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After reading Christopher Leonard’s excellent The Meat Racket , I can see why food prices can be controlled by a small group of wealthy meat corporations. I wonder if getting the Anti trust department involved might be worth including in the debate. Also the media could play a better role but generally doesn’t bite the hand that feeds it Pampers and Huggies have over 50 percent of market share which leaves the consumer in deep doo doo!

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May 10, 2023Liked by Claudia Sahm

Excellent post. I'm just a retired academic of very little brain, but I learned long ago in trying to improve student learning that data are meaningless until purpose turns them into information.

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author

Agree. It's a bit like the difference between knowledge and wisdom.

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May 9, 2023Liked by Claudia Sahm

Speaking of which data to look at, I was doing some Fred digging yesterday and noticed that real PCE for consumption goods has remained flat since mid-2021. Highest labor force participation in an era and real consumption hasn't increased. We're being bilked by producers.

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May 9, 2023Liked by Claudia Sahm

Part of me was thinking of isabella weber and her work on sellers inflation when I was reading this article of yours. Until now, the media has largely ignored the impact corporations have had on inflation. Does seem as if fed is data dependent and also can't forget about the looming debt ceiling crisis too.

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Love it!!! -- "Data are absolutely essential to policymaking .... [but] It’s not as simple as reading the latest data release and comparing it to consensus. ... Looking at the data is a worthy exercise ..., but ... Don’t let the data take you for a ride."

More cynically for me: “The government are keen on amassing statistics, The collect them, add them, raise them to the nth power, that the cube root and prepare wonderful diagrams. You must never forget that everyone of these figures comes in the first instance from the village watchman, who just puts down what he damn well please.” Anonymous, Quoted in Sir Josiah Stamp, Some Economic Factors in Modern Life. I am quoting from Diana Whistler, Kenneth J. White, S. Donna Wong, and David Bates’s Shazam Econometrics Software User’s Reference Manual. Replace "the village watchman" and the point is unchanged, LOL.

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May 11, 2023Liked by Claudia Sahm

Thanks for an insightful post. For corporate profits (past and expected) Ed Yardeni provides an excellent, near real time and (shhh) free resource. Margins are coming down faster than people realize, but they’re still above 2019. How that works its way to EPS is a different story for each. Yardeni updates this weekly: https://www.yardeni.com/pub/peacockfeval.pdf

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Thanks! I will check it out.

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May 10, 2023Liked by Claudia Sahm

"Statistics tell stories -- and some of them are lies ..."

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👍. You and Myron Scholes may be good friends. :)

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Powell still obfuscates or misses the boat: "CHAIR POWELL. So higher profits and higher margins are what happens when you have an imbalance between supply and demand, too much demand, not enough supply. And we've been in a situation in many parts of the economy where supply has been fixed or not flexible enough..... you'll see corporate margins coming down as a result of return of full competition where there's enough supply to meet demand." He seems totally ignorant of the dependence of our economy on monopoly or oligopoly suppliers (created by years of lax anti-trust enforcement) in many sectors who take advantage of this opportunity to increase rent income (xs profits) and damn the effect on the economy. Of course, this is not the Feds remit anyway. To solve this we need healthy politics of the type President Biden has promoted.

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Good insight. Undoubtedly it's the wisdom of people at Fed that guides the only lever they have (interest rates) to control demand (the efficacy of that lever is also debatable).

Off topic & fun stuff - Here is Russian Pranskters interview (in January this year) with Jerome Powell.

https://www.youtube.com/watch?v=VKd95fQnvHg&ab_channel=TLDRbeam

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I saw that. Wow.

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To me data driven implies some level of flexibility in the response (rate increase/decrease). How data driven can the Fed be if the responses are limited to 25 basis point increments. Will this Fed or any in the future use 10 basis points change? The history of using 25 basis points does not point to ‘data driven’.

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I am a stickler on words. They have (and have used) other words to underscore their flexibility and why it matters. There's been a long-standing debate about policy rules vs judgment. The Fed always sided with judgment. Frankly, rules like the Taylor rule are literally data-driven.

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Will they consider 10 basis point changes? Seems to allow for a more fine-tuned approach.

Maybe flexible is the wrong word, fine-tuned, exact, maybe? My point is that if the data says a 10 point increase will be sufficient, would they do that or follow existing practice?

My brief research could not find a rationale for 25 basis points versus 10, 5, or 50.

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No. It's convention. Plus, it would be hard to hit such precision in the implementation of the rate.

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Somehow I always pictured fed chair Powell as more of a barrel racer than a tie down roper.

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Roping in the dual mandate ...

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data dependent in this context means we wont commit to next steps before next meeting - and they place ther "degrees of freedom" in the data that there is still to come out.

it s just a way to buy time and maintain the flexibility to not commit to future movement before time

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But some people take it literally. Watch the market whip around on the releases. Plus, are very important at the Fed.

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May 9, 2023Liked by Claudia Sahm

yes of course data is important - but as you said data doesn´t speak for itself.

And I think it a wise strategy to not commit to a decision before you need to commit - and saying you are "data dependent"

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I think it's a wise strategy not to commit. "Not on a preset course" is perfectly fine messaging. I am being a bit of a stickler on the data-driven, but I wanted to make the point that it's their judgment in the end.

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May 9, 2023·edited May 9, 2023

About those revisions.

Someone on twitter mentioned, on May 5th, that "Today's BLS jobs number was skewed by the Birth/Death Model adjustment that added 378,000 jobs" but when I look at the data (https://www.bls.gov/web/empsit/cesbd.htm) I do not see that.

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I am not an expert on the birth/death model, though it's another one that's tricky.

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