Posts filed under “Inflation”
From Torsten Sløk of Deutsche Bank:
The first chart below shows that over the past year employer costs have risen significantly. The second chart shows that the rise is driven partly by a significant increase in bonuses. The third chart shows that the uptrend in wages can been seen across all parts of the services sector. And the fourth chart shows that wages are rising faster for unionized workers. This data, the Employer Costs for Employee Compensation (ECEC), is created using the same raw data that goes into the Employment Cost Index (ECI). The difference between the ECI and the ECEC is that the ECI controls for changes in the industrial-occupational composition of jobs. In other words, the ECI is intended to indicate how the average compensation paid by employers would have changed over time if the industrial-occupational composition of employment had not changed from the base period. The ECEC data on the other hand, does not control for the effect of a change in the composition of jobs. For example, if a company goes from hiring fewer customer services workers to hiring more R&D workers then it would show up in the ECEC data as higher wage inflation (because R&D workers generally have higher wages than customer services workers).
This happens to be consistent with the data showing that employment growth has been stronger for high-wage occupations and it is also consistent with the recent strong uptrend seen in private sector R&D spending (see also the charts I have sent out about this). In the 1990s we saw the opposite, with the ECI above the ECEC because more lower paying jobs were created. For more discussion of this and the differences between the ECI and the ECEC see also this BLS article here: http://www.bls.gov/opub/mlr/cwc/explaining-the-differential-growth-rates-of-the-eci-and-ecec.pdf. The bottom line remains that there are several ways of measuring wage inflation and although average hourly earnings remains flat, several of the other measures of wages are showing signs of broad-based wage pressure.
Measuring Inflation Forecast Uncertainty Edward Knotek, Saeed Zaman and Todd Clark Cleveland Fed, 2015-03 | 3.20.2015 Download pdf The federal funds target range has been zero to one-quarter percent since late 2008. But a number of signs suggest that change may be drawing near. In their projections made for the March 2015 meeting, all…Read More
The last refuge of scoundrels is their blind insistence that all data points must be adjusted for inflation. I was reminded of this earlier in the week when Nasdaq, after 15 long years, closed above the 5,000 mark. The immediate response from parts of the bearish contingency was to demand that the numbers take into…Read More
Are Oil Price Declines Good for the Economy? Kevin L. Kliesen Federal Reserve Bank of St. Louis Economic Synopses, 2015, No. 3 As expected, falling crude oil prices lead to falling gasoline prices and lower inflation. Since mid-June, the spot price of the U.S. benchmark for crude oil, West Texas Intermediate (WTI), has…Read More
From Torsten Slok, Deutsche Bank: The next ECI will be released on Jan 30 and the NFIB data that just came out points to more upward pressure, see chart below. Also, remember that the wage data used in the Fed’s FRBUS model of the US economy is the employment cost index and not average hourly…Read More
The Risks to the Inflation Outlook Vasco Cúrdia FRBSF Economic Letter 2014-34 November 17, 2014 Although inflation is currently low, some commentators fear that continued highly accommodative monetary policy may lead to a surge in inflation. However, projections that account for the different policy tools used by the Federal Reserve suggest…Read More