These disruptions are keeping inflation levels subdued, thus holding back wage growth. Average hourly earnings rose just 2.5 percent on an annualized basis last month, the Labor Department said last week. The Consumer Price Index dipped 0.1 percent in May, the Labor Department said last month. The June CPI reading is set for release Friday.
The low inflation levels in the U.S. have created conditions similar to those in Japan, Hartnett pointed out. Japan has struggled with low inflation for decades.
He noted that the U.S. 10-year yield has stayed in a tight range of approximately 100 basis points over the past three years. Similarly, the dollar-yen pair held in a range of 100-120 for about four years and the CBOE Volatility Index (VIX) between 10 and 25 for four years.
“The inability of yields, the US dollar & volatility to break out reflects the inability of the economic cycle to generate strong growth & inflation,” Hartnett said.
“The profound implications of technological disruption may ultimately require profound policy changes such as: making robots living entities so they can be taxed, governments introducing living wages, significantly higher taxation of Silicon Valley profits, and so on.”
