Robert J. Shiller, Project Syndicate: Seven More Years of Hard Times? In that case perhaps all of those crisis-induced bad decades are no longer relevant. But any such hopes that the aftermath of the current crisis will turn out better are still in the category of thoughts, theories, and dreams, not science. It is not true that if you break a mirror, you will have seven years’ bad luck. That is a superstition. But if you allow a financial market to spin wildly until it breaks down, it really does seem that you run the risk of years of economic malaise. That is a historical pattern.
Joseph G. Haubrich, Timothy Bianco, Cleveland Fed: Yield Curve and Predicted GDP Growth. Projecting forward using past values of the spread and GDP growth suggests that US real GDP will grow at about a 1.0 percent rate over the next year, the same numbers as August and just down from July’s 1.14 percent. Although the time horizons do not match exactly, this comes in on the more pessimistic side of other forecasts, although, like them, it does show moderate growth for the year.
Mark Thoma, The Fiscal Times: The U.S. Needs a New and Improved New Deal. This recession has been particularly unkind to labor markets, and indications are that a full recovery of employment is still years away. But even after the recession finally ends, worrisome structural trends that were present before the recession began will continue to cause considerable uncertainty for working class households. The rapid pace of structural change in recent years due to technological innovation and globalization has increased the risk of worker displacement in a wide variety of industries. Additional factors such as the decline in employer support for health care, the decline in employer-provided pensions, threats to Social Security, stagnant wages, and highly flexible labor markets compound the uncertainty. The social contract of bygone days has faded in the face of globalization and other pressures. What the country needs is a “new and improved new deal” that reduces the risks associated with structural change, and does a better job of preventing and easing cyclical downturns.
Mehmet Caner, Thomas J. Grennes et al, North Carolina State University: Finding the Tipping Point - When Sovereign Debt Turns Bad. Does a tipping point in public debt exist? How severe would the impact of public debt be on growth beyond this threshold? The present study addresses these questions with the help of threshold estimations based on a yearly dataset of 99 developing and developed economies spanning a time period from 1980 to 2008. The estimations establish a threshold of 77 percent public debt-to-GDP ratio. If debt is above this threshold, each additional percentage point of debt costs 0.017 percentage points of annual real growth. The effect is even more pronounced in emerging markets where the threshold is 64 percent debt-to-GDP ratio.
Davide Furceri, Aleksandra Zdzienicka, OECD: The Consequences of Banking Crises for Public Debt. The aim of this paper is to assess the consequences of banking crises for public debt. Using an unbalanced panel of 154 countries from 1980 to 2006, the paper shows that banking crises are associated with a significant and long-lasting increase in government debt.
Daniel Wilson, San Francisco Fed: Is the Recent Productivity Boom Over? Productivity growth has been quite strong over the past 2½ years, despite a drop in the second quarter of 2010. Many analysts believe that productivity growth must slow sharply in order for the labor market to recover robustly. However, looking at the observable factors underlying recent productivity growth and the patterns of productivity over past recessions and recoveries, a sharp slowdown appears unlikely.
Regis Barnichon, Andrew Figura, Fed: What Drives Movements in the Unemployment Rate? A Decomposition of the Beveridge Curve. We decompose the unemployment rate into three main components: (1) a component driven by changes in labor demand--movements along the Beveridge curve and shifts in the Beveridge curve due to layoffs--(2) a component driven by changes in labor supply--shifts in the Beveridge curve due to quits, movements in-and-out of the labor force and demographics--and (3) a component driven by changes in the efficiency of matching unemployed workers to jobs. We find that cyclical movements in unemployment are dominated by changes in labor demand, but that changes in labor supply due to movements in-and-out of the labor force also play an important role. Further, cyclical changes in labor demand lead cyclical changes in labor supply. Changes in matching efficiency generally play a small role but can decline substantially in recessions. At low-frequencies, labor demand displays no trend, and changes in labor supply explain virtually all of the secular trend in unemployment since 1976.
Joyce Kwok, Mary Daly, And Bart Hobijn, San Francisco Fed: Labor Force Participation and the Future Path of Unemployment. Although the labor market has slowly begun to recover, unemployment remains stubbornly high. The pace at which unemployment comes down over the next two years depends in part on the cyclical recovery of labor force participation and the extent to which that offsets or adds to ongoing structural changes in labor force behavior related to increased school enrollment, access to disability benefits, and movement of baby boomers into retirement. Forecasts from the CBO, the Bureau of Labor Statistics (BLS), and the Social Security Administration (SSA) suggest that, absent cyclical movements, labor force participation will trace a downward course driven by the aging of the baby boom generation. However, forecasters disagree over the trajectory participation will take. Average job growth during the last economic expansion was about 142,000 per month. If the SSA is right and labor force participation falls to 64.6% in 2012, we will need to create an average of 208,000 jobs per month over the over the 22 months beginning in September 2010 to bring the unemployment rate down to 8% in June 2012. But if the labor force participation rate rises to 65.5%, as the BLS predicts, we will need to add 294,000 jobs per month in order to reach that level.
John Haltiwanger, Ron S. Jarmin, Javier Miranda, US Census: Who Creates Jobs? Small vs. Large vs. Young. Our main finding is that once we control for firm age there is no systematic relationship between firm size and growth. Our findings highlight the important role of business startups and young businesses in
Axel Tabbarok, Marginal Revolution: Winner take-all economics. In a winner-take all economy, however, small differences in skills can mean large differences in returns and we have moved towards a winner take-all economy because technology has increased the size of the market that can be served by a single person or firm. Sherwin Rosen laid this out in a 1981 classic, The Economics of Superstars and Robert Frank and Robin Cook have a good popular account, The Winner Take All Society. Rowling's success brings with it inequality. Time is limited and people want to read the same books that their friends are reading so book publishing has a winner-take all component. Thus, greater leverage brings greater inequality.
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