BRIEFLY NOTED: For 2023-04-28 Fr
Nominal wage growth continues strong; Robert Reich reflects; Romer & Romer on applied Fed-watching; generative AI, First Republic, the mouse strikes back, and the Taylor rule...
ONE IMAGE: Nominal Wage Growth Continued Strong in þe First Quarter:
ONE AUDIO: Robert Reich & Hamish McKenzie:
“Pressing the reveal key for societ”y:
MUST-READ: Fed-Watching:
Watching what the Federal Reserve says, and does, and taking it seriously—that has truly proved to be the Royal Road to understanding a huge amount about macroeconomics and monetary policy:
Christina D. Romer & David H. Romer: Does Monetary Policy Matter? The Narrative Approach after 35 Years: ‘The narrative approach to macroeconomic identification uses qualitative sources, such as newspapers or government records, to provide information that can help establish causal relationships. This paper discusses the requirements for rigorous narrative analysis using fresh research on the impact of monetary policy as the focal application. We read the historical minutes and transcripts of Federal Reserve policymaking meetings to identify significant contractionary and expansionary changes in monetary policy not taken in response to current or prospective developments in real activity for the period 1946 to 2016. We find that such monetary shocks have large and significant effects on unemployment, output, and inflation in the expected directions. Analysis of available policy records suggests that a contractionary monetary shock likely occurred in 2022. Based on the empirical estimates of the effect of previous shocks, one would expect substantial negative impacts on real GDP and inflation in 2023 and 2024.
Very Briefly Noted:
Tobias Burns: Consumer prices rose slightly in March as annual inflation plunged: ‘The Federal Reserve’s preferred measure of inflation fell to a 4.2 percent annual increase…. The personal consumption expenditures… price index rose 0.1 percent on the month…. The “core”… 0.3 percent…
Cliff Asness & al.(2010): Open Letter to Ben Bernanke: ‘The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment…. Quantitative easing by the Fed is neither warranted nor helpful…
Joseph E. Stiglitz: No Confidence in the Fed: ‘The aftershocks of the collapse of Silicon Valley Bank… are still reverberating…. Federal Reserve… assure[s] the public that the US banking system is sound… [but] Jerome Powell told Congress the same thing just days before SVB’s collapse…
Brian Albrecht: Constrained Policy Recommendations: ‘Explicit economic models offer a unique advantage in forcing us to recognize the constraints… explicitly. They force the users to do a proper accounting…
Ana Monteiro: US Import Gain Means Flexport Sees No Recession for Some Months: ‘A steady increase in consumption and signs that US imports are set to rebound mean the world’s biggest economy isn’t set for a recession… according to forecasts released this week by supply-chain technology firm Flexport…
Shai Bernstein & al.: The Contribution of High-Skilled Immigrants to Innovation in the United States: ‘Immigrant inventors create especially strong positive externalities on… collaborators, while natives have a much weaker impact. … Immigrants are responsible for 36% of aggregate innovation, two-thirds of which is due to their innovation externalities on their native-born collaborators…
Ben Thompson: An Interview with Chip War Author Chris Miller: ‘Why the USSR failed to develop a chip industry… globalization… a feature of chip-making… Taiwan and South Korean dominance… civilian and military applications, whether or not China can catch up… structural forces versus the Great Man…
Ken White: True Threats And American Cultural Gulfs: ‘We don’t live in a single unified culture…. The cultural context of the Canadian mother and the Texas prosecutors and judge was radically different than the cultural context of a too-online teenager. They have no shared “reasonable person”…
Nick Whitaker & Works in Progress: Introducing Gentle Density: ‘A new series from Works in Progress…. Samuel Hughes stars… Dense, human-centered neighborhoods… Park Slope, Brooklyn, with architectural historian Francis Morrone…
Duncan Black: Where Did All The Bad Takes Come From?: ‘There was a proliferation of bad takes and similar starting some time in 2021…. It didn't really occur to me that “some asshole billionaire is throwing lots of money around.” That was, of course, what was happening…
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Erik Brynjolfsson, Danielle Li, & Lindsey Raymond: Generative AI at Work: ‘We study the staggered introduction of a generative AI-based conversational assistant using data from 5,000 customer support agents. Access to the tool increases productivity, as measured by issues resolved per hour, by 14 percent on average, with the greatest impact on novice and low-skilled workers, and minimal impact on experienced and highly skilled workers. We provide suggestive evidence that the AI model disseminates the potentially tacit knowledge of more able workers and helps newer workers move down the experience curve. In addition, we show that AI assistance improves customer sentiment, reduces requests for managerial intervention, and improves employee retention…
Matthew Levine: First Republic Is in Limbo: ‘The two options with First Republic Bank are pretty much: a. Do something, or b. Do nothing. “Do something” is obviously bad… a hole of tens of billions of dollars…. The consequences of doing something are obvious and bad; the consequences of doing nothing are a bit more diffuse…. There are legal limits on the Fed’s ability to keep propping up First Republic…. Economically the difference between “the banking system reports billions of dollars of losses today and then normal profits afterwards” and “the banking system bleeds these losses into lower accounting profits for the next few years” is not that great, and the former is more clarifying…
Michael Hiltzik: Disney lawsuit shows Ron DeSantis at his bullying, bumbling worst: ‘No one needs to pay hard-earned cash to be entertained by a Disney product anymore. Not as of Wednesday, when the giant entertainment conglomerate filed a federal lawsuit to quash the efforts of Florida Gov. Ron DeSantis to punish it for speaking out against DeSantis’ “Don’t Say Gay” law.
The 77-page legal complaint, filed in federal court in Gainesville, Fla., aims to stop what it terms “a targeted campaign of government retaliation — orchestrated at every step by Gov. DeSantis as punishment for Disney’s protected speech”…
Suchit Arora: ‘Bingo! on each point [about inflation] you've made, especially the one about the "optionality" in the Taylor Rule. (If I may say so, at my own expense, you have underpriced your blog!). Another thing, if I may, about the Taylor Rule. Unemployment can go up, say from 3.5% to 4.5%, in three ways. 1) Layoffs 2) Improved participation rate 3) Mix of (1) and (2). If you set aside the inflation segment of the Rule for the moment, it would recommend only one course of action for all. But the underlying economy is different in each scenario. An economy where unemployment is up due to mass layoffs is different from one in which unemployment is up because people are drawn into the labor force when jobs become easier to find. They are counted as unemployed during search…
Romer and Romer: "Many years ago, someone referred to what we do as the “literary” approach. It was clear they didn’t mean it as a compliment." Whoever said that doesn't know what scientific means and probably thinks that it is the same as scientistic. That person should be made to lick the inside door handle of a local Burger King Washroom and then wash their mouth with soap. After that they should be sent to Deirdre McCloskey for a nice tongue lashing.
Is the employment cost index a price index? Same job over time wage? or is t affected by shifts in which jobs are costed?