By Bilal Hafeez 16-09-2019
In: top-picks, Other

Top Picks: Growth & Labour Market

19th October

The new IMF Managing Director, Kristalina Georgieva, started her mandate on a gloomy warning of a global slowdown. We look at what weak growth might mean for monetary policy and why ageing populations are even more of a threat than previously thought.

The World Economy: Synchronized Slowdown, Precarious Outlook (IMF Blog) IMF downgrades growth for 2019 to 3%, the slowest pace since the 2008 crisis. Also flags bubble risks of monetary policy and need for macro-prudential policies.

Sailing into Unchartered Demographic Waters (VOX EU) David Blooms discusses the implications of the global population ageing. He proposes reforms in healthcare policies, human capital management and social securities to take on these challenges.

Reviving Innovation in Europe (McKinsey) A highly fragmented market and a lack of scale are what hinder Europe’s edges on technology innovation, causing it to fall behind the US and China. McKinsey suggests five approaches that Europe plays to its strengths including building on its industrial strength.

12th October

Despite fears of doom and gloom across all indicators, the labour market is thriving in the US.

Initial Claims Still Positive, Negative Near term Recession(The Bonddad Blog) Debunks current predictions about a looming recession by scrutinising labour market data . The average on claims remains low and the monthly YoY% change is at the same level as last year – no worries in sight.

Predicting Recessions: Financial Cycle Versus Term Spread (BIS) Measuring the financial cycle has a better predictive power for incoming recessions than the more common measure of term spreads.

The Myth of Income Stagnation, Again (Dr. Ed’s Blog) Further analysis on the state of the labour market – this piece maintains that productivity growth is increasing and consequently results in a rise in wages. Thereby, undermines theories of income stagnation.

The Best Economic News No One Wants to Talk About (The Atlantic) Looks at why neither politicians nor the media want to highlight the healthy labour market – wage growth for low-income earners has doubled poorest workers are now paid more.

The Surprising Decline of Entrepreneurship and Innovation in the West  (The Conversation) Observes various indicators of entrepreneurship such as the ratio of new firms to total firms and concludes that they all point to a decline in overall innovation.

4th October

Aging populations across the Western World comes with a number of issues while it is transforming the labour market. Established tech exporters such as Japan are losing their edge. We also look at how tech is revamping retail banking.

Why Japan Lost its Comparative Advantage in Producing Electronic Parts and Components(VOX) A sharp appreciation of the yen after the Financial Crisis, caused by capital seeking safe havens has hurt Japanese competitiveness in electronic parts, their bread and butter. Yen export prices tumble relative to production costs. Highlights a need for “craftsmanship” instead of pure price competitiveness going forward.

Population Aging and Structural Transformation(Cravino, Levchenko, Rojas) Shows that the older the population of a country, the more expenditure end up in the service sector. Population aging played a much larger role than changes in real income in the structural change observed in the US between 1982-2016.

Seven Transformative Shifts in US Retail Banking Inflection Point (McKinsey) – Pinpointing to seven transformational shifts which are advancing changes in the US retail banking industry. They have to quickly adapt – a growing number of consumers are trusting Big Tech players (Amazon, Google, Apple and Facebook) with their money instead.

Financial integration in Europe through the lens of composite indicators (Hoffman, Kremer, Zaharia) Financial integration within the Euro area, within money, bond, equity and banking markets is an important driver of growth and heavily influences per capita GDP. Another testament against Brexit. 

28th September

How Informative Are Real Time Output Gap Estimates in Europe? (IMF) Basically finds that potential growth is typically over-estimated and real-time estimates of output gaps are useless in forecasting inflation/

One Ring to Rule Them All? New Evidence on World Cycles (IMF) Counterintuitive findsing that the world growth cycle is weak for most countries and that synchronisation between economies has not increased over time (at least for growth, rather than inflation).

Why Are Some Societies More Entrepreneurial than Others? Evidence from 192 Countries over 2001-2018  (Wharton) Academic paper finds institutional factors like R&D expenditure, STEM education and density of established firms has little bearing on rates of entrepreneurship. Instead, cultural factors like gender equality, societies that value performance and acceptance of status privilege/hierarchy matter more.

Financial Conditions and Purchasing Managers’ Indices: Exploring the Links (BIS) Finds that equity prices, credit spreads and the dollar predicts PMIs

Yield Curve Inversion and Recession Risk (BIS) Decomposing components of yield curve inversion finds mixed signals for recession.

Some Observations on Determining Business Cycle Chronologies (Econbrowser) Provides a survey of how recessions and business cycles are dated. There’s a big variety of definitions – and two negative quarters of GDP is not the best.

20th September

The economy is changing thanks to tech – but increasingly the response is for more regulation, whether gig workers or automation-linked processes. We shouldn’t also forget about the dramatic disruption of the retail sector.

Working Conditions on Digital Labour Platforms (VOX) Gig economy workers on these platforms have low wages and poor labour market protections. Expect this area to be regulated soon!

The Economic Consequences of Automation (Project Syndicate) Keynes expert Robert Skidelsky argues that much automation may lead to job losses even in long-run if Karl Marx was right in the need for “reserve army of the unemployed” to keep profits high. Argues for government intervention.

Annual Report on Global Preparedness for Health Emergencies (World Health Organisation) Get scared by reading about all the bad things that can happen (see chart)

Death of Shopping Malls and Department Stores in Five Charts (Mish Talk) Battery of charts showing the rise of online shopping and its deflationary impact.