November 2018

Worker Compensation Still a Drag On Fed’s Inflation Target

The conventional financial-media headlines said the third-quarter employment cost index, out on Halloween, indicated “Pay Jumped.” What the headlines did not say (but should have) was, “Employment costs remain a drag on the Federal Reserve’s putative 2% inflation target.” The employment cost index, a broad measure of workers costs prepared by the Department of Labor that includes pay and benefits, rose 2.8% year-over-year in the third quarter. Of course, that means productivity gains in excess of 1% annually reduce unit labor costs to under 2% annually. Indeed. A day after the Halloween release, the Department of Labor released its second-quarter… Read More


Jason Furman/Martin Sandbu have the wrong premise

In The US´s lost decade, Martin Sandbu writes: I was recently presented with an intriguing thought experiment by Jason Furman, the chair of Barack Obama’s Council of Economic Advisers. He asked me: “Assume that on September 16, 2008, you were put in charge of US fiscal and monetary policy. You are given perfect foresight about the slowness of the recovery and the lack of an inflationary spiral. You are allowed to use the same tools (maybe plus a little) so nothing highly exotic, but you can use them sooner, keep them on for longer, and dial them differently. If you… Read More


NGDP Outlook Update - November 2018

We got our first read on Q3 2018 NGDP last week, it came in at $20.659 trillion, right in line with our model’s number of $20.684 trillion, based simply on the model’s time series ‘momentum’ of the recent NGDP component and the market prices component. Recent NGDP movements are the best predictor of future NGPD movements, even more so than market signals; so often NGDP updates can move our forecast quite a bit, but not this time. Instead, the forecast has dropped due to…you guessed it…the huge drop in US equity prices, commodities, a bearish shift in the yield curve… Read More