No doubt housing activity was elevated over the winter because of very, very mild weather. One housing start in Syracuse, N.Y., in December is an awful lot. So we shouldn't be surprised by a big fall-off.
Fundamentally, the economy has not slowed as investors had hoped or the Fed requires. It puts a tightening in August back on the table.
Had this number been very high, the markets would have been quite confident the Fed would raise rates. The real question is whether they are going to pull the trigger on interest rates again, and my answer is no.
I suspect that interest rates must increase considerably more than is currently expected or has been built into forward markets.
I think there's been a slowdown in economic activity, but I don't think it's been an adequate slowdown and I suspect it might be temporary. There isn't a lot of evidence yet to indicate that the economy is slowing notably.
Overwhelmingly, I think the stock market is taking the view that the economy is doing well despite the rise in interest rates, and they clearly don't think that however much interest rates go up, that it is going to impair growth, or impair profitability.
I think part of what has driven the market today are fluctuations in oil and interest rates and the bond market.
I think we have a recovery under way, ... At this stage of the recovery, the data are often mixed.
We continue to see very rapid economic growth which has been a problem for the Fed all along. We have not seen a material increase in labor costs and that's what I think is going to be the ultimate problem in the economy somewhere down the road, though clearly it's not imminent.
That's the time when a big number is most likely, mainly when we're coming out of a recession. At this stage of the business cycle, to be getting a 5 percent growth rate in productivity for a year is really very impressive.
The fact that claims are low is very comforting.
When a doctor administers medicine, he or she makes a judgment about the appropriate dosage in advance. The Fed has to make that judgment, but there's a chance they've already given out the right dosage and just need an appropriate amount of time for it to take effect.
It wouldn't be surprising if there was a little bit of a pullback in consumer spending in the first quarter as well because of the zero-percent financing in the fourth quarter, which makes for a very difficult comparison.
Unemployment is sufficiently high, and the economy has just come out of a relatively mild recession, so inflation pressures are relatively soft right now. It will take a while of solid growth before we have upward pressure on inflation, so the Fed can be a little relaxed about it.
As long as the productivity numbers are very good, the higher wage gains can be offset by higher productivity gains,
Inflation has been very soft for a number of years, and there's absolutely no reason to believe that's going to change any time in the near future.
Inflation, on the surface, does not appear to be a concern, but it's obvious that prices for some items are rising, ... It's inevitable that when people are armed with fatter paychecks and when companies are spending more to produce goods and services, prices are going to rise.
The Fed is not going to be troubled by a small miss (in the CPI). I don't think it's that big an issue, ... They're concerned that a falling stock market could hurt consumers sufficiently to curtail spending. That could be a problem.
Investors worried this morning when the oil inventory report was released, but the market is taking a second look and interpreting the data more carefully now.
But I think the underlying trend in terms of consumer spending and overall economic spending is actually up.
The economy is doing a lot better than people recognize and therefore, the Fed may have to hike rates more than they expect. The equity market is fighting the Fed.
The economy is still growing above trend as evident by erosion of the unemployment rate and the low level of unemployment claims.
As productivity slows, wage costs tend to rise -- one has an inverse relation to the other.
That's actually good news. It means we're carrying less inventory and the production process is adjusting.
There is this simplistic notion around that because the yield curve is inverted, therefore, economic growth is going to slow down, but ... no consideration is given as to why the economy would slow down.
This is a very strong report, ... The economy clearly is growing too strong and it's not going to stop on a dime, which is not very convenient to suit the Fed's needs and to meet the stock market's needs.
This is a very strong report. The economy clearly is growing too strong and it's not going to stop on a dime, which is not very convenient to suit the Fed's needs and to meet the stock market's needs.
