Econ Update: WREL Lexington VA

by Mike Smitka, Economics Dept, Washington and Lee University

Sept 17 (here) and Sept 24 (below)

The Fed – specifically the Federal Open Market Committee, comprised of the 12 presidents of the regional Federal Reserve banks and the five members of the Board of Governors – meet today, and will issue their press release at 2 pm. Even if they bump rates [they did not], "bump" is the operative term as any increase would be from 0% to 0.25% or 25 bp (basis points). Now 6 month rates have built into them a bump up to 0.5% by March 2016. In the past 12 months two year rates have really climbed – to 0.75%. [Laugh: sarcasm.] Keep going: 5 year rates, car loan territory, are at 1.5%. You have to get to 30 yrs (mortgage rate territory) to be above 3.0%. But those looking at long-term bonds don't have much to gain (or lose) by what the Fed announces tomorrow – they anticipate rates gradually rising, but over 30 years it matters little whether it occurs today or early next year. So don't expect those to move much, whichever way the FOMC votes. Remember, too, that rates jump around every day for a wide variety of reasons – so far this year 10 year and 30 year rates have averaged a bump up or down of 5 bp (.05 percentage points) each business day.

Electric Cars: Renault's the Leader, not Tesla!

by Mike Smitka

During the GERPISA auto conference in Paris in June I stayed in a hotel with a row of electric vehicles parked out front. The "Bluecar" wasn't fancy, but they were used: at times all slots were full, at others none were parked there. I don't know whether the company involved, Autolib', is doing well. But the point is that in parts of Europe a sizable part of the population sees electric cars, day-in and day-out. In Norway, they're 17% of the cars on the road, despite the challenge that batteries face in a low ambient temperature environment.

Within the electric car market the clear leader is the Renault-Nissan alliance, not Tesla. On a worldwide basis they now have over 250,000 vehicles on the road. What is most interesting are the components of Renault's business model.

First, Renault is launching multiple vehicles. Their best seller is the ZOE, made on the same assembly line as the Clio. In other words, they are not needing to design a whole new vehicle, and are gradually leveraging their multiple platforms. (They also have the Kangoo light commercial van.) With this experience in hand they are now ready to launch additional electric vehicles in short order, of course subject to demand.

Reconsidering China: An Essay

by James Vena | Jun 3, 2014 | Essays |

posted by David Ruggles

Co-blogger Mike Smitka (住老师 in his China class) comments at the end.
He's also edited out typos, filled in dates and so on using [italics].

In light of recent events some might be interested in what this China expert had to say over a year ago. He speaks as someone who has done business there for decades. Ruggles

Have China’s “growing pains” manifested into something a bit more troubling relative to its growth, internally and externally?

My first visits to Asia & China (on business) were in the early-mid 1980’s and things were obviously much different back then. Aside from being much more socially oppressed and isolated, the most glaring difference was in its local economy, as all business was nationalized.

Generational War: Do Older Worker Squeeze Today's Young Out of Jobs? Weekly WREL Radio Show

Click on Figures to enlarge!

Figure 1

Mike Smitka

I generally focus on the medium-run picture of the US labor market, the recovery process from the Great Recession. (Here is an example from this blog, replete with graphs.) As noted last week, my analysis shows we're on track to reach "normalcy" in 2018, assuming various headwinds don't slow us down. That's also the bottom line of the latest July 2015 IMF Article IV review of the US economy: we still have lots of excess capacity, in this case people who would like a full-time job but either have stopped looking on a regular basis (and hence are not counted as "unemployed") or are on involuntary short hours.