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That seems to run completely counter of the findings of another recent paper, published a week ago by former Fed chair Ben Bernanke and former IMF chief economi

That seems to run completely counter of the findings of another recent paper, published a week ago by former Fed chair Ben Bernanke and former IMF chief economist Olivier Blanchard: https://www.axios.com/2023/05/30/new-paper-predicts-rising-wages-will-keep-inflation-high https://www.axios.com/2023/05/30/new-paper-predicts-rising-w... The paper seems to indicate that the labor market did not affect inflation early on, but will continue to drive inflation henceforth. From the paper: > However, even as the effects of price shocks have waned, the effects of tight labor markets have begun to cumulate. Our decomposition shows that, as of early 2023, tight labor market conditions still accounted for a minority share of excess inflation. But according to our analysis, that share is likely to grow and will not subside on its own. The portion of inflation which traces its origin to overheating of labor markets can only be reversed by policy actions that bring labor demand and supply into better balance. Here's the paper: https://www.brookings.edu/wp-content/uploads/2023/04/Bernanke-Blanchard-conference-draft_5.23.23.pdf https://www.brookings.edu/wp-content/uploads/2023/04/Bernank...

mu53 3y ago
The annualized rate of inflation from month was 9.1% in June 2022 to 4.9% in April 2023.[1] This is far closer to the normal inflation rate of 3% a year, but still high. Wage increases usually cause an increase in prices. They had remained stagnant for about 40 years. I wonder if keeping inflation higher than 3% would help wages rise naturally without intervention by the government. [1] https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi
BoiledCabbage 3y ago
I'm not too impressed by that. Their very abstract says > We find that, contrary to early concerns that inflation would be spurred by overheated labor markets, most of the inflation surge that began in 2021 was the result of shocks to prices... And their overall train of thought is. in 2021 people thought inflation was due to wages but it wasn't, and in 2022 people thought inflation was due to wages but it wasn't, and so far in 2023 inflation isn't due primarily to wages... but the rest of 2023 inflation is going to be due to wages so we better lay people off now. Not exactly a great track record here. It really reads like they came in with a conclusion and are looking for any way to support it - because the data they surface doesn't support their conclusion. At least from my skim of the paper. Essentially the paper is data showing wages aren't a main driver, ???, followed by "but wages are scary so you should stop them from rising anyway." Well respected economists, but I'm not impressed at all by this bit of work.

mu53 3y ago

The annualized rate of inflation from month was 9.1% in June 2022 to 4.9% in April 2023.[1] This is far closer to the normal inflation rate of 3% a year, but still high. Wage increases usually cause an increase in prices. They had remained stagnant for about 40 years. I wonder if keeping inflation higher than 3% would help wages rise naturally without intervention by the government. [1] https://tradingeconomics.com/united-states/inflation-cpi https://tradingeconomics.com/united-states/inflation-cpi

BoiledCabbage 3y ago

I'm not too impressed by that. Their very abstract says > We find that, contrary to early concerns that inflation would be spurred by overheated labor markets, most of the inflation surge that began in 2021 was the result of shocks to prices... And their overall train of thought is. in 2021 people thought inflation was due to wages but it wasn't, and in 2022 people thought inflation was due to wages but it wasn't, and so far in 2023 inflation isn't due primarily to wages... but the rest of 2023 inflation is going to be due to wages so we better lay people off now. Not exactly a great track record here. It really reads like they came in with a conclusion and are looking for any way to support it - because the data they surface doesn't support their conclusion. At least from my skim of the paper. Essentially the paper is data showing wages aren't a main driver, ???, followed by "but wages are scary so you should stop them from rising anyway." Well respected economists, but I'm not impressed at all by this bit of work.