US wage and salary growth inching up, still very slowly

The third quarter was the second straight three-month period showing a favourable trend for US nominal wage and salary growth, though a lot more acceleration is needed before it’s anything to celebrate:

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Affordable housing and the legit big-city whinge

When city-dwellers moan about their high cost of living, they often elicit the unsympathetic retort that they should shut up and praise the ghost of Jane Jacobs for the cultural vibrancy of their neighborhoods, the lucrative jobs, and the artisanal pizza.

Living in a great city is a consumption good, you whinging ninnies — you SHOULD have to pay for it! Why do you think you’re entitled to live wherever you want?
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Video: LSAPs RIP

We had a chat with the FT’s US markets editor Mike MacKenzie about Wednesday’s FOMC statement. There were masks:

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Highlights from the FOMC statement, 29 October 2014

Full text here. The highlights:

– Large scale asset purchases have ended, as expected (though remember that the Fed is still reinvesting the principal on MBS and rolling over maturing treasuries). Read more

Fed talk, inequality, and the lawless border town between fiscal and monetary responsibilities

It’s hard to say which was more surprising — the passages in Janet Yellen’s inequality speech last week that appealed to American values, or the topics she chose to omit entirely.

To start with the latter, the interdependent relationship between inequality and economic growth has become a mainstream topic of economic debate in recent years, and a very contentious one. Read more

The Closer


- Why New Yorkers can’t find a taxi when it rainsRead more

Spending versus consolidation, German political capital edition

Two sets of charts from BCA Research with unclear implications:

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Bullard: FOMC should consider “a pause on the taper”

From the transcript of St Louis Fed president James Bullard’s interview with Bloomberg Television:

I also think that inflation expectations are dropping in the U.S. And that is something that a central bank cannot abide. We have to make sure that inflation and inflation expectations remain near our target. And for that reason I think a reasonable response of the Fed in this situation would be to invoke the clause on the taper that said that the taper was data dependent. And we could go on pause on the taper at this juncture and wait until we see how the data shakes out into December. So… continue with QE at a very low level as we have it right now. And then assess our options going forward. …

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What does the case for calm look like?

The abundance of worrying news continues growing — the collapse of bond yields and equity markets, falling inflation and inflation expectations all across the developed world, the ongoing slump in commodity prices.

Whether such tumultuous activity in markets accurately reflects the updated prospects for the real economy is a difficult question. The doom-iest news has been coming out of Europe (ex-UK), where concerns of a triple-dip recession do appear warranted given the latest economic indicators from — not to mention the intransigence by policymakers in — Germany. But the prospects for Japan and emerging markets, many of whose fortunes are tied to commodity cycles, have also become more disquieting. Read more

Undershooting unemployment is the new overshooting inflation

(The chart frames the upper and lower forecasts of the central tendency, which removes the highest three and lowest three forecasts of the FOMC as a whole. The red line is the midpoint between the two.)

Starting in 2009, the midpoint of the central tendency projections for the long-run unemployment rate climbed from 4.9 per cent to 5.6 per cent during the next three years. Read more

The Closer


- Lovely reflection by Josh Gans about the influence of Jean Tirole on his life and career. Read more

Bill jumps the segue

It begins ominously:

Dancing, or better yet as the beginning of my Investment Outlook suggests, being asked to dance, seems to have become an important part of my life over the past month or so. Having first been asked by my wonderful wife, Sue, and now by Dick Weil and Janus from a business standpoint, I write to you today from my desk in a new Janus office in Newport Beach, California. Read more

Video: jobs report and the implications for markets and policy

The FT’s video producer demanded that we wear his outrageously over-sized jacket to appear presentable in this conversation with US markets editor Mike MacKenzie. The least you can do is have a look:

Have a great weekend! Read more

September payrolls: +248k, and jobless rate at 5.9%

The US employment situation report for September was better than expected but not quite as good as its headline numbers suggest.

First the good news. We can take comfort that the August numbers were very likely anomalous, a blip of the kind that should be expected now and again. Jobs growth had slowed for two straight months prior to September, but the upward revisions now show that July and August were better than first believed, with a respective 243,000 and 180,000 jobs created. Read more

Shadow banking defined, again and again

Via the latest report from the IMF, click to embiggen:

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Russia defence spending facts of the day

From a summary of Russia’s proposed new budget, by Free Exchange:

The budget shows how much trouble the Russian economy is in—and how unwilling the government is to face up to reality. Read more

Global disinflationary pressures

Consider some of the global non-policy forces that might now be weighing on price inflation:

– Aging demographics, high debt loads, weak nominal wage growth and persistent output gaps in advanced economies. Read more

The Closer


- Seriously, David CameronRead more

FOMC vs the cruel, cruel summer

This morning’s Personal Income & Outlays report revealed the third consecutive monthly decline in core and headline PCE PI inflation (though August), both now just below 1.5 per cent:

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Video: FOMC reaction

We talked to the FT’s US markets editor Michael MacKenzie just after the FOMC presser ended. See also the reactions from James Mackintosh and Robin Harding.

Macro Live, Fed presser edition

Live markets commentary from 

FOMC statement for meeting of September 16-17, 2014

A few quick takeaways:

– The “considerable time” phrase stayed, as did “significant underutilization of labor resources.” Read more

Reminder: Macro Live for FOMC presser starting at 2:25pm EST

Just passing along the same info as earlier today…

A potentially pivotal FOMC meeting wraps up today, after which Janet Yellen will take questions from the media. Read more

Reminder: US Macro Live, FOMC presser edition

A potentially pivotal FOMC meeting wraps up today, after which Janet Yellen will take questions from the media.

Over at the usual place, Matt and I will be providing commentary in real time during the presser in addition to cheering on the FT’s man in Washington, Robin “Hip Specs” Harding. We’ll start at 2:25pm EST (7:25pm in London). Read more

The Fed can take its time, if it wants to

By most accounts — the musings of Wall Street strategists and media Fed watchers, speeches by FOMC members, countless online FOMC previews — momentum is building for the Fed to soon change its “considerable time” language, and to give clearer guidance on when and why it will start raising rates.

Will such changes be included in the FOMC statement that will be released on Wednesday? Read more

Slacking to stand still

Our favourite passage of Janet Yellen’s speech at Jackson Hole this year wasn’t actually in the text. It was in a footnote.

Specifically, footnote 7: “For convenience, the analysis here is presented as if cyclical factors and structural factors can be neatly delineated. In reality, the line between the two may be indistinct.”

Our initial reaction to the footnote was that it’s a banal but important point about economics in general. Even the biggest topics remain open to debate. Simplification is sometimes necessary to provide an organisational framework and a common jargon for discussing the relevant issues.

But the footnote was obviously there for a more specific reason, which was made clear in the rest of the speech: its relevance to the ongoing discussion within the FOMC and among economic commentators everywhere for the last couple of years. Read more

Jobs report disappoints in otherwise strong week of US indicators

Blowout ISM readings for both manufacturing and services. A trade deficit shrinking more quickly than expected. Auto sales in July hitting a 103-month high. Initial jobless claims in August were little changed and remained low.

All indicators released just this week. Read more

Mester’s preference for forward guidance

Loretta Mester, the president of the Cleveland Fed, gave her first speech on Thursday since taking over from her predecessor Sandra Pianalto.

From the remarks, our emphasis: Read more

Shocking wages, up then down

An observation from Credit Suisse economists about wages, emphasis ours:

The 2008 negative shock on prices was so large and, more importantly, so unexpected that sticky nominal wages were unable to react timely to deflation, causing real labor costs to rise sharply. Read more

The Closer


- Draghi’s incursion into fiscal policyRead more