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NAIRU, And Other Will-O’-The-Wisps

NAIRU, And Other Will-O’-The-Wisps

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The discussion of the role in unemployment is a key theoretical divide between Modern Monetary Theory and mainstream approaches. Theoretical conclusions determine the suggested policy response of governments to unemployment. The structural changes to the labour market made by policymakers in the 1990s were based on following a theory.

(This is a rather lengthy unedited excerpt from the manuscript of my MMT primer. It has references to other sections of the manuscript.)

The modern version of the theory relied up the concept of the Non-Accelerating Inflation Rate of Unemployment – NAIRU – although if one digs into academic history, there are a few related measures with slightly different definitions. Since I want to focus on MMT – and avoid going too far into the swamp of critiques of neoclassical macro – I want to underline this section is offering a simplified version of the evolution of the concept. Interested readers are pointed to the text Full Employment Abandoned: Shifting Sands and Policy Failures by William Mitchell and Joan Muysken. From my perspective, the historical development of these concepts might be of interest of historians of economic thought, but from an empirical perspective, any measure like NAIRU is found to be of no use in understanding the economy. Within the physical sciences and engineering (which I briefly taught), we do not waste students’ time going through the history of failed concepts.

Really Short History of NAIRU

The history behind NAIRU is long, and to do it properly, one would need to watch the full evolution of economic theory. Rather than attempt to do that, I am going to focus on the political economy aspects. I will caution the reader that it is simplistic, but my argument is that you need to get the big picture view before being bogged down in who said what.

If we look back to the pre-Keynesian era – normally called classical economics – the working assumption was that all markets moved to equilibrium courtesy of the laws of supply and demand. The story was that unemployment was essentially a natural outcome of market processes, and there was little to be done about it. If the economy is perturbed by some disturbance (a depression or recession), it will move on its own back to the level where all workers who want to work at the prevailing wage are employed. (Note that business cycle analysis as well developed as it is now, and it is not clear how seriously held this view was. This may have just been pro-market propaganda produced for the masses.)

John Maynard Keynes created the field of macroeconomics when he launched his theoretical research programme into the business cycle. The politically-charged insight of this programme was that unemployment rates can stagnate at a level above what would be seen as “efficient.” A such, governments had an imperative to drive down the unemployment rate – the Full Employment framework described in Section 2.2.

Free market-oriented politicians and economists were not happy with the social programmes aimed to reduce unemployment, and eventually launched a counterattack. The main theoretical concept advanced was the natural rate of unemployment, proposed by Milton Friedman. The idea is straightforward: if the unemployment rate falls below the natural rate, the economy will experience accelerating inflation. Although Friedman cautioned that the word “natural” was derived from usage elsewhere in economics, it was effectively mis-interpreted as being a “law of nature” and immutable. (Friedman did argue that the rate depended on other factors.)

(From the perspective of MMT, this episode is a useful example of the concept of framing in economics. Why call it the “natural rate” if it is not a law of nature? One could easily assume that this was a deliberate attempt to mislead the broad public.)

The original formulation of the natural rate of unemployment failed miserably as an empirical concept. Nevertheless, new variants of the concept appeared. In North America, the concept of NAIRU was the most popular replacement. (European theory diverged slightly, following the path set in the text Unemployment: Macroeconomic Performance and the Labour Market, by Layard, Nickell, and Jackman. I will stick to the consensus North American version of the theory for simplicity.)

NAIRU: the U.S. Experience

If one looks at the historical debates about NAIRU (and its relations), it is easy to drown in details. However, if we focus on the post-1990 period, it becomes much easier to discuss. The issue is straightforward: the concept failed empirically, and it is fairly clear that there is no easy way to save it. This was not the case in earlier decades: new models were proposed that at least fit recent historical data.

For reasons of simplicity, I will look at a single measure of NAIRU: the long-term NAIRU produced by the Congressional Budget Office (CBO). It is extremely likely that one could find a different measure that performs slightly better, but that is clearing an extremely low bar.
Chart: NAIRU and U3 Unemployment Rate

The figure above shows the movements of NAIRU and the U-3 (headline) unemployment rate. The top panel shows the levels since 1990, while the bottom shows the difference – NAIRU minus the unemployment rate. (It seems preferable to subtract NAIRU from the unemployment rate, but I am reversing it for reasons to be discussed below.) I am labelling this difference the “employment gap” – as an analogy to the output gap – but I warn that this may not be standard terminology. I cut off the charts in January 2020 to avoid the jump in 2020, which obscures movements in earlier decades.

As can be seen, the unemployment rate spikes higher during recessions, and then grinds steadily lower during the following expansion. (The 2020 experience is likely to be erratic due to the nature of the slowdown. At the time of writing, only a few post-pandemic datapoints are available.) The unemployment rate slices through the relatively slow-moving NAIRU.

Keep in mind that there are many ways in which one could calculate a NAIRU estimate. However, the premise is that it is a slow-moving variable, similar to the CBO measure shown. If we replaced the CBO NAIRU estimate with any variable that meets that criterion, all that would happen is that the unemployment gap measure just shift up or down by a certain amount, but the qualitative picture would be the same. That is, the unemployment rate drives below the new series during the expansion, and then shoots above it during the recession. (If the measure was always above or always below the observed unemployment rate, something is obviously wrong.)

Just a simple visual analysis of this chart largely puts to rest an ancient theoretical debate: does the unemployment rate “naturally” converge to NAIRU? Given that it typically took around half a decade to close the negative employment gap after recessions, the reversion speed is too slow to be of any interest.

NAIRU and Inflation

Instead, modern theories of the NAIRU (and its relations) suggest that the employment gap ought to be a determining factor for inflation. The initial problem is that “inflation” is somewhat vague: in this context, one could either look at wage inflation, or the rise of consumer prices (e.g., the CPI). (Yet another alternative is the GDP deflator, but the GDP deflator has some unusual properties that I do not want to deal with.)

If one delves into the economic literature (including Full Employment Abandoned), whether one uses consumer price inflation or wage inflation matters if one looks at the historical development of models (who gets credit for what). Since these models have obvious weaknesses, I am not too concerned about these distinctions. For completeness, I will show both variants.

The chart above shows the experience of the employment gap and the changes in average hourly earnings in the United States since 1990. The top panel shows the employment gap (NAIRU minus the unemployment rate), and the bottom panel shows the annual change in average hourly earnings.

One initial reaction is that the two series are correlated (the two series move up and down together). This is exactly what one would expect if wage inflation is correlated with the business cycle – which is a prediction of most plausible economic models.

However, this is not enough – we need to see whether inflation is accelerating (since accelerating is the “A” in NAIRU). As we can see, this is not happening. Wage inflation bottoms after a recession, but it does not keep falling. If we look at the three circled episodes after recessions, wage inflation stopped falling when the employment gap was negative – which means that it did not keep falling, even though the employment gap was still negative for a few years. As for a positive acceleration, the one clean episode where the employment gap was clearly positive (in the 1990s), we see that wage inflation stopped accelerating years before the recession (and the employment gap was positive). (The employment gap did not get very positive in the latter two expansions, so the picture is not particularly clear.)
Chart: Employment Gap And Core CPI

The figure above repeats the analysis with core consumer price inflation – excluding food and energy. (Although the use of core inflation distresses some people, the difference between headline and core is largely the result of gasoline prices. Energy prices are important, but oil price spikes cannot be exclusively pinned on U.S. domestic policy settings in the post-1990s period.

If we put aside the period of relatively high inflation in the early 1990s, we see that core CPI inflation stuck near its period average of 2.4% - with dips that occurred after the recessions that started in 2001 and 2008. Core CPI inflation was correlated with the employment gap – an unsurprising outcome given they are both pro-cyclical – but given the scale on the graph, we see that “acceleration” in inflation is negligible.

With some ingenuity, one could attempt to explain away the lack of acceleration by appealing to other factors that coincidentally always managed to cancel out the acceleration predicted by the NAIRU concept. I will return to that argument in the technical appendix.

The Policy Debates

The three expansions after 1990 featured the same debate: the unemployment rate is about to drop below NAIRU, so should the Federal Reserve hike rates to counter-act the risks of rising inflation? The lack of accelerating inflation was typically seen as the result of flawed estimates of NAIRU; if we improved the methodology, NAIRU was lower than expected. Pavlina R. Tcherneva discusses the “search for NAIRU” in Chapter 2 of The Case for a Job Guarantee.

This argument that any particular NAIRU estimate (like the one produced by the CBO) is flawed and could be replaced by a better one is entirely reasonable. If we assume that economics is a science, we need to adapt our theories to observed data. However, I have some deep reservations with this view. Given the complexity of the topic, I have deferred this discussion to a technical appendix at the end of this section.

Rather than debate estimation methodologies, there is a much simpler alternative: NAIRU does not exist. The title of Chapter 4 of Full Employment Abandoned is “The troublesome NAIRU: the hoax that undermined full employment” offers a hint as to what the authors’ views on the matter are.

From my experience, when one argues that NAIRU does not exist, one is hit with a wall of objections. The objections that I have seen were not particularly strong, as my feeling is that the people raising the objection are conflating “NAIRU does not exist” with “there is no relationship between unemployment and inflation.”

I will start off stating what I see as a minimal version of the statement “NAIRU does not exist.” The statements are theoretically weak (assume very little) but are easily understood. However, this is how I interpret MMT, and thus need to be taken as a grain of salt. I will then discuss some of the comments from Full Employment Abandoned, which is an authoritative source.

I argue that the following terms are safe observations to make about the business cycle.
  1. Inflation (however defined) is positively correlated with the business cycle: it tends to rise during an expansion.
  2. The unemployment rate is negatively correlated with the business cycle. (This seems almost to hold by definition, but people enter/leave the workforce.)
  3. The two previous statements imply that should expect to see a local relationship between unemployment rate changes and the inflation rate. This implies that we can typically fit a NAIRU-style relationship to a small segment of historical data.
  4. The unemployment rate and annual (core) inflation both feature trending behaviour: the level in the current period is relatively close to historical values. (There is considerable noise in annualised inflation rates on a month-to-month basis, but that noise tends to cancel out, so that the annual average follows a trend.)
  5. This trending behaviour means that the local models in (3) can be spliced together in back history, but one would expect that predictions based on such splices will tend to break down.

The implication of this logic is straightforward. It is a mistake to look at historical data and argue that if the unemployment rate drops below some arbitrary level in future years, inflation will accelerate. That was the mistake that policymakers and market participants kept making over the 1990-2020 period. (Will they do it after 2020? That may depend upon the theoretical success of MMT.)

Mitchell and Muysken phrase the idea differently.
We have demonstrated (in Section 4.2) that contrary to theoretical claims of the natural rate theorists, non-structural variables have an impact on the NAIRU, which means that aggregate demand variations can alter the steady-state unemployment rate. This insight, alone, undermines the concept of natural unemployment, or NAIRU, which is driven by the notion that only structural measures can be taken if the government wants to reduce the current steady-state unemployment rate. As a consequence it is little wonder that the concept of equilibrium unemployment lost its original structural meaning and becomes indistinguishable in dynamics from the actual unemployment rate. [Section 4.2, page 116]
These statements are somewhat more complex than saying NAIRU does not exist, rather it is saying that if it existed, it does not behave the way that “natural rate theorists” suppose. Fans of arcane theoretical disputes will probably prefer this phrasing, but my argument is that the plain English interpretation of the phrase “NAIRU does not exist” covers this more complex theoretical position.

The jargon about “structural” and “non-structural” might be unfamiliar. To interpret, “structural” factors are institutional barriers that allegedly cause people to remain unemployed. From the neoliberal perspective, these are mainly the result of social programmes that give incomes to the unemployed. Non-structural factors are those related to the business cycle. I now will turn to one such factor that is highlighted by Mitchell and Muysken: hysteresis.

Hysteresis

Bill Mitchell’s work in the 1980s emphasised the concept of hysteresis, although the idea has a longer history. (Full Employment Abandoned provides a 1972 quotation from Edmund Phelps that used the term in this context. Hysteresis is a term used in physics and is typically described as “path dependence.”

In the case of unemployment, the definition is as follows. Firstly, we need to assume that there we can define something resembling NAIRU so that the employment gap offers useful predictions about inflation. If hysteresis is present, this measure is affected by the historical trajectory of unemployment. More specifically, if the rate of unemployment was high, the estimated “NAIRU” will rise.

Although this might sound like the case without hysteresis, this has radically different policy implications. By driving the unemployment rate lower, the value of “NAIRU” is lower. It implies that there can be a trade-off between unemployment and inflation, and that policies that create employment are optimal – since they are associated with lower steady state unemployment. Meanwhile, this help explain the lack of inflation acceleration discussed earlier. If “NAIRU” is just tracking the unemployment rate (similar to taking a moving average), inflation will not move very much.

There are several ways in which hysteresis can arise – the literature surveyed in Full Employment Abandoned gives a number of mechanisms. Although this of interest to academics, from a practical perspective, it means that “NAIRU with hysteresis” does not behave the way the consensus assumes (e.g., the only way to lower it is through “structural reforms”). From a forecasting perspective, the concept is largely useless. Since the reality is so far away from beliefs about NAIRU, I would argue that the simplest description is that “NAIRU does not exist.”

From the perspective of MMT, the key conclusion to draw from this line of argument is that it makes little sense to keep people unemployed in order to stabilise the price level. This will be expanded upon in the discussion of the Job Guarantee in Chapter 3.

Technical Appendix: Falsifiability?

Given that the neoclassical consensus decided that inflation control is the mot important task for policy, it is no surprise that a great deal of effort has been expended upon the analysis of inflation. As such, just showing a couple time series plots is not the final word on this topic. Nevertheless, the outlook for NAIRU is not much better even if we dig deeper.

The first thing to realise is that we can very easily reject the belief that NAIRU is a constant, or that inflation depends solely upon the employment gap. We need a more complex model, where other factors influence inflation, and the estimate of NAIRU changes over time (as does the CBO series).
The addition of the extra factors gives the defenders of the concept of NAIRU (and its close cousins). Those other factors always managed to shift in such a fashion so that inflation did not accelerate, even with a non-zero employment gap. So, we can find a model that has a good fit to the back history.

Unfortunately, there are two explanations for this.
  1. The more complex model is correct.
  2. The model is wrong, and the employment gap does not cause inflation to accelerate.
Since central bankers and academics are paid to produce models that predict economic outcomes, it is perhaps unsurprising that the first option was chosen, and the second brushed aside.
Neoclassical theory is highly dependent upon variables that are inferred from the data:
  • the natural rate of unemployment/NAIRU;
  • potential GDP (a replacement to the above);
  • the natural rate of interest (r*).
Economic outcomes are the result of observed variables (unemployment, GDP, interest rates) from these theoretical constructs. Since the variables cannot be directly measured, they are inferred from statistical procedures that assume that the underlying neoclassical theory is correct.

Neoclassical theorists have little difficulty believing that the underlying assumptions of their theories are correct. However, outsiders have a good cause to question the falsifiability of the methodology. Since the level of the hidden variables are backed out from observed data, there is no way that historical data can deviate from the model predictions.

However, we are not interested in predicting historical events, we need forward-looking behaviour. As one might suspect, the models do a decent job in fitting economic data following smooth trends, but have a hard time dealing with turning points (mainly recessions, which is a sub-theme of my text Recessions). Longer-term extrapolations – such as inflation rising when NAIRU is hit in future years – also fail, with the failure covered up by continuous cuts to the estimated value of NAIRU.

It is safe to say that neoclassical theorists can find counter-arguments to my line of argument here. Since the objective of this text is to explain MMT, I will not pursue the argument. But from the perspective of those who are interested in how MMT fits in with financial market analysis, this is a topic that is of importance.

References and Further Reading

  • Full Employment Abandoned: Shifting Sands and Policy Failures, William Mitchell and Joan Muysken, Edward Elgar Publishing, 2008. ISBN: 978-1-85898-507-7
  • The Case for a Job Guarantee, Pavlina R. Tcherneva, Polity Press, 2020. ISBN: 978-1-5095-4211-6

(c) Brian Romanchuk 2020

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“I Can’t Even Save”: Americans Are Getting Absolutely Crushed Under Enormous Debt Load

"I Can’t Even Save": Americans Are Getting Absolutely Crushed Under Enormous Debt Load

While Joe Biden insists that Americans are doing great…

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"I Can't Even Save": Americans Are Getting Absolutely Crushed Under Enormous Debt Load

While Joe Biden insists that Americans are doing great - suggesting in his State of the Union Address last week that "our economy is the envy of the world," Americans are being absolutely crushed by inflation (which the Biden admin blames on 'shrinkflation' and 'corporate greed'), and of course - crippling debt.

The signs are obvious. Last week we noted that banks' charge-offs are accelerating, and are now above pre-pandemic levels.

...and leading this increase are credit card loans - with delinquencies that haven't been this high since Q3 2011.

On top of that, while credit cards and nonfarm, nonresidential commercial real estate loans drove the quarterly increase in the noncurrent rate, residential mortgages drove the quarterly increase in the share of loans 30-89 days past due.

And while Biden and crew can spin all they want, an average of polls from RealClear Politics shows that just 40% of people approve of Biden's handling of the economy.

Crushed

On Friday, Bloomberg dug deeper into the effects of Biden's "envious" economy on Americans - specifically, how massive debt loads (credit cards and auto loans especially) are absolutely crushing people.

Two years after the Federal Reserve began hiking interest rates to tame prices, delinquency rates on credit cards and auto loans are the highest in more than a decade. For the first time on record, interest payments on those and other non-mortgage debts are as big a financial burden for US households as mortgage interest payments.

According to the report, this presents a difficult reality for millions of consumers who drive the US economy - "The era of high borrowing costs — however necessary to slow price increases — has a sting of its own that many families may feel for years to come, especially the ones that haven’t locked in cheap home loans."

The Fed, meanwhile, doesn't appear poised to cut rates until later this year.

According to a February paper from IMF and Harvard, the recent high cost of borrowing - something which isn't reflected in inflation figures, is at the heart of lackluster consumer sentiment despite inflation having moderated and a job market which has recovered (thanks to job gains almost entirely enjoyed by immigrants).

In short, the debt burden has made life under President Biden a constant struggle throughout America.

"I’m making the most money I've ever made, and I’m still living paycheck to paycheck," 40-year-old Denver resident Nikki Cimino told Bloomberg. Cimino is carrying a monthly mortgage of $1,650, and has $4,000 in credit card debt following a 2020 divorce.

Nikki CiminoPhotographer: Rachel Woolf/Bloomberg

"There's this wild disconnect between what people are experiencing and what economists are experiencing."

What's more, according to Wells Fargo, families have taken on debt at a comparatively fast rate - no doubt to sustain the same lifestyle as low rates and pandemic-era stimmies provided. In fact, it only took four years for households to set a record new debt level after paying down borrowings in 2021 when interest rates were near zero. 

Meanwhile, that increased debt load is exacerbated by credit card interest rates that have climbed to a record 22%, according to the Fed.

[P]art of the reason some Americans were able to take on a substantial load of non-mortgage debt is because they’d locked in home loans at ultra-low rates, leaving room on their balance sheets for other types of borrowing. The effective rate of interest on US mortgage debt was just 3.8% at the end of last year.

Yet the loans and interest payments can be a significant strain that shapes families’ spending choices. -Bloomberg

And of course, the highest-interest debt (credit cards) is hurting lower-income households the most, as tends to be the case.

The lowest earners also understandably had the biggest increase in credit card delinquencies.

"Many consumers are levered to the hilt — maxed out on debt and barely keeping their heads above water," Allan Schweitzer, a portfolio manager at credit-focused investment firm Beach Point Capital Management told Bloomberg. "They can dog paddle, if you will, but any uptick in unemployment or worsening of the economy could drive a pretty significant spike in defaults."

"We had more money when Trump was president," said Denise Nierzwicki, 69. She and her 72-year-old husband Paul have around $20,000 in debt spread across multiple cards - all of which have interest rates above 20%.

Denise and Paul Nierzwicki blame Biden for what they see as a gloomy economy and plan to vote for the Republican candidate in November.
Photographer: Jon Cherry/Bloomberg

During the pandemic, Denise lost her job and a business deal for a bar they owned in their hometown of Lexington, Kentucky. While they applied for Social Security to ease the pain, Denise is now working 50 hours a week at a restaurant. Despite this, they're barely scraping enough money together to service their debt.

The couple blames Biden for what they see as a gloomy economy and plans to vote for the Republican candidate in November. Denise routinely voted for Democrats up until about 2010, when she grew dissatisfied with Barack Obama’s economic stances, she said. Now, she supports Donald Trump because he lowered taxes and because of his policies on immigration. -Bloomberg

Meanwhile there's student loans - which are not able to be discharged in bankruptcy.

"I can't even save, I don't have a savings account," said 29-year-old in Columbus, Ohio resident Brittany Walling - who has around $80,000 in federal student loans, $20,000 in private debt from her undergraduate and graduate degrees, and $6,000 in credit card debt she accumulated over a six-month stretch in 2022 while she was unemployed.

"I just know that a lot of people are struggling, and things need to change," she told the outlet.

The only silver lining of note, according to Bloomberg, is that broad wage gains resulting in large paychecks has made it easier for people to throw money at credit card bills.

Yet, according to Wells Fargo economist Shannon Grein, "As rates rose in 2023, we avoided a slowdown due to spending that was very much tied to easy access to credit ... Now, credit has become harder to come by and more expensive."

According to Grein, the change has posed "a significant headwind to consumption."

Then there's the election

"Maybe the Fed is done hiking, but as long as rates stay on hold, you still have a passive tightening effect flowing down to the consumer and being exerted on the economy," she continued. "Those household dynamics are going to be a factor in the election this year."

Meanwhile, swing-state voters in a February Bloomberg/Morning Consult poll said they trust Trump more than Biden on interest rates and personal debt.

Reverberations

These 'headwinds' have M3 Partners' Moshin Meghji concerned.

"Any tightening there immediately hits the top line of companies," he said, noting that for heavily indebted companies that took on debt during years of easy borrowing, "there's no easy fix."

Tyler Durden Fri, 03/15/2024 - 18:00

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Sylvester researchers, collaborators call for greater investment in bereavement care

MIAMI, FLORIDA (March 15, 2024) – The public health toll from bereavement is well-documented in the medical literature, with bereaved persons at greater…

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MIAMI, FLORIDA (March 15, 2024) – The public health toll from bereavement is well-documented in the medical literature, with bereaved persons at greater risk for many adverse outcomes, including mental health challenges, decreased quality of life, health care neglect, cancer, heart disease, suicide, and death. Now, in a paper published in The Lancet Public Health, researchers sound a clarion call for greater investment, at both the community and institutional level, in establishing support for grief-related suffering.

Credit: Photo courtesy of Memorial Sloan Kettering Comprehensive Cancer Center

MIAMI, FLORIDA (March 15, 2024) – The public health toll from bereavement is well-documented in the medical literature, with bereaved persons at greater risk for many adverse outcomes, including mental health challenges, decreased quality of life, health care neglect, cancer, heart disease, suicide, and death. Now, in a paper published in The Lancet Public Health, researchers sound a clarion call for greater investment, at both the community and institutional level, in establishing support for grief-related suffering.

The authors emphasized that increased mortality worldwide caused by the COVID-19 pandemic, suicide, drug overdose, homicide, armed conflict, and terrorism have accelerated the urgency for national- and global-level frameworks to strengthen the provision of sustainable and accessible bereavement care. Unfortunately, current national and global investment in bereavement support services is woefully inadequate to address this growing public health crisis, said researchers with Sylvester Comprehensive Cancer Center at the University of Miami Miller School of Medicine and collaborating organizations.  

They proposed a model for transitional care that involves firmly establishing bereavement support services within healthcare organizations to ensure continuity of family-centered care while bolstering community-based support through development of “compassionate communities” and a grief-informed workforce. The model highlights the responsibility of the health system to build bridges to the community that can help grievers feel held as they transition.   

The Center for the Advancement of Bereavement Care at Sylvester is advocating for precisely this model of transitional care. Wendy G. Lichtenthal, PhD, FT, FAPOS, who is Founding Director of the new Center and associate professor of public health sciences at the Miller School, noted, “We need a paradigm shift in how healthcare professionals, institutions, and systems view bereavement care. Sylvester is leading the way by investing in the establishment of this Center, which is the first to focus on bringing the transitional bereavement care model to life.”

What further distinguishes the Center is its roots in bereavement science, advancing care approaches that are both grounded in research and community-engaged.  

The authors focused on palliative care, which strives to provide a holistic approach to minimize suffering for seriously ill patients and their families, as one area where improvements are critically needed. They referenced groundbreaking reports of the Lancet Commissions on the value of global access to palliative care and pain relief that highlighted the “undeniable need for improved bereavement care delivery infrastructure.” One of those reports acknowledged that bereavement has been overlooked and called for reprioritizing social determinants of death, dying, and grief.

“Palliative care should culminate with bereavement care, both in theory and in practice,” explained Lichtenthal, who is the article’s corresponding author. “Yet, bereavement care often is under-resourced and beset with access inequities.”

Transitional bereavement care model

So, how do health systems and communities prioritize bereavement services to ensure that no bereaved individual goes without needed support? The transitional bereavement care model offers a roadmap.

“We must reposition bereavement care from an afterthought to a public health priority. Transitional bereavement care is necessary to bridge the gap in offerings between healthcare organizations and community-based bereavement services,” Lichtenthal said. “Our model calls for health systems to shore up the quality and availability of their offerings, but also recognizes that resources for bereavement care within a given healthcare institution are finite, emphasizing the need to help build communities’ capacity to support grievers.”

Key to the model, she added, is the bolstering of community-based support through development of “compassionate communities” and “upskilling” of professional services to assist those with more substantial bereavement-support needs.

The model contains these pillars:

  • Preventive bereavement care –healthcare teams engage in bereavement-conscious practices, and compassionate communities are mindful of the emotional and practical needs of dying patients’ families.
  • Ownership of bereavement care – institutions provide bereavement education for staff, risk screenings for families, outreach and counseling or grief support. Communities establish bereavement centers and “champions” to provide bereavement care at workplaces, schools, places of worship or care facilities.
  • Resource allocation for bereavement care – dedicated personnel offer universal outreach, and bereaved stakeholders provide input to identify community barriers and needed resources.
  • Upskilling of support providers – Bereavement education is integrated into training programs for health professionals, and institutions offer dedicated grief specialists. Communities have trained, accessible bereavement specialists who provide support and are educated in how to best support bereaved individuals, increasing their grief literacy.
  • Evidence-based care – bereavement care is evidence-based and features effective grief assessments, interventions, and training programs. Compassionate communities remain mindful of bereavement care needs.

Lichtenthal said the new Center will strive to materialize these pillars and aims to serve as a global model for other health organizations. She hopes the paper’s recommendations “will cultivate a bereavement-conscious and grief-informed workforce as well as grief-literate, compassionate communities and health systems that prioritize bereavement as a vital part of ethical healthcare.”

“This paper is calling for healthcare institutions to respond to their duty to care for the family beyond patients’ deaths. By investing in the creation of the Center for the Advancement of Bereavement Care, Sylvester is answering this call,” Lichtenthal said.

Follow @SylvesterCancer on X for the latest news on Sylvester’s research and care.

# # #

Article Title: Investing in bereavement care as a public health priority

DOI: 10.1016/S2468-2667(24)00030-6

Authors: The complete list of authors is included in the paper.

Funding: The authors received funding from the National Cancer Institute (P30 CA240139 Nimer) and P30 CA008748 Vickers).

Disclosures: The authors declared no competing interests.

# # #


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Copper Soars, Iron Ore Tumbles As Goldman Says “Copper’s Time Is Now”

Copper Soars, Iron Ore Tumbles As Goldman Says "Copper’s Time Is Now"

After languishing for the past two years in a tight range despite recurring…

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Copper Soars, Iron Ore Tumbles As Goldman Says "Copper's Time Is Now"

After languishing for the past two years in a tight range despite recurring speculation about declining global supply, copper has finally broken out, surging to the highest price in the past year, just shy of $9,000 a ton as supply cuts hit the market; At the same time the price of the world's "other" most important mined commodity has diverged, as iron ore has tumbled amid growing demand headwinds out of China's comatose housing sector where not even ghost cities are being built any more.

Copper surged almost 5% this week, ending a months-long spell of inertia, as investors focused on risks to supply at various global mines and smelters. As Bloomberg adds, traders also warmed to the idea that the worst of a global downturn is in the past, particularly for metals like copper that are increasingly used in electric vehicles and renewables.

Yet the commodity crash of recent years is hardly over, as signs of the headwinds in traditional industrial sectors are still all too obvious in the iron ore market, where futures fell below $100 a ton for the first time in seven months on Friday as investors bet that China’s years-long property crisis will run through 2024, keeping a lid on demand.

Indeed, while the mood surrounding copper has turned almost euphoric, sentiment on iron ore has soured since the conclusion of the latest National People’s Congress in Beijing, where the CCP set a 5% goal for economic growth, but offered few new measures that would boost infrastructure or other construction-intensive sectors.

As a result, the main steelmaking ingredient has shed more than 30% since early January as hopes of a meaningful revival in construction activity faded. Loss-making steel mills are buying less ore, and stockpiles are piling up at Chinese ports. The latest drop will embolden those who believe that the effects of President Xi Jinping’s property crackdown still have significant room to run, and that last year’s rally in iron ore may have been a false dawn.

Meanwhile, as Bloomberg notes, on Friday there were fresh signs that weakness in China’s industrial economy is hitting the copper market too, with stockpiles tracked by the Shanghai Futures Exchange surging to the highest level since the early days of the pandemic. The hope is that headwinds in traditional industrial areas will be offset by an ongoing surge in usage in electric vehicles and renewables.

And while industrial conditions in Europe and the US also look soft, there’s growing optimism about copper usage in India, where rising investment has helped fuel blowout growth rates of more than 8% — making it the fastest-growing major economy.

In any case, with the demand side of the equation still questionable, the main catalyst behind copper’s powerful rally is an unexpected tightening in global mine supplies, driven mainly by last year’s closure of a giant mine in Panama (discussed here), but there are also growing worries about output in Zambia, which is facing an El Niño-induced power crisis.

On Wednesday, copper prices jumped on huge volumes after smelters in China held a crisis meeting on how to cope with a sharp drop in processing fees following disruptions to supplies of mined ore. The group stopped short of coordinated production cuts, but pledged to re-arrange maintenance work, reduce runs and delay the startup of new projects. In the coming weeks investors will be watching Shanghai exchange inventories closely to gauge both the strength of demand and the extent of any capacity curtailments.

“The increase in SHFE stockpiles has been bigger than we’d anticipated, but we expect to see them coming down over the next few weeks,” Colin Hamilton, managing director for commodities research at BMO Capital Markets, said by phone. “If the pace of the inventory builds doesn’t start to slow, investors will start to question whether smelters are actually cutting and whether the impact of weak construction activity is starting to weigh more heavily on the market.”

* * *

Few have been as happy with the recent surge in copper prices as Goldman's commodity team, where copper has long been a preferred trade (even if it may have cost the former team head Jeff Currie his job due to his unbridled enthusiasm for copper in the past two years which saw many hedge fund clients suffer major losses).

As Goldman's Nicholas Snowdon writes in a note titled "Copper's time is now" (available to pro subscribers in the usual place)...

... there has been a "turn in the industrial cycle." Specifically according to the Goldman analyst, after a prolonged downturn, "incremental evidence now points to a bottoming out in the industrial cycle, with the global manufacturing PMI in expansion for the first time since September 2022." As a result, Goldman now expects copper to rise to $10,000/t by year-end and then $12,000/t by end of Q1-25.’

Here are the details:

Previous inflexions in global manufacturing cycles have been associated with subsequent sustained industrial metals upside, with copper and aluminium rising on average 25% and 9% over the next 12 months. Whilst seasonal surpluses have so far limited a tightening alignment at a micro level, we expect deficit inflexions to play out from quarter end, particularly for metals with severe supply binds. Supplemented by the influence of anticipated Fed easing ahead in a non-recessionary growth setting, another historically positive performance factor for metals, this should support further upside ahead with copper the headline act in this regard.

Goldman then turns to what it calls China's "green policy put":

Much of the recent focus on the “Two Sessions” event centred on the lack of significant broad stimulus, and in particular the limited property support. In our view it would be wrong – just as in 2022 and 2023 – to assume that this will result in weak onshore metals demand. Beijing’s emphasis on rapid growth in the metals intensive green economy, as an offset to property declines, continues to act as a policy put for green metals demand. After last year’s strong trends, evidence year-to-date is again supportive with aluminium and copper apparent demand rising 17% and 12% y/y respectively. Moreover, the potential for a ‘cash for clunkers’ initiative could provide meaningful right tail risk to that healthy demand base case. Yet there are also clear metal losers in this divergent policy setting, with ongoing pressure on property related steel demand generating recent sharp iron ore downside.

Meanwhile, Snowdon believes that the driver behind Goldman's long-running bullish view on copper - a global supply shock - continues:

Copper’s supply shock progresses. The metal with most significant upside potential is copper, in our view. The supply shock which began with aggressive concentrate destocking and then sharp mine supply downgrades last year, has now advanced to an increasing bind on metal production, as reflected in this week's China smelter supply rationing signal. With continued positive momentum in China's copper demand, a healthy refined import trend should generate a substantial ex-China refined deficit this year. With LME stocks having halved from Q4 peak, China’s imminent seasonal demand inflection should accelerate a path into extreme tightness by H2. Structural supply underinvestment, best reflected in peak mine supply we expect next year, implies that demand destruction will need to be the persistent solver on scarcity, an effect requiring substantially higher pricing than current, in our view. In this context, we maintain our view that the copper price will surge into next year (GSe 2025 $15,000/t average), expecting copper to rise to $10,000/t by year-end and then $12,000/t by end of Q1-25’

Another reason why Goldman is doubling down on its bullish copper outlook: gold.

The sharp rally in gold price since the beginning of March has ended the period of consolidation that had been present since late December. Whilst the initial catalyst for the break higher came from a (gold) supportive turn in US data and real rates, the move has been significantly amplified by short term systematic buying, which suggests less sticky upside. In this context, we expect gold to consolidate for now, with our economists near term view on rates and the dollar suggesting limited near-term catalysts for further upside momentum. Yet, a substantive retracement lower will also likely be limited by resilience in physical buying channels. Nonetheless, in the midterm we continue to hold a constructive view on gold underpinned by persistent strength in EM demand as well as eventual Fed easing, which should crucially reactivate the largely for now dormant ETF buying channel. In this context, we increase our average gold price forecast for 2024 from $2,090/toz to $2,180/toz, targeting a move to $2,300/toz by year-end.

Much more in the full Goldman note available to pro subs.

Tyler Durden Fri, 03/15/2024 - 14:25

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