Ethan Harris
Ethan Harris
That's about the right feel for the economy,
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It suggests moderate growth in the year ahead, but I don't think there's much risk of a 'double-dip' recession.
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It's true there's been a shift of income distribution, with a lot of income gains accruing to upper income individuals. The labor market is paying a bigger and bigger premium for being well educated, ... At the other end of the distribution, if you look at Joe Six-Pack, you've seen a big decline in big paying, low skill jobs in manufacturing.
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The bond market went into this report looking for disaster. I think there's a sense of relief in the bond market.
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The best tack is to move by a quarter point, with the promise that there will be more cuts to come if the economy remains weak. You can't maintain that promise with big bulky rate cuts.
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The basic story of the consumer is that he's OK in the near term and at risk in the medium term.
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The adjustment to higher prices has been fairly orderly. It's not a 70's style shock. Oil prices do have an effect on the economy but it's not dramatic. It's a problem but not at the top of the list.
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They'll wait to see how Christmas shapes up, and if it's weak, they'll give another rate cut in January.
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They keep fiddling with the language, and the general tone of the directive keeps getting a little less dovish. Being 'patient' sounds a little less like they're keeping rates on hold than a 'considerable period' -- though you'd need to study a dictionary closely to figure that out.
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There's this alternative scenario where the financial crisis starts to bleed into the economy in a major way,
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The retail sales report is a little bit misleading,
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It's very likely consumer spending will slow down significantly in coming months.
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At the national level, the Fed has to worry about the inflation implications of the storm.
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As you look down the road, at some point you've got to believe there's a real recovery in capital spending on the way. But I don't see the catalyst anywhere in sight.