by Mish

Growth since the 2nd quarter of 2009 is a mere 2.1%. The Wall Street Journal asks Is Two Percent as Good as It Gets?

The growth seen during the recovery might, for a while, be as good as it gets,” the Federal Reserve Bank of San Francisco’s John Fernald, Stanford University’s Robert Hall, Harvard University’s James Stock, and Princeton University’s Mark Watson said in a study to be presented among Brookings Papers on Economic Activity.

Inquiring minds may wish to download the Brookings’ report entitled Disappointing Recovery of Output After 2009 but I found it a waste of time.

Okun’s Law

The report was mostly mathematical gibberish based on Okun’s Law.

Okun’s law (named after Arthur Melvin Okun, who proposed the relationship in 1962) is an empirically observed relationship between unemployment and losses in a country’s production. The “gap version” states that for every 1% increase in the unemployment rate, a country’s GDP will be roughly an additional 2% lower than its potential GDP. The “difference version” describes the relationship between quarterly changes in unemployment and quarterly changes in real GDP. The stability and usefulness of the law has been disputed.

Clearly, Okun’s Law is at least as useless as any widely believed economic law, which is to say totally useless.

The supporting paper consists of 90 pages of largely unintelligible garbage such as the following.

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Commendable Effort

The Wall Street Journal managed to condense 90 pages of nonsense down to 2 pages of nonsense. That’s a highly commendable effort, and the best one could reasonably expect.

Here’s the conclusion: “The causes aren’t entirely clear.”

I searched the 90-page report for the word “debt“. Care to guess the number of hits? I bet you can: zero.

Modern Day Snake Oil

I was discussing economic indicators with Pater Tenebrarum at the Acting Man Blog a couple of days ago. He pinged me with the correct takeaway.

Economic forecasting is not a science, and it is actually not the task of economic science to make forecasts (contrary to what is commonly asserted). Forecasting is akin to the task of the historian. Mises called speculators “historians of the future”.
Economic laws only play a role insofar as they can be used as constraints for a forecast. The problem is that all these models simply look at the data of economic history, at statistical series that always turn tail “unexpectedly”, driven by human action.
All these mathematical models are complete humbug. It is modern-day snake oil."

Mike “Mish” Shedlock

GDPNow, FRBNY Nowcast Inch Up: Gap Still Two Percent

Te Atlanta Fed GDPNow Model inched up to 1.0% from 0.9% on Friday. Nothing much mattered since a week ago.

Second Quarter GDP Forecasts Inching Towards Convergence Around Two Percent

The Federal Reserve Bank of New York released its Nowcast forecast today. The Atlanta Fed GDPNow forecast was updated on July 14 and again on July 19.

Health Care Costs Rising Sharply (And It Will Get Worse)

Inquiring minds are diving into Kaiser Family Foundation reports on health care. The charts and stats are not pretty, and they are sure to get worse.

Jobs: How Good are the Jobs the Economy is Creating?

The Wall Street Journal has an interesting report on the jobs created since the recession.

Earth Overshoot: How Sustainable is Population Growth?

For decades people have been predicting overpopulation would wipe out energy resources if not the entire planet.

Impediments to Growth

In Hoisington’s Fouth Quarter Review (not yet posted online), Lacy Hunt takes a look at the Trump economy, policy lags, and impediments to growth. Hunt sees five major impediments, in his report.

Debt Delinquency Trends: As Good as it Gets?

Household debts climbed by $226 billion to $12.6 trillion in the fourth quarter.

Not Getting It: Michael Moore, Hollande, Merkel, Financial Times, Stephen Colbert

The parade of politicians and media pundits who are totally clueless about what happened and why is miles long.

Hyperinflation Silliness (Times Two)

The hyperinflation proponents are back at it. This time in two parts, led by Jeff Nielson. The most absurd part of Nielson’s claim is his statement “Hyperinflation has already occurred“. His claim is in reference to the US, not Zimbabwe.