Ian Shepherdson
Ian Shepherdson
Ian Shepherdson is an award-winning British economist. He is the founder and Chief Economist of Pantheon Macroeconomics, an economic research firm located in Newcastle, England, with an office in White Plains, New York. In February 2015, he was named The Wall Street Journal's US economic forecaster of the year for the second time, having previously won the award in 2003...
claims lower signal strong
For now, claims signal strong payrolls and a lower unemployment rate.
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If February is broadly similar, a March 28 rate hike is assured. The May meeting's risk is rising.
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If claims remain at their current level, we could expect the unemployment rate to be down to 4 percent or so by mid-summer.
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If claims remain anywhere near this week's level, they will send a very strong signal that the labor market is tightening.
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The Fed chairman is not habitually in the business of delivering shocks to the markets unless the circumstances are especially dire. That is certainly a fair description of the situation in the states hit by Katrina, but it does not apply to the rest of the economy.
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The Fed can and will be much more of an active player in the stock market until it turns the corner,
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In any event, a single durable good report will have little effect on the Fed.
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(The GDP and inflation data) won't prevent modest further easing,
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The drop in stock prices is no excuse to beginning cutting rates, as some in the market desperately want to believe, ... Given where oil prices are and given what the fundamentals still suggest, I don't see the Fed doing anything for the time being.
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The gains were uneven, however, with small declines in clothing and electronics, a decent 0.7 percent rise for general merchandise and a huge leap for non-store retailers. Provided January holds up -- surveys suggest so far, so good -- the overall holiday season will have been pretty good.
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The chairman will likely tell the House Budget Committee that conditions are set for recovery.
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The chairman's remarks clearly signal rates will rise this month, though we remain of the view that a November hike is not yet a done deal.
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The headline was pulled down by slightly bigger declines in gasoline, natural gas and fuel oil prices than we expected. Core PPI is now up just 1.7% year over year, down from May's 2.8% peak. It will slow further in the wake of the slowing in raw-materials prices, but the Fed cares much more about the labor market than PPI.
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The headline reflects a 3.2 percent rise in gasoline prices. Natural gas and electricity prices were also much stronger than the PPI suggested. The good news is the 0.1 percent core, which supports the Fed's view that transitory factors have boosted inflation in recent months.