What Every Leader Should Know about Macroeconomics

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What Every Leader Should. Know about Macroeconomics. Charles I. Jones. Stanford GSB. January 13, 2014. Ten Macro Ideas – p.1/74 ...
Useful Macro Graphs Charles I. Jones Stanford GSB January 12, 2015

Many of these graphs are updated versions of graphs in the Short-Run section of my Macroeconomics textbook (W.W. Norton, 2014). Others are just graphs that I find useful in my teaching.|

Chad Jones, Updated Graphs – January 12, 2015 – p. 1

Fig 9.3: U.S. Economic Fluctuations Short−run output, Ytilde +5% +4% +3% +2% +1% 0 −1% −2% −3% −4% −5% −6% −7% −8% 1970 1975 1980

1985

1990

1995

2000

2005

2010

2015 Year

Source: Federal Reserve Economic Data Chad Jones, Updated Graphs – January 12, 2015 – p. 2

Fig 9.4: Change in U.S. Employment Monthly change in employment (percent) 1.5

1

0.5

0

−0.5

−1 1970

1975

1980

1985

1990

1995

2000

2005

2010

2015 Year

Source: Federal Reserve Economic Data Chad Jones, Updated Graphs – January 12, 2015 – p. 3

Fig 10.2: The Fed Funds Rate Percent 7 6 5 4 3 2 1 0 2000

2005

2010

Source: Federal Reserve Economic Data

2015 Year Chad Jones, Updated Graphs – January 12, 2015 – p. 4

Fig 10.6: U.S. Employment Millions 142 140 138 136 134 132 130 128 2000

2005

2010

Source: Federal Reserve Economic Data

2015 Year Chad Jones, Updated Graphs – January 12, 2015 – p. 5

Fig 10.7: U.S. Economic Fluctuations since 2000 Short−run output, Ytilde +4% +3% +2% +1% 0 −1% −2% −3% −4% −5% −6% −7% −8% 2000

2005

2010

2015 Year

Source: Federal Reserve Economic Data Chad Jones, Updated Graphs – January 12, 2015 – p. 6

Fig 10.8: U.S. Unemployment Rate Percent 10 9 8 7 6 5 4 3 2000

2005

2010

Source: Federal Reserve Economic Data

2015 Year Chad Jones, Updated Graphs – January 12, 2015 – p. 7

The U.S. Employment-Population Ratio

Down from 63 to 58 V versus ∪

Percent 65 64 63 62 61 60 59 58 57 56 55 1970

1975

1980

1985

1990

1995

2000

Source: Federal Reserve Economic Data

2005

2010

2015 Year

Chad Jones, Updated Graphs – January 12, 2015 – p. 8

Fig 10.10: Inflation in the U.S. Percent 6

Dec 2007 = 2.4% Dec 2010 = 0.6% Nov 2014 = 1.7%

All items 5 4 3 2 1

Excluding food and energy

0 −1 −2 2000

2005

2010

2015 Year

Source: Federal Reserve Economic Data Chad Jones, Updated Graphs – January 12, 2015 – p. 9

Forecasts of CPI Inflation, 1 Year and 10 Years Ahead Percent 5

4

Forecast for 10 years ahead

3

2 Forecast for 1 year ahead 1

0 1990

1995

2000

2005

2010

2015 Year

Source: Survey of Professional Forecasters, FRB Philadelphia Chad Jones, Updated Graphs – January 12, 2015 – p. 10

Commodity Prices over the Long Run

Source: Economist, “Resource prices” Oct 14th 2011.

Chad Jones, Updated Graphs – January 12, 2015 – p. 11

Real GDP per Person in the United States Real GDP per person (2007Q4=100) 100 90 80 70 60 50 40

30 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Year Source: Federal Reserve Economic Data Chad Jones, Updated Graphs – January 12, 2015 – p. 12

Real GDP per Person – Current Recession Real GDP per person (2007Q4=100) 104 102 100 98 96 94 92 90 88 2000

2005

2010

2015 Year

Source: Federal Reserve Economic Data Chad Jones, Updated Graphs – January 12, 2015 – p. 13

Real GDP per Employee – Current Recession GDP per Employee 108 106 104 102 100 98 96 94 92 90 88 2000

2005

2010

2015 Year

Source: Federal Reserve Economic Data Chad Jones, Updated Graphs – January 12, 2015 – p. 14

The Beveridge Curve (2010 Nobel Prize in Economics)

Source: BLS JOLTS Highlights Chad Jones, Updated Graphs – January 12, 2015 – p. 15

OECD Outlook: Growth in Real GDP per Person

Source: OECD Economic Outlook, November 2014.

Chad Jones, Updated Graphs – January 12, 2015 – p. 16

World Outlook: Real GDP Growth

Source: OECD Economic Outlook, November 2014.

Chad Jones, Updated Graphs – January 12, 2015 – p. 17

OECD Outlook: Forecast Errors

Source: OECD Economic Outlook, November 2014.

Chad Jones, Updated Graphs – January 12, 2015 – p. 18

Dropping the Fed Funds rate to zero Percent 7 6 5 4 3 2 1 0 2000

2005

2010

2015 Year

Chad Jones, Updated Graphs – January 12, 2015 – p. 19

Risk spreads in interbank lending http://www.bloomberg.com/apps/cbuilder?ticker1=.TEDSP:IND

TED Spread: difference between the 3-month LIBOR rate and the 3-month U.S. treasury yield Chad Jones, Updated Graphs – January 12, 2015 – p. 20

Fig 14.1: Ten Year Bond Spreads 10 BAA Corporate Bond Yield

9 8 7 6 5 4

10−Year Treasury Yield

3 Spread

2 1 1996

1998

2000

2002

2004

2006

2008

2010

2012

2014 Year

Chad Jones, Updated Graphs – January 12, 2015 – p. 21

Percent 8 6

Taylor Rule prediction

4

Actual fed funds rate

2 0 −2 2000

+2

2005

2010

2015

2010

2015

2010

2015

Short−run output

0 −2 −4 −6 −8 2000

3

2005

Core CPI inflation

2 1

2000

2005

Chad Jones, Updated Graphs – January 12, 2015 – p. 22

Fig 14.8: The Fed’s Use of Unconventional Policies

Source: http://www.clevelandfed.org/research/data/credit_easing/index.cfm

Chad Jones, Updated Graphs – January 12, 2015 – p. 23

The Fed’s Stunning Use of Unconventional Policies

Source: MarketRealist.com

Chad Jones, Updated Graphs – January 12, 2015 – p. 24

The S&P 500 Stock Price Index (real) Real Stock Price Index (ratio scale) 2560

1280

640

320

160

80 1920

1930

1940

1950

1960

1970

1980

1990

2000

2010 Year

Source: Robert Shiller, http://www.econ.yale.edu/~shiller/data.htm Chad Jones, Updated Graphs – January 12, 2015 – p. 25

Bubbles in the stock market? P/E Ratio 45 40 35 Average = 16.3

30 25 20 15 10 5 0 1880

1900

1920

1940

1960

1980

2000 Year

Source: Robert Shiller, http://www.econ.yale.edu/~shiller/data.htm Chad Jones, Updated Graphs – January 12, 2015 – p. 26

Bubbles in housing prices? Real Home Price Index (1953=100, ratio scale) 200 180 Decline of 35.7 percent peak to trough

160 140 120

100

1950

1960

1970

1980

1990

2000

2010 Year

Source: Robert Shiller, http://www.econ.yale.edu/~shiller/data.htm Chad Jones, Updated Graphs – January 12, 2015 – p. 27

World Housing Prices (The Economist, August 2014)

Chad Jones, Updated Graphs – January 12, 2015 – p. 28

Per capita GDP (US=100) United States Japan

80 Western Europe 40 20

Russia Brazil China

10

India

5 Sub−Saharan Africa 1980

1985

1990

1995

2000

2005

2010 Year

Source: Author’s calculations using Penn World Tables Chad Jones, Updated Graphs – January 12, 2015 – p. 29

The Dynamics of Catch-Up Growth GDP per person (US=100) 100 80

Japan South Korea

Taiwan

40 20 China 10

India

5

0

10

20

30

40 50 60 70 Years since start of rapid growth

Source: Author’s calculations using Penn World Tables

Chad Jones, Updated Graphs – January 12, 2015 – p. 30

The Euro Area Crisis: Ten Year Bond Yields Percent 14 12 10 8

Italy Spain

6 4

Germany

2 0 1995

2000

2005

2010

2015 Year

Chad Jones, Updated Graphs – January 12, 2015 – p. 31

Unit Labor Costs in Europe Index (2000=100) 140 Greece

135 130 Spain

125

Italy France

120 115 110

Germany

105 100 95 2000

2002

2004

2006

2008

2010

2012 Year

Source: FRED Chad Jones, Updated Graphs – January 12, 2015 – p. 32