Category: Economy

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Baumol’s cost disease, aging societies and inflation expectations






Quick hit here. I have been banging on about lowflation, repeatedly suggesting it is here to stay. The Fed, on the other hand begs to differ and is pre-emptively normalizing rates, as a result. No matter how you look at this, there’s a rub though: We all consume different products, so we each experience a different individual inflation rate. Even […]

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The wisdom of crowds and government bond markets

The wisdom of crowds and government bond markets






When you look at how markets are positioned, it’s clear that a lot of people see continued low growth for years to come – a veritable Japanification of the US economy. I hope this is one of those times that markets are wrong. But I am not willing to bet on the hope, just the opposite.






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Abenomics and Japanese growth

Abenomics and Japanese growth






Only during the Great Recession did nominal GDP break out of a tight range – and then, it did so to the downside. We are nowhere near the top of the range now, nor should we expect to be anytime soon.






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Could the UK be headed for an inflationary recession?

Could the UK be headed for an inflationary recession?






The Bank of England kept its key policy rate unchanged at a record low 0.25% . Three dissents show how a weak currency and rising inflation are making it harder to keep rates low. The worst case scenario is an inflationary recession, which would topple Theresa May.






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Anarchy in UK politics means lower yields and ends austerity as we know it

Anarchy in UK politics means lower yields and ends austerity as we know it






There are several threads I want to comment on in the wake of the UK general election. And from an economic standpoint, the conclusion that follows is that austerity in the UK has now lost its appeal politically. It also means lower yields for longer. Let me explain how I came to this conclusion.






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Weekly initial claims down to 236,000 as Q2 heads to 3% growth






The labor market in the US is tighter today than it was at the same period last year. This, in conjunction with the last jobs report, gives cover to the Fed to hike rates in June.






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Jobs data: The US will hike in June amid high structural unemployment

Jobs data: The US will hike in June amid high structural unemployment






Remember the debates about structural unemployment back during the beginning of this recovery. The question was whether policymakers would write off a whole cadre of workers as ‘unemployable’ and formulate policy as if they weren’t important. After the April jobs report, I think we have our answer.






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April 2017 Jobless claims show the US economy chugging along






Claims data are still consistent with an economy adding 200,000 per month, meaning we should expect a snap back from last month’s low figure when the US jobs numbers are released tomorrow.






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Auto sales stalling for the fourth month on the trot






From an economic perspective, the coming slowdown in production will dent GDP growth.






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The Fed will continue to look through weak Q1 data






With demand for long-dated safe assets high, the yield curve will remain under flattening pressure. And that, combined with higher short-term rates will be negative for bank net interest margins and earnings.






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Why the March 2017 jobs report won’t change the Fed’s strategy

Why the March 2017 jobs report won’t change the Fed’s strategy






The 98,000 jobs added to payrolls in the US in March were well below the consensus estimate of 178,000, especially when you consider downward revisions to January and February totalled 38,000. I don’t believe this matters for the Fed though; policy tightening will continue apace.






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Jobless claims and ADP data positive ahead of jobs report

Jobless claims and ADP data positive ahead of jobs report






The consensus for the March jobs report is for an addition of 178,000 jobs. The unemployment rate is expected to remain unchanged at 4.7%. Other data show the risk is to the upside here.






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