David Autor’s guide to labour and the machine

David Autor chooses a surprising quote for the start of his latest paper on automation and jobs:

In 1966, the philosopher Michael Polanyi observed, “We can know more than we can tell… The skill of a driver cannot be replaced by a thorough schooling in the theory of the motorcar; the knowledge I have of my own body differs altogether from the knowledge of its physiology.” Polanyi’s observation largely predates the computer era, but the paradox he identified—that our tacit knowledge of how the world works often exceeds our explicit understanding—foretells much of the history of computerization over the past five decades. Read more

Janet Yellen’s Rorschach speech

If the policy implications of Janet Yellen’s every word could be ignored, then her speech at Jackson Hole this year would merely be a wonderful elucidation of why it’s so hard to measure labour market health in real time.

The meaning for policy obviously can’t be ignored, and yet markets didn’t respond strongly one way or the other, while the instant reactions from commentators and strategists differed widely. Read more

On wages and inflation: jeers for fears

We live in disinflationary times, at least in the developed world.

This doesn’t mean that monetary and fiscal policies lack the potency to offset disinflation or deflation. What it means is that holding policy constant across time, non-policy economic forces have become less and less inflationary in recent years. Read more

Video and review: “The System Worked”, by Dan Drezner

While reading Dan Drezner’s The System Worked, I kept thinking of the well-publicised conversation between Barack Obama and Tim Geithner that took place shortly before Obama’s inauguration as president in January 2009. Read more

Before Jackson Hole, roundup of Yellen’s quotes on the labor market

Janet Yellen’s speech this Friday at the annual Jackson Hole symposium is titled, with understated simplicity and brevity, “Labor Markets”. The wider symposium is itself themed, “Re-Evaluating Labor Market Dynamics”.

And it’s no wonder. Even now, after more than a year of monetary policymakers and academics arguing about the amount of labour market slack and how much it should matter, most of the known unknowns in the debate remain, well, unknown.

In anticipation of the speech, the economics team at Credit Suisse has rounded up some of Yellen’s quotes on the labour market since she became Fed chair earlier this year (emphasis in the original, and my own thoughts follow the excerpt):
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A new secular stagnation e-book

Click the image for a link to the pdf of a new secular stagnation e-book, which features entries from Summers, Krugman, Blanchard, and many others, including some critics:

Earlier this year we wondered if perhaps Janet Yellen was thinking of secular stagnation as one of the potential reasons for the Fed’s recent, if slight, downgrading of US potential growth. Read more

“Humans need not apply”

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The situation in Ferguson, MO

A departure from the usual Alphaville fare…

The tense standoff between protesters and the police in Ferguson, Missouri worsened dramatically on Wednesday, while the arrest of two journalists focused attention on the extent to which the city’s police force has become militarised.

Throughout the day, images of armed police officers perched on tanks and aiming weapons at protesters spread throughout social media. The police also issued a statement requesting that crowds assemble only during daylight hours. Read more

The Closer

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- The deep design thinking behind MIT’s incredible origami robotRead more

Video: James Sweeney on where the US economy is headed

A brief chat on the US economy with James Sweeney, chief economist of Credit Suisse investment bank and the co-author of some influential strategy notes on shadow banking and collateral. His latest note considers the labour market slack issue and the likely impact on asset markets once financial conditions begin to tighten.

The Closer

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- The FICC and the dead: banks and volatilityRead more

When investment gets real (and netted)

Does the secular deflation of computers and related equipment skew the macroeconomic data on investment in the direction of irrelevance? Read more

Video: Dan Drezner on the economic sanctions against Russia

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The Closer

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- The FT & McKinsey books of the yearRead more

The Closer

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- The pre-recession UK debt fuelled boom that never was? Read more

Wait, *now* are the kids moving out?

The chart above comes via the indispensable Sober Look, who notes that household formation continues to look stagnant.

As explained in an excellent recent post by George Masnick, different and sometimes contradicting data sets make household formation a difficult indicator to measure in real time. Read more

The Closer

FURTHER FURTHER READING

- GE brings the internet of things to the factory floor. Read more

All those US indicators: what did we learn this week?

This morning’s Employment Situation report coincided with the release of the latest Personal Income & Outlays report, bringing to a close this busy week of economic indicators and activity.

What did we learn? Here’s a brief roundup: Read more

The Closer

FURTHER FURTHER READING

- Is living on the dole bad for you? Read more

Wage growth improved in Q2, remains low

From a note by Nomura on the usefulness of the Employment Cost Index, which climbed by 0.7 per cent from the first quarter to the second:

The Employment Cost Index (ECI) is the most reliable measure of labor cost that we have. It has two primary advantages. First, it is a fixed-weight measure. Changes in the ECI are a weighted average of changes across a matrix of occupational categories and industries. Thus, the ECI is less susceptible to changes in the mix of employment as opposed to changes in actual occupational categories than other measures. Second, the ECI measures not just wages and salaries but other components of compensation, most notably healthcare costs. Read more

The Closer

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- America’s inverted tax logicRead more

Video: markets react to Q2 GDP and FOMC, look ahead to Friday

A brief chat with Fast FT’s Eric Platt:

Fed sees continued “underutilization of labor resources”

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

US Q2 un-blips Q1

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

Cash pools, Fed rev-repos, and the stagnationist future, part 1

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

US inflation has climbed. Now what?

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Problems. You have them. Lucy solves them.

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

The Closer

FURTHER FURTHER READING

- A new book on robots and the economy featuring our very own Izzy Kaminska! Read more

Video: FOMC reaction

With the FT’s US markets editor Mike Mackenzie:

Used to embed a single clip on blog posts.


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