tag:blogger.com,1999:blog-7439628176985419293.post3494816190657613689..comments2023-11-02T08:28:40.590-04:00Comments on Twenty-Cent Paradigms: Residential Investment vs Construction PayrollsBill Chttp://www.blogger.com/profile/01081319025032071808noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-7439628176985419293.post-48392962978745440192011-01-16T21:22:14.224-05:002011-01-16T21:22:14.224-05:00Personally, I think the Bank of England stopped ta...Personally, I think the Bank of England stopped targeting inflation once the financial crisis exploded. Monetary policy is now guided by the needs of the financial sector. <br /><br />Judging by recent speeches from MPC members, they appear to be unpleasantly surprised by the strength of inflation. They didn't expect the exchange rate passthrough to be so strong. They were also taken aback by the strength of indirect tax hikes on inflation. It appears that retailers past the bulk of the tax increase on to consumers. <br /><br />They also thought that the output gap would ensure a reasonably benign inflation environment. In fact, they seem to have misjudged most things over the last four or so years.<br /><br />Turning to your other issue, I'm sure that the BLS did capture some of the undocumented migrants. Nevertheless, the US housing starts data points to a vicious downturn in construction activity. Yet, one doesn't see quite the same thing in construction employment data. If it is not undocumented migrants, then one is forced to think of other less plausible hypotheses.<br /><br />As an aside, I was uncomfortable with the phrase illegal migrants, but couldn't think of anything better. I like your phrase undocumented migrants. I will use in future.<br /><br />AliceAlice Cookhttps://www.blogger.com/profile/05753570123987780947noreply@blogger.comtag:blogger.com,1999:blog-7439628176985419293.post-84341726387737198052011-01-16T13:05:01.771-05:002011-01-16T13:05:01.771-05:00Thanks for your comment.
I think the UK situation...Thanks for your comment.<br /><br />I think the UK situation raises some interesting questions about the "inflation targeting" concept. I would assume that one of the major differences with the US is that the UK is far more open, so the depreciation of the pound may be showing up in the price level (but I haven't verified this in the data).<br /><br />If a significant proportion of employment in construction is undocumented workers, and those workers are shed first in a downturn, and not captured in the statistics, that would help explain the data. I'm not sure on those points - here's what the BLS says in the FAQ on the employment situation report:<br /><br />Are undocumented immigrants counted in the surveys?<br /><br />It is likely that both surveys include at least some undocumented immigrants.<br />However, neither the establishment nor the household survey is designed to<br />identify the legal status of workers. Therefore, it is not possible to de-<br />termine how many are counted in either survey. The establishment survey does<br />not collect data on the legal status of workers.Bill Chttps://www.blogger.com/profile/01081319025032071808noreply@blogger.comtag:blogger.com,1999:blog-7439628176985419293.post-64680990838064381922011-01-15T19:16:13.632-05:002011-01-15T19:16:13.632-05:00Relocation versus aggregate demand? You might fin...Relocation versus aggregate demand? You might find it useful to look beyond the US to see whether other country experiences might help adjudicate the question. <br /><br />At the moment, the Bank of England is rather perplexed by the surge in UK inflation. They had thought that the UK output gap remained large and therefore inflation would remain subdued. <br /><br />The November inflation data proved to be a real shock, when indices beyond energy and food were also rising sharply. This strongly suggests that the financial crisis has done something nasty to UK potential output.<br /><br />I wasn't to be convinced by your story on employment. I think if you have a closer look at construction employment in the US the mystery will grow deeper. <br /><br />When the housing bubble finally burst, and housing starts collapsed, construction employment hardly changed. The reason, I suspect, was the high proportion of illegal migrant workers employed in the sector. Employment fell, but it wasn't fully reflected in the data.<br /><br />Finally, I think it is about time that you had some UK economics blogs on your blog roll. You can start with mine:<br /><br />http://ukhousebubble.blogspot.com<br /><br />AliceAlice Cookhttps://www.blogger.com/profile/05753570123987780947noreply@blogger.com