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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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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In principle, rapid productivity should make wages rise, but it seems that until the job market tightens up a bit, all the productivity gains flow to corporate profits.
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It would be kind of like when they put through a substantial emergency rate cut when the market crashed in 1987. I don't think it is evidence of panic to treat what happened yesterday as an emergency. It's an emergency on many levels.
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It fits in with the picture that the labor market is turned, inflation has turned and in a few more months they'll be tightening.
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I don't think it really suggests there is any inflation developing -- a 0.3 percent rise in wages is pretty manageable. But it's a pretty positive report; it suggests that the overall jobs market is pretty healthy.
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Now we're starting to see that wash out, and we're seeing that the labor market really has been gradually strengthening for most of the first half of this year. And this is fundamentally good news for consumers and for the health of the recovery going forward.
absolutely bond bounce gaining ground headline lost market number trend underlying
The headline number is absolutely kind of a shock, I think the bond market is probably overreacting. It's a bounce back from September, but we're still not gaining back all the ground lost in September. The underlying trend is still kind of down.
job market
I think the job market is on a roll.
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Santa's workshop will be operating pretty much at full capacity. There just probably won't be much elf overtime.
coming fairly fed percent starts sticks
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.
series
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.