The September jobs report was filled with cross-currents, some showing possible economic weakness, some showing strength. This makes the Fed’s job exceedingly difficult. Is the economy strengthening or weakening? What’s the correct monetary policy prescription? “Taper” asset purchases? Raise interest rates? Since September payrolls were so ambiguous, perhaps October’s (which will be available to the Fed prior to its November meeting) will shed brighter light on the economic trends. Just to review the latest employment data, …Read More
The Recovery Stalls; Fed Pledges “Lower for Longer;” Equity Markets Pause
With the Fed pledging to keep rates low even when (or if) inflation rises above its 2% target, it is hard to see why long-term Treasury yields (and those of other quality issuers) won’t move toward yields of similar debt in the world’s other industrial economies (i.e., Europe and Japan). The economic lull is now showing up in both the labor market (Initial Claims) and in retail sales, likely because …Read More
Holy Cow, Batman – 2! There Really Is Rampant Inflation!
The financial markets have displayed some volatility of late. The latest excuse was the on-shoring of the second case of China’s coronavirus in the U.S. And, no wonder, on a valuation basis, equities are at or near the highs of the dot-com era and similar to October 2018. Remember what happened next? As I’ve written before, equity prices are fueled by excess money creation. That is now well recognized by market commentators, but, we …Read More
Fed Provides More Liquidity; Phase 1 Trade Deal, But No Corroboration On Jobs Report
Much has happened economically in the past couple of weeks including the Fed’s communication that it does not expect any rate actions in 2020, a Conservative Party sweep in the UK (which pays well in the U.S. for free marketeers), and a supposed “Phase 1” trade pact, although there won’t be a signed document until sometime in January (still time for Lucy to pull the football away – again!). The …Read More
Deflation’s Persistence Implies Yields Will Be Lower for Longer
Despite what you hear from the TV pundits, the U.S.’s second quarter ended on weakness, and there is little evidence that economic acceleration occurred. In previous years, slow GDP growth in Q1 was followed by 3%+ in Q2. Not this time! The Atlanta Fed GDPNow model, which uses a lot of sentiment indicators, is all the way down to 2.4% for Q2. I suspect that the Commerce Department’s initial GDP …Read More
On a Recession Watch
For the first time since the industrial revolution, the U.S. faces two significant growth issues: 1) a declining labor force; and 2) a job skills mismatch. The declining labor force is demographic in nature and is occurring in every industrial economy; likely a function of the long-term success of capitalism. The skills mismatch is a function of technological change that is so rapid that the skills of the existing labor …Read More
