Category : Federal Reserve

(NYT) A Rebounding Economy Remains Fragile for Many

The eye-popping improvement in economic fortunes last year raises the question: If incomes are up and poverty is down, why is Donald J. Trump’s message of economic decay resonating so broadly?

The answer is in plain sight. While the economy finally is moving in the right direction, the real incomes of most American households still are smaller than in the late 1990s. And large swaths of the country ”” rural America, industrial centers in the Rust Belt and Appalachia ”” are lagging behind.

“We ain’t feeling too much of all that economic growth that I heard was going on, patting themselves on the back,” said Ralph Kingan, the mayor of Wright, Wyo. “It ain’t out in the West.”

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Posted in * Economics, Politics, * International News & Commentary, America/U.S.A., Anthropology, Economy, Ethics / Moral Theology, Federal Reserve, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology

(Bloomberg) Most Federal Reserve Officials Saw June Hike Likely If Economy Warrants

Federal Reserve policy makers indicated that a June interest-rate increase was likely if the economy continued to improve, boosting market expectations they will act next month.

“Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and inflation making progress toward the committee’s 2 percent objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June,” according to minutes of the Federal Open Market Committee’s April 26-27 meeting released Wednesday in Washington.

Officials were divided over whether those conditions were likely to be met in time. “Participants expressed a range of views about the likelihood that incoming information would make it appropriate to adjust the stance of policy at the time of the next meeting,” the minutes stated.

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Posted in * Economics, Politics, Credit Markets, Currency Markets, Economy, Federal Reserve, Personal Finance, Stock Market, The U.S. Government

(Telegraph) Anthony Evans-Pritchard This is a global stock market rout worth celebrating

We toiling workers can allow ourselves a wry smile. For most of the last eight years the owners of wealth and inflated assets have had things their own way, while the real economy has been left behind.

The tables are finally turning. The world may look absolutely ghastly if your metric is the stock market, but it is much the same or slightly better if you are at the coal face.

The MSCI index of world equities has fallen almost 20pc since its all-time high in May of 2015, implying a $14 trillion loss of paper wealth. Yet the world economy has carried on at more or less the same anemic pace, and the OECD’s global leading indicators show no sign that it is suddenly rolling over now.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, Asia, China, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Energy, Natural Resources, Ethics / Moral Theology, Euro, Europe, European Central Bank, Federal Reserve, Foreign Relations, Globalization, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, Stock Market, The U.S. Government, Theology

(Telegraph) Ambrose Evans-Pritchard: the Fed will have to reverse gears fast if anything goes wrong

[The data in the economic background paints]…a very murky picture. This is the first time the Fed has ever embarked on tightening cycle when the ISM gauge of manufacturing is below the boom-bust line of 50. Nominal GDP growth in the US has been trending down from 5pc in mid-2014 to barely 3pc.

Danny Blanchflower, a Dartmouth professor and a former UK rate-setter, said the US labour market is not as tight as it looks. Inflation is nowhere near its 2pc target and the world economy is still gasping for air. He sees a 50/50 chance that the Fed will have to pirouette and go back to the drawing board.

“All it will take is one shock,” said Lars Christensen, from Markets and Money Advisory. “It is really weird that they are raising rates at all. Capacity utilization in industry has been falling for five months.”

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Posted in * Culture-Watch, * Economics, Politics, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, Foreign Relations, Globalization, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, The Banking System/Sector, The U.S. Government, Theology

(FT) US industrial heartland frets as Federal Reserve rate rise looms

If the Federal Reserve proceeds as expected and raises US interest rates for the first time in almost a decade on Wednesday it will be an affirmation of what Janet Yellen and her fellow policymakers see as the strength of the US recovery.

It will also be at odds with what many in the US’s industrial economy are seeing.

From manufacturing behemoths like Caterpillar and Deere & Co to companies supplying the industrial sector the common theme in recent months has been that, thanks to a strong dollar and a collapse in commodity prices, tough times are back. Some are going so far as to declare the arrival of an industrial recession.

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Posted in * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology

(FT) Martin Wolf–America’s labour market is not working

Back in 1991, the proportion of US prime-age men who were neither in work nor looking for it was just 7 per cent. Thus the proportion of vanished would-be workers has risen by 5 percentage points since then. In the UK, the proportion of prime-aged men out of the labour force has risen only from 6 per cent to 8 per cent over this period. In France, it has gone from 5 to 7 per cent. So supposedly sclerotic French labour markets have done a better job of keeping prime-aged males in the labour force than flexible US ones. Moreover, male participation rates have been declining in the US since shortly after the second world war.

What has been happening to participation of prime-aged women is no less striking. In the US, female labour force participation rose strongly until 2000, when it was among the leaders. The US is the only G7 country to experience a sustained decline in the participation rate for prime-aged females since then. Japan, once far behind, has caught up….

The relentless decline in the proportion of prime-aged US adults in the labour market indicates a significant dysfunction. It deserves attention and analysis. But it also merits action.

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Posted in * Culture-Watch, * Economics, Politics, * International News & Commentary, America/U.S.A., Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, History, Labor/Labor Unions/Labor Market, Politics in General, The U.S. Government, Theology

(WSJ) Charles Moore–Western countries must honestly face The Middle-Class Squeeze

Since the financial crisis of 2007-08, which Western leader could boast of spreading ownership in any important way? In the U.S. and Britain, the percentage of citizens owning stocks or houses is well down from the late 1980s. In Britain, the average age for buying a first home is now 31 (and many more people than before depend on “the bank of Mom and Dad” to help them do so). In the mid-’80s, it was 27. My own children, who started work in London in the last two years, earn a little less, in real terms, than I did when I began in 1979, yet house prices are 15 times higher. We have become a society of “have lesses,” if not yet of “have nots.”

In a few lines of work, earnings have shot forward. In 1982, only seven U.K. financial executives were receiving six-figure salaries. Today, tens of thousands are (an enormous increase, even allowing for inflation). The situation is very different for the middle-ranking civil servant, attorney, doctor, teacher or small-business owner. Many middle-class families now depend absolutely on the income of both parents in a way that was unusual even as late as the 1980s.

In Britain and the U.S., we are learning all over again that it is not the natural condition of the human race for children to be better off than their parents. Such a regression, in societies that assume constant progress, is striking. Imagine the panic if the same thing happened to life expectancy.

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Posted in * Culture-Watch, * Economics, Politics, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Federal Reserve, Foreign Relations, Globalization, History, House of Representatives, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Office of the President, Pensions, Personal Finance, Politics in General, Senate, Taxes, The U.S. Government, Theology

(WSJ) Mixed Jobs Report Sets Fed Up for Close Call on Rates

U.S. employment growth slowed in August but the jobless rate fell to the lowest level since 2008, a mixed labor-market reading that leaves the Federal Reserve with a challenging decision on whether to raise short-term rates at its September meeting.

Nonfarm payrolls rose a seasonally adjusted 173,000 in August, the Labor Department said Friday. Revisions showed employers added 44,000 new jobs in June and July than previously estimated.

However, the unemployment rate, which comes from a separate survey of U.S. households, fell to 5.1%, from 5.3% the previous month. The unemployment rate is now lower than at any point since 2008 and right in the middle of the Fed’s long-run projections.

The decline in the unemployment rate strengthens the case for an interest rate increase at the Fed’s Sept. 16-17 meeting.

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Posted in * Economics, Politics, Economy, Federal Reserve, Labor/Labor Unions/Labor Market, The U.S. Government

(Wash. Post) Robert Samuelson–are we currently sowing the seeds of the next financial crisis?

The BIS critique goes like this. Low interest rates have sustained the recovery, but the support is fragile. The economy relies too much on debt, which cannot build forever, and artificially high asset prices (stocks, homes, bonds) may someday tumble from unrealistic levels. A new crisis could be severe because governments have already deployed their standard anti-recession tools: cheap credit and big deficits.

The BIS’s most intriguing point is that a new recession or financial crisis might originate with emerging-market countries: China, Brazil, India, Turkey and the like. Although there has been debt repayment in the United States, the opposite has happened in some emerging-market countries, the BIS says. Private firms have assumed dollar loans worth $3 trillion, even though their “debt servicing capacity .”‰.”‰. has deteriorated.” Will defaults follow?

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Posted in * Culture-Watch, * Economics, Politics, Anthropology, Economy, Ethics / Moral Theology, European Central Bank, Federal Reserve, History, Psychology, The U.S. Government, Theology

(Upshot NYT) Neil Irwin–Does It Really Matter Exactly When the Federal Reserve Raises Rates?

What is in Fed officials’ control is what they do today and tomorrow and in their policy meeting Sept. 16 and 17. So by deciding to raise rates then (or deciding not to), they are sending a more powerful signal than any speech or written statement that they believe it is time to start winding down the era of easy money.

The thing is, Ms. Yellen and her colleagues know this, and that comments like those she made Wednesday won’t do much to change it. The best they can do is try to manage expectations so that people don’t assume that a quarter-percentage point rise in the Fed’s interest rate target in September automatically translates to much higher rates in a year or two.

In other words, Ms. Yellen may be an economist, but she is well aware that her tools for managing the economy work via financial markets. So how bond traders interpret the Fed’s words and actions matter a great deal.

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Posted in * Culture-Watch, * Economics, Politics, Credit Markets, Currency Markets, Economy, Ethics / Moral Theology, Federal Reserve, Psychology, The U.S. Government, Theology

(Economist) Only a matter of time before the next recession strikes+the rich world is not ready

Inevitably fragilities remain. Europe is deep in debt and dependent on exports. Japan cannot get inflation to take hold. Wage growth could quickly dent corporate earnings and valuations in America. Emerging economies, which accounted for the bulk of growth in the post-crisis years, have seen better days. The economies of both Brazil and Russia are expected to shrink this year. Poor trade data suggest that Chinese growth may be slowing faster than the government wishes.

If any of these worries causes a downturn the world will be in a rotten position to do much about it. Rarely have so many large economies been so ill-equipped to manage a recession, whatever its provenance, as our “wriggle-room” ranking makes clear…. Rich countries’ average debt-to-GDP ratio has risen by about 50% since 2007. In Britain and Spain debt has more than doubled. Nobody knows where the ceiling is, but governments that want to splurge will have to win over jumpy electorates as well as nervous creditors. Countries with only tenuous access to bond markets, as in the euro zone’s periphery, may be unable to launch a big fiscal stimulus.

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Posted in * Culture-Watch, * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, European Central Bank, Federal Reserve, Foreign Relations, G20, Globalization, History, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, Personal Finance, Politics in General, The Banking System/Sector, The U.S. Government, Theology

(W Post Wonkblog) U.S. economy shrinks in first quarter, raising questions about underlying strength

The U.S. economy shrank at an annualized pace of 0.7 percent in the first three months of the year, according to government data released Friday morning, a tumble for a recovering nation that until recently seemed poised for takeoff.

The contraction, the country’s third in the aftermath of the Great Recession, provides a troubling picture of an economy that many figured would get a lift from cheap oil, rapid hiring and growing consumer confidence. Instead, consumers have proved cautious, and oil companies have frozen investment ”” all while a nasty winter caused havoc for transportation and construction and a strong dollar widened the trade deficit.

The numbers released Friday were a revision of earlier figures that had shown GDP growing in the first quarter at 0.2 percent. Markets had since expected the downward revision, in large part because of recent data showing the trade deficit at a 6½-year high.

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Posted in * Economics, Politics, * International News & Commentary, America/U.S.A., Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology

(Bloomberg) New Survey From the Fed Shows Exactly Why they are in No Rush to Raise

The Federal Reserve’s report on the economic well-being of U.S. households is out, and it contains one very interesting finding: A decent share of Americans want to work longer hours even without a raise.

The Fed asked non-self-employed workers whether they’d prefer to work more, less, or the same amount that they now work if their hourly wage was unchanged. The goal of the question was to help gauge the amount of underemployment in the economy, according to the report.

Thirty-six percent of respondents said they’d prefer to work more hours at their current wage. Among those who work part time, the share is even higher at 49 percent. The results might help Fed Chair Janet Yellen and her colleagues connect the dots in a labor market that’s still flashing mixed signals.

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Posted in * Culture-Watch, * Economics, Politics, Economy, Ethics / Moral Theology, Federal Reserve, Labor/Labor Unions/Labor Market, Personal Finance, Psychology, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government, Theology

(FT) US inflation expectations scale highs for the year

Several widely-watched gauges of US inflation expectations have climbed to their highest levels this year, as oil prices regain their footing and some investors bet that the Federal Reserve will be slow in quelling any price pressures.

The US 10-year “breakeven” rate measures the market’s expectations of average inflation over that time by comparing the yields of conventional US Treasuries maturing in 10 years and Treasury Inflation Protected Securities, or Tips.

The 10-year breakeven has shot up from a low of 1.53 per cent in mid-January to 1.92 per cent on Monday, the highest since November 2014. The five-year breakeven rate has risen to 1.71 per cent, the highest since September, while the two-year is at its highest since July 2014.

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Posted in * Culture-Watch, * Economics, Politics, Economy, Federal Reserve, History, Psychology, The U.S. Government

Federal Reserve district president returns to a stronger Charleston SC than when he visited in 2009

Lacker, president of the Federal Reserve Bank of Richmond, which includes the Palmetto State, got a first-hand look at the Boeing juggernaut during a two-day visit to the Charleston area last week.

“It’s really impressive,” he said. “What I don’t think is broadly known is the extent of which … they’ve added to what was just a manufacturing and assembly facility, and this looks now to be a bigger part of Boeing’s future than it looked a couple of years ago. So I think that speaks well for Charleston’s economic capabilities and for its work force … because they’ll tell you … the biggest uncertainty about the whole venture down here was whether they could attract enough of a work force to do the things they can do up in Puget Sound. They’ll tell you they succeeded.”

Aside from Boeing’s growth, Lacker has witnessed other sea changes since his last official visit to the Holy City. In 2009, the Fed was still cutting interest rates to jump-start the then-wounded economy. Now, some believe the time is finally ripe to start raising them again.

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Posted in * Economics, Politics, * South Carolina, Anthropology, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Federal Reserve, Housing/Real Estate Market, Labor/Labor Unions/Labor Market, The U.S. Government, Theology