FURTHER FURTHER READING
© The Financial Times Ltd 2014 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Janet Yellen’s speech on Wednesday repeated some of her earlier points about labour market slack — she thinks there is plenty left and hasn’t followed the shifting centre of gravity within the FOMC — and also included remarks on her inflation outlook and the Fed’s new, qualitative forward guidance.
On inflation: Read more
The graph above from CreditSights, which shows cumulative net job changes by industry since the start of the recession, can be used to tell a general story about the US economy and a more specific story about the current labour market recovery. Read more
For the nearly half-century through 2012, annual labour productivity growth in the US construction sector averaged close to zero, and it has been negative for the past two decades.
Here’s a graph constructed last year by Paul Teicholz, a civil engineer who has been working on construction technology issues for a long time and who produced the best concise analysis of the sector’s productivity that I’ve come across: Read more
Our brief thoughts on the FOMC minutes:
1) When Janet Yellen said at the FOMC presser that the public, in thinking about the future path of short rates, should mind the FOMC statement rather than the dots in the Summary of Economic Projections, she was simply reaffirming what had already been discussed during the meeting. What the minutes don’t explain very well is just why “the increase in the median projection overstated the shift in the projections”. In any case, the point remains that Yellen would rather the dots be considered a secondary communications tool. Read more
I was new to journalism when a friend bought for me Against the Flow, a collection of Brittan’s essays published in 2005. My friend thought I might enjoy the book based on an enthusiastic review in The Economist, which proclaimed it “so good that rivals in the field will, like this reviewer, put it down not knowing whether to feel inspiration or despair”. Read more
From her speech in Chicago:
One form of evidence for slack is found in other labor market data, beyond the unemployment rate or payrolls, some of which I have touched on already. For example, the seven million people who are working part time but would like a full-time job. This number is much larger than we would expect at 6.7 percent unemployment, based on past experience, and the existence of such a large pool of “partly unemployed” workers is a sign that labor conditions are worse than indicated by the unemployment rate. Statistics on job turnover also point to considerable slack in the labor market. Although firms are now laying off fewer workers, they have been reluctant to increase the pace of hiring. Likewise, the number of people who voluntarily quit their jobs is noticeably below levels before the recession; that is an indicator that people are reluctant to risk leaving their jobs because they worry that it will be hard to find another. It is also a sign that firms may not be recruiting very aggressively to hire workers away from their competitors. Read more
Like other parts of the US economic recovery — housing, the labour market — capital expenditures by companies have been a letdown recently, even accounting for the weather.
The latest example came in Wednesday’s durable goods report, in which the “nondefense capital goods orders excluding aircraft” component fell. (That figure is a proxy and obviously doesn’t capture everything that normally counts as capex, which also includes investment in property and structures, imported capital goods, and certain intangible assets. Capex is often poorly or loosely defined in discussions about it.) Read more
Jared Bernstein posts the chart above and notes that the US expansion is “getting on in years relative to all the others since the mid-40s”, though he’s also careful to note the large amount of variability around this figure.
The thresholds had a one-time gig, doing their job so well that they made themselves obsolete. How very New Economy of them.
Well, sort of. According to Janet Yellen’s reasoning for having ditched the thresholds as a part of the Fed’s forward guidance, they served their purpose at a time when it still seemed possible that inflation would climb above the Fed’s target even while the unemployment rate was still well above its natural level. Their presence was meant to reassure markets that the Fed wouldn’t rush to tighten in such a scenario, and in the meantime they also communicated to markets that policy was data contingent rather than calendar-based. Read more
Live markets commentary from FT.com
Here are questions to which the answers remain disputed:
1) To what extent will discouraged workers return to the labour force if the economic recovery accelerates? Read more