Recap 2-19-14


NY Fed on why the job finding rate is so low:

The parameter matching efficiency captures various factors that affect the efficiency of the matching process. An increase in skill or geographic mismatch, a decline in search effort of workers, or a decline in recruiting effort of employers would all lower the matching efficiency in the labor market. The elasticity, α, captures the responsiveness of the job-finding rate to the availability of jobs.

As seen in the charts above, both the vacancy-to-unemployment ratio and matching efficiency declined during the Great Recession and have not recovered since… We conclude that while matching efficiency has declined and remained low in virtually all industries, the most important factor in the low job-finding rate is the persistently low level of vacancies per unemployed.


  • FOMC Minutes did not contain surprises
  1. many participants commented on the relatively small increase in payrolls in December and the further decline in the unemployment rate. A number of participants indicated that the December payrolls figure may have been an anomaly
  2. Participants continued to debate the reliability of the unemployment rate as an indicator of overall labor market conditions, taking into account the further decline in labor force participation in recent quarters, still-elevated levels of underemployment and long-term unemployment, and the apparent absence of wage pressures. Much of the downward trend in the labor force participation rate since the start of the recession was seen as the result of shifts in the demographic composition of the workforce and the retirement of older workers; the extent of the cyclical portion of the decline was viewed by some as difficult to gauge at present… a number of participants saw the low rates of increase in most measures of wages as consistent with continued labor market slack.
  3. Participants agreed that, with the unemployment rate approaching 6-1/2 percent, it would soon be appropriate for the Committee to change its forward guidance in order to provide information about its decisions regarding the federal funds rate after that threshold was crossed. A range of views was expressed about the form that such forward guidance might take.

UK ILO Unemployment rose to 7.2% vs 7.1% exp and prev. The Claimant Count rate, however, decreased to 3.6% as exp vs 3.7% prev, and jobless Claims dropped by -27.6k vs -20k exp and -24k prev

US Housing Starts dropped to 880k vs 950k exp and 999k prev, while Building Permits dropped to 937k vs 975k exp and 986k prev.

Core PPI rose to 1.4% vs 1.4% exp and prev

BoE Minutes did not contain surprises following to the Inflation Report

  1. the Committee judged that a degree of spare capacity remained, concentrated in the labour market
  2. Despite the sharp fall in unemployment, the Committee judged that there remained scope to absorb spare capacity further before raising Bank Rate. When Bank Rate did begin to rise, it expected that the appropriate path, so as to eliminate slack over the next two or three years and keep inflation close to target, would be gradual.
  3. Even when the economy had returned to normal levels of capacity, and inflation was close to target, the appropriate level of Bank Rate was likely to be materially below the 5% level set on average by the Committee prior to the financial crisis.
  4. Monetary policy might have a role to play in mitigating risks to financial stability, but only as a last line of defence if those risks could not be contained by the substantial range of policy actions available to the FPC and other regulatory authorities.

Upcoming Data:

  • Wed: China Flash Mfg PMI
  • Thu: EU PMI, US CPI, Jobless Claims, Markit PMI, Philly Fed, EU Consumer Confidence, BoJ January Minutes,
  • Fri: UK Retail Sales, CA Retail Sales, CPI, US Existing Home Sales
  • Mon: German IFO, EU CPI,
  • Tue: Italy Consumer Confidence, US Consumer Confidence, Case-Shiller House Prices