WASHINGTON (MaceNews) – The week ahead features January’s jobs report and, the day before, Federal Reserve Chair Jay Powell talking about jobs.
With the escalation of the 10-year yield lately, a lot of viewers of the Wall Street Journal Jobs Summit appearance would rather he talk about inflation, credit costs, the way measures of inflation pressures may be harder to read and the way the deficit will skyrocket again after the nearly $2 trillion in pandemic relief is passed into law by the middle of the month.
But we heard those answers already in Powell’s two days of Q&A on Capitol Hill this week. Actually one senator from Montana asked Powell about the danger of rates going too low and that was batted away by him saying the Fed is mainly concerned with keeping the fed funds rate in its policy range.
Powell much preferred to talk about jobs and the elevated real unemployment rate, including work force dropouts, saying, “There’s a lot there’s a long way to go and monetary policy is accommodative and it needs to continue to be.”
So as some talking heads on the business channels were worrying whether the Fed has “lost control of the bond market” – with a 10-year Treasury yield retreating from the hardly stratospheric 1.5% – and Powell continuing to talk about a decade’s long worldwide disinflationary trend the question will remain unresolved for a while whether anticipated growth or a gathering fear of premature tightening is driving rates.
As has been observed before in this space, inflation seems to be everywhere but in the data. The report on personal income from earlier in the day pegged personal consumption expenditure growth at an annual 1.5% through January. In the latest CPI the driving-force shelter index decelerated to a 1.6% annual change from 1.8% through December.
There is one question that Powell was not asked, among the almost 120 questions he did field Tuesday and Wednesday. The answer is perhaps more relevant than what quarterly growth rates will be, or what the unemployment rate will be in the latest month. Both of those numbers are wildly distorted by the pandemic’s disruption of the series. They are for the time being no longer measures of changes in the economy but artifacts of the breaks inflicted on historical trajectories.
The numbers won’t settle down into meaningful comprehensibility for months. The pertinent question is, instead of when the level of economic activity equals pre-pandemic levels, is when will that level catch up to where it would have been without the pandemic?
Amid signs that the sharp deceleration in virus cases and deaths is already leveling off as variant strains proliferate and vaccination rates plateau, and that the low-hanging-fruit among those willing to be vaccinated may run out at some point, it’s a number no one knows. But it’s not any time soon.
A second question to be answered is the extent of that scarring that extends beyond those with atrophying skills, beyond those replaced by employers through automation and digitization, beyond those no longer needed because some sectoral demand has been destroyed.
And then there’s the even larger question of what amount of U.S. international competitiveness has been destroyed through educational impairment after months of school closing, of innovations never to be developed, of productivity enhancements that won’t be employed.
Which is why to some ears Powell’s single answer on Tuesday, apart from monetary policy or the current economy or the digital dollar, was his most important to the long run outlook. He was asked what he would do if he were a Senator in Congress. He answered that contributing to a program to enhance the productive capacity of the country would be his choice, mostly concentrating on education and training.
“What I always think I would focus on is more than what we call the supply side which is really in investing in things that will increase the potential growth rate of the United States economy over time and make that prosperity as broadly spread as possible. Let me be more specific. It amounts to investing in people and that means education, it means training, it means all of that.”
It’s enabling people, he continued, “to take part fully in our great economy and I really do think in a global economy people who are able to use and benefit from technologies – there’s no limit on the amount of those people who can be working in the United States because it’s such a global economy.”
Perhaps in his next life beyond the Fed an occupant of the Oval Office will appoint Powell as the guiding force for a national initiative to enhance productivity, opportunity and prosperity.
The week ahead also includes the latest Fed Beige Book survey of economic conditions coast to coast, January factory orders and the two ISM PMIs assessing momentum in manufacturing and services. All the major data points are listed below:
Upcoming US Economic Data
Monday, Mar 1 – 9:05a Fed Gov Lael Brainard speaks on Fin Stability, IIB
Monday, Mar 1 – 9:45a ET Feb Markit manufacturing index
Monday, Mar 1 – 10a ET ISM Feb manufacturing index – Jan 58.7/-1.8 pt
Monday, Mar 1 – 10a US Jan construction spending – Dec +1.0%/$1.49 tln
Monday, Mar 1 – 2p Atl Fed’s Bostic speaks
Tuesday, Mar 2 – 10a S&P CoreLogic home price index
Tuesday, Mar 2 – 1p Fed Gov Brainard speaks, on economy, CFR
Tuesday, Mar 2 – 2p San Fran Fed’s Mary Daly speaks
Wednesday, Mar 3 – US MBA weekly mortgage applications
Wednesday, Mar 3 – 8:15a ADP/Moody’s Analytics private payrolls est
Wednesday, Mar 3 – 9:45a Feb Markit non-mfg index
Wednesday, Mar 3 – 10a ISM Feb non-mfg index – Jan 58.7/+1.0 pt
Wednesday, Mar 3 – 10a Philly Fed’s Harker speaks
Wednesday, Mar 3 – 10:30a US EIA weekly oil stocks
Wednesday, Mar 3 – Noon Atl Fed’s Bostic speaks
Wednesday, Mar 3 – 1p Chi Fed’s Evans speaks
Wednesday, Mar 3 – 2p Fed’s Beige Bk
Wednesday, Mar 3 – 6:05p Dallas Fed’s Kaplan speaks
Thursday, Mar 4 – 8:30a US wkly initial jobless benefit claims
Thursday, Mar 4 – 8:30a US revised 4Q productivity
Thursday, Mar 4 – 10a US Jan factory orders, revised durables
Thursday, Mar 4 – 12:05p Fed Chair Powell speaks, WSJ jobs summit
Friday, Mar 5 – 8:30a US Jan payrolls, unemp rate – Dec +49K/6.3%
Friday, Mar 5 – 8:30a US Jan int’l trade goods/services
Friday, Mar 5 – 3p Federal Reserve Jan Consumer Credit G-19
Friday, Mar 5 – 3p Atl Fed’s Bostic speaks
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Separately, from Extract Analytics, the week ahead’s outlook for the SPX:
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Contact this reporter: denny@macenews.com.
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