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When It Comes To Consumer Spending, There’s Automobiles, And Everything Else. Why Is that?
FYI: Have a look at retail sales . They have been fairly soft , disappointing, or whatever measured phrases like “OK, not terrible, but not great” that analysts and commentators favor to indicate mediocrity. Nearly all consumer spending reports [ are showing soft to flat data.
Life after Liftoff: Election Year Outlook By Diane C. Swonk, Chief Economist and Senior Managing Director Mesirow Financial Themes on the Economy Consumers Shine Consumer spending is expected to remain a primary driver of growth. The quantity and quality of jobs has picked up as wages appear to be firming The scars from the Great Recession are deep. The electorate still has many reasons not to trust government officials. Implications for November ..The unemployment rate is expected to plummet to the low 4% range by the time of the election, well below the Fed’s current 4.9% estimate for full employment. That, coupled with a modest improvement in the participation rate over the course of the next year, should lift overall confidence. I would not be surprised to see consumer attitudes move back into the range we saw in the mid-2000s. That is not great, nor is it bad, just better than it has been. The scars from the Great Recession are deep. The electorate still has many reasons not to trust government officials. ..My greater concern as an economist is what the election and the politics leading up to it will mean for the Federal Reserve. And, no, this is not about how the Fed will react to an election year; historically, the FOMC has gone out of its way to separate monetary policy decisions from election-year shenanigans. The year 2016, however, is unique in that politicians from both sides of the aisle would like to clip the Fed’s wings and limit its independence. Any outcome of the election that allows Congress to control monetary policy would be a disaster. Countries that gave up their central banks’ independence are train wrecks. Ask Argentina. The process has already begun. Congress raided the coffers of the Federal Reserve to find revenues for the Highway Trust Fund, a dangerous precedent. 2016 Outlook Domestically Driven Growth . Real GDP is expected to reaccelerate after a lull in the second half of the year. The household sector is expected to pick up where the corporate sector left off; what was once a Wall Street-centric expansion will finally reach Main Street. Consumers Shine Consumer spending is expected to remain a primary driver of growth. The quantity and quality of jobs has picked up as wages appear to be firming. Entry-level wages, which were among the hardest hit by the crisis, are finally starting to pick up as increases in the minimum wage at the state and local levels are pushing up wages for lower-skilled workers. A shortfall in cheap immigrant labor is also expected to boost wages for manual workers Bottom Line We can finally say “good-bye” to one of the defining characteristics of the post-crisis era: near-zero interest rates. The bet is that the economy is strong enough to sustain somewhat higher rates, a change to welcome rather than shun. https://www.mesirowfinancial.com/economics/swonk/themes/themes_1215.pdf
Related/Trigger Warning . Washington Post Editorial Washington Post: Hold the applause for gimmicky highway bill First Published Dec 08 2015 04:15PM Congress did not embrace the obvious solution. Instead, lawmakers resorted to a variety of gimmicks, one-time funding sources and flat-out bad policies to raise the $70 billion they needed to supplement revenue from a frozen gas tax.
The government will sell several billion dollars' worth of oil from the Strategic Petroleum Reserve. It will divert money from airline and cruise ship passenger customs fees. Most concerning, the bill shakes down the Federal Reserve. The Fed already remits most of what it earns on its holdings to the treasury, keeping a share to preserve its ability to weather losses and respond to potential crises without printing money. That system has worked well. Now lawmakers will raid the Fed's surplus account to fund infrastructure and will cap the amount the Fed can hold in the future. Not only is this a poor offset — the government wouldn't be raising any new money, just moving it from one federal entity with funding needs to another — it is also an awful precedent. The Fed should have the independence to operate with the financial buffer it deems necessary. Its reserves should not be used in a legislative funding shell game. http://www.sltrib.com/opinion/3265696-155/washington-post-hold-the-applause-for
"Most concerning, the bill shakes down the Federal Reserve. The Fed already remits most of what it earns on its holdings to the treasury, keeping a share to preserve its ability to weather losses and respond to potential crises without printing money. That system has worked well. Now lawmakers will raid the Fed's surplus account to fund infrastructure and will cap the amount the Fed can hold in the future. Not only is this a poor offset — the government wouldn't be raising any new money, just moving it from one federal entity with funding needs to another — it is also an awful precedent. The Fed should have the independence to operate with the financial buffer it deems necessary. Its reserves should not be used in a legislative funding shell game."
Comments
By Diane C. Swonk, Chief Economist and Senior Managing Director Mesirow Financial
Themes on the Economy
Consumers Shine
Consumer spending is expected to remain
a primary driver of growth. The quantity and quality of jobs has picked up as wages
appear to be firming
The scars
from the Great Recession are deep. The
electorate still has many reasons not to trust
government officials.
Implications for November
..The unemployment rate is expected
to plummet to the low 4% range by the
time of the election, well below the Fed’s
current 4.9% estimate for full employment.
That, coupled with a modest improvement
in the participation rate over the course of
the next year, should lift overall confidence.
I would not be surprised to see consumer
attitudes move back into the range we saw
in the mid-2000s. That is not great, nor is
it bad, just better than it has been. The scars
from the Great Recession are deep. The
electorate still has many reasons not to trust
government officials.
..My greater concern as an economist is what
the election and the politics leading up to
it will mean for the Federal Reserve. And,
no, this is not about how the Fed will react
to an election year; historically, the FOMC
has gone out of its way to separate monetary
policy decisions from election-year
shenanigans. The year 2016, however, is
unique in that politicians from both sides
of the aisle would like to clip the Fed’s wings
and limit its independence. Any outcome
of the election that allows Congress to
control monetary policy would be a disaster.
Countries that gave up their central banks’
independence are train wrecks. Ask Argentina.
The process has already begun. Congress
raided the coffers of the Federal Reserve to
find revenues for the Highway Trust Fund, a
dangerous precedent.
2016 Outlook
Domestically Driven Growth
. Real GDP is expected to reaccelerate
after a lull in the second half of the year.
The household sector is expected to pick up
where the corporate sector left off; what was
once a Wall Street-centric expansion will
finally reach Main Street.
Consumers Shine
Consumer spending is expected to remain
a primary driver of growth. The quantity and quality of jobs has picked up as wages
appear to be firming. Entry-level wages,
which were among the hardest hit by the
crisis, are finally starting to pick up as
increases in the minimum wage at the state
and local levels are pushing up wages for
lower-skilled workers. A shortfall in cheap
immigrant labor is also expected to boost
wages for manual workers
Bottom Line
We can finally say “good-bye” to one of the
defining characteristics of the post-crisis
era: near-zero interest rates. The bet is that
the economy is strong enough to sustain
somewhat higher rates, a change to welcome
rather than shun.
https://www.mesirowfinancial.com/economics/swonk/themes/themes_1215.pdf
Related/Trigger Warning . Washington Post Editorial
Washington Post: Hold the applause for gimmicky highway bill
First Published Dec 08 2015 04:15PM
Congress did not embrace the obvious solution. Instead, lawmakers resorted to a variety of gimmicks, one-time funding sources and flat-out bad policies to raise the $70 billion they needed to supplement revenue from a frozen gas tax.
The government will sell several billion dollars' worth of oil from the Strategic Petroleum Reserve. It will divert money from airline and cruise ship passenger customs fees. Most concerning, the bill shakes down the Federal Reserve. The Fed already remits most of what it earns on its holdings to the treasury, keeping a share to preserve its ability to weather losses and respond to potential crises without printing money. That system has worked well. Now lawmakers will raid the Fed's surplus account to fund infrastructure and will cap the amount the Fed can hold in the future. Not only is this a poor offset — the government wouldn't be raising any new money, just moving it from one federal entity with funding needs to another — it is also an awful precedent. The Fed should have the independence to operate with the financial buffer it deems necessary. Its reserves should not be used in a legislative funding shell game.
http://www.sltrib.com/opinion/3265696-155/washington-post-hold-the-applause-for
YES!!
Interestingly, the term shakes down is used above. It is often reserves for organized crime.