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April 3, 2012

Latest Posts from Economist's View


Latest Posts from Economist's View


Posted: 03 Apr 2012 01:20 AM PDT
Via the Liberty Street Economics blog at the New York Fed:
How Low Will the Unemployment Rate Go?, by Jonathan McCarthy, Simon Potter, and Ayşegül Şahin, FRB NY Liberty Street Blog: ...In this post, we run ... simulations ... to see what happens to the unemployment rate if the current expansion lasts as long as any of the three most recent expansions. ... The simulated unemployment paths based on the three different scenarios are shown in the chart below. ...
Three-Alt-Paths
Posted: 03 Apr 2012 12:06 AM PDT
Posted: 02 Apr 2012 08:28 PM PDT
I'm not sure I see the connection, but when you blog they ask you to be in the course catalog:
UOCatalog
I really wish I'd brought a smaller computer along when they shot the picture. That thing is huge. If the message is supposed to be "look how connected we are here at the UO," that computer sends the opposite message.
Posted: 02 Apr 2012 02:17 PM PDT
This is part of a longer essay on wage growth during recessions from a San Francisco Fed Economic Letter:
Measuring nominal wage rigidities
Figure 2
Distribution of observed nominal wage changes
Distribution of observed nominal wage changes
Sources: Current Population Survey (CPS) and authors calculations.
Researchers generally point to asymmetries in the distribution of observed wage changes among individual workers as evidence of nominal wage rigidities. Figure 2 plots an example of this type of wage change distribution in 2011. The dashed black line shows a symmetric normal distribution. The blue bars plot the actual distribution of nominal wages.
The figure's most striking feature is the blue bar that spikes at zero, indicating the large number of workers who report no change in wages over a year. This spike stands out in the distribution of actual wage changes, suggesting that, rather than cutting pay, employers simply kept wages fixed over the year. This is supported by the large gap to the left of zero between the actual distribution of wage changes and the dashed black line representing the normal distribution. This gap suggests that the spike at zero is made up mostly of workers whose wages otherwise would have been cut.
Posted: 02 Apr 2012 10:26 AM PDT
Some papers from the NBER that caught my interest:
How Frequent Are Small Price Changes?, by Martin S. Eichenbaum, Nir Jaimovich, Sergio Rebelo and Josephine Smith, NBER Working Paper No. 17956, March 2012: Recent empirical work suggests that small price changes are relatively common. These findings have been used to evaluate competing theories of nominal price rigidities. In this paper we use micro data from the consumer price index and a scanner data set from a national supermarket chain to reassess the importance of small price changes. We argue that the vast majority of these changes are due to measurement error. We conclude that small price changes are too small a phenomenon for macro modelers to be concerned with. [open link]
Liquidity, Business Cycles, and Monetary Policy, by Nobuhiro Kiyotaki and John Moore, NBER Working Paper No. 17934, March 2012: The paper presents a model of a monetary economy where there are differences in liquidity across assets. Money circulates because it is more liquid than other assets, not because it has any special function. There is a spectrum of returns on assets, reflecting their differences in liquidity. The model is used, first, to investigate how aggregate activity and asset prices fluctuate with shocks to productivity and liquidity; second, to examine what role government policy might have through open market operations that change the mix of assets held by the private sector. With its emphasis on liquidity rather than sticky prices, the model harks back to an earlier interpretation of Keynes (1936), following Tobin (1969). [open link]
Who Suffers During Recessions, by? Hilary W. Hoynes, Douglas L. Miller and Jessamyn Schaller, NBER Working Paper No. 17951, March 2012: In this paper we examine how business cycles affect labor market outcomes in the United States. We conduct a detailed analysis of how cycles affect outcomes differentially across persons of differing age, education, race, and gender, and we compare the cyclical sensitivity during the Great Recession to that in the early 1980s recession. We present raw tabulations and estimate a state panel data model that leverages variation across US states in the timing and severity of business cycles. We find that the impacts of the Great Recession are not uniform across demographic groups and have been felt most strongly for men, black and Hispanic workers, youth, and low education workers. These dramatic differences in the cyclicality across demographic groups are remarkably stable across three decades of time and throughout recessionary periods and expansionary periods. For the 2007 recession, these differences are largely explained by differences in exposure to cycles across industry-occupation employment. [open link]
Posted: 02 Apr 2012 09:29 AM PDT
Via the Dallas Fed, once the volatile prices have been stripped out there's no evidence of inflation. If anything, inflation has been falling in recent months (before objecting that these measures do not capture actual changes in the cost of living for households, please see here):
Trimmed Mean PCE Inflation Rate, FRB Dallas: February 2012 The trimmed mean PCE inflation rate is an alternative measure of core inflation in the price index for personal consumption expenditures (PCE). It is calculated by staff at the Dallas Fed, using data from the Bureau of Economic Analysis (BEA). ...
The trimmed mean PCE inflation rate for February was an annualized 1.4 percent. According to the BEA, the overall PCE inflation rate for February was 3.8 percent, annualized, while the inflation rate for PCE excluding food and energy was 1.6 percent.
The tables below present data on the trimmed mean PCE inflation rate and, for comparison, the overall PCE inflation and the inflation rate for PCE excluding food and energy. The tables give annualized one-month, six-month and 12-month inflation rates.
One-month PCE inflation, annual rate

Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
PCE
2.0
0.1
1.1
0.8
2.7
3.8
PCE excluding food & energy
0.0
1.4
1.7
1.8
2.7
1.6
Trimmed mean PCE
1.4
1.7
2.2
1.8
1.8
1.4

Six-month PCE inflation, annual rate

Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
PCE
2.4
1.7
1.6
2.0
1.7
1.7
PCE excluding food & energy
2.0
1.8
1.6
1.6
1.6
1.5
Trimmed mean PCE
2.0
1.8
1.9
1.9
1.8
1.7

12-month PCE inflation

Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
PCE
2.9
2.7
2.7
2.5
2.4
2.3
PCE excluding food & energy
1.6
1.7
1.8
1.9
1.9
1.9
Trimmed mean PCE
1.7
1.8
1.9
1.9
1.9
1.9
NOTE: These data are subject to revision ...
James Bullard is trying to make the case that domestic inflation depends upon the global output gap, and that gap looks inflationary, but I just don't see evidence for an emerging inflation problem in the tables. For the last four months or so, inflation has been stable or falling depending on the measure you choose, and that's not what you'd expect if there was increasing price pressure due to either global or domestic forces.

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