Posts filed under “Inflation”

Labor Participation Rate and (lack of) Wage Inflation

Marginal Participants Await Higher Wages




Very interesting analysis on the Not in Labor Force cohort from Bloomberg Briefs:


In an economic cycle which has consistently been sluggish — from the overall pace of growth to wage pressures to inflation — the decline in the unemployment rate in the past several years has been truly impressive. Still, falling participation and rising wage inflation may be the more pressing labor trends for policy makers to watch.

After peaking at 10 percent in late 2009, the unemployment rate began a downtrend that has accelerated as the economy approaches full employment. As of March, the jobless rate was 5.5 percent, or 1.1 percentage points lower than a year ago. Barring the past few years, this pace of improvement has not been witnessed since the economy surged out of the deep recession of 1981-82, which was also the last time unemployment rose above 10 percent. In that period, real GDP grew in the vicinity of 8 percent, almost triple the current pace of 2.7 percent (both measures are the year-on-year percentage change of the four-quarter moving average).

The current decline in unemployment is much less impressive because of the concurrent fall in labor force participation (the sum of those who are employed or actively seeking employment as a share of the population). If potential workers become frustrated with the job search and stop actively looking, unemployment can fall for the wrong reasons as the participation rate also drops. This overstates the degree of improvement in the labor market. As a result, the trajectory of the participation rate will materially affect how policy makers interpret the unemployment rate’s approach toward 5 percent.

* snip *

The rest is at Bloomberg Briefs (subscription)

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Category: Inflation, Wages & Income

Inflation Dynamics During the Financial Crises

Category: Inflation, Think Tank

Fed: “Have Long-Term Inflation Expectations Declined?”

Category: Federal Reserve, Inflation, Think Tank

Have Long-Term Inflation Expectations Declined?

Have Long-Term Inflation Expectations Declined? Fernanda Nechio FRBSF April 6, 2015     Based on surveys of professional forecasters, expectations for price inflation 5 to 10 years ahead have edged down over the past few years. This decline seems to be primarily driven by revised expectations from forecasters who overestimated inflation in the aftermath of…Read More

Category: Inflation, Think Tank

How much weight does the FOMC put on inflation vs unemployment?

From Torsten Sløk, Ph.D.: When I discuss the timing of Fed liftoff with clients it is essentially a debate about how much weight the FOMC puts on inflation and how much weight they put on the unemployment rate. If you believe they put a high weight on inflation, then they will not raise rates anytime…Read More

Category: Employment, Federal Reserve, Inflation

More Signs of Wage 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…Read More

Category: Employment, Inflation, Think Tank, Wages & Income

Measuring Inflation Forecast Uncertainty

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

Category: Inflation, Think Tank

Please Stop Talking About Inflation Adjusted Nasdaq

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

Category: Inflation, Investing

Bianco: Lack of Inflation to Prevent Fed Rate Move

Click for video.

Source: Bloomberg

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation, Video

Are Oil Price Declines Good for the Economy?

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

Category: Energy, Inflation, Think Tank