The Institute for Supply Management said US manufacturing contracted in August for the first time in six months.
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It has become accepted wisdom that the Federal Reserve, despite its claims to be “data dependent”, is also “market dependent”-making it reluctant to further raise interest rates for fear of upsetting financial markets and driving down asset prices”. US stocks ended higher.
Consumers are indeed stepping up spending-at an annual rate of 4.2 percent in the last quarter. Not spectacular, but steady.
The US central bank is also closely watching wage growth, which slowed in August, according to the latest figures.
“We should be in for a decent rise. largely reversing a 43 point fall that we saw on Friday”, Dr Oliver said.
Even with last month’s deceleration in hiring, job growth has been strong over the past year, and economists are unlikely to be alarmed by one month’s unexpectedly sluggish figure.
Yet Fed officials just doesn’t seem to have it in them to act.
The more important problem than the Fed’s need to choose a course of action appropriate to an economy that is flashing conflicting signals is the ongoing productivity crisis. It’s why you get practically no interest on your savings at the bank.
Yellen calls this a “gradual” pace of increases. We want to know if the market has already priced the Fed hikes in. Or worse, that it’s anxious about upsetting the stock market.
This July 9, 2015 photo shows a Wall Street sign near the New York Stock Exchange in New York.
The moderation in gains, which reflects a calendar quirk, pulled down the year-on-year gain to 2.4 percent from 2.6 percent in July. The current mid-point for the federal funds rate is 0.38 percent.
The excuses for holding off rates are getting very thin. Then, it was Brexit.
“This economy continues to be remarkably resilient”, he said. None of those events derailed it.
The research suggests that NIMs and ROE tended to be higher in higher interest rate environments. There will always be some data point that doesn’t line up, but the question isn’t is everything ideal, it’s whether the economy is solid enough for another modest hike.
Oil futures rebounded following remarks from Russian President Vladimir Putin, who said he believed Russia and other producing nations should freeze output to stabilize long-suffering oil prices. The dollar rose to 103.94 yen from 103.32 yen and the euro edged down to $1.1159 from $1.1197.
“People are taking a little bit of a relief that it wasn’t a 200,000-plus print, certainly in the equity market”, said Sean Lynch, co-head of global equity strategy at Wells Fargo Investment Institute in Omaha.
But it’s all based on a wrong idea of “full employment”.
On the other, if we overlook the low productivity and exports levels for the moment, the labor market appears to be on a roller coaster ride.
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The only real holdout for the Fed is inflation. Simply hitting 2 percent isn’t the goal, at least as I understand it. And auto sales have leveled off this year after reaching a record high in 2015. But most of all, especially in light of today’s Goldilocks report with its not-too-hot-not-too-cold results, it’s a strong argument for less mysterious tea-leaf reading of trends that are supposed to influence inflation, and more focus on inflation itself. Low rates, of course, are created to encourage businesses to borrow more money which they can then use to invest in their companies which is supposed to encourage growth in the labor sector.
