One argument for maintaining tight monetary policy is inflationary pressures — but the question is whether it’s from a positive output gap or cost-push shocks (or expectations). One big question is what is the size of the output gap.
Business Cycle Indicators, as of 9/1
With the employment release, and the monthly GDP from SPGMI, we have the following picture of key macro indicators.
The Employment Release, News, and Futures-Implied Fed Funds
NFP employment at 187K (vs. Bloomberg consensus 170K), while average hourly earnings y/y up 4.3% (vs. consensus 4.4%). Combined with to June figures and preliminary benchmark revision, we have a picture of a cooler labor market.
Quantity Theory/Divisia – PaleoKeynesian Phillips Curve Horse Race
Does an error correction model of the Divisia M4 quantity theory or a old style expectations and supply shock augmented Phillips curve fit the post 2019 period better (using 1998-2019 data)? Answer: The Phillips curve works better.
Defense Equipment Investment and Depreciation
Reader JohnH asks “is there a net US GDP forecast that includes the depreciation of defense capital?”. For what I think is being asked (commonly known as NDP, or net domestic product), the answer is de facto yes.
Velocity, 1967-2023Q2
The variability of velocity calculated using divisia money indices is not necessarily lower than that using a conventional monetary aggregate, i.e., M2.
Business Cycle Indicators for July
With personal income, consumption, and manufacturing and trade industry sales released, no downturn yet. If consensus holds, the momentum continues into August. Here are some key indicators followed by the NBER BCDC, along with monthly GDP and GDPNow.
Private Nonfarm Payroll Employment – Three Measures
So far, slowing employment growth.
The Ecological Monetarism QED
Reader Econned asks me for a critique of ecological monetarism. I don’t have one overall assessment, but I will say that I do not understand (1) how Cameron Harwick came up with the conclusion that the case for ecological monetarism was proven by inflation outcomes, and relatedly (2) how the below graph was constructed, which I believe is the basis for that conclusion.
GDO, revised GDP for Q2
While GDP is revised down, GDO matches my guess from last month.