Morning Report – FOMC data dump 9/18/14

Posted on September 18, 2014 by Brent Nyitray

Markets are higher after yesterday’s FOMC statement was still reasonably dovish. Bonds and MBS are down small.

Initial Jobless Claims dropped to 280,000, an extraordinarily low number that is associated with boom times like 1999 and 2005.

Housing starts were disappointing, coming in at 956k, a sizeable drop from the upward-revised 1.11 million in July. The drop was almost all in the multi-fam segment, which tends to be extremely volatile. Building Permits fell as well.

The FOMC statement kept language stating that the Fed Funds target rate should remain at current levels for “a considerable time” after QE ends. The Fed noted there remains “significant under-utilization” of labor resources. That said, the FOMC raised their Fed Funds forecast for 2015 by 1/4 and 2016 by 3/8, according to the dot graph in the projection materials. The Fed took down their unemployment and GDP forecasts for this year and next year as well. On the subject of QE, it should end this year and for the time being, the Fed will continue to re-invest maturing proceeds. They do not intend to sell their MBS portfolio. At the margin, this means lower mortgage rates going forward. Bonds sold off on the statement (probably due to the dot graph), and stocks rallied as the Fed’s posture will remain dovish for the near and intermediate future.

Note that the “significant under-utilization” language is at odds with what the Staff economists believe is going on in the labor market. The Staff Economists discussed the idea that those who are long-term unemployed may turn out to be effectively retired, and if that is the case, then there is less slack in the labor market than previously thought. The Great Recession has put a lot of men in their prime earning years on the sidelines.

I appeared on Louis Amaya’s Capital Markets Today show and discussed the FOMC statement and the economy. You can hear the interview here.

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12 Responses

  1. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on September 18, 2014 at 8:50 am said:

    That explains it.

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  3. jnc4p's avatar
    jnc4p, on September 18, 2014 at 1:22 pm said:

    No site curates internet content better than ATiM.

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  4. jnc4p's avatar
    jnc4p, on September 18, 2014 at 1:32 pm said:

    For you NoVA

    “The Simpsons’ Groundskeeper Willie Shares His Thoughts on Scottish Independence
    By Sharan Shetty ”

    http://www.slate.com/blogs/browbeat/2014/09/13/groundskeeper_willie_for_scottish_independence_the_simpsons_janitor_discusses.html

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  5. novahockey's avatar
    novahockey, on September 18, 2014 at 1:45 pm said:

    Saw that. can’t decide what my favorite part i. i love the line about “how not to run a country.”

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  6. jnc4p's avatar
    jnc4p, on September 18, 2014 at 1:48 pm said:

    OT: Andrew Sullivan has a decent piece on the larger political implications of the new fight against IS:

    “My own dismay (even bewilderment) at the current mood in America may well be because I was largely off-grid in August. But it’s still a truly remarkable shift. In a month, the entire political landscape has reverted to Bush-Cheneyism again. I honestly thought that would never happen, that the grisly experience of two failed, endless wars had shifted Americans’ understanding of what is possible in the world, that the panic and terror that flooded our frontal cortexes from 9/12 onward would not be able to come back with such a vengeance. I was clearly wrong. Terrorism does not seem to have lost any of its capacity to promote total panic among Americans. The trauma bin Laden inflicted is still overwhelming rationality. It would be harder to imagine a more stunning success for such a foul mass murder.

    The party that was primarily responsible for the years of grinding, bankrupting war, a descent into torture, and an evisceration of many core liberties is now regarded as superior to the man originally tasked with trying to recover from that experience. The political winds unleashed by a few disgusting videos and a blitzkrieg in the desert have swept all before them. And we now hear rhetoric from Democratic party leaders that sounds close to indistinguishable from Bush or Cheney.

    Is it merely panic? I doubt it. I think what’s also coursing through the collective psyche is the thought that Obama told us we were finally out of Iraq – and events have shown that assurance to be shaky at best. A core part of his legacy has had the bottom fall out of it.”

    http://dish.andrewsullivan.com/2014/09/18/an-election-over-hawkishness/

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  7. novahockey's avatar
    novahockey, on September 18, 2014 at 1:55 pm said:

    the only reason the public turned against Iraq is because it didn’t go well.

    Patton: Men, all this stuff you’ve heard about America not wanting to fight, wanting to stay out of the war, is a lot of horse dung. Americans traditionally love to fight. All real Americans love the sting of battle. When you were kids, you all admired the champion marble shooter, the fastest runner, big league ball players, the toughest boxers. Americans love a winner and will not tolerate a loser. Americans play to win all the time. I wouldn’t give a hoot in hell for a man who lost and laughed. That’s why Americans have never lost, and will never lose a war… because the very thought of losing is hateful to Americans.

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  8. markinaustin's avatar
    markinaustin, on September 18, 2014 at 3:27 pm said:

    Once at war a Patton is indispensable. Before, not so much.

    Feels as if we are embarking on another misadventure among the Muslims

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  9. lmsinca's avatar
    lmsinca, on September 18, 2014 at 6:53 pm said:

    Mark

    Feels as if we are embarking on another misadventure among the Muslims

    This +1

    Thank God it finally cooled down a little today and the weekend is supposed to be nice, warm but nice. We’re working straight through so we can get to the beach one more time for a swim before the water gets too cold, hopefully on the 25th for a few days. I’m so happy tomorrow is Friday…………..finally.

    Looks like Congress is gone again until after the election…………….is that right? They sure have a cushy job don’t they?

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  10. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on September 18, 2014 at 7:47 pm said:

    Thank God their gone considering the alternative.

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  11. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on September 19, 2014 at 9:02 am said:

    Our betters sure spend a lot of time being butthurt.

    Alaska Sen. Mark Begich, a vulnerable Senate Democrat who ultimately sided with his party on the vote, said he was “thinking about” voting with Republicans – but decided not to after not a single GOP senator approached him to seek his vote.

    http://www.politico.com/story/2014/09/senate-funding-bill-becomes-immigration-battle-111122.html#ixzz3Dlo3nGw8

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  12. novahockey's avatar
    novahockey, on September 19, 2014 at 10:14 am said:

    Looks like Congress is gone again until after the election…………….is that right?

    yep. they’re gone until after the elections. lame duck will either do another short term CR or an omnibus that will run through the end of FY 15. depends on whether or not we have a R Senate in the 114th.

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