Group items tagged

Despite 42 consecutive months of gains in private-sector employment, the unemployment rate is still at 7.3 percent; in December 2007 it was only 4.6 percent. The current unemployment rate is higher now than in 2007 across all age, education, occupation, gender and ethnic groups.

That’s despite the fact that about four million workers have left the labor force, driving the labor force participation rate to a historic low

Although the share of the long-term unemployed has fallen from its peak of 45 percent in 2011 to 38 percent today, it is still far above its 2001-7 average. And about eight million people are working part-time for “economic reasons,”

“The current- account deficits of countries that have been under stress diminished over the last years considerably.”

Just two of 14 euro-zone government leaders have kept their posts in elections since late 2009 and extremists such as Golden Dawn in Greece are gaining support.

“The internal rebalancing in the euro area is progressing,” said Fels. “Some of them, especially Spain but also Portugal not to speak of Ireland, are regaining competitiveness.”

Empirical evidence suggests deleveraging episodes accompanied by a housing crisis will take on average five and a half years across high-income OECD countries (or seven years when accompanied by a banking crisis (Aspachs-Bracon et al. 2011, IMF 2012).

The Global Economy’s Tale Risks

Fluctuations in the world’s economies are largely due to the stories we hear and tell about them. These popular, emotionally relevant narratives sometimes inspire us to go out and spend, start businesses, build new factories and office buildings, and hire employees; at other times, they put fear in our hearts and impel us to sit tight, save our resources, curtail spending, and reduce risk. They either stimulate our “animal spirits” or muffle them.

The output gap for the world’s major advanced economies, as calculated by the IMF, remains disappointing, at -3.2% in 2013, which is less than half-way back to normal from 2009, the worst year of the global financial crisis, when the gap was -5.3%.

In 1991, American-made apparel accounted for 56.2 percent of all the clothing bought domestically, according to the American Apparel and Footwear Association. By 2012, it accounted for 2.5 percent. Over all, the American manufacturing sector lost 32 percent of its jobs, 5.8 million of them, between 1990 and 2012, according to Bureau of Labor Statistics data. The textile and apparel subsectors were hit even harder, losing 76.5 percent of their jobs, or 1.2 million.

IMF’s Olivier Blanchard says global recovery is still ‘weak’

“There is a strong case to be made for more public investment, for demand-side reasons in the short term, and supply-side reasons in the longer run,” says Mr Blanchard. The US and Germany are prime examples, Mr Blanchard said, of countries where there is a backlog of high-return infrastructure projects. He added that their governments should make the most of record-low borrowing costs and reap the large macroeconomic benefits that come from increasing demand.

Indeed, recent data suggest that more than half of the acceleration in US growth is occurring on the tradable side, even though it accounts for only about one-third of the economy. And that contribution is probably an underestimate, because income generated on the tradable supply side produces income that becomes demand on the non-tradable side – a multiplier effect that crosses the tradable/non-tradable boundary.

the main problem is that public-sector investment remains well below growth-sustaining levels. The hard part of fully realizing potential growth is shifting the composition of domestic demand from consumption to investment without adding leverage. That means paying for it on the public-sector side, via taxes and a reduction in household consumption (and in wealth accumulation).

But such adjustments cannot happen in a monetary union, so unit labor costs are slowly re-converging via a protracted process of flat nominal wage growth and slowly declining real wages (a process that would be quicker with higher inflation in Germany and Northern Europe).

The Federal Reserve is well into its third round of “quantitative easing,” in which it buys longer-term assets to bring down long-term lending rates.

In March, a smaller percentage of working-age people were actually working than at any other time since 1979.

In March, a smaller percentage of working-age people were actually working than at any other time since 1979.

Hopefully the following ten observations are less controversial in 2013 than in previous years.

As long known by elementary textbook readers, austerity policies have contractionary effects.

Debt reduction is a very long process; we're talking about decades,

Richard Koo (2003) coined the term “balance sheet recession” to characterise the endless travail of Japan following the collapse of its real estate and stock market bubbles in 1990. The Japanese government did not act to repair the balance sheets of the private sector following the crash. Instead, it chose a policy of keeping bank rate near zero so as to reduce deposit rates and let the banks earn their way back into solvency. At the same time it supported the real sector by repeated large doses of Keynesian deficit spending. It took a decade and a half for these policies to bring the Japanese economy back to reasonable health.

At the time, a majority of forecasts predicted that the economy would slip back into depression once defence expenditures were terminated and the armed forces demobilised. The forecasts were wrong. This famous postwar “forecasting debacle” demonstrated how simple income-expenditure reasoning, ignoring the state of balance sheets, can lead one completely astray.

but what would in normal times be a boon for the region may not help as much now, experts say.

Before the crisis, actions such as the European Central Bank rate cuts two weeks ago would have had a twofold effect in reviving the economy: Banks would have passed the lower rate on to their clients, while foreign-exchange markets would have marked the currency down, giving exporters better chances to sell their products abroad.

In today's polarized euro zone, it isn't that simple. For one thing, tThere is no certainty that euro-zone banks will pass on the cut in borrowing costs.

Investors Seek Yields in Europe, but Analysts Warn of Risk

Once again, foreign investors are piling into the government bonds of Ireland, Spain and Portugal — countries that got into such debt trouble that they required bailouts. Now these countries are able to sell their bonds at lower interest rates than they have seen in years, renewing hope that Europe has turned a corner.

Claus Vistesen, the head of research at Variant Perception, a London-based economic research group, sees the ratio of debt to economic output as a continuing threat to a euro zone recovery.“People think growth is coming back,” Mr. Vistesen said, “but at the end of the day, debt is still going up.”

But the reforms often fail to work. The Spanish law is intended to promote restructuring of viable firms but in practice most insolvencies end in liquidation after lengthy court proceedings.

High household debt helps explain why the Netherlands, along with Italy and Spain, remained in recession in the second quarter of 2013 even as the euro area in general embarked on recovery. Dutch GDP this year will be 2% lower than in 2011 and more than 3% below its previous peak, in 2008.

it illustrates the malign effect of high debt when house prices fall

The problem with TTIP

The TPP is a deep international integration arrangement between the US and 11 other Pacific states, which would cover 40% of world GDP and over 30% of world trade. It seeks to address as series of issues that 21st century commerce, but arguably its most obvious feature is that it excludes China – the world’s largest international trader and before long the world’s largest economy. There are, of course, the ritual genuflections towards ‘open regionalism’ – China can join if only it will agree to the necessary policy requirements – but this is about as much use as saying the Chief Rabbi can dine with you while insisting that the menu contains pork.

By signing TTIP Europe would be tying itself to a static rather than a dynamic part of the world economy and substantially reinforcing the US’s exclusionary policies.

said faltering growth was the direct result of the 18-member currency zone's inability to punish those countries that ran high deficits in contravention of limits set by Brussels.

"We have very little, if any, possibility of sanctioning those countries that break the rules," she said.

Her comments echoed those of ECB president Mario Draghi, who last month warned that without moves to strengthen the fiscal pact and impose punishments on rule-breaking countries, the eurozone project could flounder.

The euro is in greater peril today than at the height of the crisis

Two years ago forecasters were hoping for strong economic recovery. Now we know it did not happen, nor is it about to happen.

Today the eurozone has no mechanism to defend itself against a drawn-out depression. And, unlike two years ago, policy makers have no appetite to create such a mechanism.

Why the euro crisis still isn’t over, in 1 chart

So why hasn't Europe gotten a real — or any — recovery? Well, it's the debt, stupid.

Every euro that the private sector spends on paying back what it owes is a euro that gets sucked out of the economy.

“You get these occasional disconnects and start asking who’s right and who’s wrong,” said Daniel Morris, global investment strategist at TIAA-CREF.

“We think the equity market is right,” he said. “If that’s the case, bond yields are too low.”

“We’re constructive about the future and think all this intervention is going to work, but how much is priced in” to the stock market? So much, in his view, that “we’ve been selling into the strength,” he said.