Morning Report – Fed Unemployment Forecast 7/12/13

Posted on July 12, 2013 by Brent Nyitray

Vital Statistics:

  Last Change Percent
S&P Futures  1669.4 -0.7 -0.04%
Eurostoxx Index 2686.9 5.6 0.21%
Oil (WTI) 105.5 0.6 0.55%
LIBOR 0.268 -0.001 -0.19%
US Dollar Index (DXY) 83.05 0.306 0.37%
10 Year Govt Bond Yield 2.55% -0.03%  
Current Coupon Ginnie Mae TBA 103.9 0.8  
Current Coupon Fannie Mae TBA 103.4 0.1  
RPX Composite Real Estate Index 203 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.52    

 

Markets are flat this morning after yesterday’s big rally and good earnings reports from JP Morgan and Wells Fargo were offset by a miss from UPS. Bonds and MBS are up small.
 
The Producer Price Index (a measure of inflation at the wholesale level) increased .8% in June, but that was primarily driven by high energy prices. The core came in at .2%. Both readings were ahead of expectations. At 10:00, we will get the preliminary University of Michigan Consumer Confidence Survey for July.
 
The thing that jumped out at me from the Fed Minutes was the downward revision in unemployment expectations. The Fed lowered the 2013 unemployment forecast from 7.4% to 7.25%, they took down 2014 from 6.85% to 6.65% and took down 2015 from 6.25% to 6%. Given that GDP was not revised materially upward leads me to believe that they believe the labor force participation rate will remain low, which could be a drag on the economy. The other thing is that the market has had the expectation that a hike in the Fed Funds rate is going to be a 2015 event. Given that the Fed has given a threshold number for raising the Fed Funds rate of 6.5%, we could be looking at a late 2014 / early 2015 tightening. 

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22 Responses

  1. yellojkt's avatar
    yellojkt, on July 12, 2013 at 7:47 am said:

    Those are dismal rosy forecast numbers. Time for Krugman to call for more stimulus.

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  2. jnc4p's avatar
    jnc4p, on July 12, 2013 at 8:41 am said:

    Did he ever stop?

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  3. yellojkt's avatar
    yellojkt, on July 12, 2013 at 8:48 am said:

    Did he ever get any?

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  4. jnc4p's avatar
    jnc4p, on July 12, 2013 at 9:32 am said:

    Sure, the 2009 stimulus bill.

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  5. jnc4p's avatar
    jnc4p, on July 12, 2013 at 9:33 am said:

    The Hill quotes Heritage calling out Republican duplicity on the Farm Bill. They are exactly right:

    ““In fact, [Republicans] made this new bill even worse—by making sneaky changes to the bill text so that some of the costliest and most indefensible programs no longer expire after five years, but live on indefinitely,” Heritage continued. “This means the sugar program that drives up food prices will be harder to change, because it doesn’t automatically expire. It also means the new and radical shallow loss program that covers even minor losses for farmers will indefinitely be a part of the law.”

    http://thehill.com/blogs/blog-briefing-room/news/310607-heritage-blasts-house-gop-for-passing-farm-bill

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    • yellojkt's avatar
      yellojkt, on July 12, 2013 at 9:37 am said:

      This means the sugar program that drives up food prices will be harder to change, because it doesn’t automatically expire.

      The bill was a big sloppy kiss to agricultural interests and would be a bad idea irrespective of the food stamp issue. I despise the sugar tariffs with a burning intensity because they deliver millions to sugar barons like the Fanjuls and subsidize the misallocation of American farmland.

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  6. markinaustin's avatar
    markinaustin, on July 12, 2013 at 10:51 am said:

    If anyone else linked to Randy Barnett in the WSJ already I apologize in advance for the duplication.

    http://tinyurl.com/nmychpc

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  7. jnc4p's avatar
    jnc4p, on July 12, 2013 at 11:55 am said:

    Ross Douthat is pretty good on the larger meaning of the farm bill.

    “But without a vision of the common good, a party is basically just a faction, seeking only the interests of its constituents, with no sense of its responsibilities to the country as a whole. And the Obama-era Republican Party’s worst tendency has been toward just this sort of factionalism: Not an ideological extremism, exactly, but rather a vision of government that you might call “small government for thee, but not for me,” in which conservatism is just constituent services for the most reliable Republican groups and voters.

    This is what produced the party’s unfortunate Mediscare tactics during the 2009 health care debate, and it’s what produced yesterday’s egregious farm bill vote. It should go without saying that America’s agriculture policy has always been a terrible, stupid, counterproductive exercise in self-dealing cronyism.

    But when House Republicans severed the traditional connection, arbitrary but politically effective, between farm subsidies and food stamps, it briefly seemed like they were looking for an opportunity to put libertarian populist principle into practice, by separating both outlays in order to trim or reform both separately.

    But no — instead they were just making it easier for the party’s congressmen to vote for a bloated, awful big government program that benefits mostly-Republican states and interest groups, knowing that they weren’t also voting for something that pays out to the (mostly-Democratic) poor as well.”

    http://douthat.blogs.nytimes.com/2013/07/12/the-farm-bill-and-the-common-good/

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  8. jnc4p's avatar
    jnc4p, on July 12, 2013 at 12:27 pm said:

    Good piece on Warren.

    “Elizabeth Warren’s Long Game Against Wall Street
    By Kevin Roose”

    http://nymag.com/daily/intelligencer/2013/07/elizabeth-warrens-long-game-against-wall-street.html

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    • ScottC's avatar
      ScottC, on July 12, 2013 at 1:08 pm said:

      jnc:

      From your Warren link:

      Warren’s knowledge of the financial markets gives her automatic authority in Congress.

      It is not clear to me why. She is a lifetime academic, mostly in law, with no actual experience in the financial markets, and the bills she has sponsored, especially the student loan bill, along with the rhetoric she used to promote them, are not indicative to me of someone who should be commanding any authority at all with regard to financial markets.

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  9. jnc4p's avatar
    jnc4p, on July 12, 2013 at 12:36 pm said:

    Amusing:

    “NYPD Cops Embrace Darth Vader’s Theme Song
    By Dan Amira”

    http://nymag.com/daily/intelligencer/2013/07/nypd-imperial-march-darth-vader-police.html

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  10. jnc4p's avatar
    jnc4p, on July 12, 2013 at 1:36 pm said:

    “in Congress.” It’s compared to all the others.

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  11. Brent Nyitray's avatar
    Brent Nyitray, on July 12, 2013 at 3:10 pm said:

    I just came back from the California Mortgage Bankers Association Conference and, aside from some people from HUD who help originators become GNMA certified, there was no one from the government there.

    Perfect opportunity for them to learn something about mortgage lending and they ignore it. Then they scratch their heads wondering why it is so hard to get a mortgage loan…

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    • yellojkt's avatar
      yellojkt, on July 12, 2013 at 3:29 pm said:

      Perfect opportunity for them to learn something about mortgage lending and they ignore it.

      My guess is that the sequester destroyed their travel and education budget.

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  12. Brent Nyitray's avatar
    Brent Nyitray, on July 12, 2013 at 3:31 pm said:

    My guess is that the sequester destroyed their travel and education budget.

    Maybe CFPB can spare a dime… they aren’t subject to the appropriation process…

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  14. yellojkt's avatar
    yellojkt, on July 12, 2013 at 8:28 pm said:

    Urine.

    And feces.

    “as well as significant quantities of feminine hygiene products”

    Because there is no reason for a woman to carry those around except to assault a state legislator with.

    Not that I am defending the urine and feces because that is just gross.

    A few years ago when I was in Austin I jogged right through the capitol building early in the morning. Now they actually have the screening lines and machines.

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