US Economic Briefing: Phillips Curve

Yardeni Research, Inc.

October 1, 2021

Dr. Edward Yardeni 516-972-7683 [email protected]

Mali Quintana 480-664-1333 [email protected]

Please visit our sites at www.yardeni.com blog.yardeni.com

thinking outside the box Table Of Contents TableTable OfOf ContentsContents

Wage Inflation & Unemployment Rate 1-3 Wages & PCED 4 Average Hourly Earnings 5 Quits Rate, ECI, & AHE 6-7 Unit Labor Costs & Inflation 8 CPI & Unemployment Rate 9-15

October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com Wage Inflation & Unemployment Rate Figure 1. 16 16 WAGE INFLATION & UNEMPLOYMENT RATE (using average hourly earnings) 14 14

Unemployment Rate 12 (percent) (5.2) 12 Average Hourly Earnings* (yearly percent change) (4.8) 10 10

8 8

6 6 Aug

4 4

2 2

yardeni.com 0 0 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 25

* Production & nonsupervisory workers in private sector. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics.

Figure 2. 16 16 WAGE INFLATION & SHORT-TERM UNEMPLOYMENT RATE

14 14

Short-Term 12 Unemployment Rate* 12 (percent) (3.2) Average Hourly Earnings** 10 (yearly percent change) (4.8) 10

8 8

6 6

4 4 Aug

2 2

yardeni.com 0 0 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

* Unemployed for less than 27 weeks. ** Production & nonsupervisory workers. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics.

Page 1 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com Wage Inflation & Unemployment Rate Figure 3. 30 30

28 WAGE INFLATION & UNEMPLOYMENT RATE 28

26 26

24 Underemployment Rate* Average Hourly Earnings*** 24 Plus Unemployment Rate (yearly percent change) 22 22 U-6 Rate** 20 20

18 18

16 16

14 14

12 12

10 10 Aug 8 8

6 6 Aug 4 4

2 2 yardeni.com 0 0 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

* Total number of people working part time for economic reasons as percent of civilian labor force. ** Unemployed plus marginally attached plus part time for economic reasons as percent of civilian labor force. *** Production & nonsupervisory workers. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics. Figure 4. 15 10 WAGE INFLATION & UNEMPLOYMENT RATE (using Employment Cost Index)

Unemployment Rate (5.2) 8

ECI: Wages & Salaries 10 Private Industry (yearly percent change) (3.6) 6

4 Q2 5 Aug

2

yardeni.com 0 0 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: US Department of Labor, Bureau of Labor Statistics.

Page 2 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com Wage Inflation & Unemployment Rate Figure 5. 15 10 AVERAGE HOURLY EARNINGS & EMPLOYMENT RATE

Average Hourly Earnings: Production & Nonsupervisory Private Service-Producing Industries 8 (yearly percent change)

10 Unemployment Rate 6

Aug

4

5 Aug

2

yardeni.com 0 0 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Source: Bureau of Labor Statistics.

Figure 6. 15 12 AVERAGE HOURLY EARNINGS & EMPLOYMENT RATE

Average Hourly Earnings: Production & Nonsupervisory 10 Goods-Producing Industries (yearly percent change)

10 Unemployment Rate 8

6

Aug 5 Aug 4

2

yardeni.com 0 0 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Source: Bureau of Labor Statistics.

Page 3 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com Wages & PCED Figure 7. 12 12 WAGES & PRICES (yearly percent change)

10 10

Average Hourly Earnings* (4.8) 8 Core PCED (3.6) 8

6 6

Aug 4 4

2 2

yardeni.com 0 0 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

* Production & nonsupervisory workers Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics.

Figure 8. 18 18 PRICE INFLATION & UNEMPLOYMENT RATE 16 16

14 14 Unemployment Rate 12 (percent) (5.2) 12 Core PCED (yearly percent change) (3.6) 10 10

8 8

6 6 Aug

4 4 Aug

2 2

yardeni.com 0 0 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics.

Page 4 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com Average Hourly Earnings Figure 9. 8.5 10 8.0 AVERAGE HOURLY EARNINGS & TENANT-OCCUPIED RENT (yearly percent change) 7.5 7.0 8 6.5 6.0 Average Hourly Earnings: Production & Nonsupervisory Workers 5.5 6 5.0 CPI: Tenant-Occupied Rent Aug 4.5 4.0 4 3.5 3.0 2.5 Aug 2 2.0 1.5 1.0 0 .5 .0 yardeni.com -.5 -2 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Source: Bureau of Labor Statistics.

Figure 10. 12 12 HEALTH CARE WAGE & PRICE INFLATION 11 (yearly percent change) 11

10 10 Average Hourly Earnings: Health Care (7.3) 9 9 CPI: Medical Care Services (1.0) 8 8 Jul 7 7

6 6

5 5

4 4

3 3

2 2

1 1 yardeni.com yardeni.com 0 0 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Source: Bureau of Labor Statistics.

Page 5 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com Quits Rate, ECI, & AHE Figure 11. 15 15 ECI WAGES & SALARIES vs. UNEMPLOYMENT RATE

Short-Term Unemployment Rate* (3.2)

ECI: Wages & Salaries 10 Private Industry 10 (yearly percent change) (3.6)

5 5

Aug

yardeni.com 0 0 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 25

* Unemployed for less than 27 weeks. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: US Department of Labor, Bureau of Labor Statistics.

Figure 12. 4 4 TOTAL PRIVATE: QUITS RATE vs ECI WAGES (yearly percent change)

Q2 Quits Rate: Total Private (3.1) ECI Wages (yearly percent change) (3.6) Jul 3 3

2 2

yardeni.com 1 1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Source: Bureau of Labor Statistics.

Page 6 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com Quits Rate, ECI, & AHE Figure 13. 8.4 8.4 8.0 AVERAGE HOURLY EARNINGS & QUITS RATE 8.0 7.6 7.6 7.2 7.2 6.8 6.8 6.4 Quits Rate* (3.1) 6.4 6.0 Average Hourly Earnings* 6.0 (yearly percent change) (4.3) 5.6 5.6 5.2 5.2 4.8 4.8 4.4 Aug 4.4 4.0 4.0 3.6 3.6 3.2 Jul 3.2 2.8 2.8 2.4 2.4 2.0 2.0 1.6 1.6 1.2 1.2 .8 .8 .4 .4 yardeni.com .0 .0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

* Private industry. Source: Bureau of Labor Statistics.

Figure 14. 15.4 15.4 ATLANTA FED’S MEDIAN WAGE GROWTH TRACKER* & UNEMPLOYMENT RATE 14.6 (yearly percent change) 14.6 13.8 13.8 13.0 Wage Growth Tracker 13.0 12.2 Overall (3.9) 12.2 11.4 Unemployment Rate 11.4 (percent) (5.2) 10.6 10.6 9.8 9.8 9.0 9.0 8.2 8.2 7.4 7.4 6.6 6.6 5.8 5.8 5.0 Aug 5.0 4.2 4.2 3.4 3.4 2.6 2.6 1.8 1.8 yardeni.com 1.0 1.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

* Three-month moving average of median wage growth. Source: Bureau of Labor Statistics and Federal Reserve Bank of Atlanta.

Page 7 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com Unit Labor Costs & Inflation Figure 15. 6.2 50 NFIB "UNFILLED JOB OPENINGS" & ATLANTA FED’S MEDIAN WAGE GROWTH TRACKER*Aug 5.8 45 5.4 Wage Growth Tracker Overall (3.9) 5.0 40

4.6 35 4.2 Aug 30 3.8

3.4 25 3.0 20 2.6

2.2 NFIB 15 Small Business Owners: 1.8 Percent With Positions Not Able to Fill Right Now (3-ma)(48.3) 10 1.4 yardeni.com 1.0 5 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

* Three-month moving average of median wage growth, yearly percent change basis. Source: National Federation of Independent Business and Federal Reserve Bank of Atlanta.

Figure 16. 15 15 NONFARM UNIT LABOR COSTS & CONSUMER PRICE INDEX (yearly percent change)

10 10 Unit Labor Costs Consumer Price Index Ex Food & Energy

5 5 Aug

0 Q2 0

yardeni.com -5 -5 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Source: US Bureau of Labor, Bureau of Labor Statistics.

Page 8 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com CPI & Unemployment Rate Figure 17. 18 18 NONFARM BUSINESS UNIT LABORS COSTS & IMPLICIT PRICE DEFLATOR (yearly percent change)

12 12 Unit Labor Costs Implicit Price Deflator

6 6

0 Q2 0

yardeni.com -6 -6 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Source: US Department of Labor, Bureau of Labor Statistics.

Figure 18. 16 16 CPI & UNEMPLOYMENT RATE

14 14

12 CPI Goods Ex Food & Energy Commodities 12 (yearly percent change) (7.6)

10 Unemployment Rate 10 (percent) (5.2) 8 8 Aug

6 6 Aug 4 4

2 2

0 0

-2 -2

yardeni.com -4 -4 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Source: Bureau of Labor Statistics.

Page 9 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com CPI & Unemployment Rate Figure 19. 16 16 CPI & UNEMPLOYMENT RATE 14 CPI Nondurable Commodities 14 (yearly percent change) (7.4) 12 Unemployment Rate 12 (percent) (5.2) 10 10

8 8 Aug 6 6 Aug 4 4

2 2

0 0

-2 -2

-4 -4

-6 -6 yardeni.com -8 -8 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Source: Bureau of Labor Statistics.

Figure 20. 16 16 CONSUMER PRICE INDEX & UNEMPLOYMENT RATE 14 Unemployment Rate 14 (percent) (5.2) Aug 12 CPI Durable Commodities 12 (yearly percent change) (12.8)

10 10

8 8

6 6 Aug 4 4

2 2

0 0

-2 -2

-4 -4

yardeni.com -6 -6 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Source: Bureau of Labor Statistics.

Page 10 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com CPI & Unemployment Rate Figure 21. 16 16 CPI & UNEMPLOYMENT RATE Unemployment Rate 14 (percent) (5.2) 14 CPI: Rent of Primary Residence 12 (yearly percent change) (2.1) 12

10 10

8 8

6 6 Aug

4 4

2 2

0 0

yardeni.com -2 -2 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Source: Bureau of Labor Statistics.

Figure 22. 16 16 CPI & UNEMPLOYMENT RATE CPI Medical Services 14 (yearly percent change) (1.0) 14 Unemployment Rate (percent) (5.2) 12 12

10 10

8 8

6 6 Aug

4 4

2 2 Aug yardeni.com 0 0 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Source: Bureau of Labor Statistics.

Page 11 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com CPI & Unemployment Rate Figure 23. 16 16 CONSUMER PRICE INDEX & UNEMPLOYMENT RATE

14 14

12 Unemployment Rate 12 (percent) (5.2) CPI: Ex Food & Energy 10 (yearly percent change) (4.0) 10

8 8

6 6 Aug

4 4

2 2

yardeni.com 0 0 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26

Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics.

Figure 24. 16 16 CONSUMER PRICE INDEX & UNEMPLOYMENT RATE 14 14

12 Unemployment Rate 12 (percent) (5.2)

10 CPI Durable Commodities 10 (yearly percent change) (12.8)

8 8

6 6 Aug 4 4

2 2

0 0

-2 -2

-4 -4

yardeni.com -6 -6 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Note: Shaded areas are recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics.

Page 12 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com CPI & Unemployment Rate Figure 25. 20 20 CONSUMER PRICE INDEX & UNEMPLOYMENT RATE 18 18

16 16 Unemployment Rate (percent) (5.2) 14 CPI Services 14 (yearly percent change) (3.0) 12 12

10 10

8 8

6 6 Aug 4 4

2 2

yardeni.com 0 0 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics.

Figure 26. 18 18 CONSUMER PRICE INDEX & UNEMPLOYMENT RATE 16 16

14 Unemployment Rate 14 (percent) (5.2)

12 CPI: Rent of Shelter 12 (yearly percent change) (2.8)

10 10

8 8

6 6 Aug 4 4 Aug 2 2

0 0

yardeni.com -2 -2 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Note: Shaded areas are recessions according to the National Bureau of Economic Research. Source: Bureau of Labor Statistics.

Page 13 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com CPI & Unemployment Rate Figure 27. 15 15 EMPLOYMENT COST INDEX FOR PRIVATE INDUSTRY WORKERS / NONFARM PRODUCTIVITY VS CORE PERSONAL CONSUMPTION DEFLATOR (yearly percent change)

10 10

Ratio ECI & Productivity (1.3) Core PCED Deflator (3.6) 5 5

Aug

0 0

yardeni.com -5 -5 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Source: Bureau of Labor Statistics and Bureau of Economic Analysis.

Figure 28. 15 15 NAIRU* MINUS UNEMPLOYMENT RATE & AVERAGE HOURLY EARNINGS

10 10

5 Aug 5

0 0 Q2

-5 -5 NAIRU* Minus Unemployment Rate (percent) AHE: Production & Nonsupervisory Workers -10 (yearly percent change) (4.8) -10

yardeni.com -15 -15 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 25

* Non-accelerating inflation rate of unemployment. Source: Congressional Budget Office and Bureau of Labor Statistics.

Page 14 / October 1, 2021 / Phillips Curve Yardeni Research, Inc. www.yardeni.com CPI & Unemployment Rate Figure 29. 10 10 NAIRU* MINUS UNEMPLOYMENT RATE & EMPLOYMENT COST INDEX

NAIRU* Minus Unemployment Rate (percent) 5 ECI: Wages & Salaries Private Industry 5 (yearly percent change) (3.6) Q2

0 0

Q2

-5 -5

yardeni.com -10 -10 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

* Non-accelerating inflation rate of unemployment. Source: Congressional Budget Office and Bureau of Labor Statistics.

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