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60 matches for " labor costs":
In one line: Ouch, but not as bad as it looks.
In one line: Spectacular but unsustainable.
In one line: Productivity growth has peaked; expect a clear H1 slowdown.
Fed Chair Yellen said something which sounded odd, at first, in her Q&A at the Senate Banking Committee last Tuesday. It is "not clear" she argued, that the rate of growth of wages has a "direct impact on inflation".
We are a bit more optimistic than the consensus on the question of second quarter productivity growth, but the data are so unreliable and erratic that the difference between our 1.2% forecast and the 0.7% consensus estimate doesn't mean much.
The two key planks of the argument that a substantial easing of fiscal policy won't be inflationary are that labor participation will be dragged higher, limiting the decline in the unemployment rate, while productivity growth will rebound, so unit labor costs will remain under control.
On the heels of yesterday's benign Q3 employment costs data--wages rebounded but benefit costs slowed, and a 2.9% year-over-year rate is unthreatening--today brings the first estimates of productivity growth and unit labor costs.
The continued modest rate of increase in unit labor costs makes it hard to worry much about the near-term outlook for core inflation.
The Fed pretty clearly wanted to tell markets yesterday that inflation is likely to nudge above the target over the next few months, but that this will not prompt any sort of knee-jerk policy response beyond the continued "gradual" tightening.
The number of coronavirus cases continues to increase, but we're expecting to see signs that the number of new cases is peaking within the next two to three weeks.
Today's October ADP measure of private payrolls likely will overshoot Friday's official number.
The fundamentals underpinning our forecast of solid first half growth in consumers' spending remain robust.
The unexpectedly robust 128K increase in October payrolls--about 175K when the GM strikers are added back in--and the 98K aggregate upward revision to August and September change our picture of the labor market in the late summer and early fall.
It doesn'tt matter if third quarter GDP growth is revised up a couple of tenths in today's third estimate of the data, in line with the consensus forecast.
The newly-revised data on capital goods orders, released on Friday, support our view that sustained strength in business capex remains a good bet for this year.
Our composite index of employment indicators, based on survey data and the official JOLTS report, looks ahead about three months.
Everyone needs to take a deep breath: This is not 1930, and Smoot-Hawley all over again.
Halfway through the third quarter, we have no objection to the idea that GDP growth likely will exceed 2% for the third straight quarter.
One of the arguments we hear in favor of an endless Fed pause--in other words, the cyclical tightening is over--is that GDP growth is set to slow markedly this year, to only 2% or so.
The knee-jerk reaction of the stock market to the unexpectedly high hourly earnings growth number for January was predicated on two connected ideas.
Productivity growth reached the dizzy heights of 1.8% year-over-year in the second quarter, following a couple of hefty quarter-on-quarter increases, averaging 2.9%.
The jobless claims numbers today likely will mark the end of the calm before the storm effect, even though the data cover the week ended September 1, and Harvey hit on August 26.
One bad month proves nothing, but our first chart shows that October's auto sales numbers were awful, dropping unexpectedly to a six-month low.
Markets clearly love the idea that the "Phase One" trade deal with China will be signed soon, at a location apparently still subject to haggling between the parties.
The headline NFIB index of small business activity and sentiment in July likely will be little changed from June--we expect a half-point dip, while the consensus forecast is for a repeat of June's 94.5--but what we really care about is the capex intentions componen
We have two competing explanations for the unexpected leap in November payrolls. First, it was a fluke, so it will either be revised down substantially, or will be followed by a hefty downside correction in December.
We're expecting to learn this morning that productivity rose by a respectable 1.7% in the year to the fourth quarter, the best performance in nearly four years.
The startling November international trade numbers, released yesterday, greatly improve the chance that the fourth quarter saw a third straight quarter of 3%- plus GDP growth.
Productivity likely rose by 1.7% last year, the best performance since 2010.
October payrolls were stronger than we expected, rising 128K, despite a 46K hit from the GM strike.
The 6.4-point rebound in the May ISM non-manufacturing employment index, to a very high 57.8, supports our view that summer payroll growth will be strong. On the face of it, the survey is consistent with job gains in excess of 300K, as our first chart shows, but that's very unlikely to happen.
We were happy to see the small increase in the March ISM manufacturing index yesterday, following better news from China's PMIs, but none of these reports constitute definitive evidence that the manufacturing slowdown is over.
We raised our forecast for today's January payroll number after the ADP report, to 200K from 160K.
The simultaneous decline in both ISM indexes was a key factor driving markets to anticipate last week's Fed easing.
A casual glance at our first chart, which shows the headline and core inflation rates, might lead you to think that our fears for next year are overdone. Core inflation rose rapidly from a low of 1.6% in January 2015 to 2.3% in February this year, but since then it has bounced around a range from 2.1% to 2.3%.
The FOMC did mostly what was expected yesterday, though we were a bit surprised that the single rate hike previously expected for next year has been abandoned.
Monthly core CPI prints of 0.3% are unusual; June's was the first since January 2018, so it requires investigation.
Following our note yesterday about upside risks to wage growth and the question of how the Fed will respond, given their sensitivity to labor cost-push inflation risk in the past, we want to address a question raised by readers.
The reported rebound in January retail sales was welcome, but the overshoot to consensus was matched, more or less, by the unexpected downward revisions to the December numbers.
A reader pointed out Friday that the standard measurement of the impact of the weather on January payrolls--the number of people unable to work due to the weather, less the long-term average--likely overstated the boost from the extremely mild temperatures.
We see clear upside risk to the inflation data due before the FOMC announcement, from three main sources.
Slowly but surely, it is becoming respectable to argue that central bank policy in the developed world is part of the problem of slow growth, not the solution. We have worried for some time that the signal sent by ZIRP--that the economy is in terrible shape--is more than offsetting the cash-flow gains to borrowers.
The monthly survey of small businesses conducted by the National Federation of Independent Business is quite sensitive to short-term movements in the stock market, so we're expecting an increase in the November reading, due today.
Our base case forecast for today's July core CPI is that the remarkable and unexpected run of weak numbers, shown in our first chart, is set to come to an end, with a reversion to the prior 0.2% trend.
Today's November retail sales numbers are something of a wild card, given the absence of reliable indicators of the strength of sales over the Thanksgiving weekend, and the difficulty of seasonally adjusting the data for a holiday which falls on a different date this year.
For the past six years, the PCE measure of core inflation has undershot the CPI version. The average spread between the two year-over-year rates since January 2011 has been 0.3 percentage points, and as far as we can tell most observers expect it to be little changed for the foreseeable future.
The underlying trend in the core CPI is rising by just under 0.2% per month, so that has to be the starting point for our January forecast.
The Eurozone's external surplus weakened at the start of Q3.
In the wake of last week's rate increase, the fed funds future puts the chance of another rise in September at just 16%. After hikes in December, March and June, we think the Fed is trying to tell us something about their intention to keep going; this is not 2015 or 2016, when the Fed happily accepted any excuse not to do what it had said it would do.
The surge in July core retail sales was flattered by the impact of the Amazon Prime Event, which helped drive a 2.8% leap in sales at nonstore retailers.
Some shoes never drop. But it would be unwise to assume that the steep plunge in manufacturing output apparently signalled by the ISM manufacturing index won't happen, just because the hard data recently have been better than the survey implied.
The near-term U.S. inflation outlook is benign, but it is not without risk.
In recent years we have argued consistently that investors and the commentariat overstate the importance of the dollar as a driver of U.S. inflation. Only about 15% of the core CPI is meaningfully affected by shifts in the value of the dollar, because the index is dominated by domestic non-tradable services.
Our default position for core durable goods orders over the next few months is that they will fall, sharply.
As a general rule, faster productivity growth is always good news.
Jim Bullard, the St. Louis Fed president, said last week that Phillips Curve effects in the U.S. are "weak", and that nominal wage growth is not a good predictor of future inflation.
Yesterday's data were second-tier in the eyes of the markets, but not, perhaps in the eyes of the Fed. The continued surge in job openings, which reached a 14-year high in December, means that the Beveridge Curve--which links the number of job openings to the unemployment rate--shows no signs at all of returning to normal.
We continue to expect core CPI inflation to drift up further over the course of this year, partly because of adverse base effects running through November, but it's hard to expect a serious acceleration in the monthly run rate when the rate of increase of unit labor costs is so low.
The key data originally scheduled for today--ADP employment and the ISM non-manufacturing survey, and the revised Q3 productivity and unit labor costs-- have been pushed to Thursday because the federal government will be closed for the National Day of Mourning for president George H. W. Bush.
In one line: Tariffs, labor costs, and tight rental home supply pushing up core inflation, plus some noise.
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