Economist (US Macro), RDQ Economics

Conrad DeQuadros

Economist (US Macro)

RDQ Economics

RDQ Economics provides global macroeconomic consulting services with an emphasis on U.S. economic fundamentals and monetary policy.  
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Our views are driven by consistent application of classical economic and monetary principles and has generated superior anticipation of changes in the stance of monetary policy and of movements in economic growth and inflation.
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The founders of RDQ Economics—John Ryding and Conrad DeQuadros—worked together on Wall Street for a decade, in the independent research space for nine years, and have experience in central banking at the Federal Reserve and the Bank of England.  John and Conrad have worked closely with fixed income, foreign exchange, and equity traders and portfolio managers, which has enabled their analysis and advice to be tailored to a clientele that is focused on trading and investment decisions.

Credit

<p>We heard several times last week the assertion that wage increases have been significantly less than one would expect given the state of the labor market, which may point to more slack in the economy.  However, going back to the roots of the Phillips Curve, which was a reduced-form model of labor supply and labor demand, we find that for the last 20 years a remarkably stable 1960s-style Phillips Curve has emerged.  The unemployment rate for the prime-age cohort explains the rate of wage increases very well.  Only recently has there been a very modest over-prediction of the wage increases, which we find might be correlated to more sluggish business dynamics.  Running a simulation with the overall unemployment rate falling to 3.8% by the middle of next year, we predict the Atlanta Fed prime-age wage tracker rising from 3.7% to 4.9% at the end of this year, consistent with average hourly earnings growth of 3¼%-3½%.  We think the claim that wage increases have been lower than should be expected is false and we support this view without reference to the low inflation rate and the sluggish productivity growth rate.  The more detailed statistical work for this insight is presented in the attached PDF.</p>

We heard several times last week the assertion that wage increases have been significantly less than one would expect given the state of the labor market, which may point to more slack in the economy.  However, going back to the roots of the Phillips Curve, which was a reduced-form model of labor supply and labor demand, we find that for the last 20 years a remarkably stable 1960s-style Phillips Curve has emerged.  The unemployment rate for the prime-age cohort explains the rate of wage increases very well.  Only recently has there been a very modest over-prediction of the wage increases, which we find might be correlated to more sluggish business dynamics.  Running a simulation with the overall unemployment rate falling to 3.8% by the middle of next year, we predict the Atlanta Fed prime-age wage tracker rising from 3.7% to 4.9% at the end of this year, consistent with average hourly earnings growth of 3¼%-3½%.  We think the claim that wage increases have been lower than should be expected is false and we support this view without reference to the low inflation rate and the sluggish productivity growth rate.  The more detailed statistical work for this insight is presented in the attached PDF.

US Treasury (10 Yr Generic)

Phillips Curve and Labor Market Dynamism