
The Mystery of Missing Inflation Weighs on Fed Rate Move - prostoalex
http://www.wsj.com/articles/the-mystery-of-missing-inflation-weighs-on-fed-rate-move-1450056838
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gph
As a complete layperson I might be out of my depth, but is that 5%
unemployment realistic? If I remember correctly they don't count people who
have been unemployed long-term. There's a lot of people who don't work;
whether they collect disability/welfare, live off relatives, or make money
through the grey/black markets I don't think the job market has really
recovered nearly as much as a lot of people think. And a lot of those jobs are
part-time or low wage. Perhaps that's anecdotal from the impression I get, but
it doesn't seem like their model takes any of that into account.

Even without inflation it doesn't seem like the people I'm around (mostly
middle to lower class) have all that much extra spending money laying around
these days. If everyone was making more money I'm sure inflation would
rebound, but as it is most the new money the Fed has been pumping into the
economy seems to be going largely to the upper class.

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SCAQTony
No, 5.3% unemployment number is cooked. Even the BLS stats say 10.3% & that's
probably gamed too.

[http://www.cnbc.com/2015/09/04/-the-real-unemployment-
rate.h...](http://www.cnbc.com/2015/09/04/-the-real-unemployment-rate.html) …

~~~
jjoonathan
Understand the definitions of "unemployed" here (U1-U6):
[https://en.wikipedia.org/wiki/Unemployment#United_States_Bur...](https://en.wikipedia.org/wiki/Unemployment#United_States_Bureau_of_Labor_statistics)

Look up the time-series here:
[https://en.wikipedia.org/wiki/Unemployment#/media/File:US_Un...](https://en.wikipedia.org/wiki/Unemployment#/media/File:US_Unemployment_measures.svg)

It's a little silly to say that one of these measures is "cooked" while using
as evidence an alternative metric that was measured and published by the same
agency with the explicit understanding that the two metrics measured different
things.

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CyberFonic
The Fed's model is broken.

Employment might be up, but wages (except for executives) have been stagnant
for well over a decade. Retailers have been squeezing suppliers in order to
maintain low prices (hello Costco, Walmart!). Discretionary spending is low
due to under-employment in many sectors.

BTW: the "unemployment" figures fail to take into account people who are no
longer looking for work and even worse, the masses of underemployed, people
who can barely make ends meet.

~~~
jjoonathan
The BLS publishes six unemployment indexes [1] that each include and exclude
different groups for which employment status is debatable. However, each index
has a largely consistent definition over time. They all follow essentially the
same trend [2]. Could you be more specific as to the type of definition
manipulation you believe is afoot?

[1]
[https://en.wikipedia.org/wiki/Unemployment#United_States_Bur...](https://en.wikipedia.org/wiki/Unemployment#United_States_Bureau_of_Labor_statistics)

[2]
[https://en.wikipedia.org/wiki/Unemployment#/media/File:US_Un...](https://en.wikipedia.org/wiki/Unemployment#/media/File:US_Unemployment_measures.svg)

~~~
asmithmd1
The total labor force participation rate is total number of people who worked
last month over total number of civilians over 16 years old. It is at historic
lows but somehow "unemployment" is 5%

[http://data.bls.gov/timeseries/LNS11300000](http://data.bls.gov/timeseries/LNS11300000)

~~~
dragonwriter
Not really surprising, Boomers keep retiring, and retirees not interested in
work are part of the denominator for labor force participation rate, but not
in any reasonable sense of the word "unemployed".

Ever-expanding lifespans and a demographic bulge hitting retirement age
naturally combine to make labor force participation historically low.

~~~
JuanaMango
Except that is the opposite of what is happening, Boomers and others who
should be retiring are not and those who should be working are not. The only
reason the LFP is not lower than it is is because more people can't afford to
retire

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derf_
In the search for new models I've always been partial to the inclusion of
credit (marked to market) as a factor in predicting inflation, instead of just
money supply. This at least correctly predicted low-to-no inflation post-
financial-crisis despite massive increases in the money supply.

[http://www.economicsjunkie.com/inflation-deflation-
revisited...](http://www.economicsjunkie.com/inflation-deflation-revisited/)
has some good explanations of why.

There's also what you measure: consumer prices do not reflect increases in
asset prices, and the latter have grown very quickly in the past few years (as
credit has recovered).

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jweir
Related, the Federal Reserve Bank of New York recently open sourced one of its
models (coded in Julia)

[https://github.com/FRBNY-
DSGE/DSGE.jl/blob/master/doc/Data.m...](https://github.com/FRBNY-
DSGE/DSGE.jl/blob/master/doc/Data.md)

Discussion:
[https://news.ycombinator.com/item?id=10670138](https://news.ycombinator.com/item?id=10670138)

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guimarin
Software is leading to much more leverage in capital efficiency. This is
driving a reduction in CapEx spending in the US despite low interest rates.
It's driving a reduced cost in exploration and extraction, which is in turn
increasing supply for commodities and energy. We do more today with almost
every conceivable good than we ever have before. More with less is the theme
and it's getting much more powerful with software. IBM: $100bn, VMWare: $10bn,
Docker/Containers: $1bn. All the same stuff. Our efficiency is increasing
rapidly, and it's very difficult to predict with historical figures where this
goes.

~~~
dualogy
Oh I get it, the Dockers lead to the multi-year global commodity glut, well
that's a stunner..

Truthfully: it does amaze how the lens we use to view the world, shapes the
picture we see.

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randomname2
Missing? There is definitely some inflation in college tuition, housing,
healthcare costs and food.

~~~
ZoeZoeBee
3 out of the 4 you mention have all seen the Federal government silently take
over, the US Mortgage Industry, and Student Loans are now majority run by the
Feds and healthcare is on the same road, waiting for those savings any day now

~~~
danharaj
I really don't think any of those were _silent_ takeovers.

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ilaksh
They basically have one valve they can turn. The model is too simple.

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TheOtherHobbes
The model is nonsense - not even wrong.

But then the data has been massaged into irrelevance anyway, so it's pretty
much a twofer.

How these people have the gall to pretend they're doing anything that
resembles mathematical analysis is astonishing.

