đđŒ Hello friends,
Greetings from Ellicottville, NY. Letâs enjoy a leisurely Sunday Drive around the Internet.
đ¶ Vibin'
It is very inspirational to see some of the heroes from my younger years still going strong.
This week, Iâm vibinâ to the Doobie Brothersâ classic Listen to the Music, recorded live from New Yorkâs Beacon Theatre in 2018.
In a time of deep cultural division in our society, it helps (me, at least) to seek unity and togetherness where we can find it. Certain moments stand out as notable examples and this week I found one at the 3:20 mark of the video. Enjoy.
đ Â Quote of the Weekâ
âToday I will do what others wonât, so tomorrow I can do what others canât.â
â Ben Bergeron
đ Â Chart of the Week
As most folks know, the Federal Reserve Bank lowered short term interest rates by 50 basis points (0.50%) this past week. This marks the beginning of the reversal of their monetary tightening cycle, which began in early 2022 to address the rapid post-Pandemic increase in inflation.
The move was precipitated by continued declines in the rate of inflation which has been trending down for over a year. This decline in the inflation rate has been driven by a number of factors: a repair of Pandemic related supply chain disruptions, decline in the cost of housing (namely Ownerâs Equivalent Rent, which is a very slow moving data series), and a modest softening of the job market in the U.S.
Inflation has not yet reached the Fedâs target rate of 2%, a level that I continue to believe is unrealistic. Based on demographic changes in the U.S. and most of the developed world, I just donât think itâs in the cards.
This weekâs Chart highlights the tightness of the labor market as expressed by the number of job vacancies compared to the number of unemployed workers. This measure began to tighten as the economy emerged from the depths of the Great Financial Crisis.
Though distorted by the Pandemic and its aftermath, we can see that, particularly in the U.S. (black line), labor market tightness has resumed its upward trend which began in 2010.
My expectation is that for perhaps a decade or more, demographically-driven labor shortages and an aging workforce will put a floor on inflation which is likely to be, in my opinion, in the 3-3.5% range rather than the Fedâs target rate of 2%.
The light Aqua line in the Chart depicting Japan's labor market tightness is a precursor to what I believe we can expect to see in the U.S. and in most of Europe.
Artificial Intelligence (AI)-led productivity gains in many white collar jobs will relieve some of the pressure in the labor market. However, in sectors of the economy where AI can't effectively enhance productivity, labor shortages will only worsen, leading to continued labor market tightness and persistent upward pressure on inflation, making for a higher floor that monetary policy alone is unlikely to address.
đ Interesting Drive-By's
đĄ The Return of Three Mile Island - from James Pethokoukis
đ€ Take Something Away - from Ted Lamade [Link]
𧟠ChatGPT is the New Excel: The Great AI Unbundling - from Dan Shipper [Link]
đ Roundabout Production - from Arnold Kling [Link]
đ€ To Learn to Live in a Mundane Universe - from Freddie deBoer [Link]
đđŒ Parting Thought
If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em (X âem?) at me.
Please note that the content in The Sunday Drive is intended for informational purposes only, and is in no way intended to be financial, legal, tax, marital, or even cooking advice. Consult your own professionals as needed. The views expressed in The Sunday Drive are mine alone, and are not necessarily the views of Investment Research Partners or Cache Financials.
âI hope you have a relaxing weekend and a great week ahead. See you next Sunday...
Your faithful financial provocateur,
-Mikeâ
If you enjoy the Sunday Drive, I'd be honored if you'd share it with others.ââ
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