Introduction: Understanding the intricacies of economics can be challenging, and renowned economist Ha-Joon Chang addresses this in his enlightening book. He offers insights that provoke thought and stimulate discussion, straying from conventional narratives to explore broader perspectives on economic theories and practices.
● Economics: The User’s Guide
By Ha-Joon Chang
Review via The Guardian
In a time when stating that “neoclassical economics is not the sole paradigm” feels revolutionary, Chang begins his analysis. This book presents itself as more grounded and introspective compared to his previous bestseller, “23 Things They Don’t Tell You About Capitalism,” while still delivering an engaging narrative.
Chang emphasizes that no singular economic theory has triumphed over others, leading him to conclude that economics cannot be equated with the certainty of sciences like physics. There is no unified agreement among economists on fundamental issues, and thus, he argues, the pursuit of a definitive formula is misplaced—a reflection of politics rather than pure science. This perspective encourages ongoing debate and suggests that we should remain open to discussion rather than seeking conclusive answers.
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Ouch! That stings. In a disappointing update from the US Labor Department, the private sector created significantly fewer jobs in August than anticipated. Private payrolls rose by 134,000 last month, markedly lower than the expected gain of 220,000 as estimated by Econoday.com. This figure represents the weakest job growth seen this year, especially when contrasted with the 213,000 increase recorded in July. Nevertheless, it is essential to reserve judgment on whether this report necessitates drastic changes to our expectations moving forward.
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There’s an ongoing debate among economists regarding the long-term growth potential of the US economy. Notably, Robert Gordon, an economics professor at Northwestern and a member of the Business Cycle Dating Committee at the National Bureau of Research, suggests a pessimistic view. In a series of recent papers (for example, here), he argues that various trends—such as demographic shifts, wealth inequality, declining educational outcomes, and rising debt levels—will constrain the average annual GDP growth rate in the coming decades.
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Private nonfarm payrolls in the US are expected to rise by 230,000 (seasonally adjusted) in tomorrow’s August update from the Labor Department. This forecast, determined through The Capital Spectator’s median econometric point analysis, indicates a slight increase from the previously reported July rise of 198,000.
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Today’s updates regarding the labor market continue to instill confidence in a stable moderately expanding US economy. The ADP Employment Report for August was slightly softer than expected; however, year-over-year growth maintained a steady low 2%-plus trajectory. Additionally, the latest weekly report on unemployment benefit claims indicates that initial claims remain near a post-recession low. Overall, these indicators suggest the economy will continue to generate jobs at a healthy rate.
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A rising chorus of warnings from analysts suggests that the US stock market may be poised for a correction. The rationale behind this advice is clear: after five years of a robust bull market characterized by few significant declines, there are concerns about market valuation, which some analysts deem to be possibly inflated. With a sustained upward trajectory, the expectation is that a correction could be forthcoming. Geopolitical tensions, such as ongoing issues in Ukraine and the situation in Iraq, along with new macroeconomic weaknesses in Europe, further complicate the outlook. While these risks should not be overlooked, it’s important to note that the US market is still underpinned by a fundamental source: economic growth.
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The August report reveals a moderate increase in the long-term expected risk premium for the Global Market Index (GMI), an unmanaged, market-value weighted index comprising all major asset classes. GMI is now projected to achieve an annualized return of 4.7% above the “risk-free” rate, a rise from the previous month’s 3.9% estimate.
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The latest projections indicate that private nonfarm payrolls in the US are likely to rise by 223,000 (seasonally adjusted) in the upcoming August release of the ADP Employment Report, as per The Capital Spectator’s median econometric point forecast. This anticipated increase is slightly above the previously reported July figures.
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Most global markets rebounded in August following the downturn experienced in July. Despite the ongoing risks present worldwide, there was little indication that investors adopted a cautious stance last month.
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The ISM Manufacturing Index is predicted to show a slight decline to 56.8 in tomorrow’s update for August, in comparison to the previous month, according to The Capital Spectator’s median econometric point forecast. Nonetheless, this estimate remains significantly above the neutral mark of 50.0, reinforcing a solid growth outlook.
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