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Journal Article
The puzzle of weak first-quarter GDP growth
The official estimate of real GDP growth for the first three months of 2015 was shockingly weak. However, such estimates in the past appear to have understated first-quarter growth fairly consistently, even though they are adjusted to try to account for seasonal patterns. Applying a second round of seasonal adjustment corrects this residual seasonality. After this correction, aggregate output grew much faster in the first quarter than reported.
Journal Article
Fiscal Policy in Good Times and Bad
Thanks in large part to recently enacted tax cuts, U.S. fiscal policy has taken a decidedly procyclical turn?providing stimulus when the economy is growing. In fact, the projected increase in the federal deficit over the next few years would represent the most procyclical fiscal policy stance since the Vietnam War. This matters because many recent studies have found that fiscal stimulus has a smaller impact when the economy is strong, implying that the near-term boost to GDP growth could be two-thirds or less of that from previous tax cuts.
Journal Article
What's Down with Inflation?
After eight years of economic recovery, inflation remains below the FOMC?s target. Dissecting the underlying price data by spending category reveals that low inflation largely reflects prices that are relatively insensitive to overall economic conditions. Notably, modest increases in health-care prices, which have been held down by mandated cuts to the growth of Medicare payments, have helped moderate overall inflation. Further slow growth in health-care prices is likely to remain a drag on inflation.
Journal Article
Can the Income-Expenditure Discrepancy Improve Forecasts?
Gross domestic income and gross domestic product?GDI and GDP?measure aggregate economic activity using income and expenditure data, respectively. Discrepancies between the initial estimates of quarterly growth rates for these two measures appear to have some predictive power for subsequent GDP revisions. However, this power has weakened considerably since 2011. Similarly, the first revision to GDP growth has less predictive power in forecasting subsequent revisions since 2011. One possible explanation is that evolving data collection and estimation methods have helped improve initial GDP and ...
Journal Article
Trend Job Growth: Where's Normal?
With the U.S. labor market at or near maximum employment, assessing trend job growth has become increasingly important. This ?breakeven? rate, which is the pace of job growth needed to maintain a healthy labor market, depends primarily on growth in the labor force. Estimates that account for population aging and potential labor force participation trends suggest that trend growth ranges between about 50,000 and 110,000 jobs per month. Actual job growth has been well above this pace, implying that it can slow substantially in the future without undermining labor market health.