Econbrowser

Chair Warsh’s focus on the Fed’s balance sheet and inflation can be interpreted in many ways. One way is a money base version of the Quantity Theory. Take the Quantity Theory as an identity: MV = PQ P = MV/Q Let M = MB × mult, where M is a broad measure of money, MB  is the money base, roughly the liabilities side of the Fed’s balance sheet. Take logs, where lower case letters denote logs of upper case letters. p = mb + log(mult) + v – q One can think of q as a determina

In Chairman Warsh’s acceptance speech yesterday, he stated: I will lead a reform-oriented Federal Reserve, learning from past successes and mistakes both, escaping static frameworks and models, and upholding clear standards of integrity and performance. When I was watching the proceedings on TV, I wondered (yet again) what he could possibly have meant by “static frameworks and models”. There are models that are “dynamic” in the (Cowles Foundation) econometric sense

For EPU through yesterday, news sentiment through 5/18. Figure 1: Shapiro-Sudhof-Wilson News Sentiment (blue, left scale), Economic Policy Uncertainty (light red, right scale), 7-day centered moving average (bold red, right scale). Source: SF Fed, policyuncertainty.com. The News Sentiment Index has arguably been lower after 1/20/2025 than before, while EPU has been higher (simple OLS each index on Trump dummy).  

That’s an assertion by EJ Antoni. Well, in Director Judy Hsu’s May report, she tackles this issue directly. The April 2025 report, “Partisan Perceptions and Sentiment Measurement,” discusses how partisan differences do not distort the national survey estimates of changes over time. A year later, amid historically rapid changes in the public policy landscape, partisan gaps in sentiment are now even larger while national sentiment has trended down in recent months. Are the relatively

Using the HP filter applied to U.Michigan Sentiment, consumers don’t seem too gloomy relative to “average”. But they do seem gloomy relative to observed unemployment and inflation rates. Figure 1: University of Michigan Sentiment demeaned (bold black), HP detrended (blue), Misery Index regression residual (red), Misery Index 2010-26 residual (teal). NBER defined peak-to-trough recession dates shaded gray. May observations for unemployment at April level, for inflation using C

From today’s U.Mich release, final 1 yr revised up from 4.5% to 4.8%, and 5 yr revised up from 3.4% to 3.9% (!). Figure 1: Year-on-Year CPI inflation (bold black), forecasted U.Mich mean inflation (red), NY Fed median (brown), SoFIE (sky blue +), all in %. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, U.Mich., NY Fed, Cleveland Fed, and NBER.   Figure 2: U.Mich five year ahead expected inflation (red), NY Fed 3 year ahead expected inflation (brown), %. Obser

May Michigan Sentiment downwardly revised from preliminary, to a record low. Figure 1: U.Michigan Economic Sentiment (blue), Conference Board Confidence Index (brown), Gallup Confidence (green), all demeaned and divided by standard deviation 2021M01-2025m02. Red dashed line at “Liberation Day” Source: UMichigan, Gallup, Conference Board, and author’s calculations. The final Sentiment reading was revised down to 44.8 from preliminary 48.2. Expectations were revised down even more — from 48

In a previous post, I noted that the February CBO projection of debt would likely be an underestimate, and perhaps increasingly so over time, suggesting upward pressure on rates. First, the IEEPA tariffs were ruled illegal. This means something on the order of $170 billion in refunds. While this has minimal impact on the debt level this year, it means any five year ahead debt projection should be revised upward relative to the February projection. Source: CRFB (2026). The IEEPA tariffs were pa

That’s the title of a paper by Yanshuo Chen, (PhD, UCSC): This paper shows that the dot-com crash contributed to the early-2000s housing boom through a household portfolio reallocation channel. Areas more exposed to declines in stock market participation experienced significantly stronger house price growth, as households shifted investment from equities toward housing. Identification relies on a shift–share design exploiting predetermined cross-state variation in stock market participati

Let’s hope foreign non-official sector wants to hold on to US government debt. Figure 1: Federal debt held by the public as share of GDP (black line), foreign non-official sector (blue bar), foreign official sector (red bar), Federal Reserve Banks (teal bar), and other holdings (tan bars). Source: Treasury via FRED, BEA, and author’s calculations. The foreign official sector (central banks) is pretty sated with Treasurys. Fed Chair designate Walsh wants to shrink the teal portion.

Lots of gushing praise by President Trump of President Xi. Not so much from Xi. I’d characterize this as anything but tough talk from the US side. As for deliverables from the summit: None confirmed from the Chinese side. Maybe purchase of 200 Boeing aircraft — even that below the anticipated 300. Energy deal? Maybe? Trade deal? Tariff drawdown on the part of China? Elevated purchases of soybeans (2025 at $3bn, 10 yr average at $11 bn)? No details. In response to President Xi’

For Q2, GDPNow (q/q AR) is at 4%, while St Louis Fed is at 0.8%. Figure 1: GDP (bold black), GDPNow (light blue square), NY Fed of 5/15 (pink circle), Goldman Sachs of 5/15 (teal inverted triangle), St.Louis Fed news of 5/15 (orange *), May Survey of Professional Forecasters (tan), 2023-24 stochastic trend (gray). Sources: BEA 2026Q1 advance, Atlanta Fed, NY Fed, Goldman Sachs, St. Louis Fed, Philadelphia Fed, and author’s calculations. Due to trade shocks, it makes sense to also view pr

although they over-estimated in 2023-24. Figure 1: Actual year-on-year CPI inflation (bold black), lagged expectations from U.Mich. Survey of Consumers (red), [median] from NY Fed (brown), [mean] from Cleveland Fed Survey of Firms Inflation Expectations (SoFIE) (light blue +), all in %. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, U.Mich via FRED, NY Fed, Cleveland Fed, NBER and author’s calculations.

As of close today, nominal yields are up 0.62%, real up 0.38% since the beginning of the war.

We’ve had a record low in the U.Michigan consumer sentiment in May (prel.). Given real aggregate output measures are rising smartly (see this post), why is sentiment so low? Has there been a structural break? Figure 1: Misery index equals sum of unemployment and year-on-year inflation rate, % (black, left scale), inverted U.Michigan Consumer Sentiment index (teal, right scale). NBER defined peak-to-trough recession dates shaded gray. Source: BLS, U.Michigan via FRED, NBER, and author&#82

Both strongly beat consensus. From the Fed’s G.17 Release today: Figure 1: NFP employment (bold blue), civilian employment with smoothed population controls (bold orange), industrial production (red), personal income excluding current transfers in Ch.2017$ (bold light green), manufacturing and trade sales in Ch.2017$ (black), and monthly GDP in Ch.2017$ (pink), GDP (blue bars),  all log normalized to 2025M01=0. Source: BLS via FRED, BLS, Federal Reserve, BEA 2026Q1 Advance release, S&amp

Monthly GDP through March is up, while April CPI-deflated retail sales are down. The industrial and manufacturing production release is tomorrow. Figure 1: NFP employment (bold blue), civilian employment with smoothed population controls (bold orange), industrial production (red), personal income excluding current transfers in Ch.2017$ (bold light green), manufacturing and trade sales in Ch.2017$ (black), and monthly GDP in Ch.2017$ (pink), GDP (blue bars),  all log normalized to 2025M01=0. So

Today we are fortunate to present a guest post written by N. Kundan Kishor (University of Wisconsin-Milwaukee).  Lessons from three decades of long-run forecasts, and what they mean for the AI productivity debate. Artificial intelligence is expected to reshape the economy, but how much and how fast? Professional forecasters offer one useful benchmark because they are forced to translate broad narratives about technology into specific, quantitative predictions about growth, interest rates, and

Sales rise, overall hits consensus. However, gasoline store sales constitute majority of increase. Figure 1: Change in retail sales (black line), change in retail sales ex-gasoline stations (blue bar), change in retail sales from gasoline stations (red), all in millions $, s.a. Source: Census. Most of the increase in retail sales in April is accounted for by sales from gasoline stations. What has happened to retail sales ex-gasoline stations? Quantitatively, it depends on the deflator, but qua

Source: Daily Beast. Why America and China have shared interests, according to Trump.