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John Wickham and Thomas Bolland

Post World War II Japan's economy has been closely linked with the United States. Although a much smaller population Japan’s GDP per Capita in dollars matched the U.S. in 1987. Japan’s GDP per Capita in dollars remained ahead of the U.S. until 2000, only dropping below the U.S.’s GDP per Capita in dollars in 1998. Since 2000, Japan has seemingly struggled to raise its GDP per Capita above $43,0000, its highest point in the 1990’s, only being able to have it at $48,000 for 2011 and 2012, until sharply dropping of to $34,000 in 2015. What this graph doesn’t show is the immense volatility that Japan experienced when when seemingly growing and over taking the U.S. in GDP per Capita in dollars during the late 1980s and late 1990s.

When looking at the percentage change of GDP per capita, Japan is significantly more volatile than the United State. While Japan saw GDP growth between 1980 and 2000 where it surpassed the United States for GDP per capita. However, in 2001, the United States overtook Japan in largest GDP growth. However, this should come as no surprise as Japan saw their GDP per capita dip to -12.61 percent from it peak of 47.24 percent in 1987. This trend has continued to follow the stagnated japan economy as the growth percentage dropped to a new low in 2013 reaching -16.76 percent. This trend after all is indicative of the japanese economy since it ben to stagnate around 1998. Japan’s GDP made a come between 2004 and 2012 where Japan saw a slightly less volatile GDP percentage growth rate ranging from 8% to negative 4% and back. However in 2013 the japanese economy reverted back to it’s negative trend with a GDP percentage growth of -16% but interestingly enough spiked back to 12% in 2016. At this point it is tough to predict what will happen to the japanese economy due to its extreme volatility.

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Evans Alison and Chris Surran

The value of the US dollar can greatly influence the amount of imports and exports that flow in and out of the United States. A strong US dollar means that one US dollar typically has more value than one unit of a foreign country’s currency. When this is the case, foreign countries don’t tend to purchase as many US goods because they are more expensive relative to their domestic goods. Not only do exports decrease, but imports increase because it becomes cheaper to buy foreign goods. This phenomena causes US GDP to fall. On the other hand, when the US dollar is weak it’s value per unit is lower than the normal value per unit of another country’s currency. When this is the case, the US is less likely to import goods because they are more expensive than domestic goods. Also, a weak US dollar attracts foreign traders because US goods are less expensive than other countries’ goods. In this case, imports should decrease and exports should rise.

Since the Great Recession, the Trade Weighted U.S. Dollar Index, which is calculated against the United State’s main trading partners, has gradually risen. As the value of the dollar has risen, total net exports (exports – imports) has fallen, proving the theory stated above to be true. The strength of the US dollar has deterred foreign countries' interest in importing US goods. What would be a good way to weaken the US dollar to increase net exports and US GDP? Is there a better way to do this without having to weaken the US dollar?

17

Katie Bearup and Aspen Moraif

Home prices have seen a consistent increase since 2012, however, tax and mortgage rates impacting the price of purchasing new homes will likely level these rising prices. Home prices began decreasing in 2006, and declined with further speed during the 2008 recession. Not until 2012, when the economy began to heal, did home prices take un upward turn, and they have yet to slow in significant ways since.

Just in the first month of 2018, there was a 6.2% rise in home prices. Data for the month of January is the only data available for the year 2018 so far.

Home prices are growing at twice the speed of incomes, consequently making housing purchases increasingly difficult. Regions experiencing the steepest increases in housing prices are in the West, with Seattle experiencing a 12.9% increase, an 11.1% increase in Las Vegas, and a 10.2% increase in San Francisco. Even prices for starter-homes are rising, with the low price-tier home prices growing by an average of 10.6% over the last 12 months, compared to all homes in the market at 6.8%, making it hard for millennials to enter into the market.

The new tax law passed in December of 2017 negatively impacts mortgage interest-deductions, and has consequently decreased the incentive to own a home, with renting a home becoming more, or equally as, attractive. Additionally, the current mortgage rate is a steep 4.45%. New residual investment is driven by mortgage rates, so a hit will be taken to consumers investing in new homes. This new law, paired with already high mortgage rates, makes buying homes less affordable, consequently decreasing the appeal of purchasing a house. Though the impact of the tax and mortgage rates has yet to take effect, they will likely decrease the demand for houses for the remainder of the year and cause the price of homes to eventually decrease to meet the price demand of the buyers.

After being seasonally adjusted, the national index rose 0.5% month-over-month.

  • Kusisto, Laura. “Home Prices Continued to Rise in January.” The Wall Street Journal, Dow Jones & Company, 27 Mar. 2018.

15

Garrett Clinton and Jimmie Johnson

As we have been studying fiscal policy in class, we wanted to examine the different fiscal policies of former presidents George W. Bush and Barack Obama. Bush’s tenure (2000-2008) featured many tax cuts for the wealthy as his idea was they would invest and the wealth would trickle down. In addition, he was very loose on regulations for business. In contrast Obama (2008-2016) repealed many of the Bush era tax cuts and implemented the American Recovery and Reinvestment Act, which featured tax cuts and federal spending to social welfare programs in an effort to kick start the economy and recover from the great recession. Obama was also had much stricter regulations on business.

Looking at the civil unemployment rate, it shows that during the Bush era the unemployment rate was rather consistent besides the small recession in 2001 and the beginning of the great recession in 2008. For the bulk of his years, Bush’s unemployment rate remained around five percent with the lowest being 4.4% in late 2006. In the Obama era, the unemployment rate skyrocketed in 2008, so Obama came into the presidency with an unemployment rate of about nine percent. However, since the peak of unemployment at ten percent in October 2009, the rate has been mostly decreasing. During the end of his presidency the unemployment rate was similar to the Bush era at five percent.

Looking at this data is very interesting. It shows that Bush’s trickle down method was having an effect because for the bulk of his presidency the rate was consistent. It must be noted that he was in office during the housing market crash of 2008. I have not done any research on that topic, but it would be interesting to see if any of Bush’s fiscal policies aided or tried to prevent the housing bubble from growing too large. With Obama, it is even more interesting. One can say his stimulus package was a success as the unemployment rate slowly decreased to a manageable level. However, it took seven years for the employment rate to get to those low levels. Could there have been a quicker way to stabilize the unemployment rate?

Ultimately looking at the data, whose fiscal policy do you all believed better helped the American people? What major events played roles into each presidency which shifted economic standards?

Although both presidents have had signigicant roles in their impacts of economics, it is extremely interesting to note of the specific changes each president made to get us to the point we are at today. Despite of vast political welfare, when does government action subside from economic action? The free hand that drives all financial markets is not simply directed by fiscal policy but by many other factors so it is important to not focus entirely on government interaction when dealing with this subject.

Sources:

15

-Lauren Fredericks and Charlie Radcliffe

After seeing Caroline and Cade’s post about the new steel tariff in the United States, we were interested to look at domestic motor vehicles sales since 2010. Since the tariff was just enacted, we cannot observe how the tariff has actually impacted sales. However, we can use the knowledge we gained about the negative influence that increased taxes have on demand to infer that the tariff will cause a further decline in domestic sales.

Since 2010, there has been a steady increase in motor vehicle sales. In fact, sales nearly doubled between 2010 and 2018 as consumers began making larger purchases when business stabilized after the Great Recession. However, in the graph below it is clear that there has been a decline in domestic motor vehicle sales since 2014, demonstrating the U.S.’ dwindling role as the world’s producer of motor vehicles.

As we mentioned, domestic sales increased after 2010 as American consumers (sort of) recovered from the Great Recession. We attribute the later decline in demand for domestic motor vehicles to the increase in demand for foreign motor vehicles. In fact, the United States imported the highest dollar value worth of cars during 2016: $173.3 billion.1 The tariff will make it more expensive for American car manufacturers to import steel with the intent of promoting domestic production of steel. However, it is possible that American car manufacturers will instead choose to make cars abroad where steel is cheaper and then export the cars back to the United States, effectively circumnavigating the tariff.This means that domestic manufacturers would have even more competition as some U.S. companies moved overseas.

The demand for domestic motor vehicles is already declining and the effects of the tariff on steel have yet to be realized. Assuming the tariff does not boost domestic steel production, the price of domestic motor vehicles will increase when steel becomes more expensive to import. This means American consumers' demand for foreign-made cars will increase because they are more affordable, driving total sales of motor vehicles up but sales of domestic vehicles down.


1Workman, Daniel. “Cars Imports by Country.” Worldstopexports, 5 Mar. 2018. http://www.worldstopexports.com/cars-imports-by-country/.

2Long, Heather. “Winners and Losers from Trump’s Tariffs.” Washington Post. 6 March 2018.https://www.washingtonpost.com/news/wonk/wp/2018/03/06/winners-and-losers-from-trumps-tariffs/?utm_term=.ccd17c4858cd

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By Cat Spencer and Kassi Hall

Personal Consumption Expenditures: Durable goods: Sporting Equipment, supplies, guns, and ammunition

Producer Price Index by Industry: Small Arms Ammunition Manufacturing: All Other Ammo Products, Including Industrial Shells and Cartridges, Air Gun Ammo, Percussion Caps

As guns become a more divisive issue and the frequency of news reports is on the rise, it becomes more important to analyze the rate of personal consumption of guns and ammunition. As more guns have entered the market, price has also been on the rise. The Personal Consumption Expenditures on durable goods like sporting equipment, supplies, guns and ammunition remained low until around 1970, when they began increasing steadily and then sharply beginning around 1990. Despite a dip in consumption during the Great Recession, the consumption of these durable goods has only continued to increase rapidly. In 2017, a record $74.814 billion increasing by almost $20 billion in only 10 years.

Analyzing the Producer Price Index in Small Arms Ammunition Manufacturing combined with the Personal Consumption Expenditure graph displays how, despite the fact that the prices for ammunition are continually rising, even when the consumption of these goods saw a downturn during the Great Recession, prices for ammunition increased. While the rate of increase was not as significant as during non-recessional times, they increased nonetheless. As demand has increased, so too has the price of these items, likely leading to a more lucrative market and more companies entering the field, clear with the emergence of gun shows and pop-up markets and the entrance of gun supply sections in national chains like WalMart.

With the political climate of the times and walkouts being held by students all around the country, it is interesting to see how gun rates have increased in recent years. Especially as mass shootings and school shootings have increased, so too has the consumption of guns, ammunition, and supplies. As time goes on, and gun reform policies come to the table for Congress, how these rates change will be extremely interesting. As the consumption of durable goods like guns and ammunition have increased, it is clear that the prices (shown by the PPI graph for small arms ammunition) have risen steadily to keep up with high demand. The easiest explanation for this increase in demand would be that proponents of the argument that we must arm ourselves in order to protect ourselves from these shootings are increasing the amount of guns that they’re purchasing. Though it is difficult to pinpoint what purchases are contributing to this increase in consumption, it is clear that the increase in mass shooting incidents is in no way decreasing the consumption of guns and ammunition.

13

Ken Hartzfeld and Brian Legarth

This graph examines the interest rate on large loans from the London [Bank] interbank market over a monthly basis. Generally, higher interest rates indicate that the economy is stable enough to handle them. Looking at the graph you can recognize that interest rates haven't been above 2% since the Great Recession, and in the last data collection, they have broken the 2% barrier. This is indicating that the global economy is strong.

A secondary market is where individuals buy and sell securities that they own. Most common secondary markets are the NYSE or NASDAQ. The Secondary market rate measures the price of stocks being exchanged. The Secondary market rate in this graph has also increased above the 2% mark for the first time since the Great Recession, which indicates that people are spending more and with more trust in a stable economy.

These two graphs both show rates at which financial transactions take place. LIBOR [The London Bank] measures interest rates while the secondary market rate measures stock exchange prices. Both are strong indicators of an economy's stability and growth potential. These two graphs are showing strong signals of a growing economy both domestically and internationally. If I were the hypothesize, the graphs will continue to rise, but if they get too high it is grounds for concern as they could crash again as they did in the Great Recession.

19

by Caroline Trammell and Cade Hornack

Last week President Trump announced a new 25% tariff on steel imports. The intention of the tax is to help the U.S. manufactures recover from the lasting effects on steel prices from the 2008 recession. However, this tariff will most likely hurt U.S. consumers and producers, including those in the car and machinery industries.

This graph shows how the price of steel imports spiked during the recession and has not come back to the previously lowest levels since. Before the recession, the U.S. produced steel on par with its rivals in Europe and China. While the U.S. struggled to recover, other countries such as India and Korea increased their production. The U.S. has fallen behind the steel production levels of other countries.

This graph shows how the price of manufacturing steel increased during the 2000s and has never fully recovered since the recession.

The new tariff is intended to respond to the declining U.S. steel production. Commerce Secretary Wilbur Ross has pressured Trump impose the tax on steel imports to product American industry from foreign competition. Ross believes the tariff will cut competition and allow U.S. steel producers to flourish. However, these tariffs will likely do nothing more than increase prices of steel goods for the American consumer. The problem is a result of American consumer interests. Consumers in the U.S. are purchasing foreign-made steel goods rather than ones made in their own country. The production and consumption of steel occurs in these other nations while the U.S. is importing more.

The tariff is designed to decrease this trade deficit  by allowing U.S. steel manufacturers to produce at competitive rates. However, seeing that this is a consumer problem it is very possible that the tariff will only increase domestic prices.

10

For our first assignment, our group accidentally posted two and so Professor Smitka requested that for our second post we should each do a reflection.

Aidan- For my first blog post I did a comparison of Consumer Price Index and the Breakeven Inflation rate. When creating my post I found it evident that significant increases and decreases of the CPI are indicators of inflation. However, through an explanation and graph posted by Professor Smitka of seasonally adjusted CPI I learned something different. With the seasonally adjusted data, the graph had more peaks and troughs, which did not line up with the inflation rate. This reflects the post by Wickham and Bolland of the importance that seasonal adjustments has on economics. As for the comments, it was intriguing to hear alternative viewpoints, such as how the volatility of gas could have an alternative effect on CPI. I also enjoyed being able to respond to comments, especially the questions provided. In the future I will continue to attempt to provide insightful ideas and questions when commenting as they are helpful for delving further into the blog post topic.

 

Jack- For my first post I observed the correlation between degree of education and unemployment rates. I learned several lessons from my first post, which I feel are valuable to share with the rest of the class. The first being that it is useful to connect a blog post with weekly concepts discussed in class. Doing so has make each most much more interesting to read. From the software on FRED I found that it was extremely useful to the “add line” feature after clicking “edit graph.” Doing so, allowed me to add multiple lines to my graph, ranging from high school degree level unemployment rate to doctoral degree unemployment rate. This feature has made it much easier for me to show the differences between differing education levels and is much more efficient than posting five separate graphs. An area that I wished I had initially incorporated was the ability to incorporate an interactive graph. This feature makes it easier to observe quantitative data and dates, thus allowing for easier user experience. Creating my first blog post was a great experience and taught many lessons. I hope you all can learn from my narrative.

 

 

17

Katie Paton and E.C. Myers

 

The proportions of the locations of the work force in the United States are changing. The labor force is shifting from the Northeast and Midwest to the South and the West.

The West has had the largest percentage increase over the past 40 years. During the development of the United States, there have been different eras when jobs have been concentrated in certain regions. Recently, technology industry clusters have been popping up on the West Coast.  

The Multifactor productivity of manufacturing computer and electronic products has steadily increased since the late 1980’s. The industry gained momentum in course with Silicon Valley and other technological hubs along the west coast. This brought people from all over the US in search of jobs, particularly people from the Northeast, as is seen in their percentage population decline.  Industry clusters are groups of similar firms in a defined geographic area that share a common market. The Silicon Valley attracts many young technology professionals to the area due to start up companies such as Apple, Netflix, and Google.  These tech start up companies are creating an expressive culture that differs greatly from the East Coast’s work culture.

The East Coast’s developed financial market may have less room for growth than the developing West Coast’s technology market, but the past 40 years has shown a steady growth in the industry. The total assets in all commercial banks in the US has experienced a steady growth over the last 40 years. In January of 1976, when 31.6% of the US labor force was located in the south, the commercial banks had total assets of $918 billion US dollars. In December 2017, the percentage of the US labor force in the South had grown to 36.9% and the commercial banking assets had increased to $16,787 billion US dollars. While causation is not evident in these similar growth patterns, correlation is certainly evident. The South has experienced an increase in the labor force largely as a result of the growing commercial banking industry, prevalent in the south. For example, Charlotte, NC is the 2nd largest financial center in the US.

Having new industry clusters is good for the local economy as it brings jobs to the area. This growing market will increase GDP, increasing the income of technology employees, and increasing the consumption, creating a cycle to help the United States economy.

-Katie Paton & E.C. Myers