Mark Vitner
Mark Vitner
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Corporate America is on the mend. The only downside of stronger productivity growth is that it means hiring is lagging. As far as downsides go, this is roughly the equivalent of eating your broccoli. It may be tough to stomach at first, but it makes you stronger and healthier in the long run.
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High gasoline prices gradually eat away at income. The effect isn't felt all at once. We have seen consumers change their behavior in recent months and there should be further changes if prices stay at these levels.
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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 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 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,
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It's beginning to look like the Fed was right all along ... and that the case for a recession has gotten a lot weaker. It looks like we're going to have a successful bumpy landing.
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So even if tomorrow's ISM report does not show anywhere near the weakness the Chicago report does, we could still see some follow through in the next month's numbers.