Displaying items by tag: employment

(New York)

The New York Times has published an interesting piece this week which argues that markets and investors are ignoring an ugly and disastrous reality: that the economy is suffering a huge and largely unprecedented collapse in demand. New data out of Europe and Japan, as well as US manufacturing demand, this week showed that demand fell sharply in May, a sharp contrast to the employment jump. The NYT argues that this systemic fall in demand will take time to play out, but that the huge decline in employment and change in behaviors will cause a rupture in demand that will play out over years.

FINSUM: The NYT piece is very bearish. We held off on covering it until new data was released overnight showing a big fall in demand.

(New York)

Jay Powell, head of the Fed, has been working on a year-long project to overhaul one of the Fed’s most important goals. That goal is full employment. The Fed only has two mandates, stable prices in the economy, and maximum employment. Yet the definition of maximum employment is now up for debate. At the core of the consideration is the idea that having a job is different than having a good job. The difference between the two means the Fed may use a different calculation for measuring employment. That potential change has huge implications, as it would likely lead to looser monetary policy both in the immediate future and further out.

FINSUM: We think there is a big difference between the quality of different jobs in the economy which needs to be accounted for by the Fed. The current way of measuring employment was designed when most jobs were permanent and full-time, but with the rise of the gig economy, measuring methods need to shift to account for the changing nature of the labor market.

(San Francisco)

One of the core tenants of US central banking is being shunned by Jay Powell’s Fed. Former central bank leadership had always taken the approach that tight labor markets posed a serious threat for higher inflation. However, Powell is stepping away from that view. Labor markets remain tight, with unemployment very low and strong job creation consistent. Yet, the Fed has completely stepped off the gas pedal on rate hikes, a position that runs counter to previous approaches.

FINSUM: At least in this cycle, the relationship between labor markets and inflation seems to be thoroughly broken. The reality is that no one can give a great answer as to why, but Powell’s policy nonetheless sticks to the idea that the link is severed.