Data Watch

Ignorance is costly

Recently, Bill Dudley “explained”: I don’t really completely understand why inflation is as low as it is right now. We would have thought that at this unemployment rate, we would be seeing more pressure on wages, and that that would be ultimately filtering into prices. It may just be that it takes some time—that you have to be at this unemployment rate for six months or a year or two years to actually see the consequences for wages and prices. But it’s not a bad place to be. It´s just the shoddiest labor market in modern times, even compared to…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Retail Sales: Don´t forget we´re in a depression

Retail sales had a good month in November, at least when compared with the past several years. From the chart below, you see that the magnitude of the depression, which has been widening, was a tiny bit reduced with the November retail sales print. This post Harvey & Irma surge mirrors the surge in early 2014, which followed winter storms and historic colds of that season´s polar vortex. After that, sales went into a long “sleepy spell”, moving up very slowly. Early this year, they went into “coma”, simply not budging, being awakened by the August/September storms. Although many, even…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Inflation is traveling in the wrong direction. Instead of going “north”, it is slipping “south”.

Today´s CPI was less than expected, with the core version print at 1.7% y-o-y, down from 1.8% in October. Nevertheless, if Marvin Goodfriend´s nomination goes forward, the worry with nonexistent inflation will remain alive and well at the FOMC From an interview in March 2013: Tom Keene (at 10 min): Marvin, don´t you think we are going to see a dampening of GDP if we see a restricted Fed? GOODFRIEND: There is no way that this recovery can proceed with any degree of confidence unless the Fed makes sure that inflation does not move up. So I think the risks…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

US Unit Labor Costs Q3 2017 Below Q4 2015 Level

While the US Federal Reserve manifests ever-rising hysteria regarding “tight labor” markets in the US, and Martin Feldstein warns of inflationary holocausts, unit labor costs have been….falling in the US. The Bureau of Labor Statistics reported Dec. 6 that Q3 unit labor costs fell 0.7% YOY. To smoothen short-term noise, the 4-quarter moving average of ULC year-on-year growth has moved into negative territory, a pattern consistent with post-recession periods, when productivity rises and labor compensation growth lags. Tellingly, unit labor costs are now below levels of Q4 2015. The untold story is not of rising wages but rather of US…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

The Employment Report: The Fed never “loses”

In his note the day before the employment report, Fed Watcher Tim Duy concluded: Bottom Line: The Fed would have an easier time paying attention to the weak inflation numbers if the economy was not operating near their estimates of full employment and clearly growing at a pace that will soon surpass those estimates. Consequently, a report near consensus expectations will tend to strengthen their resolve regarding further rate hikes. A report that falls short of consensus, however, would likely be deemed as noise given the generally solid path of economic activity this year. We now know that at least…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Nothing to write home about, be it growth, spending or inflation.

From the news: The U.S. economy is posting another quarter of solid growth. …Many economists are projecting growth of between 2.5% and 3% in the fourth quarter, putting the U.S. in reach of a milestone: Three consecutive quarters of above 3% growth for the first time since 2004-2005. Give me a break! This is the real growth picture since the economy left behind the doldrums of the 2008-09 Great Recession. More recently, since early 2015, mean growth has ticked down, but growth volatility has dropped significantly. Instead of “solid growth”, it´s more like a “Depressing Great Moderation”! Elsewhere, the nominal…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

The economy has reached its destination!

From the news: The U.S. economy is running at its full potential for the first time in a decade, a new milestone for an expansion now in its ninth year. The chart illustrates “vividly”. To get that “encouraging” result, the CBO has applied the saying: “If the mountain won’t come to Mohamed, Mohamed must go to the mountain” in reverse, with the “mountain” (potential) coming to “Mohamed” (actual output). Yellen will be leaving with the feeling of “mission accomplished”, even if that is far from the truth. The charts below compare the recessions of 1990-91 and 2007-09 and the two…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

No sustained rebound in industrial production

Industrial Production benefited from a hurricane rebound in October 2017, rising 2.9% above October 2016. That is the highest year over year growth rate since January 2015. Note that from late 2014 to March 2016, industrial production was contracting, remaining at close to that low level until November 2016. The election certainly changed perceptions, at least for a while. The favorable base comparison, however, will soon begin to wane. The fact is that industrial output is now about even with the peak registered in November 2014, and about the same level obtained just before the end of the previous cycle,…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Retail Sales indicates the economy is dormant

Charles Evans of the Chicago Fed is downbeat on inflation, but upbeat on economic activity: The real economy in the U.S. is on solid footing, and I expect this momentum to carry forward into 2018. For some time now, activity in the U.S. has been led by solid gains in consumer spending; and more recently, growth in business capital spending has picked back up as well. With healthy labor markets and much improved household and business balance sheets, the fundamentals for continued solid growth in 2018 look pretty good. The news on inflation, however, has not been as good. Retail…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

“Low” Inflation is neither “transitory” nor “mysterious”

In a speech today, Chicago Fed president Charles Evans said: Inflation has been too low for many years Indeed, inflation has underrun our target throughout most of the post-crisis period. Core inflation did briefly reach target in early 2012, aided by the pass-through of earlier increases in energy costs, but it soon retreated. In the summer of 2016, core inflation rose to just under 2 percent, but it then fell sharply last March and has remained in the 1.3 to 1.5 percent range since then. Many economists subscribe to the view that this latest drop in core inflation simply reflects…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share