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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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.
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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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Given the volatility of the report, I don't put a lot of credence in the forecasts. The headline number is the news and the fact that it went up signals that the recovery isn't falling apart.
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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.
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If you're living on the edge, then when the price of gas and heating oil goes up, you end up over the edge.
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The unemployment situation won't truly improve until businesses increase hiring a lot more than they did in February. It takes roughly 150,000 new jobs per month just to keep the unemployment rate steady, as population growth increases the work force.