Be afraid; be very afraid.

From "'Created or saved' doesn't add up", by Joseph Lawler:

...[t]he "created or saved" numbers are meaningless. The administration purposefully devised the metric to be nebulous. Without a counterfactual, showing the trend of unemployment in the absence of the stimulus, it is impossible to know how many jobs the stimulus saved.

But this is completely counter to what I learned in economics, and how, for instance, the CBO conducts analysis. I assume Mr. Lawler doesn't dispute the impartiality of the CBO (but who knows?). Here's the way real macroeconomists conduct analysis:

As the President has discussed, analysis done within the Administration has shown how his tax cuts have substantially offset the series of adverse shocks that have been buffeting the economy. Simulations of a conventional macroeconomic model show that, without the tax cuts, the level of real GDP would have been about 2 percent lower in the

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The 3.5% growth rate was, in my view, in large part attributable to direct measures to stimulate the economy, including direct spending on goods and services by the government (Federal, state and local), as well as tax measures. First, let's take a look at how each category of final demand accounted for total growth, in the context of a mechanical decomposition, in Figure 1.

Figure 1: GDP growth and contributions to growth of GDP, in ppts; GDP (black), consumpion (red), fixed investment (green), inventory investment (orange), government consumption (purple), and net exports (light brown). Non-shaded area denotes 2009Q3 advance release. Source: BEA, 2009Q3 advance release, October 29, 2009.

Figure 1 breaks down the contributions of overall growth into the broad national income accounting components (overall investment decomposed into fixed and inventory investment). Interestingly, the contribution of government is fairly modest in Q3 (Note change of vertical axis

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On Wednesday, Wells Fargo (WFC) became the latest large financial institution to announce a reshuffle in its policy towards overdraft fees. The bank will eliminate overdraft fees for Wells and Wachovia customers when they overdraw their accounts by $5 or less. Wells will not charge customers more than four overdraft fees per day. In addition, customers will be able to opt out of overdraft coverage. Henceforth, customers can specify that they don't want their transactions authorized into overdraft if funds aren't available to cover the transaction. Wells Fargo is following the footsteps of other large banks, Bank of America Corporation (BAC) and JP Morgan Chase & Co. (JPM). While JP Morgan has decided to automatically remove all its customers from the overdraft service, and allow customers who want that protection to opt in; BofA and Wells Fargo will leave it to customers to opt ...

Representative Carolyn Maloney (D-NY), the head of the congressional Joint Economic Committee, is on record as believing that commercial real estate (CRE) is a ticking time bomb, as funding for commercial loans were virtually shut down last year when the financial system became paralyzed, with financing of even health properties remaining extremely difficult to obtain. Commercial loan delinquency rates have doubled to approximately 7.0% year over year. Add to the mix that owners of shopping malls, hotels and offices have been defaulting on loans at a significant rate, its is understandable why General Growth Properties (GGWPQ), the second largest owner of shopping malls, sought Chapter 11 bankruptcy protection. Clearly, as more companies downsize and retailers close their doors, small and regional banks may experience substantial risk of severe losses from commercial real estate loans. The pressures are not expected to improve until economic improvements are experienced ...

A detailed report from the National Association of Business Economics (NABE) says the U.S. economy will recover in the third quarter after a continued contraction in the second.

NABE said the near-term setback will be a result of a “sharp retrenchment” in business investment, but the billions in government efforts to invigorate the economy will soon offset that.

“While the overall tone remains soft, there are emerging signs that the economy is stabilizing,” said NABE president, Chris Varvares, who is also president of Macroeconomic Advisers. “The survey found that business economists look for the recession to end soon, but that the economic recovery is likely to be considerably more moderate than those typically experienced following steep declines.”

NABE also downgraded its growth forecast for the next few quarters - with the second quarter contracting 1.8%, followed by a meager 1.2% growth in the second half. The end result

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The Joint Economic Committee has now posted a video of yesterday's hearing on oil and the economy. My statement starts at about 11 minutes.

This morning, the Joint Economic Committee of the U.S. Congress took up the implications of rising world oil demand for the U.S. economy. I was invited to participate along with Daniel Yergin, Co-Founder and Chairman of Cambridge Energy Research Associates.

I have some more discussion at the Washington Post as well as the following links:

Full statement of my testimony Background supportive research Website for the JEC session

One of the definitions of “stress” offered by the Merriam-Webster dictionary is “bodily or mental tension resulting from factors that tend to alter an existent equilibrium”. Well, any bodily or mental tension investors might have been suffering from as a result of financial factors were shrugged off on Thursday with the announcement by US regulators that ten of the nation’s largest banks had to add a total of “only” $74.6 billion in equity following the completion of stress tests. However, whether this will indeed restore the equilibrium remains to be seen.

Source: Walt Handelsman

The diagram below, courtesy of the Financial Times, summarizes the stress test results in a nutshell. Click here or on the image below for a larger graphic.

Source: Financial Times

As investors welcomed the

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The ISM Services Index for April increased to 43.7, was expected to measure in at 43 for the month following a reported 40.8 for March, 0.8% down from 41.6 in February, 42.9 in January,  41.6 for December, and 37.3 in November.  The index is estimated below 50, still indicating contraction as it had been for the past 7 months, but contracted as a slower rate with the index value rising.  Showing growth this month were the following 7 industries: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Retail Trade; Finance & Insurance; Utilities; Other Services; and Accommodation & Food Services.  The only industry showing growth in the ISM Services/Nonmanufacturing Index in March is Real Estate, Rental & Leasing.  The remaining 11 industries showed contraction  This Index's complement, the ISM Manufacturing Index, which was released last Friday, came in at 40.1 showing contraction of the

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Even as investors awaited anxiously the release of the stress test results, Asian markets rose to fresh seven-month peak amid optimism that the global economy is on a path to recovery.  However, gains in Asia were modest as media reports suggested about 10 of the 19 banks undergoing stress tests in the U.S. have been directed by regulators to raise more capital. Oil prices hovered near $54 on optimism about the economy.

The Hang Seng index in Hong Kong ended the day up 49.03 points, or 0.3%, at 16,430.08.  The Shanghai Composite Index in Mainland China edged up 0.3% to 2,567.34, its highest close in nine months.  Japan's Nikkei 225 Stock Average added 1.7% to close at 8,977.37.

On Tuesday, U.S. stocks advanced as better-than-expected housing data and comments from U.S. officials that the Obama Administration is not seeking additional funds for banks boosted sentiments.  Investors heaved a

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