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What We Read Today 02 May 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

  • How Not to Be Misled by the Jobs Report (Neil Irwin and Kevin Quealy, The New York Times) Way too much significance is attached to a very uncertain number. The measurement error uncertainty for the non-farms payrolls in any given month is of the order of +/-100,000. So, if the actual increase in non farms payrolls was 150,000, the 90% confidence interval for the report extends to about 55,000 on the low side and about 250,000 on the high side. Yet the headlines tomorrow will declare the world is coming to an end if the number reported is 55,000 and that a historic boom is starting if the report is 250,000.

  • Putin Demands That Ukraine Pull Its Troops From Southeast (Neil MacFarqhuar, The New York Times) Russian Prime Minister Putin told German Chancellor Angela Merkel on Thursday that thu Ukraine must withdraw troops from the southeastern part of the country where Russian militants have seized government buildings in about a dozen towns. Econintersect suggests that if Ukraine complied with the request then Putin would send in official Russian forces "to protect the people in the absence of Ukrainian forces".
  • Here's 100 Years of Proof That Girls Are Better Students Than Boys (Brian Resnick, National Journal) Recently it has been felt that boys were falling behind girls in academic performance. A new study finds that boys have trailed girls in school for at least 100 years. The study covers school years through high school. No reason for the difference in performance is singled out. Perhaps the study should extend to college years and post-graduate studies. If the gap starts to narrow for older students it might be something as simple as faster rates of mental development which eventually even out as boys age. Of course it may be that women are just smarter than men at any age.
  • Where Obamacare Is Strongest (and Where It's Falling Short) (Sam Baker and Sophie Novack, National Journal) The final report on Obamacare sign-ups shows a huge swing in states' success. The report shows a total 0f 8.02 enrollees during the six month open enrollment period. Demographic information is still incomplete.


Today there are 13 articles discussed 'behind the wall'.

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  • A Chart that Demands Attention (Atif Mian and Amir Sufi, House of Debt) Since the end of The Great Depression economic growth has not been as dismal for any other recession compared to The Great Recession.
Why has the recovery been so dismal? This has to be one of the central research questions for macroeconomics going forward. We have several candidates: (1) secular stagnation, (2) structural changes in the economy such as demographics (3) a Gordonesque pessimism on productivity growth (4) weak government spending, (5) heightened policy uncertainty, and (6) excessively tight monetary policy. These aren't mutually exclusive.


  • More on the GDP Mystery (Atif Mian and Amir Sufi, House of Debt) This is a follow-on to the preceding article where the authors look at the components of GDP. Go to the article for details - it is mostly graphs. There are comparable curves for some past recessions with some of the GDP components. The story is both complex and straightforward.
  • Tapering is set in stone (House and Holes, Macro Business) Taper to zero is a certainty by October, according to Elliot Clarke at Westpac. The exception? Asset prices fall significantly or the U.S. economy slows. Econintersect thinks that if the economy slows any more it will simply stop.
  • What is the Billion Prices Project showing us about inflation? (Tyler Cowen, Marginal Revolution) Has CPI (Consumer Price Index) lost its way? The Billions of Prices Project (BPP) would suggest that might have happened. The first graph below is from Marginal Revolution and shows BPP averaging about 1% higher than CPI for the past year. But this sort of thing has happened before: In 2010 (starting in June) into first quarter of 2011 BPP averaged more than 1% higher than CPI. See second graph. Econintersect would suggest the meaning of the two divergences is not clear. (Note also that there has been a period of 11 months when CPI was slightly higher than BPP, as well as shorter intervals. There doesn't seem to be a systematic bias.)



  • Spending Rises, But Is It A Sign Of A Stronger Economy? (Lance Roberts, Advisor Perspectives Lance Roberts contributes weekly to GEI. He is questioning the strength of the economy when personal spending growth is all in services and goods consumption is contracting.


  • A mortgage is a terrible investment (John Aziz, The Week) A house yields no income, it deteriorates over time and for many people the best financial move is to rent, according to Aziz.
  • Tell Me Again About Rising Rates... (Chris Kimble, Advisor Perspectives The no-brainer, can't-miss trade of 2014 was supposed to be betting on higher interest rates. So how's that working out for you?


  • Young workers hit hardest by unprecedented fall in wages (Angela Monaghan, The Guardian) Wages have been contracting in the UK with real wages for all workers down 8% over the last five years. Younger workers have suffered the worst declines: 25-29 age group down 12% and 18-25 year olds down 14%.
  • Enrollment in Student-Debt Forgiveness Programs Soars in 2014 (Josh Mitchell, The Wall Street Journal) A total of 1.63 million holders of student debt who owe approximately 7.5% of the nearly $1.2 trillion of debt outstanding have applied for government assistance and restructuring. The numbers of individuals and the amount of debt have each grown approximately 70% over the last year.


  • Market Commentary: May 2015 (Birinyi Associates, Subscription Letter) Growth and value stocks for the small cap Russell 2000 index have run a pretty close race for the past five years. In the first two years after the March 2009 bottom value had an edge. In the three most recent years growth has pulled back ahead.


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