jasonfurman.bsky.social
Professor at Harvard. Teaches Ec 10, some posts might be educational. Also Senior Fellow @PIIE.com & contributor
@nytopinion.nytimes.com. Was Chair of President Obama's CEA.
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But overall, a remarkably good inflation reading. Complementing the continued strong real economy data. Nothing the Fed needs to do but watch and wait to see how long it lasts--and which side of the mandate starts to slip first.
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Tariffs did add to some goods, here is Goldman's ex ante analysis. And tariffs were still not fully in effect in May and some price passthrough takes time.
Also weakening global economy and reduced tourism have helped to soften some other prices.
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Overall inflation has been even more tame than core as energy commodities generally and gas specifically has fallen for four straight months. (This is seasonally adjusted, some months gas prices increased--just by less than the usual spring runup.)
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A big part of the story is goods prices resumed their decline (yes, the same prices affected by tariffs) and service price growth was moderate.
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Shelter was not a big part of the story.
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I didn't share the basic data earlier. Here is core CPI, came in well below expectations in May.
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The ecumenical measure takes the median of 21 different measures: 7 different concepts (e.g., with and without housing) over 3, 6 and 12 months--all re-meaned to match the PCE inflation that the Fed targets.
In practice it is very similar to 6-month core CPI (re-meaned).
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I've long thought that the only rate cuts this year will come from a rapidly declining labor market. This is not it. Hard to imagine anything that could lead the Fed to cut before the September meeting--and I would bet against a cut even then.
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Like I said, a bit of a boring release. Don't read anything into the jobs growth being lower than it had been last year, with net immigration down so much steady-state employment growth is down.
Hard to see any adverse impact of tariffs on real economy.
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And the unemployment rate.
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Here is earnings.
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Note, Federal employment continued to decline. But state and local added almost as much.
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Correction: earlier this *month* not earlier this morning.
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All in all, more indications that the pre-tariff economy had slightly elevated inflation but was possibly on track to falling to something that would round to 2%.
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And the headline.
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Here are the full set of numbers.
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And here is a gift link for the first 300 readers: t.co/zmT2ap5BSw
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If you want to read and already subscribe to the FT please use this link so you don't use up my scarce gift links: www.ft.com/content/da83...
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And yes, towards the end I make some economic arguments too. Those are important too.
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I talk about my experiences as an undergraduate, graduate student and now faculty here. This is about some of the students I interact with every day.
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The issue is the bill's gimmick ends many of the new tax cuts end after a few years--while it is almost inevitable that Congress (of both parties) would extend those tax cuts.
Oh, and it also manages to take Medicaid away from 10m people & worsen clean energy at the same time.
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But even better is to look over full cycles to both average in more data & hold the cyclical constant (ways in which different forces affect numerator & denominator ). Here is what that looks like.
So far better than 1970s/1980s/post-GFC. But a bit below everything else.
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Here are quarterlies but no one looks at them because much real & measurement noise in both numerator (output) & denominator (hours). In SR can be a like a residual for different forces affecting each. In long-run tells you about technology & capital.
Note, 1.4% over 4 quarters.