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Have We Whipped Inflation Now?

The inflation hawks have been getting their way with the Fed for the last 14 months, but it looks like it is prepared to call at least a temporary truce…

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The inflation hawks have been getting their way with the Fed for the last 14 months, but it looks like it is prepared to call at least a temporary truce in its war on inflation, foregoing the opportunity to raise interest rates at its meeting this month. That would be good news for tens of millions of workers who are experiencing the strongest labor market in more than half a century.

By any measure the Fed has been very aggressive with its interest rate hikes over the last fourteen months, going from near zero to a range of 5.00 percent to 5.25 percent. It will be some time before the full impact of these hikes winds its way through the economy. The effect of the rate hikes is compounded by the financial turmoil that followed the collapse of the Silicon Valley Bank. These surely have had the effect of slowing growth from the path we were on at the start of last year.

While some slowing was surely warranted, the question is how far we have to go? The big issue, which is still not resolved, is whether we will need to see a substantial rise in the unemployment rate to bring inflation under control. The most recent wage data suggest that we may not.

The annualized rate of wage growth over the last three months was just 4.0 percent. There were several points in 2018-19 when wage growth approached this pace, even as inflation stayed close to the Fed’s 2.0 percent target. Here’s the picture.[1]

Source: Bureau of Labor Statistics and author’s calculations.

 

As can be seen, the data do fluctuate, but there has clearly been a sharp slowing in wage growth by this measure over the last year and a half. At the end of 2021 and the start of 2022, the annualized rate of wage growth over three-month periods was well over 6.0 percent. It actually has been somewhat under 4.0 percent in prior three-month periods. (By my preferred measure, taking the average for the last three months [March-May] compared with the average of the prior three months [Dec-Feb], the annualized rate has been just under 3.8 percent.)

Whether this pace of wage growth is going to be low enough to bring inflation down to the Fed’s target can be argued, but we are clearly close to a pace consistent with the target. And, it is indisputable that we have seen a sharp drop in the rate of wage growth.

Is the Wage Growth Slowdown Driven by Composition Effects?

Some analysts have argued that it is wrong to see this wage slowdown as a victory over inflation because it is driven in part by a change in the composition of employment. The argument is that the average is being held down by rapid growth in the number of low paying jobs, and layoffs in high paying sectors. Those making this point note that the Employment Cost Index, which holds composition fixed, does not show as much slowing.

The big problem with this argument is that changes in the mix of jobs does not seem to be slowing wage growth in recent months. While hours growth in the low-paying leisure and hospitality sector was somewhat more rapid than the rate of hours growth in the private sector as a whole, this impact was largely offset by a fall in hours in the low-paying retail sector.

There has been a drop in hours over this period in the high-paying information sector, but this was more than offset by rapid growth in hours in the high-paying financial services sector. Examining the impact of composition changes, using the sectors the Bureau of Labor Statistics publishes in its monthly Employment Report, I find that changes in composition modestly increased the average wage over this period.

The other point about composition effects is that, insofar as they reflect trends and not anomalies (as with the start and end of the lockdowns), we should want to include them in our assessment of wage growth. As a first approximation, we should expect inflation to be roughly equal to the rate of wage growth minus the rate of productivity growth. If we are seeing a massive shift of workers from high paying sectors to low-paying sectors, it should show up in slower productivity growth.

To see this, imagine an extreme case where millions of software engineers and biotech researchers lost their jobs, while we saw a huge surge of employment in restaurants and convenience stores. Assuming that pay bears some relationship to productivity, we would expect to see a fall in productivity, or at least much weaker growth.

To date, we have not seen any clear evidence of a productivity slowdown. (The first quarter was awful, but it looks like the second quarter will show strong growth.) In any case, when we compare wage growth with productivity growth, we should want a measure that includes the effects of changes in composition, since our productivity measure certainly does.

Are Wages the Problem?

Many have argued, correctly, that wages have not been the cause of inflation in the pandemic. This is undeniably true, since average wage growth has trailed inflation from the start of the pandemic. There has been a big shift to profits over this period, which has been partly reversed in the most recent quarters.[2]

However, even if wage growth has not been driving inflation, it can be said that, barring other changes in the economy, overly rapid wage growth is not consistent with moderate inflation. For example, if we had 6.0 percent wage growth, it is hard to see how we can have anything close to 2.0 percent inflation. We can see a further decline in profit shares, they have risen substantially since the start of the century, but that can only go so far. Wages are nearly four times as large as profits as a share of income, so if there is a large gap between wage growth and productivity growth for a sustained period, it almost certainly will be passed on in higher prices.

There are other measures that can reduce inflation. For example, Congress can take steps to weaken patent and copyright monopolies, which would lower prices for prescription drugs, medical equipment, software and a wide range of other items. However, if we don’t see these policies being put in place, then we should expect that an overly rapid pace of wage growth will eventually be translated into higher prices.

The Fed Should Declare Victory!

But, we don’t have to speculate about a world where we have overly rapid wage growth (although Congress should still weaken patent and copyright monopolies). Wage growth has slowed to a pace that is roughly consistent with the Fed’s inflation target. We did see a modest rise in unemployment in May, but the economy still seems to be creating jobs at a healthy pace.[3] For now, it looks like immaculate disinflation is a reality.

 

 

 

 

[1]Note that I have imposed a floor and ceiling on the graph that prevent it from showing the full range. This is due to the extraordinary rapid growth reported at the start of the lockdown period, as a huge number of lower paid workers lost their jobs, raising the average pay of those still employed. This effect was reversed in the summer as many of these workers got their jobs back. To allow readers to better focus on the more normal trends in wage growth, I used a scale that leaves out these extremes.

[2] How much of this shift was due to monopoly power is questionable, since there was a comparable shift in Europe, where anti-trust enforcement has been more vigilant over the last four decades.

[3] The unemployment rate rounded to 3.7 percent in May, but it was actually 3.65 percent, meaning that the increase from April was somewhat less than a full 0.3 percentage points. It is also worth noting the difference between the strong job growth reported in the establishment survey and the drop in employment reported in the household survey was entirely due to differences in concept (e.g. the establishment survey counts multiple job holders twice and also does not count the self-employed). Using the establishment concept, the household survey actually showed slightly stronger job growth than the establishment survey in May.

The post Have We Whipped Inflation Now? appeared first on Center for Economic and Policy Research.

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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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