Macroeconomics

Great news for women: The gap between male and female earnings is narrowing.

Each year in September, the U.S. Census Bureau releases a report showing how income and poverty have changed over time. The most recent report, which came out on Sept. 13, was filled with great news. Compared with the previous year, average inflation adjusted income soared 5.2 percent. The U.S. poverty rate fell 1.2 percentage points, resulting in 3.5 million fewer people living in poverty. Even the number of people without health insurance fell by 4 million people in the past year.

While these statistics got the headline attention they deserve, there is one piece of great news in the report that hasn’t attracted as much attention but is just as important. The gap between women’s and men’s earnings shrank to a new record low. The median woman working a full-time year-round job now earns 80 percent of the median earnings given to men working full-time. Continue reading →

A common misperception about Labor Day is we all get the day off.

Labor Day is a U.S. national holiday held the first Monday every September. Unlike most U.S. holidays, it is a strange celebration without rituals, except for shopping and barbecuing. For most people it simply marks the last weekend of summer and the start of the school year.

The holiday’s founders in the late 1800s envisioned something very different from what the day has become. The founders were looking for two things: a means of unifying union workers and a reduction in work time. Continue reading →

Will Cleveland get an economic boost from the GOP Convention?

The Republican National Convention is coming to Cleveland, and boosters are cheering the millions of dollars it will bring to northeast Ohio’s businesses.  There are lots of impact studies of previous Republican and Democratic nominating conventions. Each seems to produce more eye-popping figures than the last. However, some academics and journalists suggest these conventions really have no impact on the local economy.

Which is the true story? Continue reading →

Brexit backers claim U.K. is drowning in EU regulations – are Americans underwater too?

On June 23, the United Kingdom will decide whether to leave the European Union or stay. The vote is nicknamed Brexit, short for British Exiting. One reason the debate is important outside of the U.K. is that it is partly a referendum over the amount of government regulation voters want. Continue reading →

Was the May 2016 Jobs Report Really That Bad?

This past Friday, the Bureau of Labor Statistics issued a press release stating the monthly employment figures for May 2016.  The headlines following the report’s release emphasized that the U.S. economy created only 38,000 additional jobs in May 2016. This figure promptly caused the stock market to fall. The next day’s Wall Street Journal front page led with a story declaring “Weak Hiring Pushes Back Fed’s Plans” for an interest rate hike. But the true figure was much higher than 38,000 jobs.

The actual number of additional jobs created between April and May was 651,000! This much larger figure is calculated using numbers found in table B1’s top line located on the press release’s 28th page. Continue reading →

What is Brazilian President Dilma Rousseff’s real crime?

Dilma Rousseff, Brazil’s first female president, is about to go on trial. She is temporarily suspended from office while Brazilian politicians debate whether she broke the country’s laws.

Her crime is she allegedly borrowed about US$11 billion from Brazil’s state banks – about one percent of GDP – to fund long-running social programs for small farmers and the poor while trying to get reelected, which concealed a budget deficit. Continue reading →

Why is corruption so costly?

The news is currently filled with stories of corruption.  A global group of media outlets just broke the story of secret offshore bank accounts in Panama, which suggests widespread corruption in the Russian government and elsewhere. For months, stories of the Brazilian government’s bribery scandal have filled the news. Other headline-grabbing events include Malaysia’s prime minister allegedly siphoning almost a billion dollars from a state development fund. Continue reading →

What Will Happen To Taxes If the GOP Wins?

As the old saying goes, there are only two things certain in life: death and taxes. While being taxed is a certainty, the rate and types of income being taxed is not.

Each of the five remaining GOP hopefuls – Donald Trump, Ted Cruz, Marco Rubio, John Kasich and Ben Carson (who appeared on the verge of dropping out as this article was written) – has released tax proposals on his official website. Examining these plans provides a rough idea of what will happen to the tax system if a GOP candidate wins the November presidential election. Continue reading →

How do we know the Zika virus will cost the world $3.5 billion?

The mosquito-borne Zika virus has been declared a “Public Health Emergency of International Concern” by the World Health Organization.  The virus not only appears to severely harm unborn children but is also hurting the economies of many Latin American and Caribbean countries. The World Bank estimates Zika will cost the world US$3.5 billion in 2016.

Three and a half billion dollars is a huge amount of money. How did the World Bank calculate this figure? How do we put a price tag on Zika and other health catastrophes like Ebola, dengue fever or even more common problems like the flu? Can we even trust these figures? Continue reading →

How do we know if the world is in a global recession?

Since the start of this year, stock markets around the world have fallen as panicked investors have begun believing that the world is slipping into economic malaise.  This fear has also driven down prices of commodities like oil and copper and impelled some central banks, like Japan’s, to make dramatic efforts to boost growth. The concerns are being magnified by memories of the worldwide recession of 2008 and 2009, when many countries experienced widespread joblessness, business bankruptcies and homelessness.

While national and international leaders cannot prevent worldwide economic downturns, a coordinated response among them can mitigate some of the impact. But it’s hard to rally government resources to this cause without the ability to determine whether we are actually in a recession or not.

So how do we know when the world is in a recession and such a response is needed? Continue reading →

To Really Beat Box-Office Records, “Star Wars” Will Need To Top These Numbers

This weekend, the newest Star Wars movie will start playing in cinemas throughout the world. Pundits in places like Forbes and the International Business Times are already predicting it will be the “biggest movie of all time.”

The headlines and superlatives about this movie’s box office records will dominate entertainment news during the winter. However, it is important to understand that the hoopla surrounding box office records is nothing new: Hollywood uses special effects for both making movies and discussing how a movie does financially. Hollywood movies consistently break box office (ticket sales) records because the industry does not adjust sales for inflation. Continue reading →

Fed interest rate hike may have less of an impact than you think

There is a very high chance the Federal Reserve will raise interest rates next week.  It would be the first time the Federal Open Monetary Committee (FOMC) – the Fed’s rate-setting team – has lifted its benchmark rate since 2006, beginning the so-called return to normal.  Economists, traders and policymakers have been pontificating, prognosticating and placing bets about this decision for a long time, because the impact is expected to be far-reaching.

So how will higher rates affect you? Continue reading →

What Happens When Greek Banks Are Shut? A Personal Story

The Greek government shut all banks in the country on June 29 after the European Central Bank capped emergency funding to the lenders.  Cash withdrawals from ATMs are now limited to €60 a day (about US$67) for Greek citizens. Foreigners who can find an ATM with cash are exempt from the limit, but cash-poor tourists are finding it very hard to find ATMs with money.

Continue reading →

Jeb Bush promises 4% growth. Could ‘President Bush III’ deliver?

Jeb Bush recently announced his candidacy for president by declaring that “our country is on a very bad course” and promised to fix this with the striking promise of “4% growth, and the 19 million new jobs that come with it.”

The former governor stated in his speech that he grew the Florida economy by that much every year during his two terms in office. Can he deliver the same growth in gross domestic product (GDP) for the entire US if elected? Continue reading →

The U.S.’s Economy Did NOT Shrink by 0.7% This Past Winter

Recently, business headlines around the world announced that the “U.S. Recovery Stumbles Yet Again.” These headlines trumpeted news that the U.S. economy shrank by 0.7% during the first quarter of 2015. This 0.7% figure is a large exaggeration of what actually happened to the economy last winter. Continue reading →

The Future of Work: High Paying Jobs with Crushingly Long Hours

What will jobs be like in the future? FastCompany asked me to write a short article that answered this question.  My answer was simple: what is likely in store for a growing number of people are exceptionally long work days combined with exceptionally high pay. Many more people in the future will be bringing home fat paychecks, but rarely be home long enough to spend them. Continue reading →

What Can Economics Tell Us About Deadly Earthquakes?

This past weekend Nepal experienced a massive earthquake centered about 50 miles from Nepal’s capital Katmandu. The Nepal earthquake was rated as 7.8 on the Richter scale, which was created in 1935 by Charles Richter at the California Institute of Technology. Each whole number increase means a 10 times increase in the seismograph that is measuring the ground’s movement. Each time the rating goes up by a whole number, such as from 6.0 to 7.0 thirty-one times more energy is released. The 7.8 magnitude earthquake destroyed many historic temples in Kathmandu and killed thousands of people. Continue reading →

Does The Federal Reserve Know More Than Other Government Economists?

The U.S. Federal Reserve has a complicated mandate. The legislation governing this agency states the Fed is supposed to “promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” It does this by controlling or influencing interest rates and controlling the U.S.’s money supply. The Fed has pushed down interest rates close to zero for many years to increase the number of employed people and reduce unemployment. By pushing interest rates down, it has explicitly ignored two of its three mandates. The key question for the Fed is when should it stop focusing on employment and refocus its attention on stable prices and moderate long-term interest rates? Continue reading →