common, even among low wage workers. There were 4 million workers in tipped occupations in 2023. That's 2 1/2 % of all employment, 4% of workers in the bottom half of hourly wages, and 5% of workers in the bottom quartile. /2

Real GDP growth came in at 1.6% in Q1, softer than expected. But that appears to be driven by weakness in volatile components, especially net exports. Private domestic final purchases--"core GDP" made up of consumption & fixed investment--grew 3.1%, a very strong print. The chart below shows how much broad components of GDP contributed to grown in Q1, 2023 Q4, and on average over 2017-19. You can see the significant swing in exports. Goods consumption also cooled a bit. Services consumption and residential investment firmed.

Jobs Day, March 2024

This was a strong report, and both surveys were aligned. Payroll employment grew 303K in March, with +22K net revisions. The 3M mov avg is now +276K.

Household employment grew 498K, and by 352K on a payroll basis (the household survey has far wider error bands).

The Producer Price Index (PPI) is always a difficult release to interpret. CPI and PCE are better measures of consumer prices, (though the latter takes some subindices from PPI); for example, CPI and PCE include imports and housing, both of which PPI exclude. /1 That said, PPI is no slouch on interesting data.

Contrary to the way it's often described, the headline PPI measure (PPI Final Demand) is *not* an input cost index. It's an index of seller's final prices. But PPI *does* have input cost indices, called "Intermediate Demand":

Jobs Day, February 2021 Misclassification may have pushed the unemployment rate to be up to 6.7% rather than the official 6.2%.

I'd like to delve a bit further into my Twitter thread from yesterday, both to explain why what the Fed is communicating here is interesting and valuable right now, and also to explain more why it runs into trouble over longer periods. /1

https://twitter.com/ernietedeschi/status/1363949305816580104

First, for background on how the Fed is communicating alternatives to the headline unemployment rate, read this nice @jeannasmialek piece from the other day. /2

https://twitter.com/jeannasmialek/status/1363915202316632067

Jobs Day: January 2021 Oof, -159K in normal 2-month revisions (separate from the annual benchmarking adjustments which also got folded in the data).