Millennials Like to Hit the Gym, and It's Good News for the Economy

Research over the past week looks at obesity by generation, robots and secular stagnation and China's transition

Millennials have embraced athleisure fashion, step counting and juice diets. Now — thanks to economic research — you can rest assured that the next time you see a twenty-something power-walk past in $98 Lululemon running tights, it's not all (just) for show.

A recent Gallup journal article draws economic conclusions from a generational drop in obesity, and that's the top feature in this week's research wrap.  Check out this roundup every week for blurbs on, and links to, interesting or influential global economic research. 

Research to talk about at the gym

  • Obesity in the U.S. climbed between 2008 and 2015, but it's declining among 19-to-35-year-olds, according to Gallup, which conducts surveys and provides analysis on trends including health. The age group saw a 0.6 percent drop in obesity over the period, even as adults in other generations saw a 3.8 percent uptick. This could have something to do with the fact that millennials are exercising more, as the graphic below shows. These trends in obesity come with big economic implications. The added medical costs total a whopping $142 billion annually in the U.S., Gallup says, and other research corroborates that obesity is bad for growth. It can even lower wages. Burpees, anyone? 

Title: Obesity, Smoking Damage U.S. Economy
Published: Sept. 7, 2016
Available: at Gallup website

Research to talk about with Fed-watchers

  • Try secular-stagnation-fighting robots. Automation is the topic of the month — ZEW in Germany just had a big conference about it, and bank economists are also paying attention. In a new post, Bank of England's John Lewis goes over a lot of the standard economic reasoning about why robots probably aren't going to steal your job or make your workweek shorter, and then he tucks in this gem: "If robotization does constitute a major productivity gain that raises the marginal productivity of capital, then this should push up on long run-equilibrium real rates, and hence ease fears of secular stagnation." New innovations could also require companies to scrap old physical capital, spurring more capital investment. 

    As a reminder, secular stagnation is an old idea made recently famous by Harvard's Larry Summers, and it basically means that we might be in a period of persistently lower economic growth. If it's happening — as monetary policymakers increasingly concede that it might be — it will be a real pain in the neck for the Federal Reserve and its international counterparts. It would pull down interest rates, leaving less ammunition to stoke the economy in future downturns. In short, this would be a nice silver lining.  

    Title: Robot Macroeconomics: What can theory and several centuries of economic history teach us? 
    Published: Sept. 6, 2016
    Available: at Bank Underground, on the Bank of England website

Research for the China-watchers 

  • China's external rebalancing is well on its way, the International Monetary Fund's Longmei Zhang finds, but the nation gets a mixed report card for its work internally. In particular, growth in China relies heavily on credit, and that's unlikely to improve very quickly unless "decisive corporate restructuring" and state-owned enterprise reforms are implemented. There are a few bright spots in here: the household savings rate should come down in coming decades as China's population aging progresses and the dependency ratio — basically the number of young and old people for every working-age person — bumps up. Services are also on the up and up, and "indeed, the service sector share has already reached the level of advanced economies in large cities like Beijing and Shanghai." 

    Best part? There's a color-coded scorecard showing which areas China is doing well in, and where it lags, on page 18. 

    Title: Rebalancing In China, Progress and Prospects
    Published: September 2016
    Available: on the IMF website

Findings to flag to your favorite fiscal policy maker

  •  Fiscal stimulus could have a bigger bang than monetary easing in the next recession, Goldman Sach's research team finds. Important background: Monetary policy makers across advanced economies have recently intensified their calls for fiscal policy makers to pick up the baton, saying that years at rock-bottom interest rates combined with still-weak growth has left them with limited ammunition to fight the next downturn.

    Goldman's team first simulates the impact of a $100 billion post-election stimulus lasting five years. That policy would slash 0.3 percentage points from unemployment while spurring slightly faster inflation, causing the Fed to hike one or two more times, they find. They run a second set of simulations to see how fiscal stimulus would play out in a recession. They find that a moderate fiscal stimulus would have a larger near-term impact on how much growth exceeds its potential than forward guidance and mass bond-buying, and would help the Fed to get away from zero faster. 

    For the hard-core wonks out there, it's worth noting that Goldman is more pessimistic about the potential impact of QE and forward guidance than the Fed's David Reifschneider was in a recent, widely-discussed paper, partly because they say the Fed would be much more constrained under current market conditions than in Reifschneider's simulations. 

    Title: Fiscal Stimulus from the Election to the Next Recession
    Published: Sept. 9, 2016
    Available to Goldman clients
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