US entered recession in February, ending record-long expansion: Economists

The economists said employment peaked in February and fell sharply afterward, marking the beginning of the downturn.

The US economy entered a recession in February, a group of economists declared Monday, ending the longest expansion on record.

The economists said employment peaked in February and fell sharply afterward, marking the beginning of the downturn.

The economists make up a committee within the National Bureau of Economic Research, a trade group that determines when recessions begin and end.

It defines a recession as a decline in economic activity that lasts more than a few months.

The committee noted, though, that in this case, the depth of the downturn since February had led it to determine that a recession had begun.

The unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions, the NBER panel said.

The unemployment rate is officially 13.3 per cent, down from 14.7 per cent in April. Both figures are higher than in any other downturn since World War II.

A broader measure of underemployment that includes some of the unemployed who have given up looking and those who have been reduced to part-time status is 21.2 per cent.

JP Morgan chief economist forecasts 'strong rebound' in Indian markets

The economic wounds will be "deeper than anything we've seen since World War Two", says chief economist at JP Morgan.

Global investment bank JP Morgan is forecasting a "very strong rebound" in Indian markets for the second half of the year while it remains "worried" about what it describes as deterioration in the country's public finances, social disruption and the limits of public financing in the long slog back from the coronavirus crisis.

"India is going to be going through a very difficult first half of the year. We have GDP down in the second quarter, 35 per cent annualised pace but we have a very strong rebound in the second half of the year, but one that still doesn't get you back to where you were," said Bruce Kasman, chief economist at JP Morgan, news agency IANS reported.

Kasman leads a team of thirty economists worldwide who set the bank's economic and policy views.

Globally too, JP Morgan warned on Tuesday that whatever rebound happens in the second half of 2020 won't be strong enough to undo the damage absorbed during the first deadly blow from Covid-19.

The economic wounds will be "deeper than anything we've seen since World War Two", Kasman said. "At the same time, it's going to be very short lived."

Kasman thinks the Reserve Bank of India is "almost done but not completely done" with the easing of its key interest rate.

"We have a bottom in the policy rate forecast, 3.75 (per cent) very close to where we are now, Kasman said.

India's central bank has cut its key interest rate to 4 per cent to counter the economic blow from the coronavirus pandemic.

Income and job losses are going to have a "lasting effect" on consumer behaviour, Kasman said.

Do the winners of 2019 economics Nobel focus too much on micro welfare?

Immigration and growth would help more than addressing the winners' 'manageable questions.'

Business Standard : The Royal Swedish Academy of Sciences will award the 2019 Nobel Prize in Economic Sciences to Abhijit Banerjee and Esther Duflo of the Massachusetts Institute of Technology and Michael Kremer of Harvard “for their experimental approach to alleviating global poverty.” The award reveals a deepening fault line among economists about how best to fight poverty.

What’s striking about the award is that the Nobel committee gave it to the three economists specifically for addressing “smaller, more manageable questions”—such as how to improve educational outcomes and child health in poor countries—rather than for big ideas. Mr. Banerjee and Ms. Duflo (a married couple) explicitly reject thinking about big questions in their 2011 book, “Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty.”

To be sure, breaking down big issues into smaller questions can sometimes allow quicker and more-direct solutions to unwieldy problems. Yet in the case of global poverty, economists actually do have pretty good ideas about how to fight the problem on a macro scale. Namely, immigration and economic growth, which are by far the most reliable ways to improve the quality of life among the world’s poor.

The relative narrowness of the scope of this year’s winners’ work is owed in part to their method of analysis: randomized controlled trials. Such trials allow economists to reduce the uncertainty of economic analysis by eliminating the possibility of self-selection. Yet they are also usually small in their scope, as the subjects typically must be organized directly by the researchers.

In the 1990s, Mr. Kremer and his co-authors used randomized controlled trials to estimate the effects of providing more textbooks to students and giving flip charts to schools in western Kenya. Although more textbooks improved the test scores of the most able students, they didn’t improve average test scores. Flip charts had no effect.

In another study of Kenyan schools, Ms. Duflo, Mr. Kremer and a co-author examined the effect of hiring contract teachers to supplement teachers in the civil service. Their idea was that contract teachers would be more effective because their incentives were better. If they didn’t perform well, they would be less likely to be renewed. Civil-service teachers are permanent, and it’s hard to fire them.

PM Narendra Modi starts pre-Budget meets to brainstorm on economy

The focal point of the interaction was drawing a road map for reforms across departments leading up to the ease of doing business and economic growth.

In the run-up to the Union Budget, Prime Minister Narendra Modi has lined up a string of meetings spread across days. He began the exercise on Tuesday with a meeting of top bureaucrats in finance and other key ministries to finalise the government's priorities. The focus is clearly on reviving the economy and creating jobs, officials in the know said.

Next, the PM will interact with economists, bankers and sectoral experts through the week to brainstorm on pressing issues such as agriculture, reforms and effective implementation of signature schemes and projects.

Tuesday’s meeting at the PM’s residence, attended by all the five secretaries in the finance ministry besides top officials of other economic ministries and NITI Aayog, cleared a five-year vision plan for the government to make India a $5-trillion economy by 2024, it is learnt. Also, the future course of PM’s pet projects like doubling farmers' income, PM-Kisan, Pradhan Mantri Awas Yojana, piped water for all, and electricity for all came up for discussion.

The focal point of the interaction was drawing a road map for reforms across departments leading up to the ease of doing business and economic growth. GDP growth, which has been a controversial issue recently due to doubts raised over government data, was discussed too. Stepping up government revenues while carrying out reform to push GDP growth, which slipped to a five-year low of 6.8 per cent in 2018-19, also figured in the meeting, sources said.

With the farm sector facing headwinds, Modi had last week stressed upon the need for structural reforms in agriculture to boost private investment, strengthen logistics, and provide ample market support to farmers.

The PM is expected to meet senior finance ministry bureaucrats on Thursday to discuss issues relevant to the Union Budget, to be presented on July 5.

Apart from reform announcements to be made in the Budget, the government’s fiscal consolidation roadmap, revenue position and expenditure commitments will be taken up at the meeting.

Business Standard