This is indicating that firms aren't yet reducing labor input at... by Michael Feroli

This is indicating that firms aren't yet reducing labor input at the intensive margin.

Michael Feroli

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Categorized in : Top News

We continue to expect the Fed to cut its target interest rate later this month, we believe it would have taken a much stronger number to convince Fed leadership that they have already taken out enough insurance against downside risks.

The trend in consumer spending growth still looks very solid, consumers remain the locomotive of the economy.

Recent downward revisions to estimates of economic growth, corporate profits, and employment growth all suggest that the economy is displaying classic late-cycle symptoms, moreover, these symptoms are unlikely to go away entirely even if a truce is reached in the current trade tensions.

The weakness in job growth was broadly experienced across industry groups and not obviously driven by distortions such as weather or strikes.

The supply side of the economy looks a little less shiny in light of the decline in the participation rate.

Unless there is a big upward revision to the disastrous December retail sales figure, the weak end-of-quarter consumption profile provides for very challenging arithmetic for first-quarter consumption growth.

Overall the report is good news insofar as it suggests the economy still has some capacity to grow at an above-trend pace without generating much inflationary pressure, similarly, it should ease the concerns of the hawks (at the Fed) who worry that the Fed's rate hike campaign is behind the curve.

Neither too hot nor too cold, as such, today's news won't change the terms of the inflation debate, and is likely to do little to stir the pot at the Fed meeting.

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The moderation in job gains over the past two months may mark the beginning of the slow deceleration to a sustainable pace of job gains, which we estimate to be around or a little below 100,000 per month.

The bigger inventory overhang helps explain why manufacturing sentiment remains cautious early in the fourth quarter, and does present downside risk to our 2.5 percent estimate for current-quarter GDP growth.

It pays for them to take the low-risk path of least resistance and not really change things in a big way, and then see how the data is.

It's only August, and markets move quickly. by Michael Feroli

It's only August, and markets move quickly.

Overall, given the usual noise in the data, as well as a melange of other special factors, we do not view the 1.5 percent first-quarter tracking as so far below the 2.4 percent average of the current expansion to raise more serious worries.

I'd like to say it's sustainable but I don't think it is, to sustain 280,000-type numbers month after month, you'd need really strong GDP growth and that just doesn't seem like that's in the cards right now.

In practice, the Fed cares a lot about GDP growth. GDP has disappointed while the labor market hasn't, all else equal, the continued unexciting pace of GDP growth does present a modest challenge to our June Fed call.

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There is no obvious fundamental economic factor that would contribute to today's number, we are disposed to view this decline as a one-off.

One number does not change the monetary policy outlook, but the stability in core inflation may help to offset some of the Fed's concerns about declining inflation expectations.

It's a good way to get the process rolling.

Fourth-quarter growth is looking better.