Mind both your p’s and your q’s

Here is a new and very clear Diane Coyle piece about whether gdp and CPI statistics are failing us.  Perhaps we are overestimating the rate of inflation and thus underestimating real wage growth, as many of the economic optimists suggest.  Yet I do not find that “the q’s” support this case made for “the p’s.”   For instance the employment-population ratio remains quite low, though with some small recent upticks.  If real wages were up so much, you might expect a larger adjustment from the q’s, namely the quantities of labor supplied.

Similarly, there is net Mexican migration out of the United States.  You might not expect that if recent innovations were creating significant unmeasured real wage gains.

Investment performance, while hard to measure, also seems sluggish.

Again, a closer look at the q’s makes it harder to be very optimistic about the p’s.


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