Its a scenario unfolding professor. It depends on other blocks unfolding, like a miss in the current AI capex, that looks to me the only game in town currently. Households spending is beginning to slow down as well in the high frequency data. Savings are at a historical low, and real wages growth are trending toward zero. NGDP is trending upward, but in an unhealthy way, with real GDP maintaining a low growth rate of 2% and the deflator increasing to 4.5% per year. The result is a decrease in purchasing power, even though the booming stock market softens financial conditions and accentuates the K-shaped economy. I can anticipate a crack in the current framework, but this is still a lower-probability scenario, in which the central bank's next move would be a cut rather than a hike. Let's see how the next few quarters play out.
The wealth effect has been denigrated. Regulation T margins should be raised. We didn't have a recession in 1966 even though the FED raised required reserves on time deposits while lowering Reg. Q ceilings.
Waller, Williams, and Logan seem to agree. They “believe the Fed can keep unloading bonds even when officials cut interest rates at some future date.”
Not sure how consistently falling growth of AHE and flat/falling labour force fits with this scenario. Nominal income growth must be getting quite slow.
If average hourly earnings growth is decelerating and the labour force is flat or shrinking, then labour income growth is slowing — and labour income is roughly 55 to 60 percent of nominal GDP. So you are right that this is a real tension with a 6-7 percent NGDP growth.
Three things reconcile it, and they matter in different ways.
The labor share is falling. Total nominal income is compensation plus profits plus proprietors' income. The AI capex wave is precisely the sort of episode in which output and profits grow faster than wages. So compensation can decelerate while nominal GDP accelerates — the gap shows up in the capital share. That's not a puzzle; it's the mechanism.
Flat labor force cuts the other way. If nominal spending is growing 6-7 percent while the workforce isn't growing, more of that spending has to land on prices rather than output. A shrinking labor force steepens the supply curve. It's a reason to expect more inflation from a given nominal demand, not less.
Where I'd concede ground: if compensation growth keeps falling and NGDP doesn't follow within a couple of quarters, one of the two series is telling me something I don't like. That's a genuine test, and it's worth watching rather than explaining away.
Its a scenario unfolding professor. It depends on other blocks unfolding, like a miss in the current AI capex, that looks to me the only game in town currently. Households spending is beginning to slow down as well in the high frequency data. Savings are at a historical low, and real wages growth are trending toward zero. NGDP is trending upward, but in an unhealthy way, with real GDP maintaining a low growth rate of 2% and the deflator increasing to 4.5% per year. The result is a decrease in purchasing power, even though the booming stock market softens financial conditions and accentuates the K-shaped economy. I can anticipate a crack in the current framework, but this is still a lower-probability scenario, in which the central bank's next move would be a cut rather than a hike. Let's see how the next few quarters play out.
We really need that market in Tilllionths. _It_ would not be based on hopes.
The wealth effect has been denigrated. Regulation T margins should be raised. We didn't have a recession in 1966 even though the FED raised required reserves on time deposits while lowering Reg. Q ceilings.
Waller, Williams, and Logan seem to agree. They “believe the Fed can keep unloading bonds even when officials cut interest rates at some future date.”
Not sure how consistently falling growth of AHE and flat/falling labour force fits with this scenario. Nominal income growth must be getting quite slow.
If average hourly earnings growth is decelerating and the labour force is flat or shrinking, then labour income growth is slowing — and labour income is roughly 55 to 60 percent of nominal GDP. So you are right that this is a real tension with a 6-7 percent NGDP growth.
Three things reconcile it, and they matter in different ways.
The labor share is falling. Total nominal income is compensation plus profits plus proprietors' income. The AI capex wave is precisely the sort of episode in which output and profits grow faster than wages. So compensation can decelerate while nominal GDP accelerates — the gap shows up in the capital share. That's not a puzzle; it's the mechanism.
Flat labor force cuts the other way. If nominal spending is growing 6-7 percent while the workforce isn't growing, more of that spending has to land on prices rather than output. A shrinking labor force steepens the supply curve. It's a reason to expect more inflation from a given nominal demand, not less.
Where I'd concede ground: if compensation growth keeps falling and NGDP doesn't follow within a couple of quarters, one of the two series is telling me something I don't like. That's a genuine test, and it's worth watching rather than explaining away.