Posts filed under “Data Analysis”
From Torsten Sløk:
When discussing whether the current uptrend in wages will continue, it is important to look at the group of people who are not working and whether individuals in this group will be coming back to the labor market and hold wages down. The first chart below shows that a significant part of the young people who are not working are in school. For the older age categories, a significant number of individuals are retired. It is also noteworthy that a significant amount of people in their 40s and 50s are not working because they are disabled or ill or taking care of their family. From a Fed perspective, the key question is if any of the groups shown in the chart will be coming back to the labor market and thereby hold down the uptrend we currently are seeing in wages. Young people who are studying will obviously enter the labor market eventually but for the other groups the propensity to return to employment is more uncertain. The bottom line is that wages are already trending higher and the unemployment rate is relatively low at 5.0%, so if these groups wanted to come back then we should already have seen a solid increase in labor force participation. Given this has not happened, the conclusion is that the economy is probably closer to full employment than rates markets seem to believe.
But wages are not consumer prices. So what is the broader evidence that the economy is getting closer to full capacity? If you remove the more volatile components of inflation (gas prices, food prices, other commodity prices) then we are currently seeing a solid uptrend in underlying inflation in the economy, see the second chart. This suggests that the economy is not only close to full employment but it is also close to full capacity. For more discussion, see also this Fed paper “Are Some Prices in the CPI More Forward Looking than Others? We Think So”.
Source: Torsten Sløk, Ph.D., Deutsche Bank Securities
@TBPInvictus here As those who have been following along already know, Seattle has been ground zero for the minimum wage battle, having raised it earlier this year. Critics of the higher minimum – of any minimum at all, actually – have been twisting and torturing data in a pathetic attempt to prove the higher wage…Read More
Thanksgiving is next week. Along with the family and turkey and fixin’s comes the annual — and historically terrible — holiday shopping forecasts. One of my favorite traditions is to wait until the National Retail Federation posts its annual holiday spending forecast, and then write a few columns dissecting both the methodology (it’s pretty awful) and…Read More
In my recent piece on U-6, I mentioned that the labor force participation rate (LFPR) is a favorite target for critics of the economic recovery (and the Obama administration). I mentioned that I’d written about the LFPR quite some time ago, and that Bill McBride had done likewise at Calculated Risk:
What is probably my most comprehensive piece on the LFPR is here, published in May 2014. Bill McBride, over at Calculated Risk, has also done some work on this file (see here and here). (Bill is one of the best economic bloggers out there, and I have a ton of respect for his work and am thrilled to have gotten to know him a bit over the years.) LFPR out of the way, let’s move on.
Bill has referred to critiquing the LFPR as “the last refuge of scoundrels.” And with good reason. I had no intention of revisiting LFPR, but a recent piece of research changed my mind, as you’ll soon see.
In what I believe is her most recent piece (December 2013) on the topic, BLS economist Mitra Toossi – probably the foremost authority on the subject – projects that the LFPR will continue to decline, incorporating this chart into her work:
But enough about Bill McBride, Mitra Toossi, and me. My good pal Dave Rosenberg weighed in on the LFPR in the November 12 edition of his always fabulous Breakfast With Dave. If you subscribe to one top-notch, top-down, daily view of the world, you should make it Dave’s – it’s easily the best daily insight out there, and you can scrap five others in favor of his.
Oh, and those of us who know Rosie personally found Ritholtz’s interview with him (yesterday, here) to be both informative, with parts that are hilarious.
This is a longish, thorough, and informative read, so sit back and enjoy. And remember, no credible talking head would cite this stat. Keep this in mind as you watch various business channels and shows. Continue on, then impress friends and family at upcoming Thanksgiving gatherings with your newfound knowledge!
Reproduced here with the author’s permission. Take it away, Rosie:
@TBPInvictus here. Since the economy’s been more or less chugging along like The Little Engine That Could, those with an agenda are having a harder and harder time finding ways to be critical of its performance under Obama. Two of their favorite laments are the Labor Force Participation Rate (LFPR) and the U-6 Unemployment Rate….Read More
@TBPInvictus here. Conservative Seattle talk show host Dori Monson had the (conservative) Washington Policy Center’s (WPC) Erin Shannon on his show to discuss the city’s minimum wage initiative. Hilarity ensued. There can be no doubt that Monson hosted Shannon because of this piece that she’d authored several days ago at WPC’s website. Shannon, sadly, had…Read More