ADP Up, Auto Sales Up

Moneybox
A blog about business and economics.
Oct. 3 2012 8:34 AM

ADP Up, Auto Sales Up—Are "Long and Variable Lags" for Real?

Milton Friedman is probably the most famous proponent of the view that appropriate monetary policy can always end recessions. But even he took the view that monetary stimulus works with "long and variable lags." That's never made a ton of sense to me.

Once you stop thinking of monetary policy as being about trying to stabilize the supply of base money and instead being about trying to shape nominal expectations, you'd expect the impact to be felt very quickly. Firms and individuals don't make decisions instantaneously, and there are implementation lags even once decisions have been made, but if you're trying to shift expectations up to higher equilibrium, it'll either happen quickly or else it won't work. Since no central bank does conduct monetary policy by trying to stabilize the monetary base, talking about "long and variable lags" sounds like an effort to evade accountability.

So how are we doing?

Advertisement

Pretty good it seems. September auto sales reached their highest seasonally adjusted level in four years scoring a 13 percent year-on-year increase and beating even the "cash for clunkers" surge. And the ADP report out this morning says there was a net gain of 162,000 jobs in September (PDF). Now that's all preliminary and maybe it won't hold up. But this—rather than long and variable lags—is what I'd expect to see from QE 3. An unusually strong fall as durable goods orders and construction starts surge for a few months, pushing the economy up to a higher level before returning to its more sluggish trend.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

Smash and Grab

Will competitive Senate contests in Kansas and South Dakota lead to more late-breaking races in future elections?

Stop Panicking. America Is Now in Very Good Shape to Respond to the Ebola Crisis.

The 2014 Kansas City Royals Show the Value of Building a Mediocre Baseball Team

The GOP Won’t Win Any Black Votes With Its New “Willie Horton” Ad

Sleater-Kinney Was Once America’s Best Rock Band

Can it be again?

Technocracy

Forget Oculus Rift

This $25 cardboard box turns your phone into an incredibly fun virtual reality experience.

One of Putin’s Favorite Oligarchs Wants to Start an Orthodox Christian Fox News

These Companies in Japan Are More Than 1,000 Years Old

Trending News Channel
Oct. 20 2014 6:17 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Politics
Oct. 20 2014 8:14 PM You Should Be Optimistic About Ebola Don’t panic. Here are all the signs that the U.S. is containing the disease.
  Business
Moneybox
Oct. 20 2014 7:23 PM Chipotle’s Magical Burrito Empire Keeps Growing, Might Be Slowing
  Life
Outward
Oct. 20 2014 3:16 PM The Catholic Church Is Changing, and Celibate Gays Are Leading the Way
  Double X
The XX Factor
Oct. 20 2014 6:17 PM I Am 25. I Don't Work at Facebook. My Doctors Want Me to Freeze My Eggs.
  Slate Plus
Tv Club
Oct. 20 2014 7:15 AM The Slate Doctor Who Podcast: Episode 9 A spoiler-filled discussion of "Flatline."
  Arts
Brow Beat
Oct. 20 2014 9:13 PM The Smart, Talented, and Utterly Hilarious Leslie Jones Is SNL’s Newest Cast Member
  Technology
Technocracy
Oct. 20 2014 11:36 PM Forget Oculus Rift This $25 cardboard box turns your phone into an incredibly fun virtual-reality experience.
  Health & Science
Medical Examiner
Oct. 20 2014 11:46 AM Is Anybody Watching My Do-Gooding? The difference between being a hero and being an altruist.
  Sports
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.