Morning Report – How much slack is there really in the labor market? 8/22/14

Markets are lower this morning on no real news. Bonds and MBS are flat.

Dull Summer Friday with no economic news. Janet Yellen is scheduled to hold a press conference at 2:30 EST, so there is the possibility of something coming out that could move bonds.

The Washington Post has a breakdown on the Bank of America / DOJ settlement. Although the headline amount is $17 billion, it looks like they will actually pay closer to $12 billion. Of the homeowner relief, they may run out the clock on principal modifications and drag them out, as JP Morgan is doing.

Nonvoting St Louis Fed President James Bullard argues there is less slack in the labor market than the Fed’s statements imply. He argues that it is the unemployment rate and payroll growth that matters, and that the labor force participation rate doesn’t add much information and is outside the purview of monetary policy. He is probably correct in that regard – I don’t really see how 25 basis points one way or another on the Fed Funds rate is going to affect the long-term unemployed. That said, I don’t think they move meaningfully until we start seeing wage inflation. That doesn’t rule out a symbolic increase in the Fed Funds rate sometime next year. Separately, Charles Plosser thinks we should raise rates this year.

7 Responses

  1. Several stories recently like this one about the shortage of truckers. Mostly a combination of increased demand, an aging work force, erratic work schedules, and low pay.

    Needing to have a CDL is also a barrier to entry. More gummint regulation gumming up the economy. We should let any methed-up burn-out into a cab to careen around the highways with the rest of us.

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  2. As long as there’s no artificial limitations on the number of CDL’s that can be issued and the fees track the actual costs, (i.e. it’s really about safety and not trying to restrain competition like a taxi medallion) then I don’t have a problem with it.

    I do believe that absent a CDL law that either a private certification board would fill the void, or insurance ratings would.

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  3. So wages will increase to attract more people into the industry…

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    • Trucking wages are going up but they had been taking a long slide. Corporate drivers now make more money than independents. It’s a complicated pay structure.

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  4. “Nonvoting St Louis Fed President James Bullard argues there is less slack in the labor market than the Fed’s statements imply.”

    The labor market is bifurcated now. Those who held out rather than take the first job available have pretty much rendered themselves unemployable.

    Companies will pay more to hire someone who is currently working than to hire the long term unemployed, especially if they are over 50 given the changes to health insurance ratings.

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  5. jnc

    especially if they are over 50 given the changes to health insurance ratings.

    Just so we’re clear it’s been this way for a long time with small group insurance. Every 5 years rates go up on the birthday of the employee, so even at 35 rates were higher based on age than they were at 30. It may be slightly different now with ACA for small group, but as I haven’t received my renewal yet for this year and my next 5 year birthday isn’t until next year when I turn 65 (hallelujah), I probably won’t see too much of an increase for a change.

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