Bill Cheney
Bill Cheney
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With today's report, the odds of a negative quarter of GDP growth have increased substantially, and the chances of a full-fledged recession just went up -- perhaps approaching 50-50. Job losses cut directly into the spending of the newly unemployed, and indirectly tend to have a very real impact on the confidence of those who are still working. If demand falls, firms will lay off more employees, and the downward spiral could put us over the edge into a bona fide recession before the Fed's actions can take effect.
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Hurricane Katrina undoubtedly devastated individuals and communities... but on a macro-economic basis it's clear that the US economy has more than enough momentum to absorb the hit and recover quickly.
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Most of the really alarming data has related to the manufacturing sector, which clearly is slumping. But since it only accounts for about 15 percent of total employment, it isn't dragging everything else down.
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The economy is neither roaring nor stalling; it's clearly out of the soft patch and moving along at a decent pace, and that's all the Fed needs right now.
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I think it is clear that, whatever the economic outlook was on Monday, the outlook is shakier now, and there are stronger arguments for cutting rates.
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Even though there probably is a recovery in the pipeline, there isn't going to be any clear evidence of it by the time we get around to the next meeting.
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If there are danger signs brewing ... that make people very, very nervous, I don't see anything that could prevent the same kind of mood (as Black Monday's) from reappearing. It's clear that you don't need a very concrete, cut-and-dried kind of trigger to make people stampede if they're in the mood to be stampeded.
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Santa's workshop will be operating pretty much at full capacity. There just probably won't be much elf overtime.
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If unemployment sticks at about 6.0 percent and starts coming down, the Fed will probably feel it has to start tightening fairly soon.
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Inflation is a potential risk. It's not a reality yet.
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It's another in the long series of the no-news-is-good-news story about inflation.
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I think we're toward the end of a period of real weakness and, by the third quarter, all the money (Fed Chairman Alan) Greenspan and the Fed have been pumping out will start to be spent.
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I think the job market is on a roll. Businesses are doing pretty well these days. Profits are growing nicely. I think businesses are at a point where they feel more comfortable adding people.
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It certainly too soon to be sure, but I think it's a very strong indication that hiring is getting on track.