Links for 03-20-18

Links for 03-17-18

Links for 03-13-18

Jobs Report Gives Fed Cover To Retain Gradual Rate Path

Tim Duy:
Jobs Report Gives Fed Cover To Retain Gradual Rate Path: The jobs report gives the Fed cover to retain a gradual rate path. To be sure, the rapid pace of job growth will leave them nervous about an unsustainable pace of growth. But the flat unemployment rate remains consistent with their forecasts. In addition, low wage growth indicates the economy has not pushed past full employment. If inflation remains constrained, the Fed would be pretty much on target for this year. That suggests the three-hike scenario should remain in play. But increased confidence in the outlook and risk management concerns will push up enough “dots” in the next Summary of Economic projections toward four hikes for this year. ...continued here...

Links for 03-12-18

Links for 03-09-18

I kind of got behind...

Links for 03-02-18

Fed Changing Its Tune

Tim Duy:
Fed Changing Its Tune: Yesterday I called attention to this line from Federal Reserve Chairman Powell’s testimony:
In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2 percent on a sustained basis.
I interpreted this as a shift in the Fed’s focus. The risks are shifting, hence the new concern about an overheated economy. In contrast, previous iterations of this policy guidance referred to “achieving” and then “sustaining” full employment. Central bankers must view the economy as in a danger zone for inflationary pressures. ...continued here...

“Avoiding An Overheated Economy”

Tim Duy:
“Avoiding An Overheated Economy,” by Tim Duy: Federal Reserve Chairman Jerome Powell delivered the Fed’s Semiannual Monetary Policy Report Tuesday morning. Powell smoothly and confidently responded to – or deflected – questions as if he were already seasoned in the role of Chair. As to the content of his remarks, they were hawkish. More hawkish than I anticipated and arguably signaled a significant change of focus for the Fed.  ...continued here...

Links for 02-28-18

Looking For Policy Continuity From Powell

Tim Duy:
Looking For Policy Continuity From Powell, by Tim Duy: Federal Reserve Chairman Jerome Powell will tackle his first Semiannual Monetary Policy Report to the Congress this week. The expectation is that Powell will by and large reiterate the case for continued gradual tightening of monetary policy. That has come to mean three rate hikes in 2018, although given the data dependence of policy the risk is that three becomes four. Market participants remains nervous, however, that Powell will set a more hawkish tone indicating a sharp acceleration of rate hikes. I think this very unlikely at this juncture. I do think there is room, however, to emphasize that if fiscal spending supercharges growth in 2018, then rate hikes will continue into 2019. ...Continued here...

Links for 02-26-18

Links for 02-23-18

Paul Krugman: Nasty, Brutish and Trump

"there’s a faction in our country that sees public action for the public good, no matter how justified, as part of a conspiracy to destroy our freedom":
Nasty, Brutish and Trump, by Paul Krugman, NY Times: On Wednesday, after listening to the heart-rending stories of those who lost children and friends in the Parkland school shooting — while holding a cue card with empathetic-sounding phrases — Donald Trump proposed his answer: arming schoolteachers.
It says something about the state of our national discourse that this wasn’t even among the vilest, stupidest reactions to the atrocity. No, those honors go to the assertions by many conservative figures that bereaved students were being manipulated by sinister forces, or even that they were paid actors.
Still, Trump’s horrible idea, taken straight from the N.R.A. playbook, was deeply revealing...
To see why, consider the very case often used to illustrate how
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Economic Fluctuations and Growth Research Meeting

I am here today:
Economic Fluctuations and Growth Research Meeting
Andrew Atkeson and Monika Piazzesi, Organizers
Federal Reserve Bank of San Francisco
February 23, 2018 Friday, February 23 9:00 am
Fatih Guvenen, University of Minnesota and NBER
Gueorgui Kambourov, University of Toronto
Burhanettin Kuruscu, University of Toronto
Sergio Ocampo-Diaz, University of Minnesota
Daphne Chen, Florida State University
Use It Or Lose It: Efficiency Gains from Wealth Taxation
Discussant: Roger H. Gordon, University of California at San Diego and NBER 10:15 am
Matteo Maggiori, Harvard University and NBER
Brent Neiman, University of Chicago and NBER
Jesse Schreger, Columbia University and NBER
International Currencies and Capital Allocation
Discussant: Harald Uhlig, University of Chicago and NBER 11:30 am
Katarína Borovičková, New York University
Robert Shimer, University of Chicago and NBER
High Wage Workers Work for High Wage Firms
Discussant: Isaac Sorkin, Stanford University and NBER 1:30 pm
Marcus Hagedorn, University of Oslo
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Fedspeak and the January FOMC Minutes

Tim Duy:
Fedspeak Reiterates Gradual Path: Fed speakers continue to reiterate that policy remains on a gradual path of tightening. So far, the inflation data and brightening economy has more emboldened their commitment to gradual rate hikes than a faster pace of hikes. What about fiscal policy? That train has left the station, but central bankers don’t seem too concerned – yet. ...continued here...
And one more from Tim:
First Impressions of the January FOMC Minutes: The minutes of the January FOMC meeting revealed increasing confidence in the economic outlook. That translated into increased confidence that gradual rate hikes remains the appropriate policy path. Does that mean the central bankers stand poised to raise their “dots” such that the median rate hike projection rises to four hikes? I don’t think so. I read the minutes as wiping away lingering concerns about the inflation outlook and allowing policymakers to
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Links for 02-22-18

On the Link between US Pay and Productivity

Anna Stansbury and Lawrence Summers at VoxEU:
On the link between US pay and productivity, by Anna Stansbury and Lawrence Summers, VoxEU: Pay growth for middle class workers in the US has been abysmal over recent decades – in real terms, median hourly compensation rose only 11% between 1973 and 2016.1 At the same time, hourly labour productivity has grown steadily, rising by 75%.
This divergence between productivity and the typical worker’s pay is a relatively recent phenomenon. Using production/nonsupervisory compensation as a proxy for median compensation (since there are no data on the median before 1973), Bivens and Mishel (2015) show that typical compensation and productivity grew at the same rate over 1948-1973, and only began to diverge in 1973 (see Figure 1). Figure 1 Labour productivity, average compensation, and production/nonsupervisory compensation 1948-2016
Notes: Labour productivity: total economy real output per hour (constructed from BLS and
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Links for 02-20-18

Inflation, General Data Flow, Fiscal Stimulus, And Implications For Monetary Policy

  Tim Duy:
Inflation, General Data Flow, Fiscal Stimulus, And Implications For Monetary Policy, by Tim Duy: The data flow remains supportive of the Fed’s forecast of sustained moderate growth. A spike in prices, however, drove core CPI inflation to the fastest monthly pace since 2005, again raising fears that the Fed will accelerate the pace of rate hikes. I still think this is premature. To be sure, the risk is that the Fed hikes rates more than the projected three times this year. But Powell & Co. will need more data to support a faster pace of rate hikes. They will not overreact to data that may prove to be nothing more than a flash in a pan. ...continued here...