Meridian

Category: Business

  • Treasury yields slip after soft payrolls revision

    Treasury yields slip after soft payrolls revision

    The annual benchmark revision to establishment survey payrolls removed 141,000 jobs from the March-through-June period, roughly double the consensus estimate among primary dealers.

    The two-year note fell eleven basis points within the hour. The ten-year followed with less conviction, steepening the curve modestly — a move consistent with a market pricing more near-term easing without changing its view of the terminal rate.

    Revisions of this size are not unusual and are not news in themselves. What moved the curve was the composition. The downward revision concentrated in leisure, hospitality and temporary help, the three categories that have historically turned first, and it arrived alongside a household survey that had already been softer than the establishment series for three consecutive months.

    That divergence has been the central puzzle of the past two quarters. Economists who argued the household survey was closer to the truth now have a data point. Economists who argued the opposite have a smaller sample to work with.

    Fed officials have said little. The chair’s prepared remarks on Thursday were written before the release and were not amended.

  • Why grocery prices stopped falling in June

    Why grocery prices stopped falling in June

    Grocery price disinflation over the past eighteen months looked broad. It was not. Roughly three quarters of it came from a single category — eggs, dairy and the protein complex downstream of feed costs — as the avian influenza outbreak resolved and grain prices normalised from their 2022 peak.

    That category has now returned to its pre-shock trend. There is no more room in it, which means the headline number from here reflects everything else, and everything else never disinflated much to begin with.

    Packaged goods are the clearest example. Manufacturer list prices in centre-store categories have risen at an annualised 3.1 per cent through the past four quarters, barely moving from the 3.4 per cent of the year before. The relief consumers noticed came almost entirely from promotional depth — retailers absorbing margin to hold traffic — and promotional depth is a lever with a floor.

    The June print showed that floor. Food-at-home came in flat month over month, which several commentators read as a pause. The internal composition suggests something less benign: continued decline in the protein complex offset by acceleration nearly everywhere else.

    For the Federal Reserve this is awkward rather than alarming. Grocery prices are not a policy target and do not enter the preferred inflation measure with much weight. For households they are the single most legible price signal in the economy, and legibility is what shapes expectations.

  • The Last Mile

    The Last Mile

    The Broadband Equity, Access and Deployment programme was the largest single investment in American internet infrastructure ever authorised: $42.45 billion, passed in November 2021, aimed squarely at the households that private capital had decided were not worth the trench.

    Four years on, the money has moved. The fibre has not.

    Three counties, one promise, twice

    Carter County sits in the north-east corner of Tennessee, in the folds of the Appalachians, and it has been promised universal broadband twice. The first promise came in 2015, under a state programme that paid incumbent carriers to extend existing lines. The carriers took the money and extended the lines to the edge of the profitable territory, which is where the lines already were.

    The second promise is BEAD. It is structurally different — the money flows through the state, the state runs a competitive subgrant process, and the awards carry build-out obligations with clawback provisions. On paper it fixes the failure mode of the first programme.

    Every one of these programmes is designed by people who have never had to hang a strand of fibre across a creek.

    In practice the subgrant process has taken longer than the construction it authorises. Tennessee’s initial proposal went to the National Telecommunications and Information Administration in 2023. Final approval came in 2025. Ground was broken on the first Carter County segment this spring.

    Why the delay is not incompetence

    It is tempting to read the timeline as bureaucratic failure, and some of it is. But the larger share is a design choice that nobody made explicitly. BEAD requires states to challenge and verify the federal broadband map, location by location, because the map was wrong — systematically, in the direction that favoured incumbents. Fixing it was necessary. It also consumed two years.

    The result is a programme that will probably work and will certainly arrive late. The households in Carter County that were promised service in 2015 will receive it, if the current schedule holds, in 2028.

    What the next programme should copy

    Two things, according to the state broadband directors who have now run this process twice. Verify the map before authorising the money, not after. And write the build-out obligations as milestones with dates, not as outcomes with deadlines — because a deadline that arrives when the fibre is half-strung produces a clawback fight, and a clawback fight produces no fibre at all.

  • The quiet consolidation of American dentistry

    The quiet consolidation of American dentistry

    Dental support organisations now own or manage roughly one in four dental practices in six states, up from fewer than one in twenty a decade ago. In Arizona, Florida and Texas the share is higher still.

    The corporate structure is a workaround. Most states prohibit non-dentists from owning a dental practice, so the practice remains nominally owned by a licensed dentist while a management company owns the building, the equipment, the staff contracts, the billing system and the brand. The dentist owns the licence and, in a meaningful sense, very little else.

    Patients tend to notice the consequences before they notice the ownership. The most consistent finding across state insurance filings is not higher prices for a given procedure but a change in procedure mix — more crowns, more scaling and root planing, more treatment plans that arrive at the front desk as a financing decision.

    The academic literature on whether this constitutes overtreatment is genuinely unsettled. What is not in dispute is the incentive structure: associate dentists at consolidated practices are frequently compensated on production, and production targets are set by people who do not examine patients.

    Regulatory attention has been sparse and local. Three state dental boards have opened inquiries since 2023; none has concluded. The boards are staffed by practising dentists, an increasing number of whom work for the organisations under review.

    The exit is where the money is. A practice that sells to a consolidator receives a multiple of earnings that an individual buyer cannot finance, which means the consolidator is frequently the only bidder. For a dentist approaching retirement with no associate ready to buy in, that is not a market failure. It is the only offer.

  • What the payrolls revision actually means

    What the payrolls revision actually means

    A benchmark revision is an accounting exercise, not a forecast. Once a year the Bureau of Labor Statistics reconciles its survey-based payroll estimate against unemployment insurance tax records, which cover nearly every employer and arrive with a long lag.

    This year the reconciliation removed 141,000 jobs from the spring. There are three defensible ways to read that.

    The first is that it is noise with a known cause. Benchmark revisions are systematically larger at turning points because the birth-death model that estimates job creation at new firms performs worst when firm formation is changing direction. On this reading the labour market is roughly what it appeared to be and the model will catch up.

    The second is that it confirms a slowdown already visible elsewhere. The household survey has run softer than the establishment survey for three months. Job openings have fallen. Quits are below pre-pandemic norms. The revision, on this reading, resolves a discrepancy in favour of the weaker series.

    The third is more specific and less comfortable: that the revision concentrates in leisure, hospitality and temporary help, and that those categories have historically turned first. Not a slowdown already underway, but the leading edge of one.

    The Fed will most likely take the second reading, because it requires the fewest new assumptions and because it is consistent with the direction officials have been signalling since spring. Whether that is right depends on data that does not exist yet.