FURTHER FURTHER READING
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A brief chat with Fast FT’s Eric Platt:
Better employment situation reports. Strong second-quarter growth. Inflation rising steadily. Recent congressional testimony from Janet Yellen admitting that the labour market was improving more quickly than the Fed had forecast.
Yet despite acknowledging the recent moves in the unemployment rate and inflation towards the Fed’s targets, Wednesday’s FOMC statement also added that “a range of labor market indicators suggests that there remains significant underutilization of labor resources”. Read more
A healthy Q2 print is no surprise: underlying growth was already known to be much better than the abysmal, weather-traumatised first quarter numbers indicated, while labour market indicators had been portraying an accelerated recovery for months now.
But 4 per cent annualised growth, along with a slight positive revision to the first quarter number from -2.9 to -2.1 per cent, was even better than expected. Read more
Zoltan Pozsar, in a new study published by the US Treasury Department’s Office of Financial Research, has developed an intriguing new framework for understanding the interaction between global finance and macroeconomic trends.
It includes important sections about the potentially large implications of the Fed’s new reverse repo facility and the relationship between stagnationist trends and the financial markets. Read more
Camp Alphaville’s afternoon lineup includes Lucy Kellaway joining me on stage for a free-wheeling chat about life in the workplace.
The plan is to set aside some time during the event to host a live version of her advice column, which means that we need some problems for her to solve — your problems, dear readers. Read more
Live markets commentary from FT.com
Should the Fed be unduly concerned by the decline in term premia this year?
Consider some the potential explanations given for the decline in yields: Read more
It begins with the simple concept that movements in long-term rates are explained by changes in two components: the term premium and the expected path of short rates. And while the Fed’s asset purchases mainly influence rates through their effects on the former, its forward guidance language works by altering the latter. Read more
Given the recent proliferation of debate about monetary policy and the fall in volatility — among central bank officials and the economics commentariat both — it might be worth revisiting first principles.
Start with the obvious point that the Fed’s monetary policy mandate says nothing about financial stability, which therefore must be a secondary variable. It matters only inasmuch as it affects the Fed’s ability to satisfy its mandates of price stability and full employment. This is mostly undisputed but not often stated plainly. Read more
The chart from Goldman economists breaks down the various causes behind the rapid expansion of student loan growth in the past decade. As you can see, both rising tuition and a higher share of students borrowing have contributed just as much as higher student enrollment. Read more
Here’s a short chat with the great Tracy Alloway, finance correspondent and FT Alphaville alum. Read more
Although the share of routine jobs in the labour force has been declining since the 1970s, the dramatic permanent losses started after the recession of the early 1990s. A similar trend can be observed in the manufacturing sector, which obviously would have hosted many of these jobs. Read more
Chart from the BLS, which adds:
The average age of households’ cars, vans, sport utility vehicles (SUVs), and trucks increased from 10.1 years in 2007 to just over 11.3 years in 2012. Chart 2 shows that the share of newer vehicles (those manufactured less than 5 years earlier than the year shown) dropped by nearly 33 percent from 2007 to 2012 while the share of vehicles 11–20 years old grew by 25 percent over the same timeframe. Read more
Chart I-5 shows that the government sector has subtracted 0.4 percentage points from per capita real GDP growth over the past three years; whereas in a typical recovery, government spending on goods and services would have added 0.5 points to growth.
This is the uncut, extended version of my interview with Atif Mian and Amir Sufi, a shorter version of which appeared on FT.com.
And below is a time guide, followed by some brief thoughts on their excellent new book, “House of Debt”. Read more
We continue trying out new formats for Alphaville videos. Let us know what you think.
Below is a list of studies and media pieces, some of which are referenced in the video, about young people in the US. Beneath each entry are quotes, facts and other points of analysis that we wanted to highlight:
Robin Harding summarises the discussion about the Fed’s exit strategy revealed in the FOMC minutes from the April meeting, when the committee also talked about the need for additional forward guidance.
The takeaway is that some participants think it would be a good idea for Janet Yellen to clarify the language, introduced to the FOMC statement in March, that interest rates are expected to stay below normal even after inflation and unemployment return to near-mandate levels. Some participants also want more guidance on how long the maturing Treasuries on its balance sheet will be rolled over and the principal payments on MBS will be reinvested. Read more
The chart above from a Credit Suisse note, showing that trading assets at the ten biggest US and European banks (measured by such assets) are now 17 per cent smaller than at their 2010 peak, shouldn’t come as a shock to anyone who followed the “FICC revenues suck” storyline from Q1 bank earnings season. Rates trading assets in particular have fallen precipitously in that time, by roughly a third, or $200bn.
But the strategists also provide an assessment of dealer balance sheet elasticity in a corporate bond selloff. Read more
Included in CEA chair Jason Furman’s thoughtful speech on inequality was this assessment of US tax policy in the past five years:
Since 2009 the United States has made three sets of permanent (or semi-permanent) changes to its tax code relative to the policies that were previously in effect:
The uncertainty about the extent of US labour market slack continues, and last week’s employment situation report certainly didn’t clarify the issue. Read more
King is short-term bullish on credit but, in his own words, “for all the wrong reasons”. He believes that the combination of the remarkably supportive liquidity environment of the past few years and the lack of better alternatives will remain in place for a while — even as credit fundamentals keep deteriorating and valuations become less and less attractive. Read more