Well done. Having just returned from the IMF/World Bank Spring Meetings, the focus on core data is refreshing. You might also like reading this: https://monetary policy volatility.substack.com
Thanks for the analysis Joseph great stuff as usual. What do you make of the argument the decline in ahe is about compositional shifts (more lower paid jobs in services being created) so the decline in wages (and therefore inflationary pressure in labour intensive services) is overstated? Atlanta fed wage tracker, which is composition adjusted, is still high, for example.
I don't put that much stock in the Atlanta Fed tracker as a live macro forecasting tool—it's survey data, excludes top earners, excludes people who aren't employed at both points across the time period, etc. I definitely think there's some composition effects biasing AHE downward this quarter but even quarterly gross aggregate labor income growth from payrolls data hit the lowest level since 2020 in Q1. We'll definitely get a better picture when Employment Cost Index data comes out later this month!
I liked that you are looking positively at the situation with the decline in inflation in the United States. I think your analysis and conclusions are very valid.
It does seem promising, especially on the PPI end of things, but also I'm noticing a trend of "as long as wage demand inflation decreases", which I'm not certain is a winning prospect. I'd reckon, at least intuitively and without having done much research, that wages are even stickier than CPI inflation, and that our wage increases have been both 1) long overdue and still not up to par with even inflation since 1990, and 2) barring a deep, painful recession, not going to recede.
Interesting, it looks like the seasonally adjusted series has different annual growth rates than the non-seasonally adjusted series for some reason, I did not think that should be possible. Fixing the issue now.
Ah interesting! Yes on a YoY basis you would think the seasonal adjustments would wash out right? On the other hand they do seem to keep ‘adjusting the adjustments’ so maybe there is some nuance there. Thanks for all your insights!
Brilliant post👌🏼 Any thoughts on how the potential "mild recession" might impact the disinflationary process. Additionally, considering the current global economic landscape, do you think any external factors could influence the pace of disinflation in the US?
New to the newsletter and really enjoying it. Thanks and great insight!!
Thank you Marlon! Glad to have you here and glad to hear you're enjoying!
Great post Joey! Love your newsletter.
Thank you Rinku! I'm very glad you're enjoying
Well done. Having just returned from the IMF/World Bank Spring Meetings, the focus on core data is refreshing. You might also like reading this: https://monetary policy volatility.substack.com
Thanks for the analysis Joseph great stuff as usual. What do you make of the argument the decline in ahe is about compositional shifts (more lower paid jobs in services being created) so the decline in wages (and therefore inflationary pressure in labour intensive services) is overstated? Atlanta fed wage tracker, which is composition adjusted, is still high, for example.
I don't put that much stock in the Atlanta Fed tracker as a live macro forecasting tool—it's survey data, excludes top earners, excludes people who aren't employed at both points across the time period, etc. I definitely think there's some composition effects biasing AHE downward this quarter but even quarterly gross aggregate labor income growth from payrolls data hit the lowest level since 2020 in Q1. We'll definitely get a better picture when Employment Cost Index data comes out later this month!
Great informative read. Perfect balance between all the nice visualisations and text.
Thanks Gero! Glad you enjoyed
I liked that you are looking positively at the situation with the decline in inflation in the United States. I think your analysis and conclusions are very valid.
Thank you Ted!
It does seem promising, especially on the PPI end of things, but also I'm noticing a trend of "as long as wage demand inflation decreases", which I'm not certain is a winning prospect. I'd reckon, at least intuitively and without having done much research, that wages are even stickier than CPI inflation, and that our wage increases have been both 1) long overdue and still not up to par with even inflation since 1990, and 2) barring a deep, painful recession, not going to recede.
Thanks Joseph! One question - wasn’t the peak CPI at 9.1% in June 2022? Am I looking at a different series?
Interesting, it looks like the seasonally adjusted series has different annual growth rates than the non-seasonally adjusted series for some reason, I did not think that should be possible. Fixing the issue now.
https://fred.stlouisfed.org/graph/?g=12xnh
Ah interesting! Yes on a YoY basis you would think the seasonal adjustments would wash out right? On the other hand they do seem to keep ‘adjusting the adjustments’ so maybe there is some nuance there. Thanks for all your insights!
Brilliant post👌🏼 Any thoughts on how the potential "mild recession" might impact the disinflationary process. Additionally, considering the current global economic landscape, do you think any external factors could influence the pace of disinflation in the US?