All those points are mentioned (I wish there was harmonized version of the PCE). From "first principles" the Fed should not target any inflation measure! Target NGDP-LT
What policy instruments are used to manage NGDP-LT? [if there there is/is no NGDP futures market.]
What is the policy response to a large positive/negative, supply/demand, sector specific/uniform shock? Nine cases.
[This may appear confrontational, but I really just want to understand. They are the same questions I have been trying to understand about Sumner's view.]
I think the issue is that the ‘measure’ we’re using is fine (the inflation did occur so should be captured at some point). But we shouldn’t make policy decisions just because of a measure, if we know it’s inherent issues.
We have lots of people complaining about the cost of housing, and it is my perception that homelessness has risen for reasons related to higher costs of housing. To the extent that these things are true, it seems strange to not include housing costs in a price index.
Also, poll after poll shows public concerns over inflation. This suggests to me that CPI inflation at 3.5% over the last 18 months comparted to 2.0% over the 18 months before the pandemic reflects a high rate of inflation today that previously. I think the reason for that is if you look at the growth in weekly pay for HS dropouts (a measure of low wage work) you see that wages rose 19% in the three years before the pandemic and 17% in the last three years. When you adjust for inflation using the GDP deflator you get a 13% wage increase for before and no increase over the last 3 years. Using CPI the figures are 12% and -1%.
I think this data indicates that labor shortage at the bottom has been pushing up (nominal) market wages at a pretty constant rate, but inflation has eaten those gains since the pandemic while before it translated to real improvements.
What do you mean by "unit" value. Units of what? The units of the series I linked to is dollars per week per worker. If I divide the most recent value for HS dropouts by 40 hrs, I get just under $18. I note that my grandkids who work the sort of entry level fast food/sales jobs that you don't need a HS diploma for earn $12-13 starting out (1), after a year about $15 (1) after 10 years on the job about $22 (2). When I average these, I get $18. I looked up average wage for Walmart associates and its $18. So, this figure seems to check out as best as I can tell from a small sample. So, in what way is this figure not an estimate of the wage earned by HS dropouts?
All those points are mentioned (I wish there was harmonized version of the PCE). From "first principles" the Fed should not target any inflation measure! Target NGDP-LT
Should it be FNGDP-LT? [LT = long term?]
How should the NGDP-LT target rate be chosen?
What policy instruments are used to manage NGDP-LT? [if there there is/is no NGDP futures market.]
What is the policy response to a large positive/negative, supply/demand, sector specific/uniform shock? Nine cases.
[This may appear confrontational, but I really just want to understand. They are the same questions I have been trying to understand about Sumner's view.]
Some considerations here: https://thefaintofheart.wordpress.com/2014/07/23/it-plt-ngdp-lt-is-there-a-story/
The start level should a "considered choice".
Demand shocks, positivr or negative are usually Fed-induced.
"Look-through" supply shocks. Ignore sectoral specific shocks (just as Fed should ignore relative price changes
Y-o-y doesn't cut it.
I think the issue is that the ‘measure’ we’re using is fine (the inflation did occur so should be captured at some point). But we shouldn’t make policy decisions just because of a measure, if we know it’s inherent issues.
I wrote about measures and our focus on them without critically assessing what the measure is truly catching. https://www.nominalnews.com/p/dont-tie-yourself-to-a-number-data-measurement
We have lots of people complaining about the cost of housing, and it is my perception that homelessness has risen for reasons related to higher costs of housing. To the extent that these things are true, it seems strange to not include housing costs in a price index.
Also, poll after poll shows public concerns over inflation. This suggests to me that CPI inflation at 3.5% over the last 18 months comparted to 2.0% over the 18 months before the pandemic reflects a high rate of inflation today that previously. I think the reason for that is if you look at the growth in weekly pay for HS dropouts (a measure of low wage work) you see that wages rose 19% in the three years before the pandemic and 17% in the last three years. When you adjust for inflation using the GDP deflator you get a 13% wage increase for before and no increase over the last 3 years. Using CPI the figures are 12% and -1%.
I think this data indicates that labor shortage at the bottom has been pushing up (nominal) market wages at a pretty constant rate, but inflation has eaten those gains since the pandemic while before it translated to real improvements.
So yeah, inflation is still a problem.
https://mikealexander.substack.com/p/the-beveridge-curve-and-cultural#:~:text=Biden%20is%20getting,the%20late%20teens.
Let me point out that there are no wage indices on which to base these observations. BLS produces only unit value indices.
So what is this?
https://www.bls.gov/charts/usual-weekly-earnings/usual-weekly-earnings-over-time-by-education.htm"
A unit value series
???
What do you mean by "unit" value. Units of what? The units of the series I linked to is dollars per week per worker. If I divide the most recent value for HS dropouts by 40 hrs, I get just under $18. I note that my grandkids who work the sort of entry level fast food/sales jobs that you don't need a HS diploma for earn $12-13 starting out (1), after a year about $15 (1) after 10 years on the job about $22 (2). When I average these, I get $18. I looked up average wage for Walmart associates and its $18. So, this figure seems to check out as best as I can tell from a small sample. So, in what way is this figure not an estimate of the wage earned by HS dropouts?
Most people are fiscal hawks and believe pain is needed to bring inflation lower. Hence the belief that inflation can't come lower
Do you still comment on Scot Sumner? I have not noticed your name.
Very rarely
Err ... yes, but the Fed is not supposed to be paying attention to the CPI at all!
Can you do a Harmonised for the PCE
And doesn' the PCE already weight housing less than the CPI, yet it ticked Up in March?
Just random thoughts!
From first principles, what inflation measure SHOULD the Fed use?