The Fed and Inflation
As we contemplate the outlook for monetary policy, the facts regarding the CPI are: For the fifth month in a row, increases in the CPI for shelter comprise more than 75% of the monthly increase in the core CPI (see…
Brace for a Reversal in Wages
It is highly likely that Average Hourly Earnings (wages) to be published in the Employment Situation report for February will show a reversal in direction, i.e., an increase in year-on-year wages which had declined in nine of the past…
More Inflation Hysteria
The core PCE deflator, which is the price index favored by the Fed, increased by 0.6% in January (see Chart 1). The comparison to the same month last year rose to 4.7% - the equity market sold off sharply because…
The CPI – Light at the end of the Tunnel
Like many other commentators, we have highlighted the fact that the BLS methodology means that there is a lag between the time that changes in rents actually occur versus when those changes are reflected in the price index for rent…
Wages – Continued Good News
The Employment Cost Index (ECI) for private industry wages and salaries for the 12 months6. ended December 2022 confirms two facts: (1) the ECI peaked as of June 2022 at 5.7% year-on-year; it continues to decline, reaching 5.1% in…
Core Inflation to Decline to Fed Target by Year-end
Another month of favorable inflation news has resulted in an increase in the number of converts to the opinion that peak inflation is behind us. There are a few, however, who continue to warn that the current drop is temporary…
Better News on Wages
Our conclusion that the November uptick in wages was a temporary detour from wage disinflation was vindicated on two counts. First, the monthly increase was revised down from 0.6% to 0.4% (see Chart 1). That meant that the percentage comparison…
Wage Hysteria
Knee-jerk reactions based on one data point are becoming routine. The latest example is November average hourly earnings (AHE), which resulted in several negative comments that wages were out of control which would result in aggressive Fed tightening. For the…
Very Good Inflation News
The markets finally realized that the worst news regarding inflation is behind us. The CPI for all items increased by only 0.4% in October and the year-ago change fell to 7.7% which is 1.4 percentage points below the June peak…
The Labor Market Takes a Licking and Keeps on Ticking
Those of us who are old enough to remember when tv was free and one paid for music might recall the title of this report as being the slogan for Timex wrist-watches, i.e., to have the capacity to absorb stress,…