Robin Harding Reading the jobs report through the Fed’s eyes

June 7, 2013 3:57 pm by Robin Harding

When the Fed began its third round of quantitative easing last autumn, the most recent jobs report in hand was for August, which showed an unemployment rate of 8.1 per cent. Today the unemployment rate is 7.6 per cent. The Fed said it would keep buying assets, currently at a pace of $85bn-a-month, until there is a “substantial improvement” in the “outlook for the labour market”. The question is whether the current data meet that condition or at least bring it close enough that the Fed can start to taper its purchases.

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Posted in Federal Reserve, Uncategorized |

Robin Harding Early bird specials and US growth

June 5, 2013 5:46 pm by Robin Harding

(1) There is no need to panic. After the purchasing managers’ index for manufacturing came in below 50 on Monday there was some cause to worry about the health of the economy – but the rise in the services PMI, from 53.1 in April to 53.7, suggests that consumer demand is still there.

Implications of US May ISM Non-Manufacturing (KAUC6001) Read more

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Posted in US economy |

Robin Harding FOMC preview, May 2013

April 30, 2013 5:29 pm by Robin Harding

The current FOMC meeting, which starts today and concludes tomorrow without a Ben Bernanke press conference, is unlikely to produce much news. Steady movement towards a taper of the $85bn, QE3 programme of asset purchases has been checked by a run of bad economic data since March.

I get no sense that much has changed in the thinking of most FOMC officials. There is still a fair bit of confidence that the underlying state of the economy has improved (see, for example, the comments of Boston Fed president Eric Rosengren). The main effect of weak payrolls and the sequester is to increase uncertainty about the trajectory of the economy. That encourages the status quo – and open-ended QE means the default is continued purchases. Read more

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Posted in Federal Reserve |

Robin Harding Did sequestration cause weak Q1 GDP?

April 26, 2013 10:44 pm by Robin Harding

We leaned heavily on the idea that sequestration is slowing the growth of the US economy in our write-up of Q1 GDP. The immediate reason to do so is the composition of growth.

Federal defence spending knocked 0.65 percentage points off total growth. Without that, the headline figure would have been an annualised 3.2 per cent instead of 2.5 per cent, bang in line with expectations. Read more

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Posted in Federal Reserve |

Robin Harding Reinhart-Rogoff Initial Response

April 16, 2013 9:08 pm by Robin Harding

Here below is the full statement from Carmen Reinhart & Kenneth Rogoff giving an initial response to criticisms of their work: Read more

Posted in Uncategorized |

Robin Harding Boston Fed: Labour force participation

April 12, 2013 3:38 pm by Robin Harding

The Boston Fed’s annual economic conference has opened with a paper on labour force participation, presented by two senior Federal Reserve Board economists Christopher Erceg and Andrew Levin, that has pretty dovish implications for monetary policy.

Like most other research on this subject, they find that the big decline in labour force participation since 2007 is mainly cyclical, not structural. More interestingly, they split the “employment gap” — the gap between current employment and maximum possible employment — into an “unemployment gap” and a “participation gap”.

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Posted in Federal Reserve |

Robin Harding Goldman still the Fed’s #1

March 29, 2013 10:29 pm by Robin Harding

Goldman Sachs is still the Fed’s favourite counterparty for buying and selling Treasuries – or at least it was in the first quarter of 2011. The data comes out two years in arrears and we are now at the period when $600bn of QE2 purchases were in progress.

Goldman got twice as much of that business as anybody else, which is mildly embarrassing for the New York Fed, but reflects the pecking order in the Treasury market. If you know what happened to Citi’s business during that period then please explain in comments. Read more

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Posted in Central banks, Federal Reserve |

Robin Harding Janet Yellen and the Fed’s labour market dashboard

March 4, 2013 6:37 pm by Robin Harding

Today’s speech by Janet Yellen is a mirror of Ben Bernanke last week when it comes to the costs and risks of continued asset purchases. “At this stage, I do not see any [risks] that would cause me to advocate a curtailment of our purchase program,” she says.

Where Ms Yellen, the Fed vice chair, breaks some new ground is on the definition of a “substantial improvement” in the labour market.

A reminder: the Fed says it will keep on buying assets, currently at a pace of $85bn a month, until it gets that substantial improvement. Ms Yellen sets out five measures which basically form a Fed dashboard for the labour market. Here they are: Read more

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Posted in Federal Reserve |

Robin Harding Federal Reserve: Bernanke testimony preview

February 25, 2013 6:46 pm by Robin Harding

All markets want from Ben Bernanke when he testifies before Congress on Tuesday and Wednesday is reassurance that he is not getting cold feet about the Fed’s open-ended, $85bn-a-month, QE3 programme of asset purchases. That follows minutes which, while notably vague, showed “many” participants worrying about QE3′s costs and risks.

They are likely to get that reassurance — although maybe not in the most straightforward manner. It is important to note that, when Mr Bernanke testifies, he is speaking for the committee and not for himself. This is the statutory language: Read more

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Posted in Federal Reserve |

Robin Harding Federal Reserve: QE3, exit strategy and the fiscal crisis

February 22, 2013 3:13 pm by Robin Harding

The paper at this year’s US Monetary Policy Forum – where market economists get to present to central bankers – is called “Crunch Time: Fiscal Crisis and the Role of Monetary Policy“. It shows a new wrinkle on US fiscal problems: if there is any kind of debt sustainability crisis it could make the Fed’s exit from easy monetary policy a whole lot more painful.

This is the money chart. Black is the baseline for Fed profit and loss in the coming years. Red is what happens if a fiscal crunch pushes up long-term bond yields (and hence causes losses for the Fed on its portfolio). Read more

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Posted in Federal Reserve |
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