Jason Furman Profile picture
Professor of Practice at Harvard. Teaches Ec 10, some tweets might be educational. Also Senior Fellow @PIIE. Was Chairman of President Obama's CEA.
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6 May
I'll go on a Twitter break after the jobs #s tomorrow. Will get everything out of my system before then.

Which brings me to inventories.

They are very low, getting lower, and cannot go below zero (although I also thought oil prices couldn't go below zero either so who knows.)
A good way to look at inventories is the inventory-to-sales ratio. The first tweet in this thread shows that overall inventories were 1.3 months of sales in February, towards the low end of its historic range. The number has almost certainly declined since then.
Inventories were at record lows in February in many areas of the economy including retail trade--both autos and excluding autos.

And February was an eternity ago, it likely is lower since then given the huge sales figures for March.
Read 8 tweets
6 May
I agree with everything in the thread up to this point. You have to make policy based on your best guess. In this case we have research from the US and other countries before 2020 that can inform priors. We have theory. We have commonsense.

The $300 itself wasn't scientific.
What is your argument for why UI should be more* generous in July and August (when COVID will hopefully be way down and jobs way plentiful) than it was in January and February (when COVID was spiking and jobs were scarce).

*Addition of COBRA subsidies.
Also at this point no one is going out to repeal the UI bump, that isn't part of the debate. If anything this is setting up the question of what happens after September. (And I'm open to making a $100 bump permanent to raise the replacement rate in a progressive manner.)
Read 6 tweets
5 May
Thanks for comments/thoughts, I'll ponder them.

This all started out because I see mixed signals in the labor market: (1) lots of jobs down is the most obvious (you cite it), but also (2) openings up and (3) wages up.

Moreover that was 2 months ago, improved rapidly since then.
Some of the tone, even of your tweets, sounds like the economy is like it was in 2010 or 2011. But it was more like somewhere in the 2017 period plus or minus and moving forward rapidly.
I'm a big believer in rebalancing policy towards fiscal, both for stimulus, social insurance, growth and more. Monetary policy can help support that rebalancing. Whatever you think about the appropriate time for interest rate liftoff it was moved up by the stimulus. That is good.
Read 8 tweets
4 May
One thing to keep in mind is that anecdotes are terrible. But lagged data in a rapidly changing market is also terrible. So right now would place more than usual weight on anecdotes (and my normal weight is zero). And use real-time data to update.

For example: job openings.
Job openings are very high but so are the number of people looking for jobs. A good measure of labor market tightness is the ratio of job openings to the unemployed. That was 1.4 unemployed per job opening in February, similar to what it was in mid-2016.

BUT, that was February. The economy has changed rapidly since then. The number of job openings on Indeed increased 17% from the end of February to the end of April. The number of unemployed has likely fallen since March (the most recent data).

Read 6 tweets
4 May
I spent a lot of time swatting down the counterintuitive stories about labor shortages in the aftermath of the Great Recession.

But it is different now: post Great Recession wage growth was 2pp below what it was pre-Great Recession. Now wage growth is equal to pre-pandemic.
You see this especially in the distribution of wages. The first quartile of workers had extremely low wage growth in 2011-14 but have particularly high wage growth now. atlantafed.org/chcs/wage-grow…
Moreover, these data only go through March and as @arindube has pointed out there is a lot of intertia in the data. So would not expect to see a lot of increase yet.
Read 4 tweets
29 Apr
The general view is that labor market in February or March 2021 had a lot more slack than it did in 2019. That is probably right and if the only data you had was the unemployment rate, employment rate or jobs it would seem true.
But if instead the only data you had was on labor market flows from JOLTS you would think the economy was much hotter in February 2021 than in 2019, in fact you might think it was the hottest in decades. (@nick_bunker)
Between these two, if all you had was the data on composition-adjusted wage growth from the Atlanta Fed you would note that wage growth was roughly the same as 2019 and was highest for the lowest-income workers. So labor market not much looser than 2019. atlantafed.org/chcs/wage-grow…
Read 11 tweets
29 Apr
GDP up 6.4% annual rate (it actually grew 1.6%) with large increases in consumption, biz fixed investment, housing & govt offset by a large reduction in inventories & increase in the trade deficit.

(US residents bought more stuff but a bunch came out of inventories and imports.)
As a result, U.S. GDP was 3.8% below it's pre-pandemic trend in Q1.

Note, this is not an estimate of the output gap, I would suspect the output gap was somewhat smaller because of some scarring from pandemic (less investment, R&D, early retirements, deaths).
The pattern of shortfalls from trend are wild:

Consumer durables 15% above trend in Q1 while services 8% below trend.

Business fixed investment still not recovered by residential investment booming.

Govt purchases below trend too (driven by S&L).
Read 5 tweets
28 Apr
People pointing to the lack of wage acceleration as evidence against job shortages. But I think the wage evidence is a stronger point for team tight labor market than team slack.

Wage growth remains high in the Atlanta Fed's composition-adjusted wage tracker. Image
Nominal wage growth at/above what it was in 2019, a year when slack was not huge. Data is for March, presumably the market tightened more since then and will continue to tighten. Wage growth tends to lag.

Huge contrast to low/falling wage growth in 2002 and 2010.
Good arguments for substantial slack: large net job loss & low epop, although less clarity on the relative importance of employers not offering jobs or people not taking them.

Also good arguments on the other side, like record or near record openings/quits.
Read 5 tweets
28 Apr
The American Families Plan is excellent, it would make a difference for tens of millions of families today--and expand incomes, opportunities and economic growth in the future. My main reaction is to want more of almost all of it. whitehouse.gov/briefing-room/…
Almost everything in the plan would directly benefit people, particularly children, particularly lower-income children. You can't go very wrong with these policies, they give $$$s to people with very high marginal utility.
Moreover lots and lots of evidence for LR benefits in the form of higher wages, more employment, better health, and more. Most importantly good for the families but also good for growth.
Read 13 tweets
8 Apr
Earlier today I had an exchange with @StephanieKelton. She referred me to a paper. I read the paper and it makes my point and contradicts her claim.

There is a broader lesson here about whether MMT is an alternative positive theory or normative frame. Thread.
As a positive prediction, I would say that higher interest rates reduce output and lower output reduces inflation. You can debate the magnitudes but I would use those signs.

That is separate from the normative question of whether one should raise rates, target inflation, etc.
@StephanieKelton appeared to have the opposite positive prediction: "Have you considered the possibility that raising rates might move inflation higher?"

I said "No" and she cited a paper with a theoretical model and empirical estimates that *contradict* her positive statement.
Read 12 tweets
6 Apr
@AnnieLowrey's story on index funds misses clearly making two first order important points:

1. You should invest in them

2. Even with the growth of index funds we still devote too many resources, not too little, to price discovery in financial markets.

The merits of the "you should invest in them" advice is separable from the question of what would happen if everyone invested in them. Just like my recommendation that everyone should get their pizza from Armando's would not work if everyone actually took my recommendation.
This just doesn't scare me. Image
Read 7 tweets
31 Mar
Overall I quite like the American Jobs Plan. It is a serious proposal that would help increase economic growth, ensure growth was more fair, and raise additional revenue in a broadly reasonable manner.

Much that I would love to add, a bit I would subtract. A thread.
MACROECONOMIC/FISCAL. Given that interest rates are still too low & I'm worried about demand over the medium-term, $2T in *unpaid for* well-designed investments, some temporary, would be beneficial. As such I don't think this should all or even mostly be paid for.
As such, the decision about whether to keep the infrastructure proposals and corporate tax proposals together or to put them on different tracks should be more about legislative strategy than the perceived economic need to find offsets or pay for this particular bill.
Read 18 tweets
2 Mar
Many comments that I have enough followers that it was irresponsible to tweet this.

I disagree.

I was clear that J&J is "spectacular", it essentially eliminates death/hospitalization.

But I don't think the goals of good outcomes are served by elites perpetuating noble lies.
People can understand and process information and make good decisions for themselves and society. I'm not an expert and might even be wrong on J&J vs. Pfizer/Moderna, but when experts appear to be hiding the ball it is counterproductive.
Think back to the Surgeon General telling us not to use masks because they don't work and because health professionals needed them. Could tell this was illogical. And the damage reverberates to this day.
Read 5 tweets
2 Mar
If I had a choice btwn J&J & Moderna/Pfizer, I would take Moderna/Pfizer.

If I had a choice btwn J&J now and Moderna/Pfizer thirty minutes from now I would wait 30 minutes to take Moderna/Pfizer.

If the choice was J&J now vs. Moderna/Pfizer a year from now I would take J&J now.
What I don’t know is the T for which I’m indifferent between J&J now and Moderna/Pfizer in T days.

I’ve read a lot on the comparisons of efficacy being misleading & I’m sure that’s true. But it’s hard not to feel that much of the public health opinion has a thumb on the scale.
Yes, I know J&J is spectacular, essentially eliminates death and hospitalization and much better than flu vaccines.

But Moderna/Pfizer seem spectacularer, if I could get flu shots with higher efficacy I would take them.
Read 8 tweets
12 Feb
I've gotten questions about whether to emphasize U-6 as the "true unemployment rate". It is currently 11.1%.

I don't because I think the concept doesn't add much, it misses how unusually bad the labor market is now, is analytically flawed, and can be misleading.

The official unemployment rate is 6.3%. It is unemployed (people looking for work) divided by the labor force (working or looking for work).

U-6 is 11.1%, it adds in "marginally attached" (discouraged workers & would take a job if it came along) and involuntary part-time.
DOESN'T ADD MUCH. U-6 is one of several alternative unemployment concepts produced monthly by the BLS. They are all useful to look at. But they also all pretty much up and down together so they rarely tell much of a different story.
Read 9 tweets
11 Feb
The new @USCBO report confirms that we have substantial fiscal space, in fact more than we've generally had in the past. This is even true if the American Rescue Plan passes in full.

Critical to this is low interest rates mean low debt service.
CBO projects higher debt/GDP than it did pre-pandemic. But even this projection is not "spiraling" within the budget window but a relatively gradual increase.

More importantly, debt/GDP is a bad metric to look at as I've explained before.
CBO has lowered its interest rate forecast more than it raised its debt forecast. So real debt service as a share of GDP is lower than what we expected pre-crisis. This is even true with the American Rescue Plan (and assuming it raises interest rates).
Read 5 tweets
11 Feb
I thought I would engage with this criticism of my suggestion that the UI/week bump be phased down to $100 or $200/week by late summer/early fall even if I don't love the way this person phrased their disagreement.
First, this is not a "cut":

--The UI bump is currently slated to be $0 then for late summer/early fall.

--The House Dem proposal calls for reducing the bump to $0 in September.

--IF we had adopted triggers the bump would likely have been well below this by then.
Second, my argument was about supply not demand. To have this much demand and not have overheating we need millions of people getting back into jobs. I believe that can happen. But I also want to give it every chance possible and this policy would be consistent with it.
Read 5 tweets
11 Feb
@chrislhayes raised a question about "overheating" from a thread I did. I want to answer him in a thread with general conceptual points & their current application.

Short version: if there is no risk of overheating we are doing too little.

The chance of overheating with this package is not 0% and not 100%.

Overheating is not costless.

The right sized and designed package should balance the costs/probability of costs against the benefits/probability of benefits.
Framed differently we recognize this when we say "it is better to err on the side of too much instead of too little." That sentence acknowledges the possibility of errors in both directions.

(MMT also says the limiting principle for fiscal policy should be inflation.)
Read 20 tweets
11 Feb
Excellent thread.

Stunning magnitudes: spending by unemployed increased about 25% relative to the consumption of the employed.

If we had a stable program (not the on-off-on one we had) what would we have wanted to target for that?

And how much does 2020 generalize to 2021?
You should never update your beliefs too much based on any one paper. And evidence from 1950-2019 might be more relevant in thinking about July/Aug/Sep 2021 than evidence from 2020 (points @Claudia_Sahm has made in a different context).

If I was updating would say:
Given the excess saving, the larger bank balances that @ProfFionasm and team have documented elsewhere, the $2,000 checks, the unemployed would have pre-pandemic consumption levels even with less than $400/week. jpmorganchase.com/institute/rese…
Read 6 tweets
10 Feb
Jay Powell cited an unemployment rate of 10% adjusted for participation. Willie Powell & I have been using 8.3% as the "realistic unemployment rate". Both are correct, both are useful, I won't be offended if you use his instead of mind, but a technical note on the differences.
The labor force participation rate has fallen from 63.3% in February 2020 to 61.4% in January 2021 as 4.3m people gave up looking for work. Powell's stat is that all 4.3m had not given up but were instead classified as unemployed then the unemployment rate would be 10% now.
The participation rate always falls in recessions so the Powell stat is a great way to capture just how terrible the current labor market is.

The downside of the Powell stat is that you cannot (or at least should not) compare it to historical unemployment rates.
Read 8 tweets
7 Feb
This isn’t a debate that can be settled by theory.

The theory (as well as evidence and financial market data) are clear: larger fiscal measure = more inflation.
The questions are magnitudes and balancing risks:

1. How much benefit from relief/stimulus?

2. How much inflation?

3. Is extra inflation desirable/undesirable?

4. If undershoot on output or overshoot on inflation how costly to correct later?
Having a “stimulus” theory or “relief” theory doesn’t tell us $1T, $2T, or $5T.
Read 9 tweets