Policy and data problems

Daily update

With the US not working tomorrow, we get June labor market data today. The level of inaccuracy in the data means the monthly changes should not be taken too seriously. The trends are still the same—not too much hiring, not too much firing. The general level of policy uncertainty over the past 18 months encouraged paralysis of corporate decision-making.
Federal Reserve Chair Warsh seems keen to encourage more uncertainty by offering little useful policy guidance. Warsh did suggest broadening the range of data sources the Fed uses—because official data is less reliable. This is a good thing, but it does require intelligent understanding that alternative sources also lack precision.
Warsh reiterated a belief in the productivity pixie, suggesting artificial intelligence could be a strong automatic disinflation force. This belief is troubling (because it is not true). Any new technology is a relative shock, lowering some prices and raising others (see Apple iPad pricing for details).
ECB President Lagarde suggested that risks had become more broadly balanced. Just 20 days ago, the inflation risks apparently called for urgent policy tightening. Needless to say, economic risks do not pivot this quickly, and the “broadly balanced” economic situation was visible 20 days ago when policy mistakes were made.