Friday , November 16 2018
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Jared Bernstein: On the economy

Energy prices and real wage trends

I’ve got a piece up in today’s WaPo on some of the economic and social implications of the recent tanking in oil prices. Obviously, such prices jump around, and OPEC is talking about reigning in supplies, so the negative trend could reverse. But the points of my piece are a) low oil may be a boon for consumers at the pump, but it’s inconsistent with sustainable growth, and b) especially post-midterms, it’s time to start talking about taxing carbon. I suggest raising the gas tax as a good...

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Does faster wage growth imply passthrough to faster price growth? Not necessarily. (Though see update at the end.)

Introduction As long as we’re sitting here on pins and needles re the midterms, let’s distract ourselves with some analysis of the state of the wage/price passthrough. Though not quite at the level of flipping the House, this is important information regarding inflation, interest rates, and Fed policy. As the job market has improved, wage growth has picked up. Last week, two closely watched hourly wage series—the Employment Cost Index and the Establishment Survey wage—hit 3 percent growth on...

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Another strong jobs report yields critical insights

The nation’s payrolls added 250,000 jobs last month, the unemployment rate held steady at a 49-year low, the closely watched labor force participation rate increased, and year-over-year wage growth broke 3 percent for the first time since 2009. Given that inflation has been running a bit short of 2.5 percent, this means workers are finally seeing real gains in the buying power of their paychecks. Wages were up 3.1 percent for all private sector workers and 3.2 percent for middle-wage workers,...

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Wage roundup: Amplifying new work on an important topic.

There’s been some interesting wage analysis in recent days and the findings are worth collecting and amplifying. Some of what follows is technical, but the punchlines are straightforward: –As I’ve always stressed up in these parts, tight labor markets are especially beneficial to lower-paid workers. –Even so, wage inequality remains alive, well, and connected to the recent boom in corporate profitability. –In earlier periods, unemployment rates as low today’s would have generated faster wage...

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An important correction: The U.S. does have a carbon tax. But it needs some serious attention.

I’m am avid listener to the NY Times podcast, The Daily, and I much enjoyed, if that’s the right word given the difficult topic, last Friday’s show on the urgency of pushing back on climate change. The show included an insightful discussion with recent Nobel laureate William Nordhaus on the importance of taxing carbon. But somewhere in there (not in the Nordhaus section), it was asserted that the U.S. federal government does not tax carbon. In fact, such a tax exists: it’s the federal gas...

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What’s wrong with upside-down Keynesianism?

Introduction I’ve got a piece in today’s WaPo focusing on how the tax cuts have broken an important, fiscal linkage between budget deficits and the strength of the economy. “When we close on full economic capacity, as is currently the case, tax revenues as a share of the economy should significantly rise, and deficits should fall. Instead, revenues have come way down, and deficits have climbed. Why is the deficit 17 percent higher than last year, especially when the economy is growing...

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What does “full employment” mean in the era of anchored inflation expectations?

There’s a new analysis out by a group of economists from the Goldman Sachs economic research team that raises the question of what the concept of full employment means in an era when the central bank expends significant and successful efforts to anchor inflationary expectations. The paper (which lives behind a paywall) uses four distinct techniques to to derive different estimates of the natural rate of unemployment, aka u*, aka the lowest unemployment rate consistent with stable inflation....

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Unemployment hits a 49 year low as jobs/wages stay on solid, hot-but-not-too-hot, trend.

The nation’s payrolls grew by 134,000 jobs last month and the unemployment rate fell to a 49-year low of 3.7 percent. While the jobs number came in well below expectations, that should not be considered bad news. First, Hurricane Florence may have slightly dampened monthly payrolls (see below discussion of the impact of hurricanes on the jobs data). But more importantly, upward revisions for the prior two months’ data reveal a trend over the past three months of 190,000 jobs per month, a...

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The USMCA is not a free trade deal. That’s because there are no free trade deals.

I’m doing my best to work through the text of the new NAFTA, now called YMCA, I mean CAMUS, no…wait…USMCA! Trade agreements make for a dense read…here’s a snippet from the Ag chapter, one of the 34 chapters, followed by “annexes” and “side letters”: “Parties recognize that under Article XI:2(a) of the GATT 1994, a Party may temporarily apply an export prohibition or restriction that is otherwise prohibited under Article XI:1 of the GATT 1994 on foodstuffs to prevent or relieve a critical...

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Min wg panel model

I’ve got a piece in the WaPo today that presents findings from the model described in more detail here. The model is a panel of the 50 states plus DC from 1979 to 2017 of wage, labor market, and minimum wage data. The results derive from fixed effects, panel regressions of the change in the log of the state real, 10th percentile wage on state unemployment and the change in the minimum wage variable. For this variable, I used the ratio of the state minimum wage in state i, year t, divided by...

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