Reversal of the US labor market ?

The labor market indicator in the Conference Board household survey changed trend in March. It is always easy to find a job but the indicator is now on the downside.
Given the strong link with JOLTS labor market indicator, one may wonder about a possible reversal of the US labor market.
This is a signal that seems relevant to me (see here for longer data and more in-depth analysis).

Wages and the ECB monetary policy

Discussions on wage dynamics in the Euro Area. The momentum is now higher (2%) but not sufficient to push core inflation on the upside. The enigma is not solved yet. That’s the analysis of this NY Times article.

Nevertheless, the example comparing France and Germany in the article is not totally convincing. There is still a lot to understand on the labor market.

Workers may finally be getting a bigger piece of the economic pie — at least in Europe. Just don’t ask why, or whether it will last.

In the decade since the financial crisis, much of the global economy has recovered and is back on stable footing. Companies are reporting record profits, unemployment levels are plummeting and overall global growth is back on track.

Wages in most developed countries, however, have barely budged.

Read the article here.

The French Labor Market Reform

The French government has made its first proposals to reform the labor market. Its main idea is that competitive conditions have dramatically changed and it’s impossible to have a law that can solve all the issues.
For the government a “one size fits all” law cannot exist anymore on the labor market. The main reason is that companies face now very different environments that lead to a very specific framework for each of them. Therefore it can be efficient to commit to rules at companies’ level. These specificities are globalization which can be a very different constraint from one sector to another one, technological shocks with very different speed of adjustment depending on the type of activity, regulation can be very different between firms and sectors,  companies’ size from the very large company to a very small one is also an issue and specificities associated with different sectors can have an impact on companies’ behavior.

In other words, competition is not a uniform framework Continue reading

Three Graphs on the German Labor Market

The number of unemployed has slightly increased in August (1 000). Compared to August 2013 this number has decreased by -45 000.
Employment is on a positive trend. During the last 3 months (May – July) it was up by 0.9% at annual rate. But surveys this summer have cast a doubt on such a momentum for the coming months. Continue reading

USA – The risk of rising inflation is limited

Investors and economists are now very attentive to the US labor market momentum. Its profile is expected to give information on the future of inflation and on the reaction of the Federal Reserve.
Since April 2014 the number of new jobs is 260 000 on average each month. It’s a pretty strong number. This new situation is expected to create new pressures on inflation that will force the Fed to change its monetary policy. Until now this equation doesn’t work. Wages momentum is not stronger in the recent past. (see here a description of the US labor market with June figures)
Inflation momentum will not come from the labor market directly even if there are a large number of new jobs. Two charts will convince you Continue reading

The Japanese Economy after the increase of the VAT Rate

The VAT increase on April the 1st has had a strong and negative impact on the Japanese economy. The inflation rate spiked to 3.4%, households’ purchasing power dropped dramatically and retail sales collapsed. On the manufacturing production side, the decline was significant.
These are mechanical effects of the higher VAT rate and this is a negative and persistent shock for the economy. In 1997 with already a VAT shock, the retail sales profile was the same than now and showed strong persistence. The impact was not only perceived in April but all along the year. Loss in purchasing power (see chart below) will not be reduced spontaneously and it is the trigger of this persistence. Continue reading