Global Macro Update Archive

After raising the Federal Funds Rate by 25 basis points, Chairman Warsh said labor is “in good shape.” With unemployment at 4.1%, rising job openings and weekly hours, and claims consistent with full employment, he noted the economy was operating “largely…consistent with full employment.”

The Federal Reserve raised interest rates this week, in part to reset consumer expectations on inflation. Their work is likely not done, as there is a negative surprise coming for many consumers, especially in rural America.

It won’t be news to you that the stock market is experiencing a bit of a rotation.  That happens constantly.  One or more sectors will dominate for quarters or even years, only to be replaced by other sectors as rates, geopolitics, and the economy send signals to investors.

For the past six weeks, we’ve walked through the forces creating America’s K-shaped economy, housing, healthcare, education, wages, incentives, and the political consequences when enough people decide the system is not working for them.

The quote above, often attributed to Churchill, is debated. What isn't debated is a much older phrase, one that predates him by centuries: don't shoot the messenger.

The truth about the runaway costs of healthcare turns out to be a little more complex than any single source we've named. Hospitals, insurers, private equity, administrators, pharmaceutical companies… pull the thread on any one and we land in the same overextended, bloated, extractive system.

This week we continue our series on the major causes of our K-shaped economy. To recap, three big components of the economy are growing in cost more quickly than the rate of inflation or wage growth, and have for decades. We've covered two. First housing, then higher education. Now we look at the biggest and perhaps messiest of the three: healthcare.

Ask anyone under 30 whether college is worth it, and you might get a long stare before you get an answer. Most people seem to agree: the cost is too high, and many believe degrees have been devalued and education politicized.

This week we continue our series looking at the big life expenses that have outpaced the rate of inflation over the past several decades. Last week we covered housing. This week, let’s take a look at higher education. There’s a lot to look at.

Google searches for "can I afford a home" are at their highest level in nearly two decades. While a Google search on its own isn't proof of anything, millions of queries might be a proxy for the national vibe. Right now, the vibe is that millions of people are calling into question whether they still have a shot at home ownership. The vibe happens to line up with the actual data.

Last week's issue generated more thoughtful replies than we expected. What struck me wasn't that some of you disagreed with a point or two. It was what you agreed on. Almost nobody argued that nothing had changed. The debate was over why.

For roughly three decades after World War II, worker pay rose almost one-for-one with productivity. As the economy grew, so did wages. That allowed a single income to buy a house, two cars, and take the family on vacation every year. Then, around 1979, it stopped.