The Clinton Herald, Clinton, Iowa

Opinion

February 15, 2014

Employment numbers will rebound, at some point

A little mental trick I have used to get through long winters is to proclaim March 1 as the beginning of spring.

Officially, spring begins later, I know, but it is the perception that winter is over and spring approaches. The days do not move faster, but a little psychological trick helps me get through the final weeks of winter.

Inflation is a common topic. The huge expansion of the Fed’s balance sheet feeds fears of a surge in inflation. There are two generally used measures of inflation: the consumer price index (CPI) or the Fed’s preferred metric, the core personal consumption expenditures index deflator (PCE). For the fourth quarter, the PCE was just above the post-recession low at 1.1 percent while core CPI came in at 1.7 percent. These two metrics of core inflation generally exhibit a high degree of correlation while their growth rates do not necessarily match.

This gap is largely due to different weighting factors used for the underlying components of each measure. Shelter/furnishings/household supplies make up 46 percent of core CPI versus 24 percent for core PCE. Nine percent of core CPI consists of medical care vs. 24 percent of core PCE and transportation is 15 percent of core CPI and 7 percent of core PCE. A substantial increase in rents would have a more pronounced impact on core CPI than core PCE while the reverse would hold true for an increase in medical care. Other categories have smaller differences between the two metrics, but you get the point.

The Fed’s inflation target is 2.0 – 2.5 percent before they would consider raising short-term interest rates. It had previously announced this target as part of two measures that would cause a rise in rates in order for it to fulfill its dual mandate of price stability and full employment. The other measure is unemployment.

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Poll

With the Clinton County Justice Coordinating Commission and the Clinton County Board of Supervisors discussing proposals to construct a new jail, do you think the time has come for Clinton County to construct such a facility?

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