Neal Soss
Neal Soss
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The economy is doing fine. We're at the lowest unemployment rates in a generation. Inflation is hard to find. There's just aren't the kinds of problems that would induce to you take new medicine. So if the medicine at the moment is a 4-3/4 percent Fed funds rate, keep it there.
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Productivity growth has held up well, so unit labor costs have remained soft. Against that backdrop, the inflation threat remains muted in our view. But signs of tightening labor markets are still likely to elicit further rate hikes from the Federal Reserve.
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As long as the economy is growing at such a good pace, it is appropriate and desirable that the FOMC acknowledge that with somewhat higher rates.
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Housing is backing off from its leadership role in the economy, but clearly something else is replacing it. The Fed has a little more to do and then they can rest on their oars.
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The word 'measured' could very readily disappear now. They'll probably tweak the words one more time in the direction of being that much more open-ended, but maybe with the emphasis on 'ended' than 'open.
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Market participants may well associate bad news on the economy with an increase in fiscal spending and lower bond prices.
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In its own way, this activity of testifying before the Congress is most like being a professor. You start by giving a lecture. And then you submit, so to speak, to questions from your students. So temperamentally, I think he's very well-suited to this sort of congressional appearance.
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It is magnificent that inflation continues to be low, but retail sales are smoking.
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Once upon a time, business solved its problems by raising prices. Now, they solve their problems by cutting costs and getting better productivity. It reflects that productivity but doesn't force pricing, doesn't constrict profit margins. It's what an economy's supposed to do.
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The Federal Reserve has been for some time thinking of the economy as having two diametrically opposing influences: strength domestically and weakness overseas. There's nothing we've learned (today) that changes that view.
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As a result, the swings between March and April in the Census figures tend to be smaller than the swings in the retailers' report. Chain store results from the retailers may overstate the weakness in March.
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The good news from market perspective is that if the economy is slower, all else equal, that takes pressure off the Federal Reserve.
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We're accustomed to the insights of government officials being authoritative. Greenspan's comments may be wise, but they aren't actionable anymore.
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Warmer than normal Januarys have a penchant for producing surprisingly strong payroll numbers.