Methods
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:
Just how tight is the labor market? It depends on which measurement you pick! Some economists look to the unemployment rate, or to its difference from some estimated, but not measured, “natural level” to try to assess whether the labor market and economy are in equilibrium (we are not fans
How do we evaluate model choice under uncertainty as data points are still coming in? If one model implies prescriptions with direct, catastrophic welfare costs that are empirically difficult to reverse, should the consequences affect how much weight we give the model?
This is the second piece of our vacancies series. In this piece, we refute specific vacancy-backed arguments that the Federal Reserve will need to engineer a recession in order to bring inflation under control.
The Federal Reserve has given job vacancy data center stage in assessing the strength of the labor market. The theoretical and empirical issues with vacancies data show that this is a mistake.
When we disaggregate the aggregate inflation statistics, we find that the sources of high inflation in the US and Europe are different.
Many economists and commentators disfavor reasoning about inflation from individual price increases, yet still use "core inflation" metrics, which embed reasoning about inflation from individual price increases.
