Job Market Monitor
Inflation
Inflation in Europe (August 2020) – Annual inflation down to -0.2% in the euro area
In August 2020, a month in which COVID-19 containment measures continued to be lifted, the euro area annual inflation rate was -0.2%, down from 0.4% in July. A year earlier, the rate was 1.0%. European Union annual inflation was 0.4% in August 2020, down from 0.9% in July. A year earlier, the rate was 1.4%. … Continue reading
Inflation and Unemployment in US and Europe – The large drop in US core inflation is fully accounted for by sharply higher unemployment but it still a genuine puzzle in the Euro zone
• The years leading up to COVID-19 saw persistently low inflation, … • something that came to be called by some the “missing inflation puzzle.” • Rising unemployment and weak demand are now pushing inflation down, … • though low inflation does not mean that something is automatically “missing.” • We update our Phillips curve … Continue reading
The Phillips Curve – Yes, there is a trade-off
The Phillips curve is unstable and, therefore, an imperfect guide for policy. But unstable does not mean nonexistent, and imperfect does not mean useless. As long as the tools of monetary policy influence both inflation and unemployment, monetary policymakers must be cognizant of the trade-off. Mr. Powell was smart to acknowledge during his congressional hearing … Continue reading
Inflation and Unemployment in US – What about the Phillips Curve ?
This paper studies the current state of inflation dynamics through the lens of the Phillips curve and assesses the degree of anchoring of inflation expectations. I first estimate a Phillips curve model with both past inflation and a constant anchor as explanatory variables over the 1999– 2018 period for a variety of measures of consumer … Continue reading
Inflation and Unemployment in US – The flattening of the Phillips curve
I’m thinking about the rest of us, starting at the top—with the Fed—who are struggling to figure out the nature of the tradeoff as the Fed begins to contemplate unwinding. Given Chair Yellen’s (very appropriate) focus on job-market slack and thus her up-weighting of the full employment side of the mandate, there’s clearly some anxiety … Continue reading
Unemployment and Wages in the US – Long-term unemployed should not be strongly discounted from measures of slack research finds
Some have argued that the unemployment rate may overestimate labor market slack, because the long-term unemployed (LTU) are largely structurally unemployed and exert significantly less wage and price pressure. If so, then using the aggregate unemployment rate to forecast wage or price inflation may be misleading. However, this Note, along with the companion note showing … Continue reading
US – Short and long-term unemployment exert equal downward pressure on price inflation says FEDS research
In the years following 2009, long-term unemployment has been very elevated while inflation has fallen only moderately, raising the question of whether the long-term unemployed exert less downward pressure on prices than the short-term unemployed, perhaps because such potential workers are disconnected from the labor market. However, empirical evidence is mixed. This analysis demonstrates that … Continue reading
The FED / Inflation wins over Unemployment
Ryan Avent, having exhausted his conventional analysis of the Fed’s 2008 transcripts, turns today to a more analytical approach: counting words. I think others have already made this point without numbers, but Avent’s most powerful finding is that the Fed cares way more about inflation than it does about unemployment: There is only one winner … Continue reading
Fed / Need to let inflation rise to bring down unemployment faster
The Federal Reserve may need to let inflation run a little higher than its 2-percent target in order to bring down unemployment faster, a top Fed official said on Saturday. Strictly capping inflation at 2 percent while allowing high unemployment to linger would be an “inappropriate” approach to monetary policy, Minneapolis Federal Reserve Bank President … Continue reading
The 70s / Did we need a terrible recession? asks Krugman
What we did have was a wage-price spiral: workers demanding large wage increases (those were the days when workers actually could make demands) because they expected lots of inflation, firms raising prices because of rising costs, all exacerbated by big oil shocks. It was mainly a case of self-fulfilling expectations, and the problem was to … Continue reading
US / Possible Fed Successor, Janet Yellen, Has Admirers and Foes
Ms. Yellen is now widely viewed as a logical candidate to succeed the current Fed chairman, Ben S. Bernanke, when his term ends in January 2014. She has worked closely with him in shaping and building support for the Fed’s campaign to stimulate the economy and bring down unemployment. But some of Ms. Yellen’s critics … Continue reading
US / ‘Price stability’ remains the policy advice even in the face of serious labor market inefficiencies says St. Louis Fed’s Bullard
Federal Reserve Bank of St. Louis President James Bullard gave remarks Wednesday on “Some Unpleasant Implications for Unemployment Targeters” at the 22nd Annual Hyman P. Minsky Conference. During his presentation, Bullard noted that the U.S. unemployment rate remains high by historical standards and that it has declined about 0.7 percentage points per year from its … Continue reading
Unemployment has been a much bigger problem than inflation for ordinary people research finds
“Previous literature has found that both unemployment and inflation lower happiness” write David G. Blanchflower, David N.F. Bell, Alberto Montagnoli and Mirko Moro in The effects of macroeconomic shocks on well-being (Adapted chosen excerpts by Job Market Monitor to follow). The macroeconomist Arthur Okun characterised the negative effects of unemployment and inflation by the misery index – the sum of the … Continue reading
UK / Minimum wage does not keep up with the cost of living
The National Minimum Wage Act 1998 was one of the flagship policies of Tony Blair’s newly elected Labour government. From April 1999, every worker over the age of 22 was legally entitled to at least £3.60 an hour. In 2010, it began to apply to employees aged 21 and over. For the first nine years … Continue reading
US / Fed shifts focus from inflation to jobs
The focus on jobs represents a historic shift for the central bank that began with the 2008 financial crisis and has intensified in the face of four years of middling economic growth. But how much influence the central bank wields over unemployment remains an open question: It cannot direct businesses to hire or inspire entrepreneurs … Continue reading
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