Having fallen to 5.5 per cent, the US unemployment rate now touches the high end of the central tendency range of the Fed’s long-run estimate — its proxy for the non-accelerating rate inflation rate of unemployment. Read more
A few years ago Capital Economics made a strong case that the UK output gap — or how much slack there is in the economy — was being grossly under estimated by one and all. Their note prompted a spirited debate about the importance of output gaps in ascertaining correct monetary and fiscal policy.
Well, a similar case is now being made for the Eurozone by David Mackie and team at JP Morgan.
It’s an absolutely fascinating note, which argues above all that the ECB and the European Commission are wrong to think that the Euro area output gap is modest or that the growing unemployment rate is structural, given there is so little wage pressure in the region. Read more
Deficit continues to be a dirty word in the US (despite *those* findings about the holier-than-thou Clinton surpluses not being all that great), whilst the idea that the US is an unsustainable deficit spender increasingly propagates in mainstream circles.
But, as Ethan Harris at Bank of America Merrill Lynch shows on Monday, nothing could be further from the truth. In reality the US deficit is contracting at a relatively speedy rate: Read more
The IMF’s latest World Economic Outlook has made some very interesting observations about the changing nature and growing stability of inflation.
Most notable is the following chart: