Sectoral Divergences and Real Wages

With yesterday’s employment situation release (discussed in this post), we have data employment by sectors, as well as corresponding average hourly earnings. We don’t have the CPI for that month, but using nowcasts, we can guess what is likely to be happening to real wages.

Figure 1: Manufacturing employment (blue, left log scale), and leisure and hospitality services (red, right log scale), both in 000’s, s.a. Source: BLS.

Leisure and hospitality services employment was flattening out even before omicron’s impact could have been felt. That being said, this sector’s employment preliminary estimates have been subject to (relatively) big revisions: 0.38 percentage points, compared to 0.06 points for manufacturing, for instance and 0.09 for all of nonfarm payroll employment.

Average hourly earnings rose rapidly in December. The evolution of inflation adjusted hourly earnings has varied by sector. This is shown in Figure 2.

Figure 2: Average hourly earnings in all private nonfarm payroll employment (blue), in manufacturing (red) and leisure and hospitality services (teal), for production and nonsupervisory workers, all in 2020$, s.a. December CPI used is Cleveland Fed nowcasted value. NBER defined recession dates peak-to-trough shaded gray Source: BLS, Cleveland Fed (accessed 1/8), and author’s calculations.

Real wages rose in total nonfarm payroll and hospitality and leisure, while flat in manufacturing.

Torsten Slok observes:

[W]age growth at the industry level [leads to] the conclusion is that wage inflation is particularly high in contact-intensive occupations, suggesting that the virus and labor shortages in face-to-face businesses is the key reason why wage growth is so strong.

The bottom line is that the virus continues to hold back labor supply in contact-intensive industries, and that is a key reason why there is so much upward pressure on wages. There is little the Fed can do about this other than to quickly cool down aggregate demand to avoid a situation where inflation spirals out of control. The question for investors is if the Fed is moving fast enough.


The series shown in Figure 2 are not using composition adjusted wages, however. Goldman Sachs indicates their (nominal) “composition-corrected wage tracker stands at +4.1% in Q4 (vs. +4.0% in Q3)”. This compares to the +6.9% (and +6.7% in Q3) implied by the BLS overall nonfarm payroll employment series (AHETPI via FRED). Inflation-adjusted composition-adjusted wages would then be falling given CPI’s evolution. That’s not good news for returns to labor; on the other hand it takes away from the wage-price spiral narrative.


90 thoughts on “Sectoral Divergences and Real Wages

  1. rsm

    Since (can you correct me if I’m wrong?) all proofs of rational pricing fail, why not do something like what Turkey’s currently doing, by paying inflation as interest on dollar deposits? If you fully index using standing unlimited central bank currency swap facilities as an exchange backstop, why is nominal inflation a constraint?

    1. macroduck

      Your argument is essentially to pick an unconventional approach to monetary policy over a conventional approach because…? “Proofs” (whatever those are) aren’t a reason.

      And the only concern you have is the exchange rate, so you want to use swaps to manipulate exchange rates? You do know that swaps are executed by agreement with another central bank? The Fed cannot unilaterally execute swaps?

  2. pgl

    “The bottom line is that the virus continues to hold back labor supply in contact-intensive industries, and that is a key reason why there is so much upward pressure on wages.”

    Aren’t higher real wages in these sectors something progressives have been calling for? Of course we can lament the decline in manufacturer real wages. But could it be that workers avoiding the contract-intensive sectors have migrated to the other sectors. If we get this virus under control, there will be more workers in the contact-intensive sectors and maybe an inward shift of the labor supply curve for the other sectors.

  3. JohnH

    We already have a strong indication of what’s happening with real hourly earnings: “Real average hourly earnings decreased to $11.13 in November 2021, the lowest since February 2020.”

    What’s particularly interesting is that this news has not been picked up by the media. Apparently they are content with their current, deceptive narrative that wages are surging, workers are making out like bandits…expect lots of price increases.

    It’s also interesting is that—per a Google search—prominent economists’ response has been silence. I mean, I understand Democrats not wanting to rain on Biden’s parade. And I expect Republicans to fully exploit the issue at a time of their choosing. But why are economists ignoring important news that run counter to the misleading narrative of the mainstream media?


      That is a distortion caused by lockdown measures. Show 2021 to 2022, then you reverse that. John, try harder and better.

      1. JohnH

        Sorry, Bott. Real wages “rose” during COVID asa result of lockdown measures and a change in workforce composition. This BLS report is the first to show that real hourly earnings have fallen BELOW their March 2020 level, despite all the hoopla about extremely tight labor markets driving higher wages.

        There has also been some yammering in the media, wondering why so many Americans are so unhappy with the economy. But when the BLS publishes data suggesting a logical answer, nobody notices!!! The media likes to peddle its narrative that the economy is doing great!

        1. pgl

          Nobody notices? Gee JohnH – try reading what Menzie wrote in this post. Or are you saying he is a nobody?

    2. pgl

      If you can’t find economists talking about real wages, your Google is broken. Lots of economists are discussing this issue including our host. Oh wait – Menzie is not “prominent”. Oh wait – he does not use your exact phrases and it is not on the NYTimes front page every day.

      OH NO! Prominent economists do not care about people. They are not as bright as you.

      Or is it that JohnH is nothing more than a whiney little liar? That’s it! Find some other soap box to spew your usual worthless garbage.

      1. JohnH

        The fact that lots of people talk about real wages in no way suggests that the their comments are a timely response to the most current information.

        1. pgl

          These rants of yours are both dishonest and stupid. Stop wasting our time with this childish garbage.

        2. pgl

          Oh – they did not comment exactly at 8:31 am Friday morning. Come on dude – even your own dog is laughing at you.

    3. JohnH

      Amidst all the hoopla about how great workers were doing during the pandemic, another report from EPI was also generally ignored:

      “Newly available wage data from the Social Security Administration allow us to analyze wage trends for the top 1.0% and other very high earners as well as for the bottom 90% during 2020. The upward distribution of wages from the bottom 90% to the top 1.0% that was evident over the period from 1979 to 2019 was especially strong in the 2020 pandemic year, yielding historically high wage levels and shares of all wages for the top 1.0% and 0.1%. Correspondingly, the share of wages earned by the bottom 95% fell in 2020.”

      Nice of the 1% to drive up average wages, isn’t? It sure makes the media’s job of peddling a deceptive narrative a lot easier, doesn’t it? But how to explain so much discontent with the economy? Must be Trump supporters…

      1. Macroduck

        “Ignored” must not mean what you think it means.

        There is really hypocrisy in your assertions. You want to hold economists or journalists or “people” to some standard of attention and honesty that you’ve made up, while paying no attention and being dishonest. Seriously, Johnny, you don’t know enough to be in this kind of discussion. You elbow your way in the discussion with bombastic nonsense. You’re a waste of space.

  4. Barkley Rosser

    This is blatantly off-topic, but I know now that elsewhere I have made noises about what is coming out from Russian language sources on Kazakhstan and Let a little out, I should probably let more out. So here are some items either not in western media at all or just barely so, with a lot still really very unclear there.

    The conflicts in Kazakhstan have opened up a series of struggles within the ruling elites. Crucial but barely-reported on players are members of former top leader Nursultan Nazarbaev’s family, all corruptly wealthy and holding a variety of important positions, and now asserting themselves against each other and others. This includes six nephews and three daughters. It was long thought Nazarbaev, who was the leader of the Communist Party in Kazakhstan in the late Soviet period, would select one of his daughters as his successor, but the conflicts over who led him to go outside the family for Tokayev, who was once ambassador to China and also to the UN, where he for a period held a high position under the Secretary-General there.

    One of the nephews, based in Almaty, has a very strong position in the oil industry and is apparently asserting himself. He is deeply tied to a Korean operator named Kim who converted to Islam and apparently has played a key role in managing corrupt Swiss bank accounts for top figures. The third daughter of Nazarbaev bought the house in London on Baker Street that Sherlock Holmes supposedly lived in.

    Another issue blowing up that is not being discussed at all is that of ethnic conflicts in Kaxakhstan. Part of Putin’s interest in intervening is that there is a large Russian population there, about 20% of the population, mostly in the north, the site of Khrushchev’s “Virgin Lands” program, with a lot of Ukrainians there also. The new capital, formerly Atana and now Nur-Sultan, yes, named after the old leader, is there. But even aside from Slavs versus Central Asians there are also major conflicts between Central Asian groups there. While Kazakhs are the most numerous, there are also many Uighurs, with Kazakhstan bordering China on Xinjiang, another reason China is being very quiet about all this. Apparently the top head of security who was just removed is an ethnic Uighur. There is also a major group of Chechens living there, and in 1987 there was a major outbreak of violent conflict between them and the Kazakhs. All this stuff is blowing up now.

    Putin, or at least some of his flunkies, are making demands on the Kazakhs. The leader of RT has issued a demand that to get the Russian troops, which have already arrived along with others from the other four members of the CSTO, Armenia, Belarus, Kyrgyzstan, and Tajikistan, Two of these demands are that Kazakhstan recognize Russia’s annexation of Crimea, and the other is that they go back to using the Cyrillic alphabet. The Kazakhs shifted in 2017 to using the Latin alphabet, with Putin upset at the time about that, and with current President Tokayev apparently the major figure behind that, former ambassador to China and the UN, he, although he would not become president until 2019. A lot of games going on there.

    1. JohnH

      It seems that the attempted coup/regime change/color revolution has likely been thwarted. Karim Masimov, Hunter Biden’s business partner, has been arrested. Another oligarch has fled to Kiev. It would have been a real feather in Biden’s cap if he could have pulled this off right before consultations on security assurances for Russia were to begin…

      1. pgl

        So the attempt to overthrow this corrupt government is Biden trying to impose his own corrupt interests? Is your real name Rudy Giuliani?

      2. Barkley Rosser


        “Business parner”? Sorry, total bs. Hunter Biden did meet with him once in 2014 when he had just been reappointed prime minister for the second time, out in 2016. They did not make any deals. There is nothing there.

        As it is, Massimov is a sign of just how complicated this is and how little we know. He is ethnically Uighur, as I previously noted here. He has held many positions. He has especially close links to China and taught law at Wuhan University during 1988-89. Really. He has been removed for allegedly being part of an attempted coup. WaPo is now reporting that Tokayev is trying to use the current troubles to assert his position against former leader, Nursultan Nazarbaev, whom he also removed from his position as Head of the National Security Council, although Nazarbaev has not been arrested. This connection looks more important than that Massimov once met with Hunter Biden back in 2014, a meeting that seems to have gone nowhere.

        JohnH, you seem to be a sucker for the absolutely most insane propaganda coming out of Russian sources. You have been the one actually claiming NATO has been trying to put missiles in Ukraine, thus justifying Russia piling up troops on Ukraine’s border. Sorry, but this is utterly false. You are as big of a sucker as those claiming the 2020 election was fraudulent, or even worse than that. You should be ashamed of yourself foe spouting this total garbage.

        1. pgl

          Based on JohnH’s comments on this as well as on Ukraine, he seems to be another one of those Putin puppets.

      3. Barkley Rosser


        I am adding this after having read Moses Herzog’s truly and utterly nauseating comment here that I officially puke all over. You seriously owe both me and my wife an apology, Moses. You really have gone into a deep deep toilet with this crap.

        But, as for you, completely out of it sucker, JohnH, let me remind you of the most important matter in all this Russia/Ukraine business, which is also partly relevant to the Kazakhkstan situation. In 2014, V.V. Putin (let me go moronic Moses here) VIOLATED THE BUDAPEST ACCORDS BY CONQUERING AND ANNEXING CRIMEA!

        Let me repeat that in just as loud a way. IN 2014 V.V. PUTIN VIOLATED THE BUDAPEST ACCORDS BY CONQUERING AND ANNEXING CRIMEA! The weak response by signarories US and UK to this blatant violation of Ukraine’s territorial integrity was and is totally shameful, even as nobody aside from me brings it up.

        And, of course, this violation renders all of Putin’s demands and claims regarding Ukraine right now, alll of his blatant lies, some of which you fall for like a gigantic rock. are completely without a shred of justification. He is the one who has been aggressively violating international accords and murdering people. Shane on you.

        1. JohnH

          Rosser…sorry if I offended you by citing an American newspaper that shows a photo originally published by Kazakhstani anti-corruption website in 2019. It is public knowledge that Hunter Biden had a seat on the board of Burisma, Ukraine’s biggest energy company. It came with a ver generous compensation package. It is also public knowledge that Hunter Biden served on the Chairman’s Advisory Board for the National Democratic Institute, one of the “democracy promotion” non-profits that took over regime change initiatives after the CIA was banned from staging coups. Given Hunter Biden’s mediocre credentials, it is highly likely that Hunter Biden role was at the very least to serve as Joe Biden’s eyes and ears in both of these positions. It would not be at all surprising if he exercised a similar role in Kazakhstan.

          You might also be interested in reading Glenn Greenwald’s excellent reporting in the news media’s strange lack of curiosity about Hunter Biden’s dealings and the appearance of corruption that surrounded them.

          1. Barkley Rosser


            You are indeed way off the deep end here. I am not going to comment on Glenn Greenwald. He has had zero credibility on almost anything he has put out since his one genuine coup with the Snowden material. Since then he has become a flunky of the US far right wing, putting out useful but almost uniformly false propaganda for them.

            I am also not going to comment on this lab you are all worked up about. I know nothing about it, except that I think it and its status has a big zero to do with the current events in Kazakhstan, which at the moment are hard to determine, given that the internet is shut down and the main airport in Almaty is closed. Government says things “stabilized,” which may be, with 164 dead, 16 of thise law enforcement people. Beyond that, a lot of matters have conflicting reports coming out about them that I am not in a position to adjudicate, even with my better than most sources, indeed, with those sources simply adding to the confusion.

            Regarding Hunter Biden, what on earth makes you think Joe would use him for anything, much less as “eyes and ears.” Is he using him for anything now? No, and certainly not the way Trump used his daughter and son-in-law to run all kinds of things at the White House even though they could not pass a security clearance. Hunter Biden has long been a troubled and drug addicted person who his parents worry about. They want him to do well, but no way in heck would they put any responsibility on his to do anything. Most reports have it that Joe was unhappy when Hunter got himself on the board of Burisma, obviously a cushy deal, but which had nothing to do with Joe, who was demanding that the then Ukrainian government clean up corruption, including that associated with Burisma, with there being no evidence that Hunter was involved with any of that. You must be insance, JohnH, if you think Joe Biden would rely on his seriously disturbed son to do anything. He clearly only hopes he does well and stays out of trouble. Sheesh.

            Of course, if/when GOP takes control of the House, we shall get to have endless investigations of Hunter, this stuff you have brought up, JohnH, which amounts to a big zero in the end, like Benghazi proved to be, and then the saga of his laptop, not to mention all of his sexual and drug related escapades. Oh, Fox News will have great fun with it, and I gather their new big star, “humorist” Gutfe;ld ,makes most of his jokes about Hunter Biden. No topic is to obscure or unrelated not to bring some wisecrack about Joe Biden’s distrubed and troubled son into it for a nasty wisecrack. Oh, I can hardly wait, and you will be all in for it, apparently. Sick.

        2. JohnH

          An interesting read on what the US has been doing in Kazakhstan…and how the sands may have shifted under the CIA’s feet now that the country’s intelligence chiefs have been arrested.

          “ Sadly, it is a familiar story. The Kazakh elites are notoriously corrupt even by Central Asian standards and the parasitic elites have preferred to keep their loot in safe havens in the western world . Unsurprisingly, they are hopelessly compromised to the US intelligence. It’s as simple as that.”

          It will be interesting if news reports emerge documenting the types of military biological research that’s been funded by the US. My guess is that it won’t look good for the world’s foremost promoter of human rights…

          1. pgl

            Do you even have a clue who M. K. Bhadrekumar even is? I didn’t think so. Maybe you can tell everyone he has his own blog where he opines on a lot of things. That way people might read what else he has said and whether they trust him or not.

            Of course you personally have read anything else he wrote – you were just Googling for anything – credible or not – that fits your latest spin.

          2. pgl

            You did not relate the whole story (again) as in:

            “These biological research facilities were originally envisaged as part of the so-called Nunn-Lugar Biological Threat Reduction Program to prevent the proliferation of expertise, materials, equipment and technologies that could contribute to the development of biological weapons.”

            Yea the very next sentence was:

            “But Moscow suspected that the exact opposite was happening”

            Like we should just trust every one of Putin’s utterances! PLEASE!

          3. JohnH

            pgl…I have had Bhadrakumar’s site bookmarked for years.As a senior, retired Indian diplomat, he offers unique and extremely well informed point of view.

            Pgl might start by spelling his name right!

          4. pgl

            The latest from JohnH is that some dude who is a diplomat related to India is his go to guy for developments in Eastern Europe. Could someone buy this troll a map?

          5. paddy kivlin

            nice link.

            ‘indian punchline’ [mr. Bhadrakumar] a source of many things not allowed in the us press.

            he also writes about ukraine.

            links to Matlock’s Ukraine: Tragedy of a Nation Divided

            is rebutted by the atlantic council (pnac version of nato uber ales) that admits the use plots for ukraine is a “nation building” project, while tossing dubious aspersions on Matlock.

            who wants another afghanistan!

            biden another democrat lusting for a big war, like fdr, lbj, clinton, obama?

          6. Barkley Rosser


            Biden is “lusting after war”??? Are you out of your mind? Where did you come up with that hallucination? The guy just pulled out of Afghanistan to enormous amounts of criticism from GOPs, even as this followed through on the surrender agreement that Trump made with the Taliban while leaving the then Afghan government out of the negotiation in Doha. Gag.

            It is not Biden who has been piling up troops on the Ukraine border, not has he done anything at all about anything in Kazakhtan, despite vague efforts to somehow blame him or the US for the uprisings there. The warmonger is Putin, not Biden.

            And, again, as for this lab, whatever it does, it most certainly has nothing to do with the current upheavals in Kazakhstan, much less Putin’a aggressive actions in Ukraine and elsewhere. This link is completely irrelevant. Have those burning city halls and seizing airports in Kazakhstan been demanding the removal or anything about this lab? Not that I have heard. All that has been reported have been demands to cap energy prices (which has been done) and to remove Nazarbaev from any positions (which has also been done) as well as to more substantially change the government. Despite the claims by Tokayev that this was driven by “foreign terrorists,” thus justifying the entry of CSTO troops, especially Russian ones, no substantial evidence has been provided of that. This looks to be a domestic uprising driven by purely domestic motives, and certainly nothing to do with this lab.

            Which lying show on Fox News are you getting this lunacy from? Or maybe this is too much even for them and you are getting it from somewhere else, plenty of crazy stuff flying around, or maybe you just made it up yourself out of thin air?

          7. JohnH

            pgl must think that all those military biological labs are just sitting there on Russia’s border to make candy canes for Christmas.

            What a naïf!

          8. Barkley Rosser


            You are getting more and more out of it. Just where do you think this lab is that you are so excited about that no party involved in any of this gives a phoo about except your former Indian diplomat? It is near Almaty, Kazakhstan’s largest city, which is in far southeastern Kazakhstan.

            Kazakhstan is very large, second largest in land area of the former Soviet republics (after Russia), ninth largest in land area in the world. Almaty is close to the Chinese border, but it is over 1000 miles from the Russian border. And there is no evidence it has anything to do with bioweapons.

            Try to keep yourself from needing to be taken to a padded cell, please.

          9. pgl

            January 11, 2022 at 10:56 am

            Barkley thinks paddy has lost his mind. Take a look at this comment. Putin has hired two puppets – paddy and JohnH. Of course both of these clowns are hoping Putin annexes Ukraine as well.

          10. JohnH

            Rosser: the US has not just one but seven of these labs in Kazakhstan. The one outside Almaty is just the tip of the iceberg. Some are exclusively funded by DOD.

          11. Barkley Rosser


            Yikes. You are getting yet further out. Kazakhstan does have 7 labs in its Biology and Biotechnology Institute, but none of these are funded by the US.

            There is this one lab in or near Almaty that is funded by the US. It also happens to have both Russian and Chinese scientists working at it as well as American and Kazakh ones. It deals with preventing the spread of infectious diseases. The major reason it has been subject to rumors is that apparently during the Soviet era it was involved in bioweapons research. A story on it is that the US DOD has funded it partly to keep the Kazakh scientists who were working there occupied doing something other than making bioweapons. Do you really think that Russians, Americans, Chinese, and Kazakhs would all be working on bioweapons together in a lab in Kazakhstan?

            There is a report from TASS in Russia that protestors briefly entered this lab and that pathogens were released. The Kazakh government is denying this. It does not seem to be the case that any of the CSTO forces from outside Kazakhstan have gone to this lab.

          12. Barkley Rosser

            So, trying again with a better link, more important than this lab in Almaty is the matter of what alphabet Kazakhstan uses, which Putin has made an issue of, demanding the Kazakhs go back to using the Cyrllic alphabet they used prior to 2017 when they switched to the Latin one. This is an issue across Central Asia of political, historical, and cultural significance. I have put a long post on Econospeak discussing the history and background and details of this ongoing issue most in the West know nothing about


        3. Barkley Rosser

          One more tidbit from my well-informed source that has not shown up in any western media reports I am aware of.

          Apparently Kazakhstan President Tokayev back in the late Soviet period spent serious time at the KGB’s higher academy. So, while he may have done things Putin does not like, such as change the alphabet from Cyrillic to Latin and failed to recognize Russia’s annexation of Crimea, the two of them have a lot more in common than is widely recognized or known..

          1. paddy kivlin


            gish galloper

            my mind is intact… your’s is suspect the way you go on and on!


          2. Barkley Rosser


            I just happen to know a lot about this, which you clearly do not. Want to actually provide any evidence of me being wrong about a single factual assertion I have made here? no, you can’t.

          3. Barkley Rosser

            While JohnH and paddy think that somehow that lab far away from the Russian border and never mentioned by anybody out of Russia is a big deal, what is a big deal is the alphabet issue, which was brought up by the RT head as a demand by Putin. I know that you guys have no idea what this is about or why it is important, but I have put up a fairly long post about this matter with all its historical and cultural background on Econospeak at .

    2. Moses HErzog

      @ Professor Barkley Rosser
      I don’t doubt, that many of the details you said there are TRUE, and “not being talked enough by western media”. OK, Professor Rosser, that’s the nicest you’ll get from me. But here is the problem, with part of what you said [edited – MDC]. That is, that some how murder, war, bloodshed, is “OK” or “Acceptable” if “Country X” has a large number of ethnic Russians on its Eastern border. And I’m “oh so sorry” to tell you [edited – MDC], that narrative is unacceptable to me.

      1. Barkley Rosser


        Um, I am not sure quite what you think I am supporting here. I have been trying to let people know what is going on in Russian language sources that is not being reported in western media. Indeed, I was doing this in anticipation of you in particular wanting to know “the inside story” since you demanded I tell you the one about Crimea, which I did, and you never thanked me or even commented on it. I note that I have made it clear I have no idea which of these things is true, if any of them, and have indeed made it clear we still do not know what is going on. Lots of conflicting stories are appearing in the western media, quite aside from all this stuff in the Russian language media, which indeed I am getting from my wife, who also does not know what to believe.

        I can assure you I am not at all interested in justifying anybody killing anybody. My biggest worry right now is that it seems that Putin somehow thinks his movement of troops into Kazakhstan is a sign of his strength and power and gives him a stronger hand in dealing with Ukraine and in the upcoming negotiations over Ukraine. I am worried that he is in a bubble believing his own lies about there being no Ukrainian culture, etx. I am worried that he may be more inclined to invade Ukraine as a result of all this, with all the wild stories flying around in Russia.

        If somehow you think that I or my wife are supporting any “murder, war, bloodshed,” then you are a complete and total moron, Moses. We do not, and do not try to pretend that we do. You have been reasonable and supportive during her illness, but if you try to cook up some disgusting lie because I am letting people here know what is being said on Russian language sources, then you can just go burn in hell. That is how bad it will be. Got it?

      2. Menzie Chinn Post author

        Moses Herzog: I really don’t think he was saying it was acceptable. He was forwarded an explanation why and how Putin was trying to foment trouble, I thought.

        1. Barkley Rosser


          Thank you.

          Moses, I retract my curse on you. I actually think both you and CoRev are fundamentally well-intentioned people, even if both of you get off on pushing all sorts of messed up baloney at times. In any case, on this matter you were/are waaaay off and also waaaaay over a line you do not want to be over. And, for the record, my wife and I do not agree on all of these matters, although I am not going to get into any specifics of that.

          A real bottom line here, Moses, for future reference, which I think you ought to be able to figure out, is you can go after me all you want. But if you go after my wife you will be in very deep trouble with me. Given all that you have been told, I would think you would be able to figure that one out.

        2. Moses Herzog

          @ Menzie
          I probably stated that a little too strongly, and for that I apologize. I thought Professor Rosser’s comment had a touch of rationalization to it, which I found distasteful at the very least. But that very well may have been a mistake in perception on my part. I am sorry I stated it this strongly. It probably was an unfair comment on my part. So I regret that aspect of it.

  5. joseph

    pgl: “Aren’t higher real wages in these sectors something progressives have been calling for?”

    Exactly. Which is why the Fed shouldn’t bow to all the hawks baying about a few months of inflation. We’ve had 14 years of below target inflation suppressing wages and there was nobody screaming about it. Why listen to them now?

    And by the way, Powell needs to put his foot down and expel Vice Chair Richard Clarida from the next Fed meeting. Economists are forever scolding the hoi polloi that the Fed needs to be an independent authority. But with great power comes great responsibility. These unelected Fed members are accountable to no one. They cannot be allowed to use insider information for self-enrichment. The Fed must have absolute zero tolerance for corruption. If they can’t live up to to that standard, I say burn the Fed to the ground and spread the ashes. You can’t simultaneously argue for Fed independence and allow unaccountable corruption.

    1. Barkley Rosser

      It certainly does look that Clarida has stepped way over the ethical line in his financial shenanigans. He should resign.

    2. joseph

      He didn’t just step over an ethical line. He committed a crime and should go to prison. Anything less is a farce — white collar privilege.

      Clarida’s term ends at the end of January so Powell may think he can just let this pass. That would be a grave mistake and permanently damage the Federal Reserve’s credibility as an institution the public should trust.

  6. ltr

    January 9, 2022

    Chinese mainland reports 165 new COVID-19 cases

    The Chinese mainland recorded 165 confirmed COVID-19 cases on Saturday, with 92 linked to local transmissions and 73 from overseas, data from the National Health Commission showed on Sunday.

    A total of 46 new asymptomatic cases were also recorded, and 675 asymptomatic patients remain under medical observation.

    Confirmed cases on the Chinese mainland now total 103,619, with the death toll remaining unchanged at 4,636 since January last year.

    Chinese mainland new locally transmitted cases

    Chinese mainland new imported cases

    Chinese mainland new asymptomatic cases

  7. pgl

    I posted this insightful Sept. 28, 2020 discussion of the semiconductor sector ala Chad Bown a while back:

    I decided to repost it again in light of the usual stupidity from know it all JohnH who is worried that if China takes over Taiwan = we are dead when it comes to semiconductor. Now TSMC is an incredible profitable contract manufacturer which Bown notes. Of course TSMC’s tells its shareholders in their Annual Report that they do not design their chips – they make them on behalf of companies like Samsung and Intel.

    But JohnH is convinced that TSMC designs the high end chips. No – they make them using other firms specifications. That is what contract manufacturing means. But did JohnH actually read TSMC’s Annual Report? Of course not. Did he bother to read the above link which is very informative? Of course not.

    But JohnH is now a self styled expert as he read some Bloomberg article? Damn – the stupidity burns!

    1. JohnH

      pgl misses the point yet again!

      The semiconductor “shortage is brought about because of the lack of foundry options for standard and advanced semiconductor manufacturing. Taiwan-based TSMC has had the clear lead for several years, and if you want a product on leading-edge process, your only option was TSMC. Samsung kept pace, but they hit some snags with their 10nm and 8nm product which led some of their customers to go to TSMC.

      TSMC is not a leading edge semiconductor foundry monopoly yet. However, we are seeing a glimpse of what the world may look like if TSMC is the only foundry that has a multi-year advantage on leading-edge process technology. “

      Get it now pgl. TSMC ihas a near monopoly on leading edge semiconductors. The brilliant strategy [guffaw, guffaw] of razing them to cripple China would also cripple the US, which also relies on them.

      pgl can be SO obtuse!

      1. pgl

        Wow – so many words which all amount to gibberish. Yes – he finally got TSMC is a contract manufacturer who does not design anything. Like it cannot be replaced. Hey JohnH – buy a damn dictionary as you are using terms that you do not understand.

        1. JohnH

          Yeah…Europe got rebuilt after WWII, too. It took years. That’s also how long it takes Intel to build a new microprocessor factory.

          In the meantime, pgl just assumes that the US could somehow get by with no TSMC semiconductors for years, when just a shortage during the pandemic caused a significant disruption.

          What an idiot!

          1. pgl

            WWII? You are just praying for Xi to take over Taiwan. Yea – that would be a hit to the semiconductor market but come on dude – contract manufacturers can be replaced especially since all of their engineers would likely move here anyway.

            Think about it – most of those iPhones are assembled by Foxconn which on paper is a Taiwanese multinational. Of course you would not know this as you are too stupid to read their Annual Report but most of its factories are located on mainland China. So Xi could shut down iPhone production in a New York minute without waging war.

            But wait – do you have a clue how smart phones are even made? I did not think so.

      2. pgl

        That Fortune discussion was pretty good but you clearly do not get the topic you raised. What it said was that TSMC owns process IP (not product IP as you tried to argue) and has a lot of production capacity in Taiwan. Now you thesis is that when China invades Taiwan – this all disappears. May be so but the process IP is already in the US (TSMC has a factory here) and their engineers will likely move anyway. And this current increase in chip demand has lead Samsung and certain US firms to increase their production capabilities.

        I guess the recent dynamics of this sector is something Mr. JohnH Magoo cannot see. But as Macroduck has often noted you are a blind squirrel.

        Look – you need to stop as you are only proving the obvious – you know NOTHING. Nothing except how to be the grand carnival barker.

      3. pgl

        Did you bother to read the close of this Forbes discussion?

        “Semiconductor foundries are not startup opportunities. Therefore, the US government’s only options to support US-based semiconductor manufacturing are Intel and Global Foundries. Intel has a new CEO in Pat Gelsinger, who is one of the smartest people I have met. He is very aware of this dilemma and while he has not laid out his plan for Intel yet, I suspect it will be to expand their foundry processes to keep make them highly competitive with TSMC and Samsung.
        However, the US government needs to see Intel as a crown jewel in the United States supply chain and Intel may need some serious support in terms of official US policy and investments to stay competitive. Given this reality, both short and long-term, the industry will only have a few viable foundries supporting the growing demand and need for leading-edge semiconductors. The fundamental point that needs to be addressed in the long-term is how to keep foundry competition alive. I believe Intel is critical to that future, which is why the industry needs to be concerned with Intel’s future whether companies buy chips from Intel or not.”

        It sounds like your Forbes guru is doing a bit of lobbying for Intel. Are you also lobbying for Intel? JohnH turns out to be a corporate lackey after all!

        Of course this all began with your justification for Xi invading Taiwan, which of course you claimed would hurt the US even more than China. Something tells me that Intel isn’t exactly worried about this prospect. Which might explain why you are fanning the flames for this potential invasion!

        1. JohnH

          How many years do you think it will take to bring Gelsinger’s still-to-be-formulated plans to fruition?

          Razing TSMC is simply not a viable strategic option for the foreseeable future, no matter how much BS pgl throws against the wall to see if any sticks.

    2. JohnH

      BTW, pgl, TSMC is going to raise prices 20% this year.

      It’s what monopolists do. [just making their little contribution to inflation, that’s all!]

      1. pgl

        ‘TSMC is not a leading edge semiconductor foundry monopoly yet’. Your words dumba$$. Maybe you did not notice but other contract manufacturers are getting into this game all the time. Did you even bother to read Chad Bown’s discussion? Apparently not.

        Come on dude – you have embarrassed your mom enough already.

        1. JohnH

          Pgl didn’t notice that Samsung, which is all that stands in the way of TSMC’s monopoly, has had some hiccups trying to keep up with TSMC.

          If it was that easy to compete with TSMC, others would not have conceded the market to TSMC.

          Basically pgl stands by his preposterous defense of the notion that it’s a brilliant idea to potentially raze TSMC to get China, no matter that it would shoot the US in the foot, too. And it is strange that he hasn’t noticed the havoc that just a TSMC semiconductor shortage has caused! It’s just an indication of the havoc in store for the US if TSMC were razed. Yet pgl thinks it’s an idea worth pursuing!!!

          With crazy thinking like this, pgl must of been part of the inner circle advising the US to get into all those pointless and futile wars over the past half century.

          1. pgl

            Samsung cannot keep up with TSMC? Hey moron – who does the product IP development? Hint, hint – not a company that has a business model being nothing more than a contract manufacturer. Oh wait – you have no idea what these words even mean!

            It is like Apple is making a BIG mistake outsourcing smart phone production to a contract manufacturer called Foxconn. Pay $260 for the phone and sell it for $1100. Apple is going bankrupt in your book!

          2. pgl

            “With crazy thinking like this, pgl must of been part of the inner circle advising the US to get into all those pointless and futile wars over the past half century.”

            I’m not the one fanning the flames for one tyrant to wage war to annex some small nation. No JohnH is the Russian/Chinese version of Dick Cheney!

      2. pgl

        BTW – the semiconductor sector expects worldwide sales to be $800 billion a year by 2028. TSMC may have $50 billion in annual revenue as of its latest Annual Report (which you clearly have not read) but Intel and the semiconductor division of Samsung Electronics both have $80 billion in Annual Sales. The latter two do some of their own manufacturing but the big bucks are in designing semiconductors. But how would JohnH know as he has never read an Annual Report in his little life.

        Chad Bown gets all of this but of course our supposed expert in everything didn’t read that post from Bown that I noted. Had our supposed expert in everything bothered to read Bown he would have noted two key things: (1) TSMC does not design products as its role is being a contract manufacturer (which is what foundry means BTW); and (2) there are other contract manufacturers entering the market.

        Of course any one who gets basic microeconomics knows entry sort of undermines monopoly power. But of course our supposed expert in everything has no clue what entry even means.

        I have to wonder whether JohnH even knows what a semiconductor even is!

        1. JohnH

          pgl STILL can’t fathom the fact that TSMC has a near monopoly in the manufacture of leading edge semiconductors. Shortage of these products are a major cause of supply chain problems afflicting the economy (ie. auto manufacturing). But pgl thinks that it’s a brilliant idea to raze TSMC to damage China, and…while we’re at it…why not cripple our own economy while we’re at it. Incredible stupidity!

      3. pgl

        The FRED Blog is telling us that your alleged surge in semiconductor prices has not materialized:

        Now I check with FRED to see if there is some measure of semiconductor prices that shows your alleged 20% increase. Semiconductor prices were at historical lows before the pandemic but did rise by a FEW percent points since. Gee – with a massive increase in demand for chips – one would expect some price increases even in a competitive market.

        So the question remains – do you have a shred of credible evidence to support your latest insanity? Of course not.

        1. JohnH

          Of course TSMC’s price increase didn’t show up on Fred, idiot. FRED records historical data, not what’s scheduled to happen in 2022.

          The fact that TSMC can raise prices this much is a pretty good indicator of its near-monopoly position

  8. macroduck

    “…and that is a key reason why there is so much upward pressure on wages. There is little the Fed can do about this other than to quickly cool down aggregate demand…”

    Upward pressure on wages is the reason for the Fed to “quickly cool down aggregate demand”. Yikes!

    Prices, Thorsten. Not wages. Prices. Higher wages are a good thing, all else equal. The Fed has no mandate to control wages. And as Menzie noted, wages lagging inflation Is evidence that wages aren’t the underlying problem.

    Wrong on economics and on policy. How’d he get that job?

  9. Macroduck

    The Fed has two economic mandates – stable prices and full employment. Setting aside any past biases, the balance between the two mandates is aimed at this way:

    The inflation target is symmetrical (nowadays). The natural rate is poor guide for policy, because it doesn’t seem to be identifiable. So, if letting inflation run a little hot improves employment prospects over the foreseeable future, that’s OK. If inflation risks becoming problematic, to the point that monetary will have to damage employment prospects, then early tightening will do less harm to long-term employment prospects.

    Covid is a temporary issue, for now. Either it leaves or we adjust. Current inflation risks long-term harm only to the extent that we enter a damaging new inflation regime. And while I’m sure the Thorstens of the world are happy to say they have the answer to the inflation regime question, they do not. The Thorstens of the world consistently overestimated future inflation for at least a decade, maybe two.

    I’m not sure monetary policy has much real-economy effect these days, outside the housing sector. But that is not reason to listen to people who have a “wage increases are the problem” view set monetary policy.

  10. SecondLook

    The Fed has two economic mandates – stable prices and full employment.

    Unfortunately, the historical record strongly supports the notion that those mandates have been and continue to be treated as unequal.
    As I am sure you are well aware, the Fed has never had any fixed or even flexible goals for employment, unlike rates of inflation. For them, high or low employment is significant only as it might affect prices.

    1. macroduck

      You were doing well until that last sentence. Read Yellen’s public statements and minutes from policy discussions when she was Chair. Bernanke, too. Even Greenspsn thought a little inflation risk was worth building a more productive workforce – with high levels of employment and job advancement the means of increasing workforce productivity.

      1. SecondLook

        I can’t recall employment targets, unlike inflation, ever being seriously discussed.
        A thought experiment;…
        Imagine the Fed saying that unemployment is optimally 2-2.5% and that is the Fed goal…

        1. Macroduck

          Your claim was that employment only matters to the Fed to the extent it matters to inflation. I suggested you look at publicly available evidence to the contrary. You clearly didn’t bother. Your “thought experiment” isn’t a thought experiment. Your insistence on an unemployment rate target is archaic, based on the notion that the jobless rate associated with full employment is stable over time. It clearly is not.

          So, for anybody else who might be reading these comments, please don’t be misled by SecondLook’s claims. They are not based in any real evidence or on much knowledge of Fed policy goals.

          1. pgl

            I do recall that when Trump inherited a strong economy from Obama that the FED started letting interest rates to rise. SecondLook probably slept through that period.

        2. pgl

          Seriously? No FED chairman has ever advocated lowering the unemployment rate below even 3.5%. Of course Powell is not going to push for a 2.5% unemployment rate. Then again Trump promised us 5% real GDP growth forever. How did that work out?


    The Fed normalization path is easy. The economy isn’t in recession and markets want to get back to normal. Which the Fed is doing in 2022. A year ahead of schedule.

  12. Anonymous

    (Apologies if previously discussed.) Just found a AAA page that surveys and reports reports retail gasoline prices.

    Bottom of the page is interesting presentation.
    Today: $3.30
    Yesterday: $3.30
    Week ago: $3.29
    Month ago: $3.34
    Year ago: $2.13

    TBH, I really don’t pay attention to retail product prices. Just follow oil indices (Brent if you prefer, but WTI is pretty correlated and more popular). For academic economists, I’m sure it is interesting to search for variances in pass through or timing of it. But from a first level look, I just figure oil price higher, gasoline higher. And visa versa. Really think this is the majority of the story, almost all the time. (To the extent that an overfocus on deviations from EMH are tree for forest missing insights.)

    1. pgl

      “I just figure oil price higher, gasoline higher.” James Hamilton has posted some very good posts on this relationship.

      AAA shows gasoline prices by state. Moses might want to comment on the Oklahoma situation where AAA is saying gasoline prices are $2.91 per gallon.

    2. pgl

      The color coding is interesting. States colored RED have higher prices while states colored BLUE has low prices. One can go by state and look at county by county figures with the same coloring scheme for within state comparisons.

      I bet the MAGA crowd will find this coloring system insulting!

  13. macroduck

    Just for fun, here’s an historical lender-of-last-resort tidbit:

    In late December, the Fed released data on Q4, 2019 repo borrowers, including emergency repos:

    The data show that several large money-center banks tapped the emergency facility, including Goldman, Citi and JPM. I’m not in the habit of pasting excel charts into Menzie’s comments section and I can’t find emergency repo data at FRED, but here is a look at total and 15-day and shorter repo data:

    Notice the sudden appearance of longer repos in late November.

    Demand for repos picked up in mid-September. I don’t recall whether anyone made the connection at the time, but there is (somewhat breathless) speculation now that Deutsche Bank was the source of the problem:

    The appearance of longer repos, in the DB explanation, is when banks relying on DB for liquidity realized the problem wouldn’t go away.

    Anybody have more on this? The reason I ask is that I really want the DB story, or one like it, to be true. Otherwise, the Q4, 2019 liquidity squeeze could be the follow-up to liquidity problems earlier in the year which caused the Fed to ease in H2, 2019. The Fed only raised rates to 2.25-2.50 back the and ran into trouble. The Fed is planning to raise rates again next year. I’d really like the Q4, 2019 liquidity squeeze to have idiosyncratic roots, rather than structural ones.

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