Whatever her other faults, and they are legion, Janet Yellen has impeccable timing. On the day the FOMC actually voted to raise the irrelevant federal funds rate, thus signifying to the world the soundness of the economic circumstances, the Federal Reserve calculated that industrial production had contracted for the first time (for the month of November). It was a significant shift, as IP is one of the longest and most reliable economic accounts in existence. The appearance of a negative number at the headline is reserved almost exclusively for recession; leaving the Fed to declare both recession and recovery on the very same day.
If that set up something of a debate or battle between competing narratives, it has only gotten worse for Yellen’s side. IP has since been revised lower such that the start of the steady contraction is now set two months earlier at September, and by the time the Fed ‘raised’ rates (RHINO) industrial production had actually declined by more than 2%; a level in the historical data that has precluded any other cyclical condition but recession.
Time and again with each new and ‘unexpected’ appearance of the negative sign, the refrain from policymakers and economists alike has been in unison, ‘but the labor market.’ With only an increasing degree of emphasis, themonthly chained variation of the Establishment Survey has been wielded over the past year and a half as if it was the actual stimulus itself (and there is a great deal to the accusation, rational expectations theory and all). The Fed is data dependent whereupon the ‘data’ is their own speechmaking.
My colleague Joe Calhoun put it best:
This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ June 6, 2016.
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