Mark Vitner
Mark Vitner
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The federal government is going to spend whatever they need to, to make some visible progress before next year's mid-term elections, ... And what that's going to do to an economy that's already at full employment is drive up the cost of cement, drive up the cost of steel, drive up the cost of labor.
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The most recent acceleration in productivity growth looks like it was cyclically driven, ... Even with output soaring, many businesses were reluctant to boost hiring because the Fed was hiking interest rates and energy costs were surging. Even if businesses wanted to hire more workers, many could not because the labor markets were so tight.
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It suggests there could be a profit squeeze in some of the cyclical industries, ... Autos. Household appliances. Anything that has a lot of raw commodity in it. The end user is going to have a hard time passing those costs on to the consumers.
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It's always a question in getting the cost right and delivering the product at the right time.
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The trucking industry is very competitive, so driving up the costs of hiring drivers has not really translated that much to price pressure for finished goods.
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Inflation at the end of the day is headed higher, it's just not going to happen that dramatically this year.
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it's somewhat surprising how resilient the economy has been, despite higher energy prices.
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The biggest mistake of economists over the past 20 years ... We've consistently underestimated growth.
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They would like to raise rates, but right now, keeping rates a little too low would cause the least harm in the economy. If they raise rates after this weak employment report, people will be hollering. George Bush would be hollering the loudest.
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The federal response has been much larger than we thought it would be, ... And the money is being spent much more quickly.
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(The Fed) would rather see slower economic growth over the next two years than the return of stagflation three or four years down the road. And I think they'll do everything they have to make sure we don't have stagflation.
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The Fed will probably cut rates in both August and October by 25 basis points (a quarter-percentage point) each. We really don't know what they will do beyond that.
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The Fed can't wait for core inflation to pick up before they act,
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I'm not too sure we're going to hear that much that will disturb markets, but I'm sure he'll say at least something hinting that long-term interest rates are too low,