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Perspectives Contributor:

Jess B. Yawitz, Ph.D.

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June 3, 2021

Constraints on Labor Supply Should Prove Temporary 

Total nonfarm employment in the US remains 8.2 million workers below the pre-pandemic peak reached in February 2020 and yet pockets of labor market tightening are already appearing. As is the case with other resources in the economy, both the supply of and the demand for labor have been extremely...
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April 14, 2021

Phantom Jobless Claims Mask the Labor Market Recovery

We’ve written ad nauseum in these pages about the distorted and misleading economic data that have been produced during the unprecedented economic volatility of the pandemic. Despite turning a skeptical eye on hundreds of data releases over the past twelve months, we continue to find novel ways in which the...
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November 19, 2020

A Conversation About the October Payrolls Report

Overheard on the NISA trading floor, Friday, November 6, 2020. Jess Yawitz: “Another strong payrolls report this morning, eh?” Stephen Douglass: “Yep, the jobs recovery continues to surprise to the upside. The details were even better than the headline figure too.” JY: “How so?” SD: “Well the headline figure showed...
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October 29, 2020

Making Up Is Hard To Do: The Fed Adopts An Average Inflation Target Part II

In a post earlier this week, we explained how the Fed’s new flexible average inflation targeting (AIT) framework is motivated by a desire to prevent the zero lower bound constraint from de-anchoring inflation expectations to the downside. The logic of the new framework is intuitive. If the zero lower bound...
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October 27, 2020

Making Up Is Hard To Do: The Fed Adopts An Average Inflation Target

In a landmark speech at the Jackson Hole conference in late August, Chairman Powell announced the first significant revision to the Fed’s operating framework since 2012. While the transition from a flexible inflation target to a flexible average inflation target might seem to be a subtle one, that may not...
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October 20, 2020

Initial Jobless Claims Only Tell Half the Story, and it’s Not the Good Half

Regular readers will know we’ve been on somewhat of a campaign against economic disinformation this year, describing how data errors and faulty seasonal adjustments have been sending misleading signals about the true state of the labor market. Alas, we are called into action yet again. Every Thursday brings the release...
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August 28, 2020

Progress

As we have been saying, the seasonal adjustment process for initial jobless claims has been wholly inappropriate given the scale of job losses during the pandemic. Because the process is multiplicative rather than additive, the adjustment factor has now inflated the actual claims numbers by over 4.6 million since March,...
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July 30, 2020

Seasonally Maladjusted: How Statistical Methods Have Destroyed 3.7 Million Jobs Since March

In this short note we demonstrate, primarily using a few examples and data points, how totally inappropriate it is to seasonally adjust initial unemployment claims during the pandemic and how doing so can lead to very misrepresentative “headline prints.” Why seasonally adjust claims? The purpose of seasonal adjusting is to...
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July 9, 2020

Labor Market Update: Objects in Mirror are Better than They Appear

The labor market continued its spectacular recovery in June. The jobs report released on Friday reflected a net gain of 4.8 million jobs, almost double the increase from May. The monthly change in nonfarm payrolls has set a record in each of the last four months: two record decreases followed...
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June 15, 2020

A 10 Million Job Surprise

The May jobs report produced the biggest surprise we have ever seen from an economic data release. Nonfarm payroll employment increased by 2.5 million in the month, a full 10 million jobs higher than the Bloomberg median forecast for a loss of 7.5 million jobs. Not a single one of...
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Does the size of a company's pensions affect its stock price?

April 24, 2020

A Recession Unlike any Other

The longest expansion in U.S. economic history ended in February. March ushered in a recession that will be unlike any other we have seen before. In the last five weeks, 26 million workers have filed for unemployment insurance. That’s more than the total number of jobs that were created in...
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March 6, 2020

Coronavirus Fear Shocks Global Markets

Coronavirus has sent shockwaves throughout global financial markets. Since mid-February major global equity indices are down by 10-20%, investment grade US dollar credit spreads have widened by 30-50 basis points, and US Treasury yields have plummeted to all-time lows. The driving force behind this market turmoil is fear of the...
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November 18, 2019

State of the US Consumer in Four Charts

With no shortage of economic uncertainty in the world, it is natural to ask whether the US consumer can continue as the primary engine driving the expansion. Our answer to that question is yes. You’ve no doubt seen many of the well-known statistics describing today’s exceptionally strong labor market. The...
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September 4, 2019

Monetary Policy in the U.S. is Being Determined by European (Japanese) Financial Markets

As we approach the next Fed meeting in September, expect more chatter on 1) whether they should ease and 2) what the inverted Treasury yield curve is saying about recession risk. Currently, the yield curve is shaped like a saucer. The highest rate is the 1-month bill, the lowest is...
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May 19, 2017

Go Long!

The Treasury Department is considering issuing an ultra-long bond with a maturity greater than 30 years. The idea was first raised in post-election interviews with then-nominee for Treasury Secretary Steven Mnuchin and formalized last month when Treasury requested a response on the subject from primary dealers and the Treasury Borrowing...
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December 2, 2016

Make Funded Status Great Again (Again)

The ongoing equity rally and the rise in Treasury yields prompted us to revisit this analysis. Between yesterday’s close (December 1) and November 10, when we originally calculated these estimates, the yield of the 30-year Treasury increased 15 bps while the MSCI ACWI climbed 0.3% higher. As a consequence, plan...
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November 11, 2016

Make Funded Status Great Again

It has been an interesting week. Regardless of your political leanings, Tuesday’s election seems to have already produced another unlikely winner: defined benefit plan sponsors. Between last Friday and yesterday (November 10), the yield on the 30-year Treasury increased 38 bps while the MSCI ACWI jumped 2.2%. This increase in...
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June 8, 2016

There’s Beta in my Alpha! (Part 2)

I received some feedback asking whether the high correlation of managers both to beta and to each other applies to “Aggregate” managers as well. As a brief follow-up to the previous post, I thought I would share results we obtained from the eVestment Analytics database of managers benchmarked to the...
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May 20, 2016

There’s Beta in My Alpha!

When I was a kid, being called different never felt like a good thing. Fortunately, with age I have come to realize that sometimes being different is good. With that in mind, I share this post - warning, the following is as close to marketing as we will ever come!...
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December 22, 2015

Brazil Downgraded to Junk—But It’s Not High Yield!

Brazil’s sovereign debt was recently downgraded below investment grade (IG). Before the downgrade, its index-eligible bonds were included in both the Barclays US Credit Investment Grade Index and the JPMorgan Emerging Market Bond Index, two of the more commonly followed indices. Beginning 1/1/16, these bonds will fall out of the...
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December 10, 2015

Fed Liftoff: More Questions than Answers

Markets are currently implying nearly an 80% probability that on December 16th the fed funds target range will be raised by 25 basis points. This expected increase will be the first rate hike since June 2006 - when a share of Lehman Brothers cost more than a share of Apple,...