And in big inflation news, the CPI-based Ecumenical Underlying Inflation measure was exactly 2.0% in May, consistent with the Fed's target. This is the first time it has been there since I started this concept during the inflationary episode. The ecumenical measure takes the median of 21 different measures: 7 different concepts (e.g., with and without housing) over 3, 6 and 12 months--all re-meaned to match the PCE inflation that the Fed targets.

In practice it is very similar to 6-month core CPI (re-meaned).

A boring jobs report, in a good way. 139K jobs added (140K private). Unemployment rate unchanged at 4.2%. Hours unchanged. Only notable deviations from steady state were participation down and unusual wage growth up. Note, Federal employment continued to decline. But state and local added almost as much.

Strong jobs report. 177K jobs added. Unemployment rate steady at 4.2% but participation rate up and U-6 down. Hours steady. A slowdown in hourly wage growth. Federal employment was down a bit but state and local more than made up for it. The trend in private jobs is basically the same as total.

Real GDP fell at a 0.3% annual rate in Q1.

The underlying numbers are very extreme--with an enormous increase in imports and inventories.

My preferred measure of "core GDP" a better signal, up at a 3.0% annual rate (see next) Final Sales to Private Domestic Purchasers is usually a better predictor of future GDP growth.

It includes:
Personal consumption: +1.8%
Business fixed investment: +9.8%
Residential investment: +1.3%

ft.com/content/58576a…

Wednesday's Q1 GDP # will have a lot of economic noise, a lot of measurement noise, and could generate even more political noise.

A technical🧵on one aspect: what period does it reflect?

The answer is a combo of pre- and post- 1/20 because of the weirdness of quarterly averages When I (and most people) look at things like CPI or jobs, we look at something like a three month average. That would be growth from Dec 2024 to Mar 2025. Which is also the (geometric) average of the growth rates in Jan, Feb and Mar. It tells you what happened in those 3 months.

Four roughly true and important propositions about trade. Asserting not explaining here, will explain sometime:

1. The volume of trade depends, inter alia, on the magnitude of domestic and foreign tariffs:

X + M = f (US tariffs , foreign tariffs) 2. The balance of trade depends mostly on U.S. macroeconomic balances, like the budget deficit and level of business investment:

X - M = f(US macro balances)

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% Here are the full set of numbers. They were uniformly ugly in February.

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.

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...

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 🧵. 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…

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. Here are the full set of numbers.

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 🧵 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).

I have a new piece in @ForeignAffairs titled, "The Post-Neoliberal Delusion and the Tragedy of Bidenomics". They were generous about giving me a lot of words but were less generous with charts--so this long thread partially rectifies that. (And links to the piece at the end.) @ForeignAffairs First let me say some good policy came out of the Biden administration, including on climate and microchips. And more good policy would have come out if it wasn't blocked by unified Republican opposition.

But...

Inflation came in below expectations but still a touch on the high side.

Core CPI annual rate:
1 month: 2.7%
3 months: 3.3%
6 months: 3.2%
12 months: 3.2% Shelter inflation was moderate and the three month moving average continues to basically trend down, albeit slowly.

Tariffs & exchange rates. A short explainer of the simple case of 10% across-the-board tariffs. Let's start with no retaliation.

Brief version: Tariffs will strengthen the U.S. dollar which will reduce impact on consumers but exacerbate it for exporters.

Three cases: 1. No exchange rate effect. In this case imports are 10% more expensive for consumers. Exports are the same (because the exchange rate did not change) and the trade deficit shrinks. The entire tariff is paid by Americans.

Labor market tightness has stabilized over the last several months after a loosening steadily through the summer. Job openings were up and quits down. My favorite metric, job openings per unemployed, was stable. Here are openings and quits. They've been telling a somewhat contradictory story in recent months as openings are up and quits are down.

Inflation came in a touch above expected, with core CPI at an annual rate:

1 month: 3.8%
3 months: 3.7%
6 months: 2.9%
12 months: 3.3%

The last mile is proving very, very stubborn. Here are the full set of numbers.

I believe it is useful to make small contributions to big things (many engaged in doing that now) & also bigger contributions to small things.

On the later, in @BostonGlobe I argue for zoning reform to enable Cambridge to help build more than 1,000 additional housing units.

A🧵 States and localities can resist the likely regressive thrust of federal policymaking while doing what they can to build a more progressive, inclusive and upwardly mobile society.

To do that we need cheaper housing.

And to do that we need more housing.

I know many skeptics of prediction markets. I don't have an ideological faith in them (OK, maybe quasi ideological). But the empirical evidence is they have worked really, really, really well. And did again on Tuesday night.

A short 🧵 about this remarkable picture. Markets gave Trump a 60% chance. How does that prove they know what they're doing? If Harris won could say, "but she had a 40% chance" so wasn't wrong.

That's correct. Can only judge when you've seen them many, many times. Do 60% chance things happen 60% of the time?

The macroeconomy is strong--high growth, low unemployment, falling inflation--the best of any advanced economy.

But there was a reluctance to present/understand how families were still not out of the deep inflation hole. And too much masked by cherrypicking/misleading stats. IF Donald Trump had been President for the last 4 yrs here are some stats you would have heard more from progressives. Relative to 2019:

--Real median household income down 0.7%

--3m more people in poverty (poverty rate up 0.6pp)

--Unemp rate up 0.6pp

--Mortgage rate up 3pp

Another strong GDP report (2.8% in Q3) pushes real GDP even further above the pre-pandemic forecast. The 2.8% (annual rate) was just below the strong expectation. Excluding volatile components, private domestic sales to final purchasers was 3.2%.

Consumption and equipment investment were very strong while structures (both residential and non) subtracted.