Tuesday, October 20, 2015

FOMC | Will Fed Hawks Say Boo Next Week?

The FOMC can't do much to help the U.S. economy on Oct. 27-18.
All it can do is scare people. Early Halloween at the Fed?
The long stretch of zero-bound Fed policies since September 2008 must be giving some policy makers cabin fever.

The Federal funds rate (remember that?) was dropped to near zero after the Lehman crisis.

I was there when former Federal Reserve Board Vice Chairman Laurence (Larry) Meyer of Macroeconomic Advisers told the NY Association for Business Economics in December 2008 that the FOMC should take a long vacation - two years. (Till the Fed starts to crunch, they might as well be at lunch.)

Larry Meyer didn't have any idea that the vacation would have stretched from two to seven years. It's now past the end of the Biblical-bovine feast-and-famine cycle. (Is that why the Fed term is 14 years? One full cycle? Senator Carter Glass would know.)

As a Fed hawk when he was Vice Chairman, Meyer would doubtless be on the side of those calling for a rate increase at the FOMC meeting next Tuesday-Wednesday.

The BLS state job numbers for September (as usual coming out more than two weeks after  the national numbers) that were just released this morning show little change in unemployment rates over August.

Unemployment, based on the relatively small sample of households (it's a stretch to rely on them for month-to-month guidance, but you use what there is), shows 37 states and D.C. continuing to decline month over month, with six states registering an increase and seven no change.

A state unemployment-change diffusion index - which I have advocated someone track - would reduce the multiple numbers to a single one that could be usefully charted. Compared with September 2014, the state unemployment data for September show 41 states down, seven states up, and two states unchanged. Sepember's national jobless rate, which was released earlier this month and is seasonally adjusted, was unchanged from August at 5.1 percent; it was 0.8 percentage point lower than in September 2014.

The nonfarm payroll employment numbers are more interesting and they show weakness around the country. They decreased in 27 states, increased in 20 states and D.C. and are unchanged in three  states. The biggest losers by job count - the weakest states based on a count of payroll job losses - were Missouri, Pennsylvania and Michigan. The biggest winners were Texas, New York, and Georgia.

On a percentage basis, the biggest losers were Hawaii, Vermont and Wyoming and the biggest winners were Delaware and Kansas, and South Carolina.

Compared with the same month a year ago, nonfarm employment increased in 46 states and D.C.  and decreased in 4 states. The biggest winners are Utah, South Carolina, Idaho and Washington. The biggest losers are North Dakota, West Virginia, Wyoming and Alaska.