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Lawrence H. Summers Profile picture
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Feb 16 • 5 tweets • 2 min read
.@ASDomash and I released new study showing just how tight labor markets are and just how worrisome this is for inflation.

How Tight are U.S. Labor Markets? nber.org/papers/w29739#…
Labor market tightness looks at a level that historically corresponds to sub 2 percent unemployment.

Our tightness measure predicts inflation better than the unemployment rate or the employment ratio based on time series and cross section data.
According to the most recent high-quality data, the private sector ECI taking out incentive pay and the unsmoothed Atlanta Fed wage tracker, WAGE INFLATION IS RUNNING AT ABOUT 6 PERCENT AND ACCELERATING.
I see no reason to think wage inflation will not accelerate further given incredibly tight labor markets.

Nor do I see how even 6 percent wage inflation is consistent with overall inflation at an acceptable level.
marketwatch.com/story/larry-su…

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More from @LHSummers

Lawrence H. Summers Profile picture
Feb 11
.@JosephEStiglitz is a brilliant micro theorist. Unfortunately, his attempts at practical macroeconomics commit all the errors of wishful thinking that have brought the United States to this point.

A Balanced Response to Inflation rooseveltinstitute.org/2022/02/09/a-b…
In June, he called inflation a red herring and said that if it wasn’t, the Fed could act decisively to stop it. Now with 7 percent inflation he opposes substantial increases in interest rates.
He says inflation is volatile and has come down by half since October. Actually, monthly CPI inflation has been at annualized rates above 7 percent for all of the last 4 months.
Read 9 tweets
Lawrence H. Summers Profile picture
Feb 6
I am sorry to see the @nytimes taking MMT seriously as an intellectual movement. It is the equivalent of publicizing fad diets, quack cancer cures or creationist theories.

nytimes.com/2022/02/06/bus…
Yes article does point out data it regards as inconsistent w MMT & quotes @jasonfurman as being critical but this is like reporting symmetrically on the ongoing argument btw evolutionary biology & creationism & noting a development on evolutionary side. Fundamentally misleading
I greatly admire @jeannasmialek's reporting but I was very disappointed this time out. She was also victimized by an egregiously misleading headline, if the goal of her story was to point out MMT’s weakness.
Read 8 tweets
Lawrence H. Summers Profile picture
Jan 27
I approve of the Fed’s turn towards recognition of inflation as the primary threat to the US economy. I can’t understand why they are still doing QE on any scale. Perhaps they will learn the lesson that being specific @ future intentions is dangerous b/ of what it locks you into.
I don’t understand the communications strategy behind causing major volatility during the press conference rather than delivering all the messages in the FOMC statement.
The Flexible Average Inflation Target (FAIT) framework taken seriously would require a period of sub 2 percent inflation to offset what we are now going thru.
Read 5 tweets
Lawrence H. Summers Profile picture
Jan 19
1/ @paulkrugman works to manufacture disagreement between us over antitrust policy and its relation to inflation.

Paul agrees that increased monopoly power of a kind addressable by antitrust is at most a minor cause of the recent surge in inflation.
2/ I was clear in my tweets that if inflation was simply being used as an impetus to support the Biden competition policy agenda, much of which I support, I had no objection.
3/ Paul invokes Kennedy’s attack on steel executives. That rhetoric was very strong. So were the legal tactics used by his brother’s Justice Dept. Most historians regard Kennedy’s victory as pyrrhic.
Read 7 tweets
Lawrence H. Summers Profile picture
Dec 26, 2021
The emerging claim that antitrust can combat inflation reflects “science denial”. There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them.
I hope the Admin is simply using inflation as a way of adding urgency to the promotion of competition. That is a possible reading of this important @nytimes @jimtankersley @arappeport article. I strongly support much of the Admin’s competition agenda.

nytimes.com/2021/12/25/bus…
However, as described, hipster Brandeisian antitrust, with which the Admin and its appointees flirt, is more likely to raise than lower prices.
Read 14 tweets
Lawrence H. Summers Profile picture
Dec 24, 2021
Judged purely in terms of economic impacts, the Administration’s decision to extend student loan moratorium is highly problematic.
At a time when unemployment is unusually low and household balance sheets are very strong for all income quintiles, there is no special case for across the board relief now, unlike when it was put in place two years ago.
The Admin understood this when it made clear the last round of temporary debt relief would be the final one & not be extended. How much things have changed since the onset of Covid when it was completely explicit that student loan relief would sunset after the previous extension
Read 12 tweets

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