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Eight possible explanations and not a single mention of the word "deflation." The Japanese have a long history of low unemployment and deflation working togeth
by apo 9y ago
Eight possible explanations and not a single mention of the word "deflation."
The Japanese have a long history of low unemployment and deflation working together:
http://www.tradingeconomics.com/japan/unemployment-rate http://www.tradingeconomics.com/japan/unemployment-rate
Maybe the idea that lower unemployment always leads to inflation is just wrong.
For now, wage decreases have been masked by cuts to employer-funded health insurance programs. Eventually, there will be nothing left to cut there leaving the possibility that we'll see across-the-board wage cuts.
- IanDrake 9y agoExactly. The demand for labor and the demand for the US dollar could be balancing labor costs.
- petra 9y agoShouldn't deflation come with decreasing prices all around, not just wages ? because except for a few relative small sectors, it doesn't seem to be the case.
- pixl97 9y agoNo, asset inflation is a different problem https://en.wikipedia.org/wiki/Asset_price_inflation https://en.wikipedia.org/wiki/Asset_price_inflation
- ChuckMcM 9y agoI was wondering why they didn't mention deflation as well.
- cjlars 9y agoUsing the Personal Consumption Expenditures (PCE) index instead of the CPI, as is more common, would strengthen this argument, as it shows inflation 0.3-0.5% points lower per year than the CPI [1]. In my view (and the Federal Reserve's) the PCE is a better measure of standard of living, since it adjusts more aggressively for changes in the quality of goods and changes in the basket of goods people purchase -- i.e. it better adjusts for the emergence of things like iPhones. So growth, both in wages, and in general would look a bit better under the PCE deflator. Regardless, you're still at a low rate of growth, not deflation. If labor force participation was the issue, we'd see that trending up, which we do a bit, but not much. One other theory somewhat consistent with the data is that we're seeing downward pressure from automation, yet if that was true productivity should be rising faster. [1] https://www.clevelandfed.org/newsroom-and-events/publications/economic-trends/2014-economic-trends/et-20140417-pce-and-cpi-inflation-whats-the-difference.aspx https://www.clevelandfed.org/newsroom-and-events/publication...