The knee-jerk market response that sent the 10-year Treasury yield to 1.54% during Thursday’s speech by Federal Reserve Chairman Jerome Powell implies that the Fed may have to act to dampen yields at the long end of the curve. That may be necessary to reinforce its policy regime of flexible average inflation targeting adopted last year, and to bolster the ... READ MORE >
February jobs preview: Winter doldrums ahead of a springtime rebound
We expect a total increase in employment of 105,000 jobs for February with the unemployment rate holding steady at 6.3% when the Labor Department releases its monthly data on Friday. The primary narrative for the month will be the contrast between the true level of unemployment in the economy and the official data. Our estimate of the unemployment rate ... READ MORE >
RSM UK Financial Conditions Index is positive as budget is introduced
While the medical and life sciences communities were doing the remarkable work of developing three effective coronavirus vaccines over the past year, global monetary and fiscal authorities have been laying the groundwork for an economic recovery. With the introduction of the latest U.K. budget, we anticipate that financial conditions are conducive to a ... READ MORE >
U.S. inflation outlook: Don’t believe the hype
The reflation of the American economy following the debilitating effects of the pandemic has begun. Recent increases in growth forecasts, the January jump in retail sales, trillions of dollars in fiscal aid and stimulus, as well as the prospect of a household-led boom over the next two years, have spurred a debate around the prospects for inflation and ... READ MORE >
RSM US Manufacturing Outlook Index: A sustained recovery as rebound takes shape
The outlook for manufacturing in the United States continues to improve, signaling a robust rebound as the post-pandemic economy takes shape. For the seventh consecutive month, the RSM US Manufacturing Outlook Index increased, showing above-normal sentiment. It’s more evidence that the U.S. manufacturing sector continues to lead the economy out of the ... READ MORE >
CHART OF THE DAY: Closing out the gap year
A recent study by the Federal Reserve Bank of St. Louis found sharp downturns last year in enrollments of freshman at four-year and two-year public colleges, and a moderate downturn at private four-year nonprofit colleges. There were fewer returning students (upper classes), but the decline was not different from other recession periods when household ... READ MORE >
Government transfers fuel robust income and spending: Incomes ex-transfers illustrate need for additional stimulus
Government transfers from the end-of-year $908 billion fiscal aid package were the primary catalyst for the 10% increase in income and the 2.4% jump in spending, a robust kickoff to what is going to be one of the more memorable years in economic activity in decades. The personal savings rate increased to 20% in January from 13.7% in December. The amount of ... READ MORE >
Initial jobless claims: Only cold comfort for those out of work
Seasonal distortions caused a larger-than-expected decline in first-time jobless claims to 730,000 for the week ending Feb. 20, which significantly understates the true pace of first-time firings across the economy. We would urge policymakers to approach the decline with a grain of salt, which is generally more than was available for the roads in ... READ MORE >
CHART OF THE DAY: Leading indicator points toward economic reflation
The Conference Board’s leading economic indicator continues to point toward a reflation of the economy from the shock of the pandemic. The board's Leading Economic Index, released on Monday, showed a monthly gain of 0.5% in January to 110.3, continuing a string of increases. We expect a 6.1% rate of growth in the American economy this year. But even with ... READ MORE >
CHART OF THE DAY: The 10-year Treasury yield goes its own way
The yield on 10-year Treasury bonds rose above 1.3% four times on Wednesday before closing just below 1.28%. The securities continued to trade in that range on Thursday. This comes despite the Federal Reserve’s efforts to suppress the cost of borrowing. Fixed-income investors are clearly pricing in a general reflation of the economy this year that will ... READ MORE >