Nonfarm Hires Jump 64.7 Percent from 4.656 Million in Mar 2020 to 7.670
Million in Jun 2020, Higher by 16.8 Percent Than 6.564 Million in Jun 2019 In the Global
Recession, with Output in the US Reaching a High in Feb 2020 (https://www.nber.org/cycles.html), in the Lockdown
of Economic Activity in the COVID-19 Event, Seventeen Million Fewer Full-Time
Jobs Relative to Working Population in the COVID-19 Event, Recovery Without
Hiring in the Lost
Economic Cycle of the Global Recession with Economic Growth Underperforming
Below Trend Worldwide, Youth Unemployment, Middle-Age Unemployment 190.6 Percent
Higher in Jul 2020 Than in Jul 2007 In the Global Recession, with Output in the
US Reaching a High in Feb 2020 (https://www.nber.org/cycles.html), in the Lockdown
of Economic Activity in the COVID-19 Event, Increase of US Consumer Prices at
Annual Equivalent 7.4 Percent in Jul 2020 with Inflation Worldwide, Growth of
US Exports at 9.4 Percent in Jun 2020 and Imports at 4.7 Percent, World
Cyclical Slow Growth, and Government Intervention in Globalization: Part IV
Carlos M. Pelaez
© Carlos M. Pelaez, 2009,
2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
IA1 Hiring Collapse
IA2 Labor Underutilization
ICA3 Seventeen Million Fewer
Full-time Jobs
IA4 Theory and Reality of Cyclical Slow
Growth Not Secular Stagnation: Youth and Middle-Age Unemployment
IC United
States Inflation
IC Long-term US Inflation
ID Current US Inflation
II United States International Trade
III World Financial Turbulence
IV Global Inflation
V World Economic
Slowdown
VA United States
VB Japan
VC China
VD Euro Area
VE Germany
VF France
VG Italy
VH United Kingdom
VI Valuation of Risk
Financial Assets
VII Economic
Indicators
VIII Interest Rates
IX Conclusion
References
Appendixes
Appendix I The Great Inflation
IIIB Appendix on Safe
Haven Currencies
IIIC Appendix on
Fiscal Compact
IIID Appendix on
European Central Bank Large Scale Lender of Last Resort
IIIG Appendix on Deficit Financing of Growth and the
Debt Crisis
ID Current US Inflation. Consumer price
inflation has fluctuated in recent months. Table I-3 provides 12-month consumer
price inflation in Jul 2020 and annual equivalent percentage changes for the
months from May 2020 to Jul 2020 of the CPI and major segments. The final
column provides inflation from Jun 2020 to Jul 2020. CPI inflation increased 1.0
percent in the 12 months ending in Jul 2020. The annual equivalent rate from May
2020 to Jul 2020 was 4.5 percent in the new episode of reversal and renewed
positions of carry trades from zero interest rates to commodities exposures;
and the monthly inflation rate of 0.6 percent annualizes at 7.4 percent with
oscillating carry trades at the margin. These inflation rates fluctuate in
accordance with inducement of risk appetite or frustration by risk aversion of
carry trades from zero interest rates to commodity futures. At the margin, the
decline in commodity prices in sharp recent risk aversion in commodities
markets caused lower inflation worldwide (with return in some countries in Dec
2012 and Jan-Feb 2013) that followed a jump in Aug-Sep 2012 because of the
relaxed risk aversion resulting from the bond-buying program of the European
Central Bank or Outright Monetary Transactions (OMT) (https://www.ecb.europa.eu/press/pr/date/2012/html/pr120906_1.en.html). Carry trades
moved away from commodities into stocks with resulting weaker commodity prices
and stronger equity valuations. There is reversal of exposures in commodities
but with preferences of equities by investors. Geopolitical events in Eastern
Europe and the Middle East together with economic conditions worldwide are
inducing risk concerns in commodities at the margin. With zero or very low
interest rates, commodity prices would increase again in an environment of risk
appetite, as shown in past oscillating inflation. Excluding food and energy,
core CPI inflation was 1.6 percent in the 12 months ending in Jul 2020 and 2.8
percent in annual equivalent from May 2020 to Jul 2020. There is no deflation
in the US economy that could justify further unconventional monetary policy,
which is now open-ended or forever with very low interest rates and cessation
of bond-buying by the central bank but with reinvestment of interest and
principal, or QE→∞ even if the
economy grows back to potential. The FOMC is engaging in renewed increases in
the Fed balance sheet. Financial repression of very low interest rates is now
intended as a permanent distortion of resource allocation by clouding
risk/return decisions, preventing the economy from expanding along its optimal
growth path. The FOMC had engaged in recent increases of purchases of
securities after reducing interest rates in the global recession, with output in the
US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. Consumer food
prices in the US increased 4.1 percent in 12 months ending in Jul 2020 and
changed at 3.6 percent in annual equivalent from May 2020 to Jul 2020. Monetary
policies stimulating carry trades of commodities futures that increase prices
of food constitute a highly regressive tax on lower income families for whom
food is a major portion of the consumption basket especially with wage
increases below inflation in a recovery without hiring (Section I and earlier https://cmpassocregulationblog.blogspot.com/2020/07/collapse-of-united-states-dynamism-of.html). Energy
consumer prices decreased 11.2 percent in 12 months, increased at 25.2 percent
in annual equivalent from May 2020 to Jul 2020 and increased 2.5 percent in Jul
2020 or at 34.5 percent in annual equivalent. Waves of inflation are induced by
carry trades from zero interest rates to commodity futures, which are unwound
and repositioned during alternating risk aversion and risk appetite originating
in the European debt crisis and increasingly in growth, soaring debt and
politics in China. For lower income families, food and energy are a major part
of the family budget. Inflation is not persistently low or threatening
deflation in annual equivalent in any of the categories in Table I-2 but simply
reflecting waves of inflation originating in carry trades. Zero interest rates
induce carry trades into commodity futures positions with episodes of risk
aversion and portfolio reallocations causing fluctuations that determine an
upward trend of prices. There are now exceptional effects on prices in the
global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Table I-3, US, Consumer Price Index Percentage Changes 12 months
NSA and Annual Equivalent ∆%
|
|
% RI |
∆% 12 Months Jul 2020/Jul |
∆% Annual Equivalent May 2020 to Jul 2020 SA |
∆% Jul 2020/Jun 2020 SA |
|
CPI All Items |
100.000 |
1.0 |
4.5 |
0.6 |
|
CPI ex Food and Energy |
79.679 |
1.6 |
2.8 |
0.6 |
|
Food |
14.252 |
4.1 |
3.6 |
-0.4 |
|
Food at Home |
7.971 |
4.6 |
2.4 |
-1.1 |
|
Food Away from Home |
6.282 |
3.4 |
5.7 |
0.5 |
|
Energy |
6.069 |
-11.2 |
25.2 |
2.5 |
|
Gasoline |
2.715 |
-20.3 |
71.5 |
5.6 |
|
Electricity |
2.494 |
-0.1 |
-3.2 |
0.3 |
|
Commodities less Food and Energy |
20.071 |
-0.5 |
2.8 |
0.7 |
|
New Vehicles |
3.745 |
0.5 |
4.5 |
0.8 |
|
Used Cars and Trucks |
2.521 |
-0.9 |
2.7 |
2.3 |
|
Medical Care Commodities |
1.624 |
1.1 |
1.2 |
0.0 |
|
Apparel |
2.698 |
-6.5 |
1.8 |
1.1 |
|
Services Less Energy Services |
59.607 |
2.3 |
3.7 |
0.6 |
|
Shelter |
33.468 |
2.3 |
2.0 |
0.2 |
|
Rent of Primary Residence |
7.871 |
3.1 |
2.4 |
0.2 |
|
Owner’s Equivalent Rent of Residences |
24.277 |
2.8 |
2.4 |
0.2 |
|
Transportation Services |
5.046 |
-3.7 |
8.1 |
3.6 |
|
Medical Care Services |
7.372 |
5.9 |
6.6 |
0.5 |
% RI: Percent Relative Importance
Source: US Bureau of Labor Statistics https://www.bls.gov/cpi/
Chart I-18, US, Consumer Price Index, Housing, NSA, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/cpi/data.htm
Chart I-19 provides 12-month percentage changes of the housing
CPI. Percentage changes collapsed during the global recession but have been
rising into positive territory in 2011 and 2012-2013 but with the rate
declining and then increasing into 2014. There is decrease into 2015 followed
by stability and marginal increase in 2016-2020 followed by initial decline in the
global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Chart I-19, US, Consumer Price Index, Housing, 12-Month
Percentage Change, NSA, 2001-2020
Source: US Bureau of Labor Statistics
There have been waves of consumer price
inflation in the US in 2011 and into 2020 (https://cmpassocregulationblog.blogspot.com/2020/07/contraction-of-household-wealth-by-14.html and earlier https://cmpassocregulationblog.blogspot.com/2020/06/mediocre-cyclical-united-states.html) that are
illustrated in Table I-5. The first wave occurred in Jan-Apr 2011 and
was caused by the carry trade of commodity prices induced by unconventional
monetary policy of zero interest rates. Cheap money at zero opportunity cost in
environment of risk appetite was channeled into financial risk assets, causing
increases in commodity prices. The annual equivalent rate of increase of the
all-items CPI in Jan-Apr 2011 was 4.9 percent and the CPI excluding food and
energy increased at annual equivalent rate of 1.8 percent. The second wave
occurred during the collapse of the carry trade from zero interest rates to
exposures in commodity futures because of risk aversion in financial markets
created by the sovereign debt crisis in Europe. The annual equivalent rate of increase
of the all-items CPI dropped to 1.8 percent in May-Jun 2011 while the annual
equivalent rate of the CPI excluding food and energy increased at 2.4 percent.
In the third wave in Jul-Sep 2011, annual equivalent CPI inflation rose
to 3.2 percent while the core CPI increased at 2.4 percent. The fourth wave
occurred in the form of increase of the CPI all-items annual equivalent rate to
1.8 percent in Oct-Nov 2011 with the annual equivalent rate of the CPI
excluding food and energy remaining at 2.4 percent. The fifth wave
occurred in Dec 2011 to Jan 2012 with annual equivalent headline inflation of
1.8 percent and core inflation of 2.4 percent. In the sixth wave,
headline CPI inflation increased at annual equivalent 2.4 percent in Feb-Apr
2012 and 2.0 percent for the core CPI. The seventh wave in May-Jul
occurred with annual equivalent inflation of minus 1.2 percent for the headline
CPI in May-Jul 2012 and 2.0 percent for the core CPI. The eighth wave is
with annual equivalent inflation of 6.8 percent in Aug-Sep 2012 but 5.7 percent
including Oct. In the ninth wave, annual equivalent inflation in Nov
2012 was minus 2.4 percent under the new shock of risk aversion and 0.0 percent
in Dec 2012 with annual equivalent of 0.0 percent in Nov 2012-Jan 2013 and 2.0 percent
for the core CPI. In the tenth wave, annual equivalent of the headline
CPI was 6.2 percent in Feb 2013 and 1.2 percent for the core CPI. In the eleventh
wave, annual equivalent was minus 3.0 percent in Mar-Apr 2013 and 0.6
percent for the core index. In the twelfth wave, annual equivalent
inflation was 1.4 percent in May-Sep 2013 and 2.2 percent for the core CPI. In
the thirteenth wave, annual equivalent CPI inflation in Oct-Nov 2013 was
1.8 percent and 1.8 percent for the core CPI. Inflation returned in the fourteenth
wave at 2.4 percent for the headline CPI index and 1.8 percent for the core
CPI in annual equivalent for Dec 2013 to Mar 2014. In the fifteenth wave,
inflation moved to annual equivalent 1.8 percent for the headline index in
Apr-Jul 2014 and 2.1 percent for the core index. In the sixteenth wave,
annual equivalent inflation was 0.0 percent in Aug 2014 and 1.2 percent for the
core index. In the seventeenth wave, annual equivalent inflation was 0.0
percent for the headline CPI and 2.4 percent for the core in Sep-Oct 2014. In
the eighteenth wave, annual equivalent inflation was minus 4.3 percent
for the headline index in Nov 2014-Jan 2015 and 1.2 percent for the core. In
the nineteenth wave, annual equivalent inflation was 3.2 percent for the
headline index and 2.2 percent for the core index in Feb-Jun 2015. In the twentieth
wave, annual equivalent inflation was at 2.4 percent in Jul 2015 for the
headline and core indexes. In the twenty-first wave, headline consumer prices decreased at 1.2 percent
in annual equivalent in Aug-Sep 2015 while core prices increased at annual
equivalent 1.8 percent. In the twenty-second wave, consumer prices
increased at annual equivalent 1.2 percent for the central index and 2.4
percent for the core in Oct-Nov 2015. In the twenty-third wave, annual
equivalent inflation was minus 0.6 percent for the headline CPI in Dec 2015 to
Jan 2016 and 1.8 percent for the core. In the twenty-fourth wave, annual
equivalent was minus 1.2 percent and 2.4 percent for the core in Feb 2016. In
the twenty-fifth wave, annual equivalent inflation was at 3.7 percent
for the central index in Mar-Apr 2016 and at 1.8 percent for the core index. In
the twenty-sixth wave, annual equivalent inflation was 3.7 percent for
the central CPI in May-Jun 2016 and 2.4 percent for the core CPI. In the twenty-seventh
wave, annual equivalent inflation was 0.0 percent for the central CPI and
1.2 percent for the core in Jul 2016. In the twenty-eighth wave, annual
equivalent inflation was 2.4 percent for the headline CPI in Aug 2016 and 2.4
percent for the core. In the twenty-ninth wave, CPI prices increased at
annual equivalent 2.4 percent in Sep-Oct 2016 while the core CPI increased at
1.2 percent. In the thirtieth wave, annual equivalent CPI prices
increased at 2.4 percent in Nov-Dec 2016 while the core CPI increased at 2.4
percent. In the thirty-first wave, CPI prices increased at annual
equivalent 4.9 percent in Jan 2017 while the core index increased at 2.4
percent. In the thirty-second wave, CPI prices changed at annual
equivalent 1.2 percent in Feb 2017 while the core increased at 2.4 percent. In
the thirty-third wave, CPI prices decreased at annual equivalent 1.2
percent in Mar 2017 while the core index changed at 0.0 percent. In the thirty-fourth
wave, CPI prices increased at 1.2 percent annual equivalent in Apr 2017
while the core index increased at 1.2 percent. In the thirty-fifth wave,
CPI prices changed at 0.0 annual equivalent in May-Jun 2017 while core prices
increased at 1.2 percent. In the thirty-sixth wave, CPI prices increased
at annual equivalent 1.2 percent in Jul 2017 while core prices increased at 1.2
percent. In the thirty-seventh wave, CPI prices increased at annual
equivalent 5.5 percent in Aug-Sep 2017 while core prices increased at 1.8 percent.
In the thirty-eighth wave, CPI prices increased at 2.4 percent annual
equivalent in Oct-Nov 2017 while core prices increased at 2.4 percent. In the thirty-ninth
wave, CPI prices increased at 3.7 percent annual equivalent in Dec 2017-Feb
2018 while core prices increased at 2.8 percent. In the fortieth wave,
CPI prices changed at 0.0 percent annual equivalent in Mar 2018 while core
prices increased at 2.4 percent. In the forty-first wave, CPI prices
increased at 3.0 percent annual equivalent in Apr-May 2018 while core prices
increased at 2.4 percent. In the forty-second wave, CPI prices increased
at 1.8 percent in Jun-Sep 2018 while core prices increased at 1.8 percent. In
the forty-third wave, CPI prices increased at annual equivalent 2.4
percent in Oct 2018 while core prices increased at 1.2 percent. In the forty-fourth
wave, CPI prices changed at 0.0 percent annual equivalent in Nov 2018-Jan
2019 while core prices increased at 2.4 percent. In the forty-fifth wave,
CPI prices increased at 3.7 percent annual equivalent in Feb-Apr 2019 while
core prices increased at 2.0 percent. In the forty-sixth wave, CPI
prices increased at 1.2 percent annual equivalent in May-Jun 2019 while core
prices increased at 2.4 percent. In the forty-seventh wave, CPI prices increased
at 3.7 percent annual equivalent in Jul 2019 while core prices increased at 3.7
percent. In the forty-eighth wave, CPI prices increased at 1.2 percent
annual equivalent in Aug-Sep 2019 while core prices increased at 2.4 percent.
In the forty-ninth wave, CPI prices increased at 2.4 percent annual
equivalent in Oct-Dec 2019 while core prices increased at 1.6 percent. In the fiftieth
wave, CPI prices increased at 1.2 percent annual equivalent in Jan-Feb 2020
and core prices at 2.4 percent. In the fifty-first wave, CPI prices
decreased at annual equivalent 5.1 percent in Mar-May 2020 while core prices
decreased at 2.4 percent. In the fifty-second wave, CPI prices increased
at 7.4 percent annual equivalent in Jun-Jul 2020 and core prices increased at 4.9
percent. The conclusion is that inflation accelerates and decelerates in
unpredictable fashion because of shocks or risk aversion and portfolio
reallocations in carry trades from zero interest rates to commodity
derivatives.
Table I-5, US,
Headline and Core CPI Inflation Monthly SA and 12 Months NSA ∆%
|
|
All
Items SA Month |
All Items NSA
12 month |
Core SA |
Core NSA |
|
Jul 2020 |
0.6 |
1.0 |
0.6 |
1.6 |
|
Jun |
0.6 |
0.6 |
0.2 |
1.2 |
|
AE ∆% Jun-Jul |
7.4 |
|
4.9 |
|
|
May |
-0.1 |
0.1 |
-0.1 |
1.2 |
|
Apr |
-0.8 |
0.3 |
-0.4 |
1.4 |
|
Mar |
-0.4 |
1.5 |
-0.1 |
2.1 |
|
AE ∆% Mar-May |
-5.1 |
|
-2.4 |
|
|
Feb |
0.1 |
2.3 |
0.2 |
2.4 |
|
Jan |
0.1 |
2.5 |
0.2 |
2.3 |
|
AE ∆% Jan-Feb |
1.2 |
|
2.4 |
|
|
Dec 2019 |
0.2 |
2.3 |
0.1 |
2.3 |
|
Nov |
0.2 |
2.1 |
0.2 |
2.3 |
|
Oct |
0.2 |
1.8 |
0.1 |
2.3 |
|
AE ∆% Oct-Dec |
2.4 |
|
1.6 |
|
|
Sep |
0.1 |
1.7 |
0.2 |
2.4 |
|
Aug |
0.1 |
1.7 |
0.2 |
2.4 |
|
AE ∆% Aug-Sep |
1.2 |
|
2.4 |
|
|
Jul |
0.3 |
1.8 |
0.3 |
2.2 |
|
AE ∆% Jul |
3.7 |
|
3.7 |
|
|
Jun |
0.1 |
1.6 |
0.3 |
2.1 |
|
May |
0.1 |
1.8 |
0.1 |
2.0 |
|
AE ∆% May-Jun |
1.2 |
|
2.4 |
|
|
Apr |
0.3 |
2.0 |
0.2 |
2.1 |
|
Mar |
0.4 |
1.9 |
0.2 |
2.0 |
|
Feb |
0.2 |
1.5 |
0.1 |
2.1 |
|
AE ∆% Feb-Apr |
3.7 |
|
2.0 |
|
|
Jan |
0.0 |
1.6 |
0.2 |
2.2 |
|
Dec 2018 |
0.0 |
1.9 |
0.2 |
2.2 |
|
Nov |
0.0 |
2.2 |
0.2 |
2.2 |
|
AE ∆% Nov-Jan |
0.0 |
|
2.4 |
|
|
Oct |
0.2 |
2.5 |
0.1 |
2.1 |
|
AE ∆% Oct |
2.4 |
|
1.2 |
|
|
Sep |
0.1 |
2.3 |
0.2 |
2.2 |
|
Aug |
0.2 |
2.7 |
0.1 |
2.2 |
|
Jul |
0.1 |
2.9 |
0.2 |
2.4 |
|
Jun |
0.2 |
2.9 |
0.1 |
2.3 |
|
AE ∆% Jun-Sep |
1.8 |
|
1.8 |
|
|
May |
0.3 |
2.8 |
0.2 |
2.2 |
|
Apr |
0.2 |
2.5 |
0.2 |
2.1 |
|
AE ∆% Apr-May |
3.0 |
|
2.4 |
|
|
Mar |
0.0 |
2.4 |
0.2 |
2.1 |
|
AE ∆% Mar |
0.0 |
|
2.4 |
|
|
Feb |
0.3 |
2.2 |
0.2 |
1.8 |
|
Jan |
0.4 |
2.1 |
0.3 |
1.8 |
|
Dec 2017 |
0.2 |
2.1 |
0.2 |
1.8 |
|
AE ∆% Dec-Feb |
3.7 |
|
2.8 |
|
|
Nov |
0.3 |
2.2 |
0.1 |
1.7 |
|
Oct |
0.1 |
2.0 |
0.3 |
1.8 |
|
AE ∆% Oct-Nov |
2.4 |
|
2.4 |
|
|
Sep |
0.5 |
2.2 |
0.1 |
1.7 |
|
Aug |
0.4 |
1.9 |
0.2 |
1.7 |
|
AE ∆% Aug-Sep |
5.5 |
|
1.8 |
|
|
Jul |
0.1 |
1.7 |
0.1 |
1.7 |
|
AE ∆% Jul |
1.2 |
|
1.2 |
|
|
Jun |
0.1 |
1.6 |
0.1 |
1.7 |
|
May |
-0.1 |
1.9 |
0.1 |
1.7 |
|
AE ∆% May-Jun |
0.0 |
|
1.2 |
|
|
Apr |
0.1 |
2.2 |
0.1 |
1.9 |
|
AE ∆% Apr |
1.2 |
|
1.2 |
|
|
Mar |
-0.1 |
2.4 |
0.0 |
2.0 |
|
AE ∆% Mar |
-1.2 |
|
0.0 |
|
|
Feb |
0.1 |
2.7 |
0.2 |
2.2 |
|
AE ∆% Feb |
1.2 |
|
2.4 |
|
|
Jan |
0.4 |
2.5 |
0.2 |
2.3 |
|
AE ∆% Jan |
4.9 |
|
2.4 |
|
|
Dec 2016 |
0.3 |
2.1 |
0.2 |
2.2 |
|
Nov |
0.1 |
1.7 |
0.2 |
2.1 |
|
AE ∆% Nov-Dec |
2.4 |
|
2.4 |
|
|
Oct |
0.2 |
1.6 |
0.1 |
2.1 |
|
Sep |
0.2 |
1.5 |
0.1 |
2.2 |
|
AE ∆% Sep-Oct |
2.4 |
|
1.2 |
|
|
Aug |
0.2 |
1.1 |
0.2 |
2.3 |
|
AE ∆ Aug |
2.4 |
|
2.4 |
|
|
Jul |
0.0 |
0.8 |
0.1 |
2.2 |
|
AE ∆% Jul |
0.0 |
|
1.2 |
|
|
Jun |
0.3 |
1.0 |
0.2 |
2.2 |
|
May |
0.3 |
1.0 |
0.2 |
2.2 |
|
AE ∆% May-Jun |
3.7 |
|
2.4 |
|
|
Apr |
0.4 |
1.1 |
0.2 |
2.1 |
|
Mar |
0.2 |
0.9 |
0.1 |
2.2 |
|
AE ∆% Mar-Apr |
3.7 |
|
1.8 |
|
|
Feb |
-0.1 |
1.0 |
0.2 |
2.3 |
|
AE ∆% Feb |
-1.2 |
|
2.4 |
|
|
Jan |
0.0 |
1.4 |
0.2 |
2.2 |
|
Dec 2015 |
-0.1 |
0.7 |
0.1 |
2.1 |
|
AE ∆% Dec-Jan |
-0.6 |
|
1.8 |
|
|
Nov |
0.1 |
0.5 |
0.2 |
2.0 |
|
Oct |
0.1 |
0.2 |
0.2 |
1.9 |
|
AE ∆% Oct-Nov |
1.2 |
|
2.4 |
|
|
Sep |
-0.2 |
0.0 |
0.2 |
1.9 |
|
Aug |
0.0 |
0.2 |
0.1 |
1.8 |
|
AE ∆% Aug-Sep |
-1.2 |
|
1.8 |
|
|
Jul |
0.2 |
0.2 |
0.2 |
1.8 |
|
AE ∆% Jul |
2.4 |
|
2.4 |
|
|
Jun |
0.3 |
0.1 |
0.2 |
1.8 |
|
May |
0.3 |
0.0 |
0.1 |
1.7 |
|
Apr |
0.1 |
-0.2 |
0.2 |
1.8 |
|
Mar |
0.3 |
-0.1 |
0.2 |
1.8 |
|
Feb |
0.3 |
0.0 |
0.2 |
1.7 |
|
AE ∆% Feb-Jun |
3.2 |
|
2.2 |
|
|
Jan |
-0.6 |
-0.1 |
0.1 |
1.6 |
|
Dec 2014 |
-0.3 |
0.8 |
0.1 |
1.6 |
|
Nov |
-0.2 |
1.3 |
0.1 |
1.7 |
|
AE ∆% Nov-Jan |
-4.3 |
|
1.2 |
|
|
Oct |
0.0 |
1.7 |
0.2 |
1.8 |
|
Sep |
0.0 |
1.7 |
0.2 |
1.7 |
|
AE ∆% Sep-Oct |
0.0 |
|
2.4 |
|
|
Aug |
0.0 |
1.7 |
0.1 |
1.7 |
|
AE ∆% Aug |
0.0 |
|
1.2 |
|
|
Jul |
0.1 |
2.0 |
0.2 |
1.9 |
|
Jun |
0.1 |
2.1 |
0.1 |
1.9 |
|
May |
0.2 |
2.1 |
0.2 |
2.0 |
|
Apr |
0.2 |
2.0 |
0.2 |
1.8 |
|
AE ∆% Apr-Jul |
1.8 |
|
2.1 |
|
|
Mar |
0.2 |
1.5 |
0.2 |
1.7 |
|
Feb |
0.1 |
1.1 |
0.1 |
1.6 |
|
Jan |
0.2 |
1.6 |
0.1 |
1.6 |
|
Dec 2013 |
0.3 |
1.5 |
0.2 |
1.7 |
|
AE ∆% Dec-Mar |
2.4 |
|
1.8 |
|
|
Nov |
0.2 |
1.2 |
0.2 |
1.7 |
|
Oct |
0.1 |
1.0 |
0.1 |
1.7 |
|
AE ∆% Oct-Nov |
1.8 |
|
1.8 |
|
|
Sep |
0.0 |
1.2 |
0.2 |
1.7 |
|
Aug |
0.2 |
1.5 |
0.2 |
1.8 |
|
Jul |
0.2 |
2.0 |
0.2 |
1.7 |
|
Jun |
0.2 |
1.8 |
0.2 |
1.6 |
|
May |
0.0 |
1.4 |
0.1 |
1.7 |
|
AE ∆% May-Sep |
1.4 |
|
2.2 |
|
|
Apr |
-0.2 |
1.1 |
0.0 |
1.7 |
|
Mar |
-0.3 |
1.5 |
0.1 |
1.9 |
|
AE ∆% Mar-Apr |
-3.0 |
|
0.6 |
|
|
Feb |
0.5 |
2.0 |
0.1 |
2.0 |
|
AE ∆% Feb |
6.2 |
|
1.2 |
|
|
Jan |
0.2 |
1.6 |
0.2 |
1.9 |
|
Dec 2012 |
0.0 |
1.7 |
0.2 |
1.9 |
|
Nov |
-0.2 |
1.8 |
0.1 |
1.9 |
|
AE ∆% Nov-Jan |
0.0 |
|
2.0 |
|
|
Oct |
0.3 |
2.2 |
0.2 |
2.0 |
|
Sep |
0.5 |
2.0 |
0.2 |
2.0 |
|
Aug |
0.6 |
1.7 |
0.1 |
1.9 |
|
AE ∆% Aug-Oct |
5.7 |
|
2.0 |
|
|
Jul |
0.0 |
1.4 |
0.2 |
2.1 |
|
Jun |
-0.1 |
1.7 |
0.2 |
2.2 |
|
May |
-0.2 |
1.7 |
0.1 |
2.3 |
|
AE ∆% May-Jul |
-1.2 |
|
2.0 |
|
|
Apr |
0.2 |
2.3 |
0.2 |
2.3 |
|
Mar |
0.2 |
2.7 |
0.2 |
2.3 |
|
Feb |
0.2 |
2.9 |
0.1 |
2.2 |
|
AE ∆% Feb-Apr |
2.4 |
|
2.0 |
|
|
Jan |
0.3 |
2.9 |
0.2 |
2.3 |
|
Dec 2011 |
0.0 |
3.0 |
0.2 |
2.2 |
|
AE ∆% Dec-Jan |
1.8 |
|
2.4 |
|
|
Nov |
0.2 |
3.4 |
0.2 |
2.2 |
|
Oct |
0.1 |
3.5 |
0.2 |
2.1 |
|
AE ∆% Oct-Nov |
1.8 |
|
2.4 |
|
|
Sep |
0.2 |
3.9 |
0.1 |
2.0 |
|
Aug |
0.3 |
3.8 |
0.3 |
2.0 |
|
Jul |
0.3 |
3.6 |
0.2 |
1.8 |
|
AE ∆% Jul-Sep |
3.2 |
|
2.4 |
|
|
Jun |
0.0 |
3.6 |
0.2 |
1.6 |
|
May |
0.3 |
3.6 |
0.2 |
1.5 |
|
AE ∆% May-Jun |
1.8 |
|
2.4 |
|
|
Apr |
0.5 |
3.2 |
0.1 |
1.3 |
|
Mar |
0.5 |
2.7 |
0.1 |
1.2 |
|
Feb |
0.3 |
2.1 |
0.2 |
1.1 |
|
Jan |
0.3 |
1.6 |
0.2 |
1.0 |
|
AE ∆%
Jan-Apr |
4.9 |
|
1.8 |
|
|
Dec 2010 |
0.4 |
1.5 |
0.1 |
0.8 |
|
Nov |
0.3 |
1.1 |
0.1 |
0.8 |
|
Oct |
0.3 |
1.2 |
0.1 |
0.6 |
|
Sep |
0.2 |
1.1 |
0.1 |
0.8 |
|
Aug |
0.1 |
1.1 |
0.1 |
0.9 |
|
Jul |
0.2 |
1.2 |
0.1 |
0.9 |
|
Jun |
0.0 |
1.1 |
0.1 |
0.9 |
|
May |
-0.1 |
2.0 |
0.1 |
0.9 |
|
Apr |
0.0 |
2.2 |
0.0 |
0.9 |
|
Mar |
0.0 |
2.3 |
0.0 |
1.1 |
|
Feb |
-0.1 |
2.1 |
0.0 |
1.3 |
|
Jan |
0.1 |
2.6 |
-0.1 |
1.6 |
Note: Core:
excluding food and energy; AE: annual equivalent
Source: US Bureau of Labor Statistics https://www.bls.gov/cpi/
The behavior of the US consumer price index NSA from 2001 to
2020 is in Chart I-20. Inflation in the US is very dynamic without deflation
risks that would justify symmetric inflation targets. The hump in 2008
originated in the carry trade from interest rates dropping to zero into
commodity futures. There is no other explanation for the increase of the
Cushing OK Crude Oil Future Contract 1 from $55.64/barrel on Jan 9, 2007 to
$145.29/barrel on July 3, 2008 during deep global recession, collapsing under a
panic of flight into government obligations and the US dollar to $37.51/barrel
on Feb 13, 2009 and then rising by carry trades to $113.93/barrel on Apr 29,
2012, collapsing again and then recovering again to $105.23/barrel, all during
mediocre economic recovery with peaks and troughs influenced by bouts of risk
appetite and risk aversion (data from the US Energy Information Administration
EIA, https://www.eia.gov/). The
unwinding of the carry trade with the TARP announcement of toxic assets in
banks channeled cheap money into government obligations (see Cochrane and
Zingales 2009).
Chart I-20, US, Consumer Price Index, NSA, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/cpi/data.htm
Chart I-21 provides 12-month
percentage changes of the consumer price index from 2001 to 2020. There was no
deflation or threat of deflation from 2008 into 2009. Commodity prices
collapsed during the panic of toxic assets in banks. When stress tests in 2009
revealed US bank balance sheets in much stronger position, cheap money at zero
opportunity cost exited government obligations and flowed into carry trades of
risk financial assets. Increases in commodity prices drove again the all items
CPI with interruptions during risk aversion originating in multiple fears but
especially from the sovereign debt crisis of Europe.
Chart I-21, US, Consumer Price Index, 12-Month Percentage
Change, NSA, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/cpi/data.htm
The trend of increase of the
consumer price index excluding food and energy in Chart I-22 does not reveal
any threat of deflation that would justify symmetric inflation targets. There
are mild oscillations in a neat upward trend.
Chart I-22, US, Consumer Price Index Excluding Food and
Energy, NSA, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/cpi/data.htm
Chart I-23 provides 12-month
percentage change of the consumer price index excluding food and energy.
Past-year rates of inflation fell toward 1 percent from 2001 into 2003 because
of the recession and the decline of commodity prices beginning before the
recession with declines of real oil prices. Near zero interest rates with fed
funds at 1 percent between Jun 2003 and Jun 2004 stimulated carry trades of all
types, including in buying homes with subprime mortgages in expectation that
low interest rates forever would increase home prices permanently, creating the
equity that would permit the conversion of subprime mortgages into creditworthy
mortgages (Gorton 2009EFM; see https://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html). Inflation rose and then collapsed during the unwinding
of carry trades and the housing debacle of the global recession. Carry trades
into 2011 and 2012 gave a new impulse to CPI inflation, all items and core.
Symmetric inflation targets destabilize the economy by encouraging hunts for
yields that inflate and deflate financial assets, obscuring risk/return
decisions on production, investment, consumption and hiring.
Chart I-23, US, Consumer Price Index Excluding Food and
Energy, 12-Month Percentage Change, NSA, 2001-2020
Source: US Bureau of Labor Statistics
https://www.bls.gov/cpi/data.htm
© Carlos M. Pelaez, 2009,
2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
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