Inflation Analysis
Quantitative research that disaggregates price data to identify which goods and services are driving inflation, and uncovering the specific supply-side disruptions that are behind the increase. This detailed analysis allows us to predict inflation trajectories with remarkable accuracy - our forecasts have outperformed predictions from several prominent financial institutions. We design targeted responses that address root causes rather than symptoms, enabling policymakers to combat rising prices without sacrificing the employment gains that benefit American workers.
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There will be a time and a place for a more thorough retrospective of this still-unfolding (dis)inflationary episode, but it would be premature to make strong declarations at this juncture. We should all be thrilled by the past 6-7 months of inflation data, but it is ultimately only 6-7
One argument that the labor market is to blame for high inflation has been the significant rise in unit labor costs during the post-pandemic recovery. The most recent example comes from the ECB:
Throughout the pandemic recovery, high inflation has been attributed to tight labor markets and high wage growth. Fed officials have, for months, maintained that the labor market needs to soften in order to bring down inflation. Commentators have pointed to high wage growth as a source of cost-push inflation: My
We reconstruct the White House’s core non-housing services wage index. We walk through the construction of this series, which is available for premium donors.
Bottom Line: The consumer has proven to be resilient in its spending patterns in a number of respects, but real food consumption has not. Given the correction in domestic food consumption, and the potential peaking out of 'food at home' inflation, food services inflation has plausible potential to
The economy, as we all know, is mainly made up of goods and services that people buy and sell. This is an intuitive divide: when you pay for something – whether you are a business, household, or government – it’s either an object or an action, and its prices are based
The Fed is worried that inflation will continue until wage growth comes down or unemployment ticks up based on the continued strength in “Core PCE Services ex-Housing”. But the Fed is wrong to be so confident.
For those who have followed my Twitter feed, you will know that I have long pointed out that "narrow vs broad-based," "transitory vs persistent," and "supply vs demand" are not three ways of saying the same thing.