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Joey Politano🐇🚴🌱🕊️ Profile picture
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9 Nov, 6 tweets, 2 min read
To celebrate 5 months of blogging and (almost) 500 subscribers, I wanted to share my favorite piece from each month.

In October, I wrote about the Phillips curve relationship between unemployment and inflation—and research that shows it was always flat.

apricitas.substack.com/p/the-life-dea…
In September I tackled the "natural" rates of interest, unemployment, and economic growth and how their use and estimates impair economic policymaking.
apricitas.substack.com/p/the-fault-in…
In August I discussed automation and its effects on the labor market to explain why robots don't take our jobs and what the future of work looks like.
apricitas.substack.com/p/the-interper…
In July I debunked the myth that US monetary policy has been "too loose" since the 2008 financial crisis. In reality, it has been too tight—with disastrous results for employment.

apricitas.substack.com/p/tight-moneta…
In my first blog post back in June I showed how well different estimates of inflation expectations could forecast actual inflation (spoiler alert: consumer inflation expectations do poorly, while models based on market estimates do fairly well).
apricitas.substack.com/p/what-to-expe…
I've truly enjoyed writing, and I hope you've enjoyed reading! There's still more stuff coming—including a breakdown of inflation data and the "Great Resignation" this week—so go subscribe if you're interested!

apricitas.substack.com

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More from @JosephPolitano

Joey Politano🐇🚴🌱🕊️ Profile picture
10 Nov
The Consumer Price Index (CPI) rose by 0.9% in October, making the year-on-year CPI inflation 6.2%.

I did a full break down of this month's CPI data in a the blog post below.

Here's a short thread with the important takeaways: 🧵
apricitas.substack.com/p/cpi-inflatio…
The CPI is currently running well ahead of its pre-COVID 2% growth trend, although it is worth acknowledging that the Personal Consumption Expenditures Price Index (which the Federal Reserve targets) has shows significantly lower readings. Image
The pandemic has driven spending that would have gone to services into additional consumer and durable goods. Supply chains appear strained are operating under unprecedented order volumes. In other words, this is a crisis of abundance rather than a crisis of scarcity. Image
Read 9 tweets
Joey Politano🐇🚴🌱🕊️ Profile picture
9 Nov
I really want to push back on both this construction of the market estimate of r* and its conclusions.

You can't use long term bond yields as evidence of the "natural rate of interest" as these yields are implicitly based on expectations of future short term policy rates.
If long term bond yields partially reflect expected future short term rates, we would see expectations of excessively tight monetary policy reflected in this estimate of r*.

Indeed, that's what we saw during the 2013 taper tantrum and right now with Japanese Government Bonds.
I'm not a big fan of r* conceptually, as I elaborate on here. Monetary policy is almost always a set of choices, and constructing a reliable measurement of "natural" interest rates is extremely hard.

apricitas.substack.com/p/the-fault-in…
Read 6 tweets
Joey Politano🐇🚴🌱🕊️ Profile picture
8 Nov
A lesson in Swedish monetary history (part 1/2)
part 2/2
I had to cut a lot of information (including a lot of drama with exchange rates) to fit the meme format but you can read the full external report here:

data.riksdagen.se/dokument/RFR-2…
Read 4 tweets
Joey Politano🐇🚴🌱🕊️ Profile picture
6 Nov
Throughout the 2010s, the Federal Reserve constantly tightened monetary policy prematurely—with disastrous results.

Today, the Federal Reserve is again tightening policy. Did they get it right this time, or are they repeating the same mistake? 🧵

apricitas.substack.com/p/the-federal-…
First, let's look at Nominal Gross Domestic Product (NGDP). NGDP growth was low throughout the 2010s and never returned to the pre-recession trend after 2008. Today, NGDP has practically returned to its pre-pandemic trend!
Gross Labor Income (GLI), which measures the total worker compensation, also appears to be on trend by traditional measures. However, using the enjoyment cost index, which allows us to better track GLI in real time, shows that there's still room for improvement.
Read 10 tweets
Joey Politano🐇🚴🌱🕊️ Profile picture
5 Nov
In a great month for the US labor market, October saw 531,000 jobs added and the unemployment rate drop to 4.6%.

I did a full break down of this month's employment data in a the blog post below.

Here's a short 🧵with the important takeaways:

apricitas.substack.com/p/the-october-…
After stalling out at 78% for 2 months, the prime age employment-population ratio increased significantly to 78.3%. This essentially measures the percent of working-age people who are employed, so it makes for the clearest measure of labor market health.
The number of people employed part-time for economic reasons held steady at 4.4 million, which is close to pre-pandemic levels. This is down dramatically from the record high of nearly 11 million in April of 2020.
Read 9 tweets
Joey Politano🐇🚴🌱🕊️ Profile picture
23 Oct
The Federal Reserve sets short term interest rates.

But attempts to control long term interest rates are considered "unconventional".

In truth the Fed has full control of short and long term interest rates. The yield curve is merely a policy choice.🧵
apricitas.substack.com/p/the-yield-cu…
America's yield curve has been decreasing and flattening since the Great Recession. That means that short term and long term interest rates are decreasing, and the gap between them is narrowing. To understand why, we have to understand what determines a bond's yield.
Yields can be decomposed into expected short term interest rates plus bond risk premium.

Expected short term interest rates reflect expected future Fed interest rate policy.

Bond risk premiums reflect duration risk (bond price sensitivity to rate changes) and liquidity risk.
Read 8 tweets

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