Data Watch

Lately, Yellen has been sounding as “robotic” as Marco Rubio: Financial conditions in the United States have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar. These developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market, although declines in longer-term interest rates and oil prices provide some offset. Of course, economic growth could also exceed our projections for a number of reasons, including the possibility that low oil prices will boost U.S. economic growth…...

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The unemployment rate registered 4.9%. Our forecast was 4.8% while the market consensus pegged it remaining at 5%. Probably, unemployment rates below 5% will get the Fed “excited” and, therefore, “trigger-happy”. There´s absolutely no reason for that. To see why, look at our blog post The Fed & the Unemployment Rate, published today. Basically, a real improvement in the labor market would be associated not with a falling labor force participation rate and a low employment-population ratio, but with a rise in those two ratios. Again, monetary policy which the Fed thinks has been accommodative, has in fact been tight…...

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Today the January 2016 Non-Manufacturing ISM came out. It was much worse than expected at 53.9 vs 58.5 expected. Consensus in the market is for a return to decent RGDP growth based on Non-Manufacturing growth, its employment intentions and resulting high consumer confidence. The market´s lurch downwards was only arrested by a clear statement from President of the NY Fed that he and the FOMC had noticed the weakness and would take it into account at the March FOMC meeting (see our blog comment today “Dudley is the market´s man on the FOMC, a small mercy”). The key employment component…...

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ISM Manufacturing for January 2016, and Nominal Personal Consumption Expenditures Growth for December 2015. Wiggles along a downtrend. A reflection of monetary tightening! The last couple of months in 2015 showed that inflation is not “brain dead”. The resumption of the fall in oil and commodities in the new year could well reverse the recent minuscule inflation gains! Actually, our forecasts say it will. (see Monthly Analysis Jan 1, 2016) Aren´t we thrilled that in the statement from the January FOMC Meeting the Fed wanted to reassure us that the inflation target is symmetric. Who believes that inflation would be…...

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