Transcript Economics 2012 - Robert Ricketts

Economics 2012
Are we there yet?
Robert Ricketts
F r a n k M . B u r k e C h a i r i n Ta x a t i o n
Rawls College of Business
Te x a s Te c h U n i v e r s i t y
March 2012
World Industrial Production
Now vs. Great Depression
Volume of World Trade
Now vs. Great Depression
World Equity Markets
Now vs. Great Depression
Still, the Worst Downturn Since WWII—
Although Things are Slowly Getting Better
Unemployment is Dropping
Payrolls are Increasing
Where are the Jobs Coming From?
How is it that Jobs Increase but the
Unemployment Rate Stays the Same?
Employment to Population Stabilizing?
February Jobs Report Relatively Good
Current Statistics (February 2012, seasonally adjusted, BLS)
Civilian non-institutional population, 16yr+, (CPS,
242,435,000
Household Survey)
Employment (CPS)
142,065,000
Employment (CES, Payroll Survey)
132,697,000
Number of unemployed (CPS)
12,806,000
Civilian labor force estimate (CPS)
154,871,000
Unemployment rate estimate (CPS)
8.3%
Labor force participation rate estimate (CPS)
63.9%
Wages Remain Relatively Low
Especially for Nonsupervisory Employees
Business Production is Rising
Labor Doesn’t Appear to be Sharing in Profit
Growth
Still, Inventories are Shrinking, Suggesting that
Further Increases in Production are Ahead
So How Quickly Must the Economy Grow to
Return to “Full” Employment?
New Website Hosted by the Atlanta Federal Reserve:
http://www.frbatlanta.org/chcs/calculator/index.cfm
The “Jobs Calculator” calculates the net employment change
needed to achieve a target unemployment rate after a specified
number of months. The user can adjust the target unemployment
rate, the number of months, and the assumed labor force growth.
Calculator estimates that the economy will have to generate
between 297,000 and 318,000 jobs per month to reduce the
unemployment rate to 5.0% in the next 24 months. (We have
averaged about 160,000 jobs per month for the past year—
private payrolls have increased at about 200,000 per month,
while government jobs have been declining around 40,000 per
month on average).
Compare January Reports last 5 years
 Jobs report – last 5 Januaries:





January 2008: +13,000
January 2009: -820,000
January 2010: -39,000
January 2011: +68,000
January 2012: +243,000
So … What to Do?
Current Debate is About What Government Should Do:
 Nothing?
 Stimulus—if so, what kind?




Infrastructure spending
Individual tax cuts
Corporate tax cuts
Other?
 Is the budget deficit relevant?
First, What’s Holding Down Consumption
(besides job uncertainty)
Why Credit Overhang is Different Now
The Effects of “Austerity”
Major Policy Initiatives and the Deficit
Deficits and Government Spending—Comparing
the Last Seven Administrations
Components of Government Spending:
1962-2022 (post 2012 figures projected)
Reducing Unemployment and Government
Spending are Inextricably Linked
Spending—by the Numbers
Program Spending as a Share of GDP Under Continuation of Current Policies
Avg 1962-2011
2012
2017
2022
Primary outlays
18.5%
22.0%
20.0%
20.0%
Less Social Security
14.5%
17.1%
14.9%
14.5%
Less Social Security and Medicare
13.0%
13.8%
11.6%
10.8%
Note: program spending includes all federal expenditures other than net interest
on the debt. Sources: OMB through 2011; CBPP analysis of CBO data thereafter.
Maturity-Weighted Real Interest Rate on U.S.
Treasury Debt
“Out of Control” Spending?
Do the Markets Anticipate Inflation?
Same Graph: 2011-2012
Actual Inflation
Next Week
 The Role of Tax Policy in the Recovery: Short and
Long Run Issues



Budgetary considerations
Inequality and economic performance
Regulatory uses
 Roadblocks Ahead?
 Europe
 Politics
 Wall Street
Unemployment is Taking Longer and Longer to
Adjust