Maury Harris
Maury Harris
Maury Harris is a managing director and chief economist for the Americas for UBS. Harris was named among the 2012 Bloomberg 50 Most Influential people in global finance...
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A key issue now will be whether the latest spike in gasoline prices leads to another 'soft spot' in consumer spending.
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Difficulties of seasonally adjusting the retail sector around year-end suggest that the two-month average -- about flat -- is a more reliable gauge of hiring trends.
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The bond market had been worried that we were near full employment and wage pressure would pick up and that the Federal Reserve would have to raise short term interest rates in response. But now that the all important employment cost index was up just 0.6 percent, the Fed doesn't need to raise short term rates because the economy is slowing down.
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The contained job gains will make it easier for the Fed to convince investors that it will not rush to tighten. We still expect tightening to start only next August.
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In that context, he will lose credibility if he under-appreciates the extent to which (economic) growth is already weakening in response to earlier rate hikes.
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Both current conditions and expectations remain above their wartime lows, but the reversal of previous gains undercuts the notion that the slowdown early this year owed only to geopolitical concerns. Consumers are clearly troubled by the absence of new hiring, and worry about income prospects.
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Price pressures appear to be building at crude PPI levels, but the Fed will likely wait to respond until these pressures filter into the consumer price index. We do not expect that to occur until next year.
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I think we're probably more adaptable now than we were in the past. Education is the key to that -- it makes you flexible.
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Certainly, there was nothing in Mr. Greenspan's testimony to suggest he has seen any strong preliminary data from the April employment report.
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You typically see a rebound in the labor force when the economy starts to recover. But because businesses are operating so much more efficiently, there's a limit to the number of jobs available. Unemployment could still go up a few ticks.
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With consumption accounting for about 70 percent of GDP, the extra strength should add about 0.7 point to total GDP growth.
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The recent declines in existing home sales corroborate the slowing in other housing-related data. We expect additional slowing in the housing market, including prices, in 2006. In turn, the cooling will probably result in a moderation in overall growth.
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Today's FOMC statement did not add any new specificity or much elaboration, and the initial reaction in the bond market has been limited.
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Through the volatility, the trend in claims is gradually downward again, consistent with the labor market slowly starting to regain momentum after a setback in late 2002.