The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

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May 31, 2005

Help Wanted?

Angry Bear cites the April help-wanted advertising index report from the Conference Board as "disappointing news":

The Conference Board’s Help-Wanted Advertising Index – a key barometer of America's job market – was unchanged in April. The Index now stands at 39. It was 38 one year ago. In the last three months, help-wanted advertising declined in seven of the nine U.S. regions. Steepest declines occurred in the South Atlantic (-12.4%), East North Central (-10.8%), and West North Central (-9.9%) regions.

Says Conference Board Economist Ken Goldstein: “The labor market indicators were soft in April.

Maybe, but we should probably heed this warning from Rob Vallarta, issued in the January 21 edition of the Federal Reserve Bank of San Francisco's Economic Letter:

“Due to its reliance on newspaper advertising, however, the help-wanted index is an indirect measure of job vacancies.The level of job advertisements appearing in newspapers may change for reasons that are unrelated to overall labor demand. For example, equal employment opportunity laws raised the level of newspaper job advertising in the 1960s and 1970s, while internet job advertising has served as an increasingly effective substitute for newspaper advertising in recent years.”

In fact, Monster.com's Employment Index tells a somewhat different story:

Online job demand and recruitment activity edged slightly higher in April, continuing a steady upward trend for 2005, but at a much more measured pace, according to the latest findings of the Monster Employment Index. Tracking to other recent economic indicators showing slower-than-expected U.S. economic growth, the Index’s moderate increase showed overall online job availability remaining strong throughout the country, with all U.S. Census Bureau regions at their highest levels for the year – eight of the nine showed an increase during April. The overall Index increased from 130 in March 2005 to 131 in April – marking the Index’s highest level to date and a nearly 30-point increase over its April 2004 level of 103.

Here's the time series, if you are the visual type:


In truth, I would not want to put money on either of these indexes.  A better picture will come from the BLS' Job Openings and Labor Turnover (JOLTS) report, due June 7.  By then, of course, we will have the May employment report and not have to rely on what the April "vacancy" statistics were trying to tell us.

May 31, 2005 in Data Releases | Permalink


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I had a look at preliminary BLS mass layoff numbers (published May 27) which were up 6,000 to 137,000 (SA) M-O-M in April. Being aware that it is only a partial jobless claims statistic I still wonder how this corresponds with the NFP surprise rise of 274,000. Should I wait for final figures which come with 3 months delay?

Posted by: Toni Straka | May 31, 2005 at 02:38 PM

Mark Thoma and I both thank you for 2 reasons. Mark suggested my post should have gotten more notice - but then some of my readers noted to both of us that there are better measures than newspaper advertising. And you provided a better measure! Well done!!!

Posted by: pgl | May 31, 2005 at 03:22 PM

One quick note. I agree that both want ads and Monster have shortcomings, but it also strikes me that they may capture very different segments of the labor market. I can imagine a sixty year old unemployed laborer who does not own a computer and may not think to check Monster in any case, and other people who would never think to do anything but search online (but even so many may check the newspaper's online want ad listings). While no replacement for the more formal surveys you cite, these indexes may still tell us something about particular segments of the market. There are still those who sit down and circle job listings in the paper.

Posted by: Mark Thoma | May 31, 2005 at 04:23 PM

While we are talking about the labor market for us old folks (well, I'm about to turn 50), Andrew Samwick's latest post has an interesting comment by Andrew Samwick covering the 55-64 crowd, which goes over similar grounds that Bill Polley and I covered a while back. OK, I'm trying to be good and turn down that heat over Krugman's use of the word "only". So many interesting discussions to have - why are we bothering with Luskin lunacy anyway?

Posted by: pgl | May 31, 2005 at 04:59 PM

I am not sure how one can so easily dismiss actual postings for a survey. They survey data has been problematic for sometime now.

Newspaper job ads have been dead for over two years. Most major employers do not use newspaper anymore.

Monster plus the other internet sites are a great way to estimate job activity.

The comment that a 60 year may not use the Internet today is like saying a twenty something doesn't use a cell phone. Please catch up with the times - its 2005.

Posted by: simon | May 31, 2005 at 09:08 PM

Simon --

Actually, I'm not sure whether I should agree with you or Mark. My gut tells me that the Monster.com series is far superior, but I can't actually attest to how representative it is. It's a pretty new series, so it doesn't have a track record we can test yet.

(Incidentally, the claim of the Vallarta article I cite is that the help-wanted index does a pretty good job of matching the JOLTS data if you detrend it. Of course,the JOLTS series is short too...)

pgl -- Your generosity is always welcome.
Toni -- I think the answer is yes.

Posted by: Dave Altig | May 31, 2005 at 11:07 PM

I think Monster gets more bogus, or questionable, ads than newspapers do. It's far more efficient to post ads to Monster, covering a large geographic area, than to put them in the various newspapers that cover the same area.

I'd also be concerned about Monster's index, because the number of ads reflect the company's performance. They may be tempted to fluff it up a bit, to make themselves look better. And the motivation of their index may not be to provide good data, but instead to get free publicity.

Also, when a newspaper's ads rise or fall, it's most likely a reflection of the local availability of jobs. When a national online service's job ads rise, it could be because they are competing better against other sites. When the site's job ads fall, it could theoretically be due to their having implemented an annoying behavior on the site which drove users away (for example if Monster started using lots of popups and interstitials.)

I'd be more inclined to trust a survey of multiple online sites, which didn't break out individual sites' numbers, and removed the incentive to fudge the numbers.

Posted by: Jon H | June 01, 2005 at 09:05 PM

I think local papers are far more likely to carry low-wage jobs from small businesses, while online services are more geared toward white-collar jobs and low-wage jobs at large businesses.

I can't see a corner bar looking for bartenders via Monster.

Posted by: Jon H | June 01, 2005 at 09:08 PM

Jon --

Your points are well taken. However, my understanding is that the Monster Index is in fact a survey of multiple online sources. Here's how they describe it on their site:

"Based on a real-time review of millions of employer job opportunities culled from more than 1,500 Web sites, including a variety of corporate career sites, job boards and Monster, the Monster Employment Index presents a snapshot of employer online recruitment activity nationwide."

As I noted before, in the end the proof will be in the pudding -- but we'll have to wait awhile to get a time series that is long enough to build a record of predictive of performance.

Posted by: Dave Altig | June 02, 2005 at 07:06 AM

The Conference Board's Help-Wanted index is the most accurate measure of available employment in the US. The data for the index, supplied by WANTED Technologies (www.wantedtech.com) is the most extensive and exhaustive information available. This alliance was just announced in July of this year. Contrary to Monster's index, the Conference Board's measure uses more than 2,000 online sources. These sources include national, regional and local job boards, online media sites and corporate postings. It will give the broadest picture of what's happening in the job market, in real-time. I highly recommend it.

Posted by: Lisa | August 01, 2005 at 08:48 AM

Loan Offer Here.apply now

Posted by: GREGFORD | June 15, 2007 at 08:06 PM

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This Week's Funds Probabilities

The holiday and the French referendum pushed this week's report on the federal funds rate probabilities back a day, but there was nothing to get in a big rush about anyway.  As of close of the trading day last Friday, "our" calculations from options on federal funds futures had the probability of another 25 basis points in June at about 91%, with the balance equally split between no change and a 50 basis point increase.


Expectations are still pretty diffuse on the October contract, which spans three meetings of the federal Open Market Committee (June, August, and September). By week end, however, the measured pace scenario -- cumulatively 75 basis points over the three meetings -- made a bit of a run. primarily at the expense of betting on a pause at 25 basis points more and the expectation of a slightly more aggressive pace of rate hikes.


Here's the data:
Download july_pdfs_053105.xls
Download october_pdfs_053105.xls

May 31, 2005 in Fed Funds Futures, Federal Reserve and Monetary Policy | Permalink


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May 30, 2005

On To The Netherlands

The next fight takes shape. From the Financial Times:

No campaigners in the Netherlands on Monday urged the Dutch to complete the job the French began on Sunday, and hammer another nail in the coffin of the European Union constitutional treaty in a referendum on Wednesday...

While a No vote from France was bad enough, EU leaders believe a second No from one of the EU's founding members would put the treaty beyond resurrection and plunge the 25-nation bloc into an even deeper crisis of confidence.

Geert Wilders, the right-wing Dutch MP and a leading light of the No campaign, hailed the French vote as "the beginning of the end for the European super-state".

"The treaty is half-buried but Brussels is clever enough to revive it," he said. "Hence the Dutch electorate must overwhelmingly vote No on Wednesday...

Maxime Verhagen, who leads Mr Balkenende's Christian Democrat Alliance, said "every Yes vote counts", while Jozias van Aartsen, parliamentary leader of the liberal VVD party, said: "The game is not yet over. Paris does not write the law for us."

Camiel Eurlings, a Dutch Christian Democrat in the European Parliament, said the sight of French extreme-right leader Jean-Marie Le Pen celebrating and hoping for a repeat in the Netherlands, should alone shock the Dutch into voting Yes.

De Telegraaf, the biggest-selling newspaper and a supporter of the treaty, said the French result had left the Dutch in the odd position of voting "about something that no longer exists". But it urged the Dutch to consider "the merits of the treaty and its importance to the Netherlands".

Opinion polls before Sunday showed the Dutch Yes campaign trailing but gaining ground. TNS/NIPO had Yes at 36 per cent, with No on 52 per cent. Interview-NSS said No was down from 63 to 56 per cent, while Yes had moved to 44 per cent.

May 30, 2005 in Europe | Permalink


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The EU Leaders Speak

From Deutsche Welle, Jacques Chirac starts it off, although without saying a lot:

"You have rejected the European constitution by a majority," he said. "It is your sovereign decision and I take note of it. Nevertheless, our ambitions and interests are profoundly linked to Europe. France, a founding member of the union, remains, naturally, within the union."

Others were more outspoken:

The French rejection of the EU constitution is "a defeat for France and a defeat for Europe," French Defence Minister Michele Alliot-Marie said Sunday after a historic referendum won by opponents of the treaty.

Her colleague, Foreign Minister Michel Barnier called the result a "real disappointment," although said those who voted "yes" should remain proud of their vote.

"It is a test for our country because, and I've said this before the referendum, it's going to be tougher and it is going to be tougher for our country to defend its interests," he said.

He's not alone with that sentiment:

Polish foreign ministry official Pawel Swieboda called the decision a defeat for France.

"It means it is choosing the past and not the future and risks losing its natural role as a political leader in Europe," he said.

The Germans apparently feel like losers too.

German politicians from across the political spectrum described the "no" in Sunday's referendum on the EU constitution in France as a step backwards and a setback for Germany's attempts to unify Europe.

"This is a setback for Germany's aim to promote the unification of Europe," said Guido Westerwelle, the leader of the opposition Free Democratic Party (FDP)...

Klaus Wowereit, the mayor of Berlin and a member of Chancellor Gerhard Schröder's ruling Social Democrats, described the outcome as "a step backwards."...

According to Gerd Langguth, a political scientist at the University of Bonn in Germany, the vote in France was a vote against Jacques Chirac, but also against an EU that was going too fast for many.

"For a few years the EU will be in a crisis situation," he said. "There will be an attempt to build things up again, but France is one of the founding members of the European Union and so this "no" is a challenge that will not easily be overcome.

But Jacques Barrot, vice-president of the European Commission  says the fat lady hasn't sung just yet:

"Once a project has been launched, you cannot abandon it."

The Latvian foreign minister concurs:

Artis Pabriks, foreign minister of another new member state, Latvia, said the vote meant EU politicians had to look closely at the signals voters were sending their way. She urged her own parliament to go ahead with their scheduled vote on Thursday and vote the constitution through.

"I am convinced that we should stick to the idea of the constitution," he said. "We can not turn back. It would be a disaster."

Ditto Gerhard Schröder:

Chancellor Gerhard Schröder, a key ally of Chirac and the other half of the Franco-German motor behind much of the EU integration drive, said the vote was "a setback" but did not mean the end of the road.

"The outcome of the referendum is a setback for the process of ratifying the constitution, but not its end," Schröder said.

But there is some joy in Mudville:

... there are voices among the opposition camp who are more than pleased with the outcome, including Phillipe de Villiers, who played a visible role in the "no" campaign in France.

"Europe has to be rebuilt. The constitution is no more," he said. "The people have said no massively. There is no more constitution."

May 30, 2005 in Europe | Permalink


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The French Vote: The Bloggers Abuzz

Lots of good stuff:

Edward at A Fistful of Euros notes that Beijing has seized on the moment to harp about Euro-protectionism.

A Few Euros More reports that the Nordic countries are soldiering ahead.

Brad Setser wonders how this will affect Turkey's application to join the EU, and opines that the EU constitution woes will likely strengthen the dollar and be bad for the US.

Independent Political Blog follows up on the Turkey thought with a passage from a George Will column that includes this:

Here is one analysis of why the French may reject the EU constitution today. This constitution seems to be a synthetic construction by politically correct elites detached from real people and real life. In part, many French are afraid of losing their welfare system. But I'll bet the real, though perhaps unspoken, fear is of being swamped by Muslim immigration from Turkey.

Jane Galt believes the EU can live without the constitution, but non-growing pains  in the eurozone are a really big deal.

The Prudent Investor agrees with Brad and Jane: "There is risk of a further weakening [of the euro] as Europe now faces not only economic but mounting political problems as well."

Daniel Drezner provides several interesting links, including the top four reasons the French said no, from the BBC.  They are:

  • Dissatisfaction with the current French government
  • Worries (mostly misplaced) that the constitution moves the EU in an "Anglo-Saxon" direction economically
  •   General concerns at the development of the EU, especially a perceived reduction of France's influence in the enlarged Union
  •   Concerns at possible future membership of Turkey in the EU.
  • David K. Smith declares: "That should mean, after all the niceties, that the constitution, and the prospect of a UK referendum, are dead." EU Referendum is not sure, however.  And The Diplomatic Times Review provides a link to a Deutsche Welle opinion column indicating that the Germans are undeterred.

    About EU takes notice of a Reuters report that Ireland intends to forge ahead with its own vote on the constitution.

    If this isn't enough, Instapundit has a load of links.  And if that ain't enough, try Steeph.

    UPDATE: Be sure to read godement's remarks in the comments section.

    May 30, 2005 in Europe | Permalink


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    The real reason the French voted no is fear of unemployment and dissatisfaction with current policies in FRance according to post voting polls. Europe came a distinct fourth in these surveys.

    Thus, forget about the FRench rejecting Europe. Forget about the comments of French ministers. The vote was about them and it was against them.

    It is rational too. You give people 172 pages of fine print to read and then you are surpised that they prefer not to read it and rather answer the question that is on their mind ? Please, we do not live in a perfect world with perfect people.

    France may well have shot itself in the foot on this one, and several partners may well be rightly very annoyed by this, but it was unavoidable. It remains to be seen how many countries that hold a referendum will approve this constitution as opposed to those who go through the parliamentary process.

    Posted by: godement | May 30, 2005 at 12:53 PM

    BG --

    Very nice.


    Posted by: Dave Altig | May 30, 2005 at 02:32 PM

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    Blair Begins The Bail

    From Yahoo News (via Radio Free America):

    Prime Minister Tony Blair warned that Europe faced serious questions over its future after France rejected a new EU constitution, and said Britain would only hold a referendum if there was still a treaty to ratify.

    Blair, on holiday in Italy, called for a period of reflection over the fate of the landmark document in order not to to pre-empt a Dutch referendum, set for Wednesday, or a quarterly summit by EU leaders in mid-June...

    While emphasising that he hoped the Netherlands would support the text, he said the real issue was the underlying anxiety that people had about Europe's economic potential.

    "Underneath all this there is a more profound question, which is about the future of Europe and, in particular, the future of the European economy and how we deal with the modern questions of globalisation and technological change."...
    In April last year, Blair pledged to put the EU constitution to the unwaveringly eurosceptic British electorate, despite opinion polls showing that a large majority oppose it.

    After France's 'Non' and ahead of the next referendum in the Netherlands, however, the British leader was more cautious about a vote at home.

    "If there is a constitutional treaty to vote upon we will have a vote in Britain before ratifying it," he told reporters.

    May 30, 2005 in Europe | Permalink


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    Does anyone know what brand of champagne is Tony Blair's preferred ?

    Posted by: godement | May 30, 2005 at 12:55 PM

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    A Big Time Non

    From the Financial Times:

    France voted 55 per cent to 45 per cent to reject the proposed European constitution, in a severe condemnation both of the government and the perceived liberal tendencies of the European Union. Many believe the French rejection could be followed by a No vote in the Netherlands on Wednesday, dealing a potentially fatal blow to the European Union's constitutional treaty and bringing Europe's 50-year integration drive to a halt.

    The political fallout in France was immediate:

    President Jacques Chirac is widely expected to announce a change of government on Monday or Tuesday after meeting his Prime Minister Jean-Pierre Raffarin the morning after France's vehement rejection of the European constitution on Sunday night...

    The 54.87 per cent vote for the No campaign is also a personal humiliation for President Chirac, who called the referendum with a view to bolstering his political authority before the presidential elections.

    Calls for his resignation came from left and right, with even pro-constitution politicians turning on the French president to blame him for the electoral disaster.

    But the FT's Peter Norman claims (to  subscribers only) the game is not over yet.

    The size of the French No vote has delivered a shock to the European Union and its political class. But it would be wrong to assume it marks the imminent end of Europe's constitutional treaty.

    ... the treaty [signed in Rome last year] itself envisaged that there might be difficulties with one or two member states, implying that all should try to ratify it by a deadline of November 1 2006.

    Declaration 30, appended to the treaty, says "that if two years after the signature of the treaty ... four fifths of the member states have ratified it and one or more member states have encountered difficulties in proceeding with ratification, the matter will be referred to the European Council".

    The European Council is the assembly of EU heads of state and government that meets about four times a year to give the EU strategic direction. It was a European Council meeting in June 2004 that agreed the constitutional treaty.

    The European Council's next meeting will be on June 16-17 under the chairmanship of Jean-Claude Juncker, the Luxembourg prime minister, who currently holds the six-month rotating presidency of the EU.

    A statement, issued on Sunday night by Mr Juncker jointly with the presidents of the European parliament and the European Commission, suggested he might want to press ahead with the ratification process. While respecting the outcome of the French vote, it recalled that nine member states, representing 49 per cent of the EU population, had already ratified the treaty and that the majority of states had not yet had an opportunity to complete the ratification process.

    Norman endorses a sentiment expressed last week by Henry Farrell...

    Although the French No vote is a shock for the EU and its ruling elites, it may have the salutory effect of making those elites listen in future to the people...

    ... but then goes on to suggest "the people" just didn't understand:

    True, the No voters in France had many different reasons for rejecting the constitutional treaty. But after a furious debate in recent weeks, no-one could accuse them of ignorance.

    With hindsight it is clear that the French government should have made a bigger and better effort to explain the constitutional treaty...

    Also with hindsight, it was a mistake to call the text a constitution, which it is not. A constitution implies a sovereign body: the superstate of eurosceptic myth. The text agreed by the Convention in 2003 and completed by the EU governments in 2004 is a constitutional treaty, by which member states voluntarily confer some sovereignty on the EU.

    Umm, OK.

    Developing, as they say.

    May 30, 2005 in Europe | Permalink


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    May 27, 2005

    The Week's Data Roundup

    I have been remiss in my posts on data releases this week, so herein is my penance.

    April Existing Home Sales:

    From Reuters:

    Sales of existing U.S. homes surged an unexpectedly large 4.5 percent to a record high in April and home prices posted the biggest annual gain in almost 25 years, a trade group said on Tuesday, in a report renewing concerns of inflated prices in housing markets...

    The national median home price rose 15.1 percent to $206,000 from the same month a year ago, the NAR report showed. That price increase was the biggest since November 1980, when prices rose 15.6 percent, NAR said.

    These comments by Alan Greenspan were widely reported...

    "We don't perceive that there is a national bubble but it's hard not to see ... that there are a lot of local bubbles," Greenspan told the Economic Club of New York last week.

    ... and the purveyors of the data see of bit too much frothiness themselves:

    "The record was basically unexpected, but low mortgage  rates were unexpected as well," said David Lereah, chief NAR  economist.

    "Prices are now becoming a concern. There's a speculative  element in home buying now," he added.

    The beat went on with Wednesday's report on April New Residential Sales. From Bloomberg:

    U.S. new home sales unexpectedly increased in April to a record pace, a sign historically low mortgage rates and job gains keep powering housing. Prices rose, reflecting an increase in purchases of more expensive homes.

    Sales rose 0.2 percent to a 1.316 million annual rate during the month, after a 1.313 million in March that was less than initially reported, the Commerce Department said today in Washington...

    Home sales so far this year have averaged a 1.27 million rate, compared with last year's record 1.2 million.      

    The median price rose to $230,800 in April from $217,500 a month earlier. Compared with the same month last year, the median price has increased 3.8 percent.         

    The median price fluctuates depending on which regions are strong and the types of homes being sold. More higher-priced homes were sold in April, while the number of cheaper houses sold declined, today's statistics showed.

    Geez.  How long can this go on? 

    "I think home prices are going to slow down,'' said Michael Moran, chief economist at Daiwa Securities America Inc. in New York. ``In some local markets, you're actually going to see housing prices decline,'' although it ``may not happen until interest rates go up,'' he said...

    Some economists still expect housing sales to fade in the second half of 2005 if mortgage rates rise in response to Fed rate increases. So far, that hasn't happened. The average 30-year rate is lower now than it was in June 2004, when central bankers embarked on a series of eight interest-rate increases.

    Oh, that crazy conundrum.

    Calculated Risk opines that the real surprise "was the significant downward revision in the March numbers" for new home sales.

    Need more signs that the soft patch is past? Here's April Advance Durable Goods for you, from BusinessWeek online:

    Orders to U.S. factories for big-ticket manufactured goods shot up 1.9 percent last month...

    The Commerce Department said the increase in demand for durable goods, items expected to last at least three years, was the best showing in five months. Orders rose by $3.71 billion to a seasonally adjusted $200.3 billion last month, reflecting strength in autos and aircraft...

    The 1.9 percent jump in durable goods orders, the largest advance since a 2 percent increase last November, followed three straight monthly declines including a sharp 1.6 percent drop in March. That decline had raised worries that the economy could be faltering as consumer and business confidence were jolted by higher energy bills.

    But several stronger-than-expected reports of April activity have eased fears of a prolonged slowdown.

    As expected following the surprise decline in the first quarter trade deficit, first quarter GDP growth was faster than originally reported. First Quarter GDP, from CNNMoney:

    The U.S. economy grew at a faster pace in the first quarter than earlier estimates, the government reported Thursday...

    The gross domestic product, the broad measure of the nation's economic activity, rose at an annual 3.5 percent rate in the first quarter, compared to the 3.1 percent gain reported in an earlier report...

    A smaller-than-expected trade gap in March was one of the major reasons for the upward revision in GDP. Purchases of imported goods and services reduce the GDP, while exports, which grew to record levels in March, increase the measure of the nation's economic activity.

    That didn't get in the way of a little negative spin:

    ... but the stronger reading fell a bit short of Wall Street expectations.

    ... Economists surveyed by Briefing.com had a consensus forecast that the GDP would be revised up to 3.6 percent growth, while Reuters found a range of estimates from 3.2 to 4.0 percent growth...

       "I think the slowdown is still in the cards," [John Silvia, chief economist with Wachovia Securities] said. "We're probably looking at 3.5 to 3.25 (percent growth) in the second quarter, and 3.0 to 3.25 (percent) in the second half. Part of what drove the first quarter number was an increase in inventories, and a lot of that was unintentional. You've already seen businesses starting to scale back production to reduce that inventory.

    "I don't see a  reacceleration of this economy at all, unless there is an external factor," he said.

    The market, however, was not quite as hesitant.  From msn Money:

    US stocks rose on Thursday as investors welcomed a modest upward revision of first-quarter US gross domestic product growth

    Thus, the Capital Spectator asks...

    The stock market yesterday was encouraged with the upward revision in first quarter gross domestic product. So too was the bond market. Can both markets be right?

    ... and answers:

    The stars arguably are aligning in the bond market's favor. As a bonus, the stock market doesn't have a problem with the data either. When everyone's bullish, there's no place for bears.

    Perhaps First Quarter Corporate Profits had something to do with it. From Reuters, via the Chicago Tribune:

    U.S. corporate profits grew 4.5 percent in the first quarter and accounted for the largest share of the economy since early 1967, the Commerce Department said Thursday.

    Although that was down from 13.5 percent growth in the fourth quarter, profits accounted for 10.9 percent of gross domestic product in the January-March period, the most in almost four decades.

    The earnings growth in excess of GDP will underpin business investment and help fuel the expansion, said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh.

    "Businesses are going to spend with profits at these levels and with the amount of capital that's available," he said. The economy is "fairly firm."

    Closing the week, the April Personal Income report generated some mixed reactions. From BusinessWeek online:

    Personal incomes rose in April at the fastest pace in five months , helped by a big jump in employment, while consumer spending slowed a bit, the government reported Friday.

    The Commerce Department said incomes rose by 0.7 percent last month, the best performance this year. Analysts said it reflected the strong gain of 274,000 jobs last month and a rise in the workweek, which both boosted private wage growth.

    Consumer spending rose by a lower-than-expected 0.6 percent in April but the government revised the March gain to a stronger 0.9 percent, up from the 0.6 percent increase that had been originally reported for March.

    General Glut warns, however, that real disposable income gains are less impressive, and consumption growth still outstrips disposable income growth (though the gap is closing).  The Financial Times had a similar perspective:

    Personal income climbed by 0.7 per cent in April. Yet Americans saved an even smaller portion of their disposable income, just 40 cents for every $100 of disposable income.

    The real growth in wages was also chipped away by a 0.4 per cent increase the personal consumption expenditure index, a broad measure of price rises. A sharp rise in tax payments also ate into earnings growth, leaving disposable income just 0.5 per cent higher.

    Ian Morris, US economist at HSBC, said that growth in disposable income was decent rather than booming. Year over year the rise was 3.3 per cent. With consumption running at a year on year rate of 4.1 per cent, the savings ratio hit a new cyclical low of 0.4 per cent. The savings rate has only ever been lower once, in October 2001.

    All in all, to me it adds up to a pretty solid set of statistics, but confusion seems to reign supreme.  This is from the lead item at Market Watch, at the time of this post:

    Soft patch persists

    Somewhere in the last few weeks, a fog seems to have descended over the U.S. economy, and economists seem lost about where it is headed.

    That was immediately followed by this item:

    Stocks lifted by upbeat economic view

    U.S. stocks ended higher Friday, wrapping up a week of solid gains ahead of the three-day Memorial Day holiday, as investor confidence in the economy returned after a number of positive reports.

    Go figure.

    May 27, 2005 in Data Releases | Permalink


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    I follow all the same economic reports as everybody else, but how many of them are truly robust leading indicators? In fact, only the stock market, as the so-called "stock market barometer", has even the potential to give us even a modest clue as to where the economy is headed.

    The slope of the yield curve is also supposed to give us a clue about the future, but even this metric has gotten labeled as a so-called "conundrum", and with wildly divergent views as to where it's headed.

    The Fed itself has said that this is a very uncertain time for monetary policy.

    Yes, this is clearly a "fog."

    I would characterize this as an "economic forecasting confidence slump." Quite a number of prominent economists have very divergent views about economic growth, inflation, the yield curve, and monetary policy. How can *anyone* be rationally confident in the face of such uncertainty? Sure, like me, you can be quite optimistic about the future, but betting on a particular path to and through that future is an entirely different story.

    And the big question remains... will the "animal spirits" of the stock market be a better leading indicator (six to eighteen months out) than the most intricate and sophisticated econometric models of the most prominent economists? Of course that begs the question of what the best metric(s) of the health of the economy should be (other than simply a rising stock market.)

    -- Jack Krupansky

    Posted by: Jack Krupansky | May 28, 2005 at 01:50 PM

    Some lightbulbs get pretty bright just before they burst or burn out.

    Posted by: Movie Guy | May 29, 2005 at 01:19 AM

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    May 26, 2005

    The Future Of The EU: An Optimistic Assessment

    Crooked Timber has a terrific essay by Henry Farrell -- hat tip A Few Euros More -- proposing that the strain in the European Union is actually a symptom of something good.

    The French are looking decidedly wobbly on the new European constitution, which they vote on next Sunday. The Dutch, who will be voting soon after, appear to be strongly opposed. This all sounds dreadful for pro-Europeans. However, I’m going to make two predictions. First, the unexceptionable one – I don’t think that the constitution has much chance at all of being ratified. If it somehow gets over the French hurdle, it’s going to come a cropper at the British one. Then the risky one – I reckon that the European Union may be on the verge of acquiring real political legitimacy for the first time, exactly and precisely because of the vociferous debates which are starting to get going.

    Professor Farrell notes that, up to now, ignorance has been bliss.

    Political elites have bought into the European project from early on, on the basis that it means peace on the European mainland, and more trade and higher economic growth for everyone. But there’s been a radical disconnect between the EU’s rather vague, lofty aims of “ever closer union” on the one hand, and the actual day to day business of European politics on the other. Neither of these inspire much popular support or interest – while most European mass publics have vaguely been in favour of further European integration, it’s been because their leaders have told them that it’s a good thing. This has given these leaders a lot of leeway to do what they want at the EU level without the general public knowing what’s happening. It’s also allowed these leaders to blame ‘Brussels bureaucrats’ for choices that they have made themselves, but which they know will be unpopular with voters. In short, the EU is a political project dressed up in technocratic clothing – it’s succeeded in part because its day-to-day activities sounds so boring to outsiders.

    The problem with this, of course, is that over time, the European Union has begun to leach legitimacy, as it has become ever more powerful and less accountable...

    Thus, we have a set of institutions (the European Union) which are increasingly politically powerful, but which don’t have much democratic legitimacy.

    That, according to Farrell, is about to change forever, and out the ashes of the movement to form an EU constitution will come a discussion that really matters:

    Thus, a new debate is beginning to emerge over what kind of European Union we should have – a Europe that’s more aligned with the social-democratic model, or a Europe that’s closer to the classical liberal approach; protection versus free markets...

    Underlying merits aside, the fundamental point is that these arguments are less obstacles to European integration than the birth pangs of a European Union in which voters actually begin to pay attention to what’s happening at the European level. The European Union is becoming a political space, in a way that it hasn’t been in the past... We’re arguably on the cusp of the opposite switchover in the EU - people are beginning to articulate their grievances with the EU as it is, and to propose alternative ways of doing things. Domestic political parties are beginning to align themselves with different models of what Europe should be. This wasn’t possible as long as Europe was a vague set of aspirations that political elites from left and right could agree on, but that the public didn’t care about. And it arguably lays the foundations for a much more robust European Union than has existed in the past.

    A great read.

    ASIDE: It's a bit off topic for this blog, but Crooked Timber is also hosting a Steven Levitt seminar -- essentially a collection of essays on Levitt's and Stephen Dubner's Freakonomics, along with responses from Levitt himself.  (Henry Farrell and Tyler Cowen are among the contributors.)  I add it to my must read list.

    May 26, 2005 in Europe | Permalink


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    FWIW, I believe the blog's name is just "Crooked Timber," and that "Out of the..." is the first half of a Kant quotation that adorns the masthead.

    Posted by: SomeCallMeTim | May 26, 2005 at 10:59 AM

    You're right -- my bad. It's fixed.

    Posted by: Dave Altig | May 27, 2005 at 09:10 PM

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    May 25, 2005

    More On Nuclear Energy Safety

    Eric McErlain, editor of the weblog NEI Nuclear Notes, sends me a link to the Nuclear Energy Institute's  summary of safety measures in U.S. nuclear power plants.  Here's an abridged version of their list:

    Comprehensive nuclear safety process. Safety is ensured at nuclear power plants in the United States according to four interlocking steps:

    1. extensive government regulations have been established to protect the public,
    2. nuclear plants are built according to designs that meet the regulations,
    3. owners are required to operate the plants according to approved specifications and abide by strict controls on changing the designs, and 4. regulators monitor operations and compliance with regulations through resident inspectors stationed at every site.

    Multiple redundant safety systems... Two or more safety systems perform key functions independently, such that, if one fails, there is always another to back it up, providing continuous protection.

    Highly reliable automated safety systems. A nuclear plant has numerous built-in sensors to watch temperature, pressure, water level, and other indicators important to safety. The sensors are connected to control and protection systems that adjust or shut down the plant, immediately and automatically, when pre-set safety parameters are approached or breached.

    Physical barriers safely contain radiation and provide emergency protection... The containment ensures that the Chernobyl accident of 1986 a substantial radiation leak could not occur in the United States...

    Multiple controls on the chain reaction. Control rods present in the reactor are adjusted to regulate the reaction by absorbing neutrons. In addition, the water level inside the reactor also moderates the reaction. Water ordinarily facilitates the reaction, but the greater the reaction and the greater the heat produced, the more water is turned to steam, leaving less to promote the reaction. In this way, the reaction is automatically moderated. Moreover, if the water were ever lost, multiple emergency cooling systems would activate to make up the water loss and keep the reactor from overheating....

    Materials management for reliable plant components.All nuclear plant owners participate in a comprehensive, industry-wide materials management program that identifies when components of nuclear plants need to be inspected, repaired, and replaced to ensure that the materials from which they are made perform according to standards..

    Plant fire protection receives special focus...

    Plant security protects against sabotage. Plant security resources and procedures are designed to prevent a hypothetical intrusion involving a paramilitary force armed with automatic weapons and explosives. Security measures include physical barriers and illuminated isolation zones; well-trained and well-equipped guards; surveillance and patrols of the perimeter fence; search of all entering vehicles and persons; intrusion detection aids, such as closed-circuit television and alarm devices; bullet-resisting barriers to critical areas; a contingency reaction force; coordinated emergency plans with off-site police, fire, and emergency management organizations; and regular drills and periodic procedural reviews. Employees undergo a variety of tests and record checks before obtaining various levels of security clearance, which is controlled by electronic key cards. Employees with unescorted access are subject to continual behavioral observation programs.

    It all makes a lot of sense to me.  Skeptics, however, might note that the Institute is not an impartial party, so comments or a heads-up on more critical assessments, always welcome, are especially encouraged in this case.

    May 25, 2005 in Energy | Permalink


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    Nuclear energy is a fascinating topic, but unfortunately we as a country are still not in a "mode" where we're going to make the kind of progress that needs to be made.

    As far as the NEI's saftey measures, that's all well and good, but as Fed Chairman Greenspan (and others) noted after the 1998 LTCM financial "meltdown", there's a serious lack of "stress testing". So many of the items on NEI's list have failed at various times in the past few decades that the term "swiss cheese" comes to mind.

    A number of years ago their was some dispute over a more modern form of "inherently safe" nuclear power. Even that technology had potential issues, and it was *two* generations ahead of the nuclear power technology we have in use today.

    One of the key problems with nuclear power here in the U.S. is *identical* to the problem with Chernobyl: lack of management that truly comprehends the degree of difficulty inherent with the technology. With most "incidents", there is almost always an element of lapse on the part of management.

    That said, I would certainly invite a renewed national debate on modern nuclear power, especially as we attempt to consider "energy independence".

    -- Jack Krupansky

    Posted by: Jack Krupansky | May 25, 2005 at 01:28 PM

    Couple of points:

    Mentioning the American nuclear industry and Chernobyl in the same breath is ill-informed at best and deceptive at worst. From reactor design to management philosophy and safety procedures, there is very little in common between the two industries besides the word nuclear:

    Soviet Power Plant Designs:

    It's also important to note, that in the wake of TMI in 1979, the industry moved aggressively to improve safety throughout the fleet -- most significantly by establishing the Institute for Nuclear Power Operators (INPO), an organization that leverages rigorous peer review and peer pressure in order to ensure safe operations.

    The TMI 2 Accident: Its Impact, Its Lessons

    What's the result? Consistently high measures of safety and operating performance.


    Anyone who has spent any time in the nuclear energy sector can appreciate just how seriously they take safety. Hence, I think your characterization of American nuclear management doesn't have a whole lot of merit, as the figures in the most previous reference indicate.

    Posted by: Eric McErlain | May 25, 2005 at 02:11 PM

    For me, the crucial question is not the technical specifications of the safety precautions, which I am completely unqualified to judge, but the attitude of the people in the industry. The nuclear power industry of the first post-war decades seemed to me to be defensive and apologetic, preferring to deny problems as long as possible and resisting outside criticism (to say nothing of pushing for laws protecting them from liability if anything went wrong).

    By contrast, in the mid-1970s, when the people working in genetic engineering became concerned about possible future problems, they called a halt to their research (before any buildup of outside pressure) and met at Asilomar to confront the issues facing them. Within a year or two they had rules and guidelines in place that have held my confidence, at least, for decades.

    I looked through the materials referenced by Mr. McErlain. To me, they seem to be the type of self-congratulatory materials put out by industries more interested in public relations than in public well-being. They probably would not understand my reaction, which is part of the problem.

    For environmental reasons, I would like to be able to support further development of nuclear power. But if those publications fairly represent the industry, it has lost my vote.

    Posted by: Alan | May 26, 2005 at 03:21 PM

    Post-war industry? I think it's safe to say that nuclear generation has evolved significantly since then, even moreso in the post-TMI era after the establishment of INPO and the relentless application of industry peer pressure to improve safety and performance.

    Is it really fair to judge an entire industry on an impression that was made many decades ago? I don't.

    As for the quality of the documents concerning the performance of the nuclear industry, I thought the press release provided a fair summary of the findings. If that's not good enough, why not check the facts against WANO's 2004 report yourself:


    In addition, I suggest you take a look at the following speech delivered by our CEO, Skip Bowman, the former head of Naval Nuclear Propulsion, that he delivered at the 2005 NRC Regulatory Information Conference:


    Finally, if you don't believe us, you can listen to this speech on reactor safety delivered last week by NRC Chairman Nils Diaz at the 2005 Nuclear Energy Assembly:


    As for Alan's assertion that our documents aren't up to snuff, I ask other readers to simply review them on their own. At least I back up my assertions with hard data, rather than a an assertion from long ago.

    Posted by: Eric McErlain | May 26, 2005 at 04:03 PM

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