Peak Fantasy Time

If you want to know why both Wall Street and Washington are so delusional about America’s baleful economic predicament, just consider this morsel from today’s Wall Street Journal on the purportedly awesome November jobs report.
Wages rose just 2.5% from a year earlier in November – near the same lackluster pace maintained since late 2015, despite a much lower unemployment rate. But in a positive signfor Americans’ incomes, the average work week increased by about 6 minutes to 34.5 hours in November…. November marked the 86th straight month employers added to payrolls.
Whoopee!
Six whole minutes added to a work week that has been shrinking for decades owing to the relentlessly deteriorating quality mix of the “jobs” counted by the BLS establishment survey. In fact, even by that dubious measure, the work week is still shorter than it was at the December 2007 pre-crisis peak (33.8) and well below its 2000 peak level.
The reason isn’t hard to figure: The US economy is generating fewer and fewer goods producing jobs where the work week averages 40.5 hours and weekly pay equates to $58,400 annually and far more bar, hotel and restaurant jobs, where the work week averages just 26.1 hours and weekly pay equates to only $21,000 annually.

This post was published at David Stockmans Contra Corner on Friday, December 8th, 2017.

Below The August Jobs Headline – -Even More Weakness

In the technical notes for the Employment Situation Report, the payroll numbers that everyone obsesses over in fine detail, the BLS still shows a 90% confidence interval at 1.6 standard deviations that works out to /- 115k. That means that whatever number gets splashed onto every headline and worked into every major commentary piece isn’t really the number of payroll changes. It is a statistical estimate that only anchors that confidence interval.
What the BLS actually reported for August was that if they gathered all the data again and again100 times, it is expected that in ninety of those the payroll gain would fall in a range of 266k at the upper end of the confidence interval and 36k at the lower end. That changes the interpretation dramatically from the certainty that is reported about how there was a ‘disappointing’ 151k jobs created in August 2016. In fact, given that confidence interval, it could be that the true amount of job gains was something like 266k and consistent with the mainstream interpretation of the past two months that made everyone forget all the economic problems, or closer to 36k and the disaster that so unnerved everyone in the May report (and anything in between those extremes).
There is entirely too much focus and deference to the individual monthly figures; they tell us very little in the end. That is even more the case in the past two years where purported job gains, statistical or real, have proved completely irrelevant to the overall state of the economy. And that discrepancy has led even further into the wrong direction; rather than question the payroll numbers as statistics, the fact that the BLS figures have been in a world of their own has caused this emotional response where the media and economists now scrutinize the fine details of each monthly payroll estimate that much more. The mainstream has declared even more meaning out of desperation even as the usefulness of the jobs report actively declines (as if such accuracy was ever possible in the first place).

This post was published at David Stockmans Contra Corner on September 4, 2016.

Why Wages Aren’t Rising – – There Is Still Immense Slack In The Labor Market

Basic economics has proven that when the supply of something dwindles, absent an offsetting drop in demand the price should rise. When translating these fundamental terms to the labor market especially of the past few years, the supply means ‘slack’ or the available pool of workers not yet working; demand has been, we are told repeatedly, very robust; therefore the price of labor, the hourly wage rate, should be rising and rapidly so if only to match the rhetoric (‘best jobs market in decades’).
Monetary policy is already at a great disadvantage because its core philosophy seeks to discourage rapid growth in wages. Figuring that wage inflation leads to actual inflation, central banks believe they must act to control it even though, as noted above, it’s basic economics that shows and truly delivers the best basic economy. This policy handicap isn’t one-sided, however, as this ‘recovery’ has proven beyond any doubt. In other words, central banks have also philosophical problems about getting wages to rise in the first place.
In the past nearly decade, it all works around and toward ‘slack.’ Economists claim that the unemployment rate is the best indicator of it largely because of what we find of the past. Despite positive growth since the Great Recession, it was never at any point enough to erase the deep hole with which this post-crisis period started. But because the BLS surveys the labor force and that survey is taken as scientific verification of it, this initial deficit is just ignored as if covered by demographics or other non-economic factors. The unemployment rate says those who want to work are doing so and rapidly enough since the middle of 2014 that the recovery is full and the economy will only getter better from here (so that monetary policy must shift before it gets ‘too’ good).

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ August 10, 2016.

July Jobs Report: Trying To Find Meaning In The Meaningless

The BLS released yet another perfect payroll report for July. It hit on all the major themes, putting further distance to the shocking May number. All the right people have been reassured by all the right parts.
U. S. employment rose at a solid clip in July and wages rebounded after a surprise stall in the prior month, signs of an improving economy that opened the door wider to a Federal Reserve interest rate increase in September…
‘We view this report as easily clearing the hurdle needed to keep the Fed on track for a September rate hike. The bar for not moving now is much higher,’ said Rob Martin, an economist at Barclays in New York.
Unfortunately for anyone who still thinks the Establishment Survey contains useful information, the quotes above were written in August 2015, not August 2016, about the July 2015, not July 2016, jobs figures. That happy sentiment last year at this time was derived from the initial estimate of 215k, less than the current July’s 255k. After revisions showed that, at least according to the BLS view of the trend-cycle world, the labor market last summer was supposedly much stronger than first thought, the Establishment Survey now registers an impressive 277k for July 2015.
And it mattered not one bit.

This post was published at David Stockmans Contra Corner on August 5, 2016.

Trump Isn’t All Wrong About Trade Deficits – -How Washington’s Money-Printers Betrayed American Workers

Trump Isn’t All Wrong About Trade Deficits – – How Washington’s Money-Printers Betrayed American Workers
……. Needless to say, the lack of good jobs lies at the bottom of the wealth and income drought on main street, and the recent BLS jobs reports provide still another reminder.
During the last seven months goods-producing jobs have been shrinking again, even as the next recession knocks on the door. These manufacturing, construction and energy/mining jobs are the highest paying in the US economy and average about $56,000 per year in cash wages. Yet it appears that the 30-year pattern shown in the graph below – – lower lows and lower highs with each business cycle – -is playing out once again.
So even as the broadest measure of the stock market – -the Wilshire 5000 – – stands at 11X its 1989 level, there are actually 20% fewer goods producing jobs in the US than there were way back then.

This post was published at David Stockmans Contra Corner on August 4, 2016.

Inside The June Payroll Report – – -More Of The Same, And Not In A Good Way

As it currently stands in the headline BLS figures, the Establishment Survey greatly rebounded to 287k from a downward revised 11k in May. There is this month, just as last month, too much emphasis on the monthly payroll figure as it is more often than not noise. We can only hope the drastic extremes of the past two months may have finally injected a more cautious approach to what has always been a statistical process.
Two payroll reports ago, one that was taken as ‘ugly’, I wrote:
There is very little value to begin with in trying to parse monthly variation, reflected in a wide confidence interval at just 90% confidence. For all we know the jobs market in April 2016 was exactly the same growth as March 2016 when everyone was far more pleased. What we really don’t know is whether both March and April should have everyone elated or seriously worried (obviously, the rest of the economic data points uniformly point to the latter).
That seems to be the overall message even for a blowout topline figure like 287k; it might be good but in reality there is just as good a chance payrolls in June were no different than May as both may have been somewhere in the middle. Even with that huge gain, the overall trend is still slowing. The 6-month average in June was just 172k, barely changed from 169k in May because the 287k for June replaced 271k from December as it dropped from the 6-month period. That isn’t just significant for the arithmetic of moving averages, it is significant in terms of orientation and determining significance.
In other words, the BLS estimates now that payroll gains in December 2015 ended a 3-month run where the increase in each was above 270k. For three months straight to end last year, the Establishment Survey suggests even more robust conditions than just the one month in June 2016 – and that all amounted to nothing. In the context of the wider economy, the major payroll reports seem to be generating much more noise than meaningful signal.

This post was published at David Stockmans Contra Corner on July 8, 2016.

Brexit Proved It’s All A Central Bank Funded Mirage

I keep hearing that the ‘Chicken Little’s’ are once again being proved wrong. We keep being shown chart, after chart, after chart, after chart how the market recovers from perilous sell-offs. This is expressed as ‘proof’ the ‘market’ doesn’t want to go down, and has legs to vault ever higher.
Cause for concern is being dismissed by the hordes of next in rotation fund managers, economists, Ivory Tower academics, or Nobel Laureates as they themselves stampede to any available cameras, microphones, or keyboards that will quote them as saying ‘See…all that worrying is for naught. And expressing anything other is strictly for the gloom and doom crowd.’ Which they then will triumphantly state: ‘Which has been wrong over, and over, and over again.’
My response is this: Then why is nobody buying it? (e.g., the market) Figuratively, as well as literally.
If one looks at any credible volume report, the participation rate as to those ‘buying’ into these rallies, which by the way, are the result of a previous fall instilling (once again) a near death experience. It rivals that of a BLS report. i.e., great headlines – just don’t look at how many people are actually ‘participating.’
I have another question: Why can’t the markets proceed any higher than when QE ended in Oct/Nov of 2014? You know, if this is truly: a fundamentally based bull market that is.
Or, is it that – its fundamentally full of bull? I believe it’s a big-ole-pile of the latter, and little to none of the former.

This post was published at David Stockmans Contra Corner on July 4, 2016.

The Fed Has Whiffed Again – – Massive Monetary Stimulus Has Not Helped Labor, Part 2

In Part 1 we established the rather obvious point that in today’s world of flexible just-in-time production, hours-based labor scheduling and gig-based employment patterns, there is really no such standardized labor unit as a ‘job’.
Accordingly, the headcount-centered metrics of the BLS, such as the U-3 unemployment rate and the nonfarm payroll numbers, are a relic of a half-century ago world of mines, factories, warehouses and retail shops where a 40 hour workweek on a year round basis was the standard practice.
In that context, a simple paint-by-the-numbers exercise demonstrates the foolishness of the Fed’s obsession with hitting a quantitative ‘full employment’ target. Since the latter entails gunning the financial markets with monetary ‘stimulus’ until every last iota of ‘slack’ has been drained from the labor market, the question answers itself when viewed in an hours based framework.
To wit, the US working age population between 16 and 65 totals 205 million, meaning that on a standard work year basis of 2000 hours, the potential labor force amounts to 410 billion hours. However, according to the BLS’ own data, only 230 billion labor hours are currently being utilized by the US economy from that potential hours pool.

This post was published at David Stockmans Contra Corner by David Stockman ‘ June 11, 2016.

Productivity And Labor – – -More Evidence For Failing Supercycle

The BLS updated its productivity estimates yesterday to incorporate the BEA’s slight upward revision in GDP for Q1 2016. The changes to the productivity series were also small, where the initial estimate was for -1% (annualized) US labor productivity now revised to -0.6%. Private output, the BLS’s matching point in the BEA GDP series, was revised slightly higher to 0.86%.
Since the start of 2014, total hours worked have averaged a gain of 2.15% (annualized) and thus the ‘best jobs market in decades.’ That is significantly better than the 1.67% average increase in total hours during the worst of the housing bubble (2004-07) and more than double that ‘recovery’ period as a whole (1.03% 2003-07). It is also more than the late 1990′s, where total hours averaged 1.96% from 1995 to 2000.
For the BLS, the recovery in total hours has been almost perfectly steady. Even though the period from the middle of 2014 until recently has been classified in historically glowing terms, from the perspective of just hours worked the years prior to it weren’t actually that much different. In fact, the average gain from 2011 through Q1 2016 is exactly 2%. That suggests the jobs market over the past five and one quarter years is just about the same for labor input growth as during the dot-com bubble.

This post was published at David Stockmans Contra Corner on June 9, 2016.

The False Recovery Hype Is Now Even Coming Out Of The BLS Jobs Report

The payroll report missed badly, as the headline ‘job creation’ number gained only 38k in May 2016. That was the lowest monthly gain of the entire ‘recovery.’ Last month’s figure, which had already caused significant angst, was revised even lower to just 123k. The mainstream is predictably apoplectic, and why wouldn’t it be? After all, month after month after month there was only the Establishment Survey and unemployment rate to hold off the steady rise in uncertainty, the determined approach of negative signs in more and more places. If the Establishment Survey turns too, there is nothing left. Even ‘full employment’ will be transformed from a serious signal of full economic health to nothing more than marking the cycle peak.
I seriously doubt there were even 38k jobs gained last month, as the BLS doesn’t measure that only chained monthly variation. What’s important and relevant is not the headline number especially in any single month but rather the direction and intensity of the variation. On that score, there might be meaningful developments, perhaps threatening to make the labor statistics relevant again.
With the latest revisions (non-benchmark) and the current estimates, the Establishment Survey has been less than 190k in four of the five months of this year. The six-month average gain has dropped to just 170k, the lowest since November 2012 – the start of the slowdown.
The pattern in the average is unmistakable once you set aside questions about its altitude; it follows the successive ‘dollar waves’ or runs with a few months of lag. The first drop in the average starts in February 2015 and ends at August, matching the first ‘rising dollar’ episode that hit hardest at the end of 2014 and beginning of 2015. The second ‘dollar’ event, by far the worst so far, began in July 2015 and kept right on through January and February, encompassing both global liquidations; with the latest drop in the payroll average close behind.

This post was published at David Stockmans Contra Corner on June 3, 2016.

The False Recovery Hype Is Even Now Coming Out Of The BLS Jobs Report

The payroll report missed badly, as the headline ‘job creation’ number gained only 38k in May 2016. That was the lowest monthly gain of the entire ‘recovery.’ Last month’s figure, which had already caused significant angst, was revised even lower to just 123k. The mainstream is predictably apoplectic, and why wouldn’t it be? After all, month after month after month there was only the Establishment Survey and unemployment rate to hold off the steady rise in uncertainty, the determined approach of negative signs in more and more places. If the Establishment Survey turns too, there is nothing left. Even ‘full employment’ will be transformed from a serious signal of full economic health to nothing more than marking the cycle peak.
I seriously doubt there were even 38k jobs gained last month, as the BLS doesn’t measure that only chained monthly variation. What’s important and relevant is not the headline number especially in any single month but rather the direction and intensity of the variation. On that score, there might be meaningful developments, perhaps threatening to make the labor statistics relevant again.
With the latest revisions (non-benchmark) and the current estimates, the Establishment Survey has been less than 190k in four of the five months of this year. The six-month average gain has dropped to just 170k, the lowest since November 2012 – the start of the slowdown.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ June 3, 2016.

Rattle Me This – – So What If The G-7 Fools Are Uncomfortable?

President Obama says that the feckless world leaders who squandered their taxpayers’ money on last week’s G-7 junket to Japan are ‘rattled’ by Donald Trump.
Bully for the Donald!
These clowns need to be rattled – -right to their very bones. And we might as well start with our own snake oil salesman-in-chief.
It seems that Obama can’t stop taking bows for the awesome recovery he claims to have presided over and the 14 million new jobs he claims to have created. Yet that’s as big a whopper as anything that Trump has ever let fly.
In fact, at the February 2008 peak prior to the crisis, the BLS reported 138.5 million nonfarm payroll jobs compared to 143.9 million in April 2016. The net gain is thus only 5.6 million, and it means nearly 9 million or 61% of the 14 million new jobs our President has been crowing about are not ‘new’ at all.
Actually, they were ‘born-again’ jobs, and even then they consist of lower paying and lesser quality jobs than the ones obliterated during the crash and so-called Great Recession.

This post was published at David Stockmans Contra Corner By David Stockman ‘ May 31, 2016.

Ugly Payrolls – – – Nothing’s Changed, It’s Mostly BLS Noise

Wall Street is predictably overreacting to the unpleasant payroll report. It is understandable in a way since, as noted yesterday, the Establishment Survey and the unemployment rate are all that is left to suggest the economy remains on track and any weakness would be temporary. It was a strained position to begin with, especially since the economy shifted lower almost two years ago and really took ‘temporary’ off the table. Still, there is great emotion attached to the BLS’s headline numbers.
Stock markets slid sharply on Friday and the dollar fell after U. S. non-farm payrolls numbers came in well short of forecast, adding to concerns over the pace of economic growth that have weakened investors’ appetite for risk globally.
Futures prices showed Wall Street set to open as much as half a percent lower while stock markets in Europe deepened morning falls, sending global indices towards their worst weekly losses since early February.
The monthly numbers reflected that characterization, with the Establishment Survey gaining just 160k, just barely above the revised gain for January and the lowest monthly estimate since last summer’s widespread introduction to uncertainty. Calculated employment via the Household Survey fell by 316k after an enormous run, which was reflected in the official labor force tally that dropped by 362k after adding an (literally) unbelievable 2.4 million in the six months before.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ May 6, 2016.

President Obama Explains What The “Fiction-Peddling” BLS Got Wrong – Live Feed

Grab your popcorn. Having proclaimed his greatest achievement during his presidency as “saving the world from another Great Depression,” we wonder what President Obama will have to say today when he discusses the economy. Following the decline in corporate profits, a manufacturing sector in recession, an auto industry which is shuttering production, minimum wage state job losses rising, and an equity market that is unable to make new highs, what cynical, skeptical, “fiction-peddlers” will he blame today’s dismal jobs data on?
President Barack Obama on Friday will deliver a statement “on the economy and new steps to strengthen financial transparency and combat money laundering, corruption, and tax evasion,”the White House said.
President Obama is due to speak on the economy at 1205ET…


This post was published at Zero Hedge on 05/06/2016.

Dubious Retail Jobs Surge – – The BLS Is Smoking Something

Going only from the conventional interpretation of the optimistic 242,000 in payroll gains Friday, it is still remarkable how more than one-fifth of those purported job creations in February were due to activity in retail trade alone. The monthly variation estimate for the retail sector (not including wholesale or transportation of goods) was an especially robust 55k even though the manufacturing sector is and has been contracting. The dichotomy is particularly striking since retail sales have also been noticeably weak over the past year, sales which suggest recession not the robust hiring.
Overall retail sales, including auto sales, have not been in the range considered of a healthy economy since the summer of 2012, yet the BLS has figured the usual straight line advance in hiring and employment. Since a minor curtailment in the middle of the 2012 weakness and slowdown, the BLS suggests that an enormous 1.08 million retail jobs have been created even though retail sales have lingered at dangerously low levels the whole time. Retail sales during an evident growth period should be rising by 6%minimum, not near or below 3%. In fact, 3% growth has been uniformly associated with recession.
In the late 1990′s, retail sales were growing routinely at 7-9% until the dot-com recession. As you would expect, from early 1998 until December 2000, the BLS reports that retailers added 865k jobs total, or about 25.5k per month. That is only slightly more than the 24.5k per month the BLS gives us for the past three and a half years of almost recessionary retail sales. As retail sales have sunk only further over the past year or so, the BLS instead somehow shows an enormous acceleration in retail trade jobs even better than the late 1990′s.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ March 8, 2016.

A Modest Proposal: Gift The BLS To The Democratic National Committee Or Sell It To CNBC

Yes, the BLS is now producing such a steaming pile of waste matter that it might as well be made an arm of the DNC. Or in the alternative, some of the billions that US taxpayers have wasted on it over the years might be recouped from a sale to CNBC. After all, bubblevision’s monthly cheerleading session couldn’t do without it.
In any event, once again this month the labor department bureaucrats did not go out and actually count 242,000 new jobs or even extrapolate them from a valid, scientific sample survey of the Gallup variety.
Folks, they never left their cushy offices; they plucked these numbers from a computer model!
Even before the Census Bureau turned over to the BLS its ragged February data sheets from calling households which do not have phones and surveying businesses which may or may not exist, they more or less knew this month’s numbers.
How? Why they are just fitting a projection line to the trend of the last several years, and then gussying up the resulting hockey sticks with even flakier seasonal maladjustments, re-estimates, birth/death factors and a lot more statistical shenanigans.

This post was published at David Stockmans Contra Corner on March 5, 2016.

It’s Not Awesome – – Retail Slump Belies BLS’ Job Fantasies

When Janet Yellen testified to Congress last week, she was as usual careful with her words. Alan Greenspan once called it ‘mumbling with incoherence’ but there is very little left to rambling in Yellen’s predicament. Where Greenspan was once the ‘maestro’ and Bernanke the ‘hero’ Yellen is stuck holding the bag, and I think she knows it. In truth, there isn’t the faintest difference between any of them, which is exactly the problem and her source of frustration. The Fed is in grave danger of being unquestionably revealed for the backward, incompetent institution it always was.
As to the recent stumble, it makes for the most uncomfortable juxtaposition between what the Fed did in December and what the economy and markets have continued to do since mid-year last year. To continue on in that contradiction leaves her no choice but to blame again ‘overseas.’
‘Financial conditions in the United States have recently become less supportive of growth,’ she told the House Financial Services Committee. ‘These developments, if they prove persistent, could weigh on the outlook for economic activity.’
She meant that convulsions in the stock markets could harm the economy…
Ms. Yellen argued on Wednesday that the rest of the world was to blame. She said the crucial question confronting the Fed was whether the domestic economy is strong enough to keep growing modestly even as the global economy struggles.
As always, it has to be ‘overseas’ because the BLS says so.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ February 23, 2016.

Productivity Bust Stinks Up Phony BLS Jobs Surge

/ February 4, 2016
With the BLS’s release of Q4 productivity figures, we get to check the BLS’s estimates just in time for tomorrow’s increasingly irrelevant payroll report. That much has become thoroughly apparent especially since the middle of last year as the Establishment Survey and unemployment rate only diverge with the overall breadth of economic indications. With GDP no longer corroborative, the labor reports have been in a world all their own. Far too many economists still rely upon them as their sole window for economic interpretation and these productivity numbers show further why they should not.
You have to understand what productivity means as both an economic concept and the statistic as it is constructed and presented. No economy will grow with low or even zero productivity; it’s plain common sense. Yet, the BLS’s numbers say that productivity growth has been zero or near it for five years. It has puzzled economists only because they take the calculations at face value. The fact that productivity is and remains so confusing already suggests that further investigation on all those accounts within the figure is warranted, and even demanded.
Any way you want to present the productivity estimates, clearly ‘something’ is amiss starting around the beginning of 2011, flowing into and out of the 2012 slowdown. It has persisted at an alarmingly low state for years now, meaning that this is not simple statistical variation that will converge on its own to the mean. I have chosen to focus on the latter two years because that encompasses the ‘best jobs market in decades’, which serves really to highlight the major discrepancy here. In terms of economic common sense, why would businesses be hiring so robustly and getting so little out of their employees overall?
In the statistical sense, the BLS tells us that productivity since the start of 2011 is just slightly positive; during the ‘best jobs market in decades’ it is even less so – essentially zero.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider via ALHAMBRA PARTNERS.

Why The Bulls Will Get Slaughtered

Well, they got that right. Detecting that ‘parts of the U. S. jobs report for January seem fishy’, MarketWatch offered this pictorial summary:
Needless to say, none of that stink was detected by Steve Liesman and his band of Jobs Friday half-wits who bloviate on bubblevision after each release. This time the BLS report actually showed the US economy lost 2.989 million jobs between December and January. Yet Moody’s Keynesian pitchman, Mark Zandi described it as ‘perfect’
Yes, the BLS always uses a big seasonal adjustment (SA) in January – – so that’s how they got the positive headline number. But the point is that the seasonal adjustment factor for the month is so huge that the resulting month-over-month delta is inherently just plain noise.
To wit, the seasonal adjustment factor for the month was 2.165 million. That means the headline jobs gain of 151k reported on Friday amounted to only7% of the adjustment amount!

This post was published at David Stockmans Contra Corner by David Stockman ‘ February 6, 2016.

The Q4 GDP Report – – Yellen’s Cronkite Moment

Fourth quarter GDP was estimate at just 0.68906% Q/Q in its advance statement. There is no more ‘residual seasonality’ left with which to obfuscate the deficiency in 2015; the year ended as it had begun, under great suspicion. Unlike most economic context given as commentary, that actually makes sense as both markets and other more fruitful economic measures have been suggesting all along. At best, GDP has exhibited great instability which is itself an indication of weakness since GDP was constructed to be the most charitable interpretation of economic growth.
Instead of riding into the sunset of QE-inspired success, the economy last year decelerated and left only questions as to exactly that. The year saw only one quarter that could be in any way characterized as decent, leaving three as undesirable; two unconscionably close to zero.
By the standard of average SAAR’s, GDP in 2015 was 2.38%, slightly less than 2014′s 2.43%. In terms of average Q/Q, 2015 was appreciably worse at just 1.78%; not really meaningfully better than even 2012 and certainly nowhere near projecting ‘overheating.’ In fact, by comparison to the last ‘recovery’ after the dot-com recession, 2015 seriously underperforms 2006 (a year that included half of it on the wrong side of the housing bubble).
That left the FOMC little choice but to make the alteration to its statement language in January, being forced into acknowledgement that GDP was no longer confirming their view. That leaves the FOMC’s recovery as purely the imagination of the BLS and its hopelessly isolated unemployment rate. The GDP report provided only contradiction for the ‘inflation’ reality in 2015, too. If the Fed meant that calculated inflation rates would at least begin to respond to past monetary policy efforts bearing fruit in the actual economy, then the fact that nominal GDP failed to reach the 2% threshold twice in 2015 has to be a fatal blow to any designs about ‘slack’ being sufficiently addressed. Again: Nominal GDP failed to reach 2% half of the year, including the last three months.

This post was published at David Stockmans Contra Corner on January 30, 2016.