Lara Rhame
Lara Rhame
bin dollar economy falling fits led risk tape view
The bin Laden tape has led to some dollar selling. The tape fits with the view of those who think the U.S. economy is at risk of falling into a sinkhole.
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If you look at the segments of the economy where we do have deflation, particularly in the goods industry -- and particularly in durable goods, such as automobiles and heavy machinery -- that's where most of the layoffs have been concentrated, ... That's where you see the connection of disinflation to overall economic growth.
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The underlying state of the economy is on weak footing, and we're going to need further stimulus to keep the recovery on track.
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The manufacturing sector has been so battered that it's too early to say the troubles are over in that sector. But we're seeing the economy making some kind of a bounce after contracting in April. We have to see now whether or not that continues.
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As the economy gets more and more dependent on housing being the key driver of growth, the economy becomes more and more vulnerable to that sector slowing down.
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Most people at the Fed seem to feel that the national economy is strong enough to absorb the effects of Katrina. That to me seems that you will not see the Fed rate hike derailed.
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Certainly the economy now looks like it was in better shape in January-April than expected. But these data don't show the economy making any improvement.
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Everybody has to learn a little more economics than they want to learn, now that we're drawing more and more of a distinction between actual GDP and final domestic demand, which is GDP minus inventories. Inventories can surprise. It's hard to make a solid forecast about them, and the Fed said that. I think the market continues to overestimate Fed rate cuts.
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People's outlook for the economy changes much faster than the underlying state of the economy. The Fed tries to keep its eye on the larger ball and not on the ping-pong ball of the stock market.
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This is not a 'ripping off the Band-Aid' kind of situation, where you know how much the pain will be and that you'll be fine afterwards. We don't know how well the economy has healed. The Fed remains very concerned ... that they might overshoot and give the economy such a shock they'll have to cut rates again.
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The economy contracted in April and probably contracted in May; June is when we should be getting a bounce. If we're to believe all the stars are aligned for a perfect eclipse of the recession in the second half, then it should happen sooner rather than later.
job
I think they'll need to see a lot of job growth, not just one month.
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In the near term, markets are getting very excited about the idea of the end of quantitative easing, and that's causing the yen to come under some upward pressure.
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The euro can go pretty far -- when currencies correct, they have a tendency to do that. But I don't see the recent move as dramatic or unexpected, and I don't think it's out of line with fundamentals.