Our Press corps appears to annoy FRBM head: Neel Kashkari: The extreme emotions around the labor market

The most extremely weird thing about credulous business-friendly reporters is their willingness to publish cries of “labor shortage” without any evidence of rising wages, or even any inquiry into how a “labor shortage” is to be defined. This seems to—rightly—annoy FRBM head Neel Kashkari: Neel Kashkari: “The extreme emotions around the labor market: “‘historic, severe worker shortages’. Sounds like a real crisis. Is it?…

…By several measures, wage growth remains muted (around 2.7%)-much lower than historical episodes with “extreme worker shortages.” Usually the price is the best indicator between supply and demand. Price growth for labor is low. Where’s the “extreme shortage?” Interestingly, the price of oil has doubled over the past few years from around $30 to $60. I haven’t heard anyone declare oil “shortage.” Why not? Should we tap the Strategic Petroleum Reserve? No because it’s the price responding to supply and demand…. Far fewer teens are choosing to be in the labor force today than 20 years ago. How many might choose to enter with higher wages? Our economists @MinneapolisFed always remind me about “sticky prices” – firms are reluctant to lower prices and wages in recessions. These hyperbolic headlines remind me the reluctance to adjust prices is in both directions. There’s something very emotional for firms about wages. Paying more for oil, or steel, or corn is no big deal. That’s just the market. But if they can’t find workers at the wages they are used to paying, that’s a historic worker shortage…

April 19, 2018


Brad DeLong
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