GDP Grows by 3.2 Percent, Initial Claims for Unemployment Insurance Remain Elevated – Thoma – I have been worried since November of last year about the economy moving sideways, and more specifically about stagnating employment since February. Yesterday’s release of initial claims for unemployment, which saw average claims increasing slightly, did nothing to change that assessment: Initial claims have been moving sideways for four months, and are above the approximately 400,000 level many people believe represents the point at which jobs are being created rather than lost. Here’s a graph of the series: Here’s a graph since 2007 that makes the recent sideways movement in claims more apparent: Turning to other economic news, the Bureau of Economic Analysis released its advanced estimate of GDP growth for the 1st quarter this morning, and GDP growth was estimated to be 3.2 percent:
What is "social license," and has Goldman Sachs lost it? – It’s been a bad week or two for Goldman Sachs. On April 16, the Securities and Exchange Commission charged the firm with fraud for the way it structured and sold some junky mortgage-related products. Earlier this week, its top executives came off as responsibility-evading jerks when testifying before Congress. And then on Thursday, the Wall Street Journal reported that the SEC had referred Goldman’s case to the Justice Department. I’d argue that Goldman is entering dangerous territory. The firm is in danger of losing what may be its most valuable asset: its social license. Social license is a vague term that you see bandied about more and more in the corporate world. It’s something like reputation. Social license describes how a company plays with others and how it responds to problems. If a company has social license, it behaves in such a way that other businesses and institutions want to do business with it, and governments are more likely to give it permission to operate.
How much would a Greek devaluation help? – Arnold Kling is skeptical and while I am on board with the economics of the anti-Euro crew, and I think Greece should leave the Euro, I believe the anti-Euro argument is now being pushed too far. For instance, contra Paul Krugman, I don’t see Euro membership as, in this regard, the main economic difference between the British and the Greeks. Who has the Elgin marbles and how did they get there? What longer-run historical and cultural forces does this reflect? Keep in mind there is nothing stopping Greece from cutting the nominal prices of its exports, right now, thereby altering its real terms of trade. Those prices just aren’t *that* sticky, especially if the business model of the country is falling apart.
The charts below show the debt distribution of Greece and Germany as a percentage of their respective GDP. Germany should serve as a kind of risk free benchmark: The data are from Bloomberg and IMF’s World Economic Outlook Database (2010e) Click here (Greece) and here (Germany) for the actual amount outstanding per year.
Where to Buy, Where to Rent… When should you rent versus buy? It’s a question lots and lots of people are asking these days. Armed with intriguing new post-crash data on the relative costs of renting versus buying, The New York Times’ David Leonhardt suggested that the significant decline in real estate prices was making buying a home a much better proposition in a growing number of communities across the country. (The Times offers a great interactive rent-or-buy tool, if you’re currently thinking about this).Leonhardt’s analysis provoked an intriguing debate among many of the web’s most thoughtful economics commentators. Ryan Avent, writing at Free Exchange, urged caution. Felix Salmon thinks housing prices still have a ways to fall, especially as inflation eats away at them. Robert Shiller, the Yale economist who initially identified the housing bubble, and the tech bubble before that, also believes real estate prices may still have further to fall. Leonhardt replies thoughtfully here and here
Europe’s strained marriage – On Monday, I looked at Germany’s attitude to Greece from a nationalist/tactical perspective, and promptly got slapped down by dsquared: “Congratulations,” he wrote, “you’ve proved the impossibility of not only the 2004 and 2007 accessions, but also of the Common Agricultural Policy.” But the fact is that the Europe which grew in 2004 and 2007, and the Europe which came together to create the CAP, now looks as though it is falling apart. Philip Stephens has an essay in today’s FT which diagnoses this well, and which captures the sudden shift that we’ve seen of late, from the “reassuringly ineluctable” EU of a couple of years ago to something much more precarious today:
Gulf States Mobilize for Valdez-Scale Oil Disaster – U.S. Interior Department inspectors began boarding deep-water platforms in the Gulf of Mexico and Louisiana mobilized the National Guard as an expanding oil slick that may rival the Exxon Valdez spill approached the coast. Future drilling must safeguard against a recurrence, President Barack Obama said today in remarks at the White House, promising a “thorough review” of the BP Plc well leak the government estimates is spewing 5,000 barrels a day. Interior Secretary Ken Salazar was ordered to report in 30 days the additional precautions needed, Obama said. The department’s Minerals Management Service, regulator of offshore drilling, is focusing on the blowout preventer, equipment used by all drillers that should have prevented the spill and an explosion that resulted in the death of 11 people, Mike Saucier, an agency spokesman, said yesterday at a press conference.