Okay, previously we were in a down trend in Jobless Claims, but that downward trend seems to have stalled out, like most of our other economic indicators. And yet once again the prior periods numbers were revised upward. The numbers aren’t all that bad, but they are another step in a bad trend.
Initial Jobless Claims
Federal Reserve Vice Chair Janet Yellen spoke last night to the Boston Economic Club. Yellen got to the point quickly, at the end of the second paragraph of her speech she says:
“As always, considerable uncertainty attends the outlook for both growth and inflation; events could prove either more positive or negative than what I see as the most likely outcome. That said, as I will explain, I consider the balance of risks to be tilted toward a weaker economy.”
She outlined three headwinds to a sustained recovery - housing, fiscal policy and Europe. She clearly believes that the Feds optimal control structure is the current FRB/US model given its ability to account for non-conventional policy. And then she notes that this optimal control rule implies a Fed Funds rate on hold until late 2015. She also points out that she believes that this rule achieves more rapid employment gains than other structures, WITHOUT taking inflation above 2 percent. In the end she says language changes won't do the trick when it comes to more accommodation – clearly signaling that she favors balance sheet expansion.
Of course, Yellen is just one member of the FOMC committee, but an important one. And I think she would be perfectly happy to ease in this environment. So if you combine Yellen’s speech, add in Charlie Evans speech in NYC, Dennis Lockhart’s' recent comments on more accommodation and a well planted press story from the usual sources, we have some pretty strong ‘Fed Speak’ indicating that some nucleus of the Fed is in favor of more accommodation.
The voice that really matters is Federal Reserve Chairman Ben Bernanke. Perhaps today we will get to hear what Bernanke thinks when he goes to Capitol Hill.
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury