U.S. Economic News

U.S. Economic News

August 19, 2016

U.S. Economic News

Stephen King of the Financial Times argues that persistently low productivity growth may be rendering monetary policy impotent.  Stubbornly low productivity and inflation lead to low interest rates, like we see today, and leave nowhere for rates to go in the event of a recessionFT

A new Freddie Mac outlook report shows that long-term mortgage rates have stagnated due to a lack of consistent, positive economic dataThe report projects that long-term rates will remain below 4% through next year, as inflation has failed to drive any sustained increases.  WaPo

New research from an economist at Boston College finds that jobs held in greater proportion by older workers tend to require higher levels of dependability and outdoor work (e.g., lower-skilled service jobs) and lower levels of active learning, numerical ability, and physical skills (e.g., engineering jobs, manufacturing jobs).  Overall, these jobs tend to pay 6-11% less than jobs that favor younger people, mainly because of lower skill requirements.  NY Times

U.S. Economic News

U.S. Economic News

August 18, 2016

U.S. Economic Indicators

Jobless claims decreased 4,000 to 262,000 last week.  The four-week moving average rose 2,500 to 265,250.  DOL Report

The Philadelphia Fed’s Business Outlook Survey reported positive but tenuous growth in manufacturing in the mid-Atlantic region, as the index rose 5 points to only 2.0 in August.  Although the current new orders index fell significantly from 11.8 to -7.2 and indicators of current employment weakened considerably, the survey’s index of future manufacturing activity rose to its highest reading since January 2015, suggesting that weakness is likely to be temporary.  Report

The Conference Board’s Leading Economic Index (LEI) for the U.S. rose 0.4 percent in July following a 0.3 percent increase in June, suggesting that the economy could pick up modestly in the coming months after anemic growth during the first half of the year.  All components except consumer expectations contributed to the increase.  Conference Board Report, WSJ

U.S. Economic News

Minutes from the Federal Reserve’s July FOMC meeting suggest that a rate hike is possible as soon as September, provided that the outlook for growth, hiring, and inflation improves first.  Many of the Fed’s worries have receded in recent weeks, as financial markets promptly recovered after the U.K.’s “Brexit” referendum and job gains picked back up in June.  WSJ

U.S. Economic News

U.S. Economic News

August 17, 2016

U.S. Economic News

Chelsey Dulaney and David Harrison of the Wall Street Journal argue that conflicting signals about rate hikes are diminishing the Fed’s influence over markets.  For example, the US dollar fell to its lowest level since June against a basket of currencies yesterday, even though multiple Fed officials signaled that the market was underestimating the probability of a near-term rise in interest rates.  WSJ

The Financial Times’ Amar Bhidé writes that central banks should be held accountable for prudent lending practices by banks, especially in the low interest rate environment.  “Cheap money” created by easing programs around the world could fuel another credit bubble, the author argues, so central banks should focus on responsible lending rather than full employment or price stability.  FT

Steven Pearlstein argues in a Washington Post op-ed that rising automation of certain low-paying jobs will not result in permanent job losses.  The author argues that higher demand will drive the shift to automation, which in turn will increase efficiency, lower prices, boost spending in other sectors of the economy, and ultimately create more jobs.  WaPo

U.S. Economic News

U.S. Economic News

August 16, 2016

U.S. Economic Indicators

Consumer prices were unchanged in July on a seasonally adjusted basis but are up 0.8% yearoveryear.  The “core” CPI, which excludes food and energy, ticked up 0.1% in July and is up 2.2% on the year.  BLS Report

Privately-owned housing starts rose 2.1% in July to a seasonally adjusted annual rate of 1.2 million and are up 5.6% year-over-year. Housing permits dipped 0.1% to a 1.2 million annual pace in July, but are up 0.9% on the year.  Census Bureau Report 

Industrial production increased 0.7% in July (down 0.5% Y/Y) after rising 0.4% in the previous month.  This marks the largest monthly gain since November 2014.  Capacity utilization rose 0.5 percentage point to 75.9.  Fed Report

U.S. Economic News

The New York Times editorial board argues that the European Central Bank’s reliance on negative interest rates has not boosted growth in European economies and could be dangerous.  The authors believe that record-low borrowing costs may incentivize risky behavior among banks, institutional investors, and individuals, which in turn could fuel asset bubbles around the world.  NYT

U.S. Economic News

U.S. Economic News

August 15, 2016

U.S. Economic Indicators

The NAHB Housing Market Index rose two points to 60 in August, driven by increases in both the current sales and sales expectations indexes.  Solid builder confidence reflects historically low mortgage rates, increased household formations, and a firming labor market.

NAHB Report

The August Empire State Manufacturing Survey indicated that industrial activity in the New York region declined slightly as the headline index fell 5 points to -4.2.  The new orders index remained near zero, and labor market indicators pointed to little change in employment levels and hours worked.  Respondents remain optimistic about future conditions, although to a lesser extent than in July.

NY Fed Report

U.S. Economic News

Gavyn Davies of the Financial Times argues that events in foreign economies are far more important in determining equilibrium U.S. interest rates than previously thought. Davies believes that until this changes, the Fed will continue to err on the side of dovishness — as evidenced by lower long-term interest rate expectations from FOMC members.  FT

According to the Wall Street Journal, consumers have shifted away from traditional retailers and consumer goods and towards online platforms and services. This shift accounts for roughly 5% ($600 billion annually) of consumer spending since 2000, and reflects growth in non-discretionary expenditures like healthcare, student debt, housing, and transportation.  WSJ

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