Statistical Analysis 04 Per capita GDP and GNP O XXXXXXXXXXO14 .O0 Log per capita measures (Ch.O5¢4, ZO08Q4=0 Mh P GNP Col (50P XXXXXXXXXXVAY ECO 1 fo Yee FCO 2012 Another source GDPCi/POP 0.0440 -— 0.0435 + - “ XXXXXXXXXXo << r— +t XXXXXXXXXX | Qa ™ = GS 0.0420 + ‘'S mo — XXXXXXXXXXF XXXXXXXXXXl l l j XXXXXXXXXX XXXXXXXXXXShaded areas indicate US recessions. FRED att 2012 research.stlouisfed.org 08 O68 O44 4 O32 4 .O0 - OF 4 - O XXXXXXXXXXConsumption and Household net worth (per capita) Log real per capita, ZOORR4=0 Household net worth aX Consumption Conn ro yee Foo T y y y T y XXXXXXXXXXr T 2011 r 1 , 2012 Ratio of household liabilities to GDP: If you believe that excessive household debt was the main problem, then the economy is on the mend TLBSHNO/GDP 1.05;- 0.95 F0.90 fF XXXXXXXXXXBil. of $/Bil. of $ XXXXXXXXXX60 1 I I I J XXXXXXXXXX XXXXXXXXXX : Shaded areas indicate US recessions. FRED ee 2012 research.stlouisfed.org Productivity and Compensation 10 Log real values, os nonfarm business sector, 2008@4=0 Mutput 06 - per hour 4 4 Compensation O02 4 Oo ayy, BOO TE FO yer CO ITH -.02 T T T T T T T T T T 2009 2O XXXXXXXXXX2O12 CBO assessment with and without the American Recovery and Reinvestment Act (ARRA) — i.e. the “stimulus” 14,400 WSJ 14,000 4 Mean Actual 13, XXXXXXXXXX,200 4 Mo A RRA hi impact 12,800 4 Chuinepact) 12,400 4 Stet COI Ee eye F.C ET 12,000 . r . T . ' T ' . t T T r t T . r . T . r r T r . ' XXXXXXXXXX XXXXXXXXXXBailout of the Automobile Industry o | WA ECO PD OW eSe COT Log real motor 45) vehicle production and consumption, Production 5 | 2008Q4=0 2 14 Consumptian of a new vehicles XXXXXXXXXXRomney, "Let Detroit Go Bankrupt", 3 MYT 2009 Mov. 12, XXXXXXXXXXl 2011 ! 2012! more austerity in the =100 U.K. Real GDP, pre-crisis peak ' ZOZTOZ . TOzrOz ' pOttOz . EDTTOZ ' ZOTTOZ - TOTrOZ Y yootoz * eD0TOZ . zDoTOz ' TooTeZ ~ po600z - €D600Z . Z0600Z . T6002 ’ pOs00z - €0800Z r zD800z ’ Tos00z ~ poL00z r €0L XXXXXXXXXXTos00z The difference XXXXXXXXXXi00 - $ XXXXXXXXXXso co bs 8] No inflation here! US Private Wages, Production and Nonsupervisory Employees io % Change Y-0-¥ XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX2012 Wp //etonoritimew tyeened comm au/ Theory: Liquidity trap: there is not enough demand (S > 1) when the real interest rate is zero Due to the roa c lack of demand, printing money (Quantitative Easing) has not been omnia inflationary of interest The graph shows that the “natural” real rate of interest (r) consistent with full employment is negative. Since r = i — 1m and the nominal interest rate cannot be negative, the only way for r to be negative is for expected inflation, mn, to rise. QE3 has been designed to increase expectations of inflation to reduce r. U.S.: Swing of private sector into financial surplus necessitated large public deficits to avoid a deeper slump Gross Government Saving (GGSAVE) GPSAVE-GPDI 1,200 — 800 + Private ==. surplus - Ss 400 = Ss or Ny — ee = XXXXXXXXXXmee Government -_ - = s deficit S -soo} aoe -1,200 i Li L 1 i L i i L i XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX20i2 Shaded areas indicate US recessions. — GGSAVE FRED 2012 resear ch. stiouisfed.org — GPSAVE-GPO!I THE JOB MARKET Employment barely keeps up with population Civilian Employment-Population Ratio C(EMRATIO) 63 r61 59 fF ss i 1 1 1 I J XXXXXXXXXX XXXXXXXXXXShaded areas indicate US recessions. FRED oft 2012 research.stlouisfed.org Employment Population Ratio EP ratio, 25-54 ~ TO-O°CT02 ~ TO-60-TT02 . T0°Z0-TT0Z . TO-L£0°0T02 ~ TO-eT6002 - T0-S0° XXXXXXXXXX°0T XXXXXXXXXXW°E0- 8002 ~ XXXXXXXXXXTO-T0-£002 . T0-90°9002 ~ TOT T-S002 - TO-0-S002 . T0°60°H002 ~ TOZ0°w00z ~ TO-£0-€002 . T0*7 T2002 . TO*S0°C002 ~ TO-0T XXXXXXXXXXTO-E0-T002 . WO°T XXXXXXXXXX82 - 8O XXXXXXXXXXoO Ss A plunge and a stabilization at a depressed level, which has now gone on for almost three years. Everything else is just noise. August 2012 employment report: 96k gain Monthly average gain of 139,000 this year US Nonfarm Payrolls Monthly Change 300 / FMAM 3 | A S$ O WN DOD J FM AM YF ) A iy Monthly Change —————= &MonthMoving Average = [2 fMonth Moving Average mp //econanates typepad com/Nrgyy Private Employment in two administrations Changes in private employment since inauguration —— Obama -5000 Month Public employment in two administrations Note: the spike in 2010 is the census! Changes in public employment since inauguration Bush — Obama Month Government employment shrank under Obama: If government employment had grown as fast under Obama as it did under Bush, we’d have a million and a half more people employed today! All Employees: Government (USGOVT) Source: U.S. Department of Labor: Bureau of Labor Statistics 23, XXXXXXXXXX,800 } 22,400 T Fs ; : =~ 22,000 { 21,600 | pee 21,200 (Thousands of Persons) 20,800 +} >. a 20,400 I i L i l i ; XXXXXXXXXX XXXXXXXXXX Shaded areas indicate US recessions. FRED 2012 research.stiquisfed.org Government employment divided by population: Government employment (think school teachers) does not even keep up with population! USGOVT/POP XXXXXXXXXXNg “ XXXXXXXXXXF o = Ee uw S oo7v2- = & o 0.071 Fw =a o