Latest PMIs show US losing momentum while RoW is gaining momentum

Sticky services prices behind sticky overall PCE inflation

Flash April PMIs point to slower growth in the US but a pickup in Europe and Japan

Outlook strengthens for US while it weakens for other major economies

Crude petroleum prices are having a big impact on inflation expectations

Inflation surprising to upside in the US; by contrast to the downside in the euro area

 Gross Domestic Income is catching up with GDP

FOMC expects GDP growth above trend over the next three years

US core CPI inflation has begun to reaccelerate

Fiscal-policy aided factory building in the U.S. provided an unusually large boost to growth last year

US consumers much more optimistic than those in the Euro area and the UK

  Job openings take a step down in 2024

Fed's super core services inflation measure pushing up core rate

Blue Chip forecasters expect significant monetary easing this year except in Japan

Euro area economy stagnating while US grows above trend

Chinese and Japanese equity markets are diverging markedly

Chinese population declines in 2023 for second consecutive year

Outlook for US GDP growth on the rise; declining in euro area, Japan and China

There are still 1.4 job openings for every unemployed person in the US

US PCE inflation over the past six months has slowed to the Fed's 2% target

FOMC think rate hikes are done and looks for 75bps of decline in 2024

Weaker economic data surprises pushing down US interest rates

Recent disinflation has been widespread across Europe and North America

Recent decline in US inflation expectations helping to lower interest rates

China is losing its luster as foreign direct investment heads out

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Charles Steindel

State labor markets were mixed to moderate in April. Six  states had statistically significant gains in payrolls , with the most impressive gains Missouri’s .6 percent increase and Florida’s 45,300 (.5 percent). The other states, and DC, had changes deemed to be insignifcant, including New Jersey’s drop of more than 10,000 (.2 percent). 

Five states had statistically significant declines  in their unemployment rates in April, and two had increases. None were larger than .2 percentage point.  The highest unemployment rates were in California  (5.3%), DC (5.2%) and Nevada (5.1%). No other state had rates as much as a point higher than the national 3.9%. Maryland, Massachusetts, Minnesota, Mississippi, Nebraska, New Hampshire, North Dakota, South Dakota, Utah, Vermont, Virginia, Wisconsin, and Wyoming  had rates of 2.9% or lower, with both Dakotas at 2.0%. 

Puerto Rico’s unemployment rate was unchanged at 5.8 percent, while the island’s job count moved up by 1,200.


State Labor Markets in April

Paul L. Kasriel

Yesterday evening, May 8, Erin Burnett, host of CNN’s “Erin Burnett Out Front”, interviewed President Biden. When Ms. Burnett was with Bloomberg News, she was my favorite presenter because her facial expressions indicated whether the person she was interviewing was saying things that were illogical or were fabrications. So, it was with some disappointment when Ms. Burnett made some false or misleading statements when interviewing President Biden yesterday evening about the state of the US economy.

Ms. Burnett had a lot to say about the higher inflation that exists today compared with February 2020. Yes, as shown in Chart 1, the year-over-year percent change in the Personal Consumption Expenditure (PCE) chained price index was 2.71% in March 2024 compared to 1.64% in February 2020. Ms. Burnett received a BA in economics from Williams College. Did her macro and money/banking professor not teach her that inflation is everywhere and always a monetary phenomenon? And what quasi-government agency in the US is responsible for monetary matters?

240509X1.jpg

But then Ms. Burnett stated that household real incomes were down. Not true, as shown in Chart 2. Both aggregate real disposable personal incomes and per capita real personal incomes are higher in March 2024 than they were in February 2020. So, yes, Ms. Burnett, the rate of inflation currently is higher than it was in February 2020, but, adjusted for the higher price level, incomes are higher.

240509X2.jpg

Ms. Burnett talked a lot about higher food prices. Yes, the level of food prices is higher currently than they were in February 2020, but aggregate nominal disposable income has increased to the same degree as have food prices. This is demonstrated in Chart 3 in which are plotted the index of nominal disposable income and the index of the PCE chain price index for food purchased for off-premises (home) consumption. Both indices have a base of 100 for February 2020. In March 2024, the index for nominal disposable income was 125.33 compared to the 125.14 March food-price index. Again, increases in nominal disposable incomes have kept pace with increases in food prices.

240509X3.jpg

If households are worse off economically today than they were in February 2020, just before Covid hit the fan, how is that they are spending more of their disposable incomes on discretionary items (items other than food, clothing, energy and housing) in March 2024 than they were in February 2020? (See Chart 4.) The implication of Ms. Burnett’s questions to President Biden was that households today had to spend more of their incomes on necessities rather than luxuries. The data do not bear this out.

240509X4.jpg

I realize that Ms. Burnett is in the entertainment business rather than the objective news and analysis business. And I realize that being in the entertainment business, Ms. Burnett had to ask her share of “gotcha” questions. But come on, Ms. Burnett. Get your facts straight.

Just the Facts, Erin

Joseph G. Carson

The widely followed employment cost index (ECI) jumped 1.2% in Q1 2024, faster than the 0.9% increase in Q4 2023, raising fears that labor costs are re-accelerating. As big as the jump in the ECI was in Q1, another labor cost measure (ECEC) shows employee costs are rising even faster.

The Bureau of Labor Statistics, the government agency in charge of reporting labor market data, provides two crucial measures of employee costs: the employment cost index (ECI) and employer costs for employee compensation (ECEC). Both measures, with a similar scope covering 5500 to 5600 private industry establishments and 23000 occupational observations, play a pivotal role in labor cost analysis. However, it's important to note that the ECI excludes employment shifts among occupations and industries, while the ECEC does not, making the ECEC an equally important comprehensive measure of total current employment costs.

The two measures are simple to understand: the starting point for both measures is the change in wages, but if people move to higher-paying jobs or shift occupations because of the promise of higher pay, the ECEC measures will grow faster than the ECI. In contrast, if the opposite is true, when the jobless rate is high, job openings are low, and people have to accept lower-paying jobs, the ECI would increase faster than the ECEC.

In the last several years, the labor market has been characterized by a record number of job openings, which have encouraged people to shift industries and occupations in search of higher pay. The labor cost data confirms this did happen. Private industry wage costs in the ECEC have outpaced the increases in the ECI every year, and the increase in 2023 of 6.9% was the largest on record and 270 basis points over the increase in the ECI.

The Q1 2024 report for ECEC is due on June 18. Based on the still high number of job openings and low jobless rate, the Q1 rise in the ECEC index should exceed the ECI increase, adding to current fears of higher labor costs feeding into inflation numbers.

How Fast Are Labor Costs Rising?  Faster Than You Think

Viewpoints: May 2024

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