Global Economic Watch


Global Economic Watch


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Retail Sales Continue 2014 Rise

06-12-2014 10:37 AM with no comments

Retail sales rose again in May, increasing 0.3 percent over April sales.  All in all, the last three months have seen a welcome boost for retailers, with the Commerce Department sharing revised numbers for April showing 0.5% growth that month.  From the Census Bureau:

Nonetheless, Bloomberg's Jeanna Smialek reports that the retail data came in below expectations.   So we'll file this under, "watch this space" for now. 

Read the release here.

Posted by Graham Griffith

Blankfein on a Stronger China

06-12-2014 9:52 AM with no comments

Lloyd Blankfein spent an hour with Charlie Rose earlier this week, and gave as comprehensive a take we've seen him give on his approach to leading one of the world's most powerful financial institutions, Goldman Sachs.  In this excerpt, he explains why he believes that an economically stronger China is something to be embraced and encouraged, rather than demonized and feared:

Watch the full interview here.

Posted by Graham Griffith

The Rise and Fall of the Check

06-11-2014 9:56 AM with no comments

It doesn't seem that long ago when writing checks was a daily practice.  But look at where checks rate now:

That's from Matt Phillips of Quartz.  Phillips has an interesting piece about the decline of checks.  Checks became very popular in the post World War Two boom, according to Phillips, and their rise prompted some interesting innovation in the banking industry, like magnetic ink character-recognition code.

The arrival of MICR, which became the industry standard in 1967, helped drive check-processing times below two days during the 1970s, according to a Fed report (pdf). Those improvements in processing times made checks a more viable option for a range of household payments. The number of checks written surged to nearly 33 billion by the end of 1979. That year, checks made up roughly 86% of all non-cash payments, according to a separate report (pdf).

But the check’s days as king of the cash alternatives were numbered. While the number of check payments continued to rise into the mid 1990s—they peaked at an estimated 49.5 billion in 1995—checks began to lose significant market share to alternative forms of payment like debit and credit cards and direct, electronic, automatic clearinghouse payments (ACH).

The trend toward electronic payments only gathered pace, and by 2003, the Fed estimated (pdf) that other forms of payment had overtaken checks in usage. And by 2006, checks accounted for barely one-third (pdf) of non-cash payments in the US.

Consumer preferences seem to be a key driver of the trend. According to the Fed, debit cards and credit cards are by far consumers’ favorite way to make payments. Some 43% of the consumers surveyed by the Fed said debit was their preferred method of payment. Another 22% preferred using credit cards. A solid 30% preferred cash. Checks? Only 3% of the people who took part in the Fed study preferred using checks. (Check preference was highly correlated with older consumers.)

Read How America fell out of love with writing checks here.

Posted by Graham Griffith

How Leaders in Latin American Companies Are Preparing for the World Cup

06-11-2014 9:20 AM with no comments

The World Cup kicks off tomorrow in Brazil.  Well, the game is in Brazil, but it kicks off just about everywhere.  So smart office managers are getting prepared for distracted workers.  Mercer gathered some intel on how managers in four of the most football/futbol/soccer crazed nations are planning on handling game time, and here is a glimpse of the findings:

See the full-size infographic here.

Posted by Graham Griffith

Tim Harford's Happynomics Lessons

06-10-2014 8:56 AM with no comments

It sounds as though Tim Harford, aka The Undercover Economist, has been doing some binge reading on happynomics.  As we've noted here before, more and more economists are applying rigor (perhaps to varying degrees, as with all subject areas) in studying happiness and well-being.  Harford shares "four tips for happiness from the dismal science."  Here is the first tip:

Number one: don’t be distracted by the obvious. When buying a new car, it’s natural to imagine yourself thrilling to its acceleration. When buying a new house, it’s only human to ponder the pleasure of hosting guests at a summer barbecue on the patio. But such thoughts fall prey to what psychologists call “the focusing illusion”. Most of our time will be spent neither throwing summer parties nor overtaking lorries. Yet we’re swayed by these attractions because we’re focusing on them just at the moment that we decide.

The focusing illusion was splendidly captured by a pair of questions asked of college students by researcher Norbert Schwartz and others: “How happy are you?” and “How many dates did you have last month?” The research team discovered that people having a lot of dates also say they’re feeling very happy – but only if asked about the dates first. If the happiness question comes first, there’s a far smaller correlation between the answers. Those students asked initially about their love lives continued to think about them when pondering their happiness. Otherwise they might have been worrying about money, career or exams.

The focusing illusion lies in wait for us whenever we make a decision. Nattavudh “Nick” Powdthavee, an economist and author of The Happiness Equation, says that we have to try to “look beyond what’s salient about an experience”. Don’t just think about the obvious when making decisions; think about how day-to-day life is likely to change as a result – if it changes at all.

Read tips 2 through 3 here.

Hat tip Mark Thoma.

Posted by Graham Griffith

Marketplace Whiteboard: Debt and Deficit

06-10-2014 8:45 AM with no comments

We humans have tendency to conflate debt and deficit--our well-heeled political leaders included.  They are related, of course, but distinct.  And Paddy Hirsch steps up to the Marketplace Whiteboard to help us respect the differences:

Posted by Graham Griffith

Gallup: Standard of Living Index Reaches New High

06-09-2014 8:01 AM with no comments

Americans are living better than they have in years, according to the results of a Gallup survey.  Gallup started tracking the U.S. Survey of Living Index in January 2008.  Never before has it reached the heights it is at now.

The vast majority (80%) of those surveyed are "satisfied with their standard of living" according to Gallup.  We are struck more by how optimistic Americans seem to be about their future quality of life:

Read the release here.

Posted by Graham Griffith

Evan Osnos on 'The Age of Ambition' and Chinese Economic Reform

06-09-2014 7:48 AM with no comments

If you want to understand China today, you have to understand the economic reform started in 1978 by Den Xiaoping's government.  According to The New Yorker's Evan Osnos, that reform touched off the "age of ambition" that we see today.  Not coincidentally, Osnos has a new book out, Age of Ambition: Chasing Fortune, Truth, and Faith in the New China.  He spoke about the book and the "new China" at the Carnegie Council. In this excerpt, he discusses Deng's "re-imagination" of the Chinese economy. 

Watch more from the event here.

Posted by Graham Griffith

BLS Jobs Report: Unemployment Stays at 6.3%

06-06-2014 8:10 AM with no comments

The unemployment rate stayed at 6.3% as the U.S. economy added another 217,000 jobs in May, according to the Department of Labor.  The labor force participation also stayed at the same level as in April: 62.8%.  Here's a look at the unemployment trends from the Bureau of Labor Statistics:

Here are some of the key data from other areas we like to track in the monthly jobs report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 7.3 million, changed little in May. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

In May, 2.1 million persons were marginally attached to the labor force, essentially unchanged from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 697,000 discouraged workers in May, little different from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.4 million persons marginally attached to the labor force in May had not searched for work for reasons such as school attendance or family responsibilities.

Read the full report from the BLS here.

Posted by Graham Griffith

McKinsey Insights: 'Digitizing the consumer decision journey'

06-05-2014 2:10 PM with no comments

McKinsey principals Edwin van Bommel, David Edelman, and Kelly Ungerman are trying to help executives aiming for "marketing perfection" in the digital age.  The first step toward perfection is understanding consumer behavior in today's marketplace.  Not an east task, since consumer behavior is, as Edelman discusses in this video, changing:

So what can companies do?  They can work on "managing the consumer decision journey" in the following ways:

•Discover. Many of the executives we’ve spoken with admit they are still more facile with data capture than data crunching. Companies must apply advanced analytics to the large amount of structured and unstructured data at their disposal to gain a 360-degree view of their customers. Their engagement strategies should be based on an empirical analysis of customers’ recent behaviors and past experiences with the company, as well as the signals embedded in customers’ mobile or social-media data.

•Design. Consumers now have much more control over where they will focus their attention, so companies need to craft a compelling customer experience in which all interactions are expressly tailored to a customer’s stage in his or her decision journey.

•Deliver. “Always on” marketing programs, in which companies engage with customers in exactly the right way at any contact point along the journey, require agile teams of experts in analytics and information technologies, marketing, and experience design. These cross-functional teams need strong collaborative and communication skills and a relentless commitment to iterative testing, learning, and scaling—at a pace that many companies may find challenging.

Read the full article here.

Posted by Graham Griffith

What the Black Death Can Teach Us About Economic Development Today

06-05-2014 8:33 AM with no comments

To understand the future of economic development, we must better understand economic history.  So contends Peter Temin,Gray Emeritus Professor of Economics at MIT.  In a column at Vox, Temin takes us back to the 14th century, when the Black Death prompted an historic shift. 

The rise in wages as a result of the Black Death was sustained by a shift in marriage patterns that increased the age of women’s marriage, and reduced the rate of population increase. The adaptation to the initial shock led to a durable rise in people’s income. This, in turn, led to a demand for more meat in their diet, which, of course, was accommodated by more husbandry. The whole pattern fit together with the Black Death as a shock that shifted households and the economy from one demographic equilibrium to another.

This research dovetails with Allen’s argument that the initial innovations of the Industrial Revolution emerged from tinkering by producers to reduce the costs of expensive labour and reap the benefits of cheap power. In response to the awareness that wages were generally high in western Europe, Allen (2009) went to some lengths to show that the small gains from these initial innovations were not profitable in either France or the Netherlands.

Allen (2013) also argued that wages and energy prices in North America were close enough to the British pattern for policy initiatives – tariffs, education, and infrastructure investments – to create conditions hospitable to industrialisation. This was definitely true for countries in western Europe that followed the British pattern once industrial productivity advanced from its initial level. Although these countries did not have the factor prices to make the initial innovations of the Industrial Revolution profitable, the further development of these innovations rendered them profitable at factor prices close to those in Britain. And, as Allen noted, policy changes helped industrialisation along as it spread.

But this was all within the high-wage area described by Voigtländer and Voth. They noted that the European marriage pattern extended only from the Atlantic to a line from St. Petersburg to Trieste. Other countries in Asia or Africa were low-wage economies, subject to Malthusian pressure on wages, and their factor prices were not close to the English ones. Small changes in economic policies were not sufficient to make industrialisation profitable in India or Egypt. The story that links the Black Death to the Industrial Revolution, therefore, is also a story telling why Europe industrialised in the past two centuries.

Read The Black Death and industrialisation: Lessons for today’s South here.

Posted by Graham Griffith

Get Ready for the 'Purpose Economy'

06-04-2014 8:06 AM with no comments

A couple centuries back, much of the world shifted from an agrarian economy to an industrial economy.  More recently, we saw the information economy come along to disrupt the industrialized model.  Are you ready for the next wave?  Aaron Hurst, CEO of Imperative and founder of the Taproot Foundation, thinks we might now be shifting to a purpose economy.  From Big Think:

Posted by Graham Griffith

Unemployment Drops in Europe

06-04-2014 7:34 AM with no comments

In a bit of welcome news, unemployment in Europe is down. The number of unemployed men and women across Europe, as estimated by Eurostat, dropped by 151,000 across the EU and by 76,000 in the euro area in April.  Even better, the number of unemployed is 1.167 million less across the EU than in April 2013, and 487,000 less across the euro area.  The unemployment rate is now at 10.4% across the EU 28 (compared to 10.5% in March) and 11.7 % in the euro area (11.8% in March).

Austria and Germany is the only member states below 5.0% unemployment.  The unemployment rate in Greece and Spain remains above 25%.  Eighteen of the 28 EU member states saw a decline in the unemployment rate compared to April 2013.  Unemployment among young workers remains a major problem, but even in that group there is improvement.  From the report:

In April 2014, 5.259 million young persons (under 25) were unemployed in the EU28, of whom 3.381 million were in the euro area. Compared with April 2013, youth unemployment decreased by 415 000 in the EU28 and by 202 000 in the euro area. In April 2014, the youth unemployment rate5 was 22.5% in the EU28 and 23.5% in the euro area, compared with 23.6% and 23.9% respectively in April 2013. In April 2014, the lowest rates were observed in Germany (7.9%), Austria (9.5%) and the Netherlands (11.0%), and the highest in Greece (56.9% in February 2014), Spain (53.5%) and Croatia (49.0% in the first quarter of 2014).

Read the full report here.

Posted by Graham Griffith

Atlanta Fed Macroblog: 'How Discouraged Are the Marginally Attached?'

06-03-2014 8:24 AM with no comments

When we look at the Labor Department's monthly job reports, we make sure to take a close look at changes in the number of marginally attached workers and discouraged workers.  The Atlanta Fed's Dave Altig, John Robertson, and Ellyn Terry make an interesting case for thinking about marginally attached workers as a subset of discouraged workers, rather than a totally separate group.  From the Atlanta Fed's Macroblog:

Federal Reserve Bank of New York President William Dudley, for example, recently suggested that a sizeable part of the decline in labor force participation since 2007 can be tied to discouraged workers exiting the workforce. This suggestion follows related comments from Federal Reserve Chair Janet Yellen in her press conference following the March meeting of the Federal Open Market Committee:

So I have talked in the past about indicators I like to watch or I think that are relevant in assessing the labor market. In addition to the standard unemployment rate, I certainly look at broader measures of unemployment… Of course, I watch discouraged and marginally attached workers… it may be that as the economy begins to strengthen, we could see labor force participation flatten out for a time as discouraged workers start moving back into the labor market. And so that's something I'm watching closely.

What may not be fully appreciated by those not steeped in the details of the employment statistics is that discouraged workers are actually a subset of “marginally attached” workers. Among the marginally attached—individuals who have actively sought employment within the most recent 12-month period but not during the most recent month—are indeed those who report that they are out of the labor force because they are discouraged. But the marginally attached also include those who have not recently sought work because of family responsibilities, school attendance, poor health, or other reasons.

In fact, most of the marginally attached are not classified (via self-reporting) as discouraged (see the chart):

At the St. Louis Fed, B. Ravikumar and Lin Shao recently published a report containing some detailed analysis of discouraged workers and their relationship to the labor force and the unemployment rate. As Ravikumar and Shao note,

Since discouraged workers are not actively searching for a job, they are considered nonparticipants in the labor market—that is, they are neither counted as unemployed nor included in the labor force.

Read the full post here.

Posted by Graham Griffith

Annan and Clinton Address Africa Rising Conference

06-03-2014 8:09 AM with no comments

Last week the IMF and the government of Mozambique co-hosted a conference "to take stock of Africa's strong economic performance." Kofi Annan and Bill Clinton addresses the Africa Rising conference, and each urged leaders to focus on sustaining economic success through policies that focus on building resilient structures throughout African nations, and through regional cooperation.

Posted by Graham Griffith

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