Posted by: Michael Mandel on August 19
I figured I'd do the previous post a different way. Today's PPI report contains data on both goods and services. The only one that anyone ever quotes is the goods side of the economy. But here's both on the same chart. The top line is the year over year change in the PPI for finished goods, less food and energy. The bottom line is the year over year change in the PPI for the 'traditional service industries.'
Based on this chart, is it more correct to say that a)inflation is accelerating or b) inflation is decelerating?
(you can tell that I've spent too much time finishing up my textbook).
Just for fun, here's another chart. This is the year over year change in hourly earnings, based on all employees (the new index from the BLS). I don't see any inflation here either.
Posted by: Michael Mandel on August 19
Yes, I know the headlines say "Wholesale prices rising at fastest pace since 1981." That's from Associated Press. All the other online news service--CNN, the NYT, Reuters, Bloomberg--have roughly the same take on this morning's PPI numbers. I'm sure that BW.com has picked up at least one of these reports as well.
But frankly, the inflation-scaremongers are living in the 1950s. The PPI number that they are reporting consists only of goods, in an economy increasingly dominated by services. And services inflation is falling, not accelerating. Here's the chart, which shows year over year change in the producer prices for the service sector.
This is where the real action is happening. In fact, there is a squeeze on prices going on, not an acceleration in inflation.
(traditional service industries include everything from healthcare to information to finance to accomodations. They do not include retailing and wholesaling, or transportation).
[Changed title of post as of 3PM]
Posted by: Michael Mandel on August 12
...deep on the Jersey shore, putting fixes onto the final pages of my textbook ("Economics:The Basics" -- very very soon to appear from McGraw-Hill). For a break, I walk along the beach once a day, and read about the John Edwards sex scandal. Back on Monday!
Posted by: Michael Mandel on August 01
The labor market report this morning shows that private sector jobs are down by 418K over the past year. That doesn't seem so bad. However, history suggests that the revisions downward could be quite large.
Let's look back at the last recession in 2001. The July 2001 employment report, released August 3, 2001, showed that private employment had risen by 369K over the previous year. According to the latest revision, the actual change in private jobs from July 2000 to July 2001 was a decline of 398K jobs--almost an 800K swing.
I'm not saying that the same thing will happen again...but the job numbers have a real tendency to be overstated when recessions are starting.
Posted by: Michael Mandel on August 01
This morning's employment report shows the unemployment rate now up to 5.7%, while the private sector lost 76K jobs. Outside of health and social assistance, the loss was 110K.
Now, the unemployment rate never gets revised (except for some small fiddles for seasonal adjustment). The job number does get revised, and is likely to be revised down.
But the real question now is how long the weakness in the labor market is likely to last. After the 2001 recession, private jobs kept falling and didn't turn up until 2003. That was a heck of a long time. In large part, that was the result of a surge of outsourcing to China and other countries, which drained away any strength in the labor market recovery.
The problem this time will be the weakness in consumer demand, so that we won't get any bounceback in retailing or any consumer-related areas.
I'm not sure I know the answer yet...it's something I'm going to keep an eye on.
BTW...I'm still thinking about whether it's the right time to buy in the stock market
