Following up on a recent discussion within the economics commentariat (to which we contributed), we emailed economist Ed Wolff to request a further breakdown of his findings on changes in US income and wealth inequality.
Wolff’s analyses data from the Fed’s triennial Survey of Consumer Finances, which considers pre-tax income but does include government transfers. You can read our earlier posts on his work here and here. Read more
The issue of whether US inequality has climbed since the recession of 2008 has been relitigated this week. A short analysis by Stephen Rose claimed that income inequality had actually fallen, assigning the credit to public policy.
David Leonhardt of the New York Times discussed Rose’s findings, followed by further analyses and critiques from Ben Walsh and Nick Bunker. I’ll present the findings first before adding my own thoughts at the end. Read more
We’ve been reading through the exhaustive new report from Citi on the noticeable impact of automation on the labour markets of several industries, and we came across a finance-related section that’s worth passing along.
It offers an update on the relative progress within the industry of moving various products to electronic trading platforms (emphasis ours, and click to enlarge the chart): Read more
I really like my colleagues at the FT, but I spend at least half my working hours wishing they would stop talking. Pipe down. Not quite STFU but at least be mindful of making a racket. Read more
Earlier in January we refrained from commenting on the disappointing US wage figures in the December employment situation report.
The quarterly-released Employment Cost Index, as we and many others have noted, is a more comprehensive measure of labour compensation growth — better reflecting overall compensation and, as a fixed-weight measure, adjusting for shifts in employment categories. And we knew the Q4 numbers would follow the December jobs report a few weeks later — though not, sadly, in time for the Fed’s meeting last week.
The latest ECI was released Friday morning, and three quick points follow. Read more
Sometimes the simplest explanation is the only one needed, and in economics it doesn’t get much simpler than supply and demand.
Competing reasons have been offered for the sustained, vigorous decline in 10-year and long-dated US Treasury yields despite the acceleration in the economic recovery since last spring. Most recently the sharp drop in yields has coincided with the stunning fall in oil and long-term inflation expectations, which boost real yields and thus make Treasuries more appealing. Read more
Today’s FOMC statement should be about as shocking as the ending of The Sixth Sense.
Wait, you were genuinely surprised that Bruce Willis was dead the whole time? Fine, about as shocking as the final scene of The Usual Suspects then. Read more
Some thoughts, musings, and simply fun items we’ve recently come across:
1) As of the start of this week, global non-energy equities have held up fine: Read more
The annual conference hosted by the American Economics Association offers so many panels and paper discussions, on such a wide variety of topics, that there is something for everyone during each two-hour slot of time.
Should one follow the crowd to Mankiw vs Piketty on the importance of r > g (which got colourful), or get funky and check out Experimental Finance and Neuroeconomics? Read more
Remember that we’ll be hosting a special edition of US Markets Live starting at 2:25pm EST. Join us here.
The highlights from the statement, which we’ll update as we make our way through it: Read more
Joseph and I will be kicking off at 2:25pm EST (7:25pm in London) at the usual place. We’ll have a few minutes to discuss the statement before the presser starts at 2:30pm.
Join us at the usual place! Read more
Have we been early or just wrong? Read more
Our pal Josh Brown has a hilarious post highlighting the pessimism bias in how the fall of oil prices has been discussed in the US:
This past June, crude oil prices were hitting highs above $110 a barrel and the narrative was that this was why stocks were selling off. The S&P 500 had a weekly correlation of .55 with oil, meanwhile, and had actually spent most of the year rising with it. So not only was the “story” of why stocks were dropping false, the data was as well. Read more
Back in 2011, inflation climbed above the Fed’s 2 per cent target, but the FOMC resisted the impulse to tighten monetary conditions. Long-run inflation expectations hadn’t risen to worrying levels, and Ben Bernanke perceived that a price spike led by oil was likely to be “transitory”.
No surprise there: he wrote the paper on this very topic. And he was proved right. Read more
A handy chart from BCA Research (click to embiggen):
The first thing to be said about the macroeconomic impact of Obama’s executive order on immigration is that it will be small but not trivial.
The second thing to be said is that although the impact will be small, it will also be positive. Read more
Split in half the six years from the start of the US recession at the end of 2007 through the end of last year, and consider them as a pair of three-year periods.
In the first period — from 2007 through 2010, and which we’ll refer to as the crisis years — wealth inequality in the US spiked while income inequality actually contracted quite aggressively, the latter a reversal of the pre-recession trend. “Crisis years” isn’t a perfect label, as the recession actually ended in mid-2009, but it’s good enough for our purposes here. Read more
Jason Furman chairs the president’s Council of Economic Advisors and therefore has an obvious incentive to present the Obama administration’s policy outcomes in the best light, but nonetheless this chart from his recent speech is striking:
The first streak: October marks the 49th consecutive month of positive US jobs creation, the longest such period since the second world war.
Superficially this sounds impressive, and very much a good thing. But it isn’t, really. Read more
FT Alphaville and the FT’s US markets team are hosting a night of drinks and trivia in New York on the evening of Wednesday, November 19th.
The last time we did this (in London), we grilled you on the eurozone sovereign debt crisis, the complexities of synthetic ETFs, seasonal adjustments in economic indicators, and other proudly nerdy topics. Read more
To our readers, thanks so much for subscribing to The Closer. This is the final daily email from FT Alphaville, but you can continue receiving expertly curated missives from the Financial Times via First FT. We encourage you to have a look and subscribe. Thanks again!
FURTHER FURTHER READING Read more
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:
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?
We had a chat with the FT’s US markets editor Mike MacKenzie about Wednesday’s FOMC statement. There were masks:
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
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
FURTHER FURTHER READING
- Why New Yorkers can’t find a taxi when it rains. Read more
Two sets of charts from BCA Research with unclear implications:
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. …
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