November 3, 2017

The Labor Market remains “Strong”

Powell is in the same corner as Yellen. According to Powell: “Inflation is a little bit below target, and it’s kind of a mystery,” he told CNBC in August. “You would have expected, given that we’re getting tighter labor markets, that we’d have a little higher inflation. I think that what that gives us is the ability to be patient.” When he takes over in February, he can sit on his hands and wait! For a long time we cannot see any relation between the two, as the chart illustrates. For the last two years, wages have remained docile, just as…...

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As I reported in this space recently, the U.S. Federal Reserve has been in sustained catatonic hysterics about “spreading labor shortages” in the United States, going back several years, as evidenced by Beige Book passages nearly too numerous to catalogue. This week, the U.S. Labor Department reported third-quarter unit labor costs were down 0.1% year-over-year. As noted by many, the Fed long ago ossified and since at least 2008 has chronically projected inflation, interest rates and economic growth higher than is obtained. Perhaps underlying this petrified bias has been an acute squeamishness about labor markets, especially as advanced by regional… Read More