« Currently at Inflection Point of Unemployment | Main | Capital Income Consumption is Finally Falling »



Feed You can follow this conversation by subscribing to the comment feed for this post.

Very interesting. Following up on your intro line, since 1990, changes in the CPI seem to lag changes in employment by, say, 9 months to a year, more or less, but the relationship is less clear in the preceding period (including, obviously, the 1970s, where negative correlation seems simultaneous). How might you explain that -- if I am reading this correctly?

Hello Canuck,
There really shouldn't be this close of a correlation between the two factors. If money supply times velocity matches growth in employment, there would be no inflation. But it seems that M*V not only matches growth in employed but doubles it.
The only answer I can think of is that M*V is measured upon number of employed, and capacity building.
Labor wages are stagnant. Supply-side is optimized and maximized. Inflation is muted to the point that it equals increases in employed people.
Before 1980's, there was surging demand from boomers and labor power. This was happening upon big increases in the number of employed. Labor had a lot of power back then. But now less people are building the employed numbers, they have less power.
Demand is muted.
The fact that less people are increasing the employed numbers may explain part of why velocity of money keeps falling, which keeps inflation in line with growth in employed.

The comments to this entry are closed.

Data as of 3rdQ-2018
Effective Demand = $18.433 trillion
Real GDP = $18.671 trillion
Productive Capacity = $24.872 trillion
UT index is at effective demand limit = -0.92%
Effective demand limit = 74.1%
TFUR = 75.1%
ED Fed rate rule = 4.0%
Estimated Natural Real Interest rate = 2.3%
Short-term real interest rate = 2.8%

There is no recession for 3rdQ-2018. Chance of recession is growing as economy has now reached 2nd effective demand limit in this business cycle. I am forecasting that economic conditions will begin to contract in the second half of 2018.

Click on Graphs below to see updated data at FRED.

UT Index (measure of slack):

The UT Index



z derivatives in terms of labor & capital:

z derivatives in terms of labor & capital

Effective Demand, real GDP & Potential GDP:

ED, real GDP & pot rGDP

ED Output Gap:

ED Output gap

Corporate profit rate over real cost of money:

Corp profit rate over real cost of money

Exponential decay of Inflation:

Corporate profits impact Inflation

Measures of Inflation:

Measures of Inflation

YoY Employment change:

YoY employment change

Speed of consuming slack: yoy monthly:

Speed of consuming slack

Speed of consuming slack: quarterly:

Speed of consuming slack quarterly

Real consumption per Employee:

real consumption per employee 2

Will real wages ever rise faster than productivity?:

Productivity & Real Wages



Productivity against Effective Demand limit:

Prod & ED limit

Bottom of Initial Claims?:

Initial claims

Tracking inflation expectations:

Fisher effect?

M2 velocity still falling:

Measures of Inflation

All in one:

All in one

Double checking labor share with unit labor costs & inflation:

My Photo
Edward Lambert: Independent Researcher on Effective Demand. Graduate of Atlantic International University where independent research was developed.
Some links for economic analysis
Fed Views - San Francisco Fed, around 10th of each month.
Well's Fargo monthly - around 10th of each month
Well's Fargo weekly
Well's Fargo Interest rate report
Well's Fargo Economic indicators
T. Rowe Price weekly market wrap-up
Blog powered by Typepad
Member since 03/2013