Powell's Wage-Price Spiral Fears Were a Fiction... Hard Landing in Play Now
'Rates Have Been Too High for Too Long'
UBS Voice Note on Powell’s Hawkish Bias (1800 words)
CITI Elections fiscal preview (PDF)
GS: Elections fiscal preview (PDF)
The Fed’s current hawkish stance is entirely unwarranted
There is not and never has been a Wage-Price spiral risk this cycle
Much of the inflation was opportunistic corporations price-gouging unnecessary fiscal helicopter money
The chief proof of this is in the Unit Labor Cost indicator
The Labor Market is much softer than the BLS data would have you think.
This morning we heard a snippet of an interesting voice note from UBS’ Chief Economist. In it he discussed the tight labor market and risk of Wage-Price spiral.
Here are the operative phrases in that note transcribed:
“When considering inflation, it is unit labor costs that represent the labor market component, not wages and absolutely not average hourly earnings.
[T]here is not and never has been a labour cost price spiral in the States [this cycle]
[T]he fact that labour costs have so consistently been below consumer price inflation helps to explain why economists are so certain about the profit-led inflation story this year.
If this is true, then in combination with the repeated lowering of Job growth numbers over this past year (as ZeroHedge just pointed out) then Powell’s current rate stance may be too high for a little too long, and a rate cut can reasonably be seen as warranted using this mindset.
The Argument For Easing
The UBS’ Chief economist Paul Donovan argues simply that Labor markets were doubtfully *ever* tight enough to potentially cause the Wage- Price spiral that Powell invoked early in his hiking regime.
This was complete nonsense according to the economist in the voice note sent to institutional and global hi-net worth investors today.
“There is not and never has been a labor cost price spiral”
Listen yourself. (Reference 1:50 minute mark)