Daily Charts - Inflation & Automation

Inflation is expected to continue to drift lower tomorrow, driven by base effects. I wonder, it takes one bad print to completely shift back to inflationary narratives.

CPI MoM, we will benefit from base effects until June but the MoM data shows we are still annualizing at 5-6%. Expectation is 0.4% MoM tomorrow.

I’m surprised there is not more discussion about this. Compared to the 70s, we live in a much more globalized world. Labour markets are local but it is hard to believe that goods inflation respects borders. Additionally, headline inflation is driven by volatile items such as food and energy, which are less affected by country-specific fiscal stimulus. Inflation could be driven everywhere by the total world’s stimulus. How much do BoC rate hikes really impact local inflation in a globalized world? Below you will see estimates of how much inflation is driven by international factors.

Record spending on manufacturing construction heralds a made-in-the-U.S. rebound, stoked by green-energy incentives and concerns about foreign supply chains. Higher domestic labour costs incentivize automation of goods made at home. Are we starting to see a reshoring construction boom?

Manufacturing employment in the US steadily declined as China joined the WTO in 2001.

Durable goods manufacturing were impacted the most.

Electronics manufacturing left in 2001. The next big catalyst was the global financial crisis as companies took their manufacturing offshore.

It would be interesting to understand why apparel and textiles were disproportionately impacted. My guess would be it is labour intensive.

Interestingly, wage stagnation began in the 1980s. Globalization can’t be entirely blamed for stagnating wages. This chart seems to be blaming the end of Bretton Woods… I don’t know about that.

Low unemployment rates are obfuscating a larger issue in the labor market today. The recent strength in employment data has almost entirely been driven by unskilled jobs. Even though we have nearly 2 job openings for each unemployed person, most of those jobs available are not high-paying jobs.

Aging has exerted a powerful influence on the post-pandemic drop in labor force participation. Once you control for aging, participation has recovered a great deal since the large shock induced by the pandemic.

AI could be globalization/automation for white collar jobs. You have seen Italy ban ChatGPT. Technology needs to be embraced to compete at a global level

The recent advances in AI have been revolutionary to concentrated in language. They are consuming more and more data.

Which degrees do students regret?

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