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Startups Only Stable. We’re Waiting….

We keep looking for evidence that policy changes coming out of Washington—namely tax cuts and deregulation—are stimulating entrepreneurship and so far we’re coming up empty.

The latest evidence comes for the BLS’s Business Employment Dynamics (BED) series.

The BED series isn’t the timeliest around—we just got the data for the first quarter. But we shouldn’t get too hung up on novelty; these things have long-term effects.

Establishment births, expressed as a percentage of total establishments, were unchanged between 2017Q4 and 2018Q1, at 3.1%. (Establishment deaths, which are available with an additional three quarter lag—you want to make sure they’re really dead and not just unresponsive—rose between 2017Q1 and 2017Q2.) That 3.1% birth rate is below earlier peaks in 2005, 2012, and 2015 (each of which was lower than the previous).

Maybe things will pick up, but they haven’t yet.

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More data, more problems. Note on millennials

On Millennials: Our sense of the real story was captured by
a note from Stephanie Mackay. It’s a bit long,
but we didn’t want to take it apart.
(Full disclosure: we have close ties to the Columbus Center.)

I am currently the Chief Innovation Officer
for Columbus Community Center, a social
services agency that serves individuals with
intellectual disabilities [in their efforts to enter
and stay in the labor force]. I mention my
title because in the last fifteen years my job
has evolved from traditional fundraising to
reframing how those of us in the nonprofit
world can collaborate to tackle tough, pervasive
social issues in a more visionary and
impactful way. I do poke fun at millennials on
occasion (I get to because I have two of my
own), but frankly, I have seen a profound shift
in how they think about the world, money,
and social impact. I am actually inspired by
their sophisticated sense of connecting money
with fairness and inclusion.

To read full report, click here:
TLR-8-14-18

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Richard Yamarone

Many of you already have the heart-breaking news that the wonderful Richard Yamarone stopped breathing yesterday afternoon; he had a heart attack on Thursday morning while playing hockey with his team, his Thanksgiving tradition.

In 2009, Captain Chesley Sullenberger safely landed his crippled plane on the Hudson River. So accomplished was he that he planned to hit the river where he thought there would be no boats, telling passengers to, “Prepare for a hard landing.” I remember thinking at the time it would have been admirable if the monetary officials could have been so blunt in 2007.

Rich was. Back in the early days of the recovery he wrote, “The recent depression—ask any real economist.” He never confused the height of the markets with the state of the economy. He thought about workers and wages, inequities, rigged systems, and he worked incredibly hard. He was incisive, deep, an awesome singer, and truly hilarious. His humor made it easier to take some of his darker observations. Once he was outlining a dreadful eventuality when suddenly he noted it was odd that we were both laughing. (I’ll leave it to those in his league to cover his fly-fishing abilities.)

A tremendous man, a tremendous friend, and a tremendous economist, the real kind.

And he had a burly Welsh heart. Also a pilot, Rich too would have thought about the boats on the river.

Rich was 55.

In today’s note his closest friend Dave Rosenberg wrote that Rich “managed to squeeze many lives into one short one.” Josh Frankel added a lovely image, his idea for a Bloomberg late night show called “Yammy in his Jammies,” featuring Rich running down, say, the nonfarm payrolls in feety pajamas. Dean Eisen called him open and honest about himself—simple words but hard to do. Josh Rosner, “He measured others, generously, by the kindness in their hearts, but few could have truly been measured against his own.” (More here.)

And don’t miss him singing and playing.

We loved Richard.

Last night I dreamed that a mighty redwood fell in the forest.

Philippa

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Protected: A new culprit lurks in the footnotes

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Inflation, that dog just won’t bark

We are happy to report that Hale Stewart will be contributing to our blog going forward. Here’s a longer look from him, with an assist from the St. Louis Fed, at pricing trends.

Friday’s inflation report was, yet again, underwhelming, further confirming that upward price pressures are contained. Core and overall CPI are 1.7% Y/Y:

fredgraph-16

Both measures are below the Federal Reserve’s 2% inflation target. Core (in blue) was slightly above 2% for most of 2016 while total CPI (in red) was rising. But its increase did not influence overall CPI, indicating that commodity pressures are weak. Although they are part of the misery index, neither food nor energy prices should concern us in terms of sticky inflation:

fredgraph-17

fredgraph-21

The top chart shows the year Y/Y percentage change in food and beverage prices, which were declining from the beginning of 2015 to 3Q2016. They are now increasing, but are only slightly above 1%. The bottom chart shows energy prices which were negative for approximately two years, turning positive at the beginning of 2017. Yes, they did spike to about 15%, but that’s as much a function of statistics as the marketplace activity. Now they are quickly declining. Just as importantly, food and beverage prices are only 13.63% of CPI while energy prices are 7.35%, meaning both would have to increase at sharply faster rates for an extended period time for us to be concerned.

Energy and food prices are the only commodity prices adding to CPI:

fredgraph-19

All commodities less these two items have subtracted from CPI for over four years. This sub-index of overall CPI accounts for 18.95% of CPI. Its negative contributions counterbalance any upward pressure from food and energy prices.

Finally, we have the sub-index for services less energy:

fredgraph-20

This was between 3%-3.2% for most of 2016, but has since decreased sharply. The underlying reasons for this spike have dissipated.

Readers sometimes suggest we adjust spending measures, like retail sales, for certain segments’ own personal deflation in order to show that spending is actually quite strong. That gets a “Huh?” from us. If spending were strong, prices would be floating up. The point is that they are not.

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