With a trillion in 07 mortgage resets, a rate hike is a million to one I say - - unless we go down first - - and to listen to Poole last week it doesn't seem like down is coming soon. 25bp hike is too risky now with this housing and consumer psychological backdrop. They'd cause a recession. Better to sit back and do nothing while other countries raise and reevaluate this summer. I'd think we see a more clear slowing of the US economy by then also. What is the critical condition that requires taking action on rates this Spring? Nothing.
FOMC doesn't raise rates in midst of a slowing economy. Equities markets are pricing in a 2007 rate cut.
I agree with trader above. A hike would be asking for a recession. A cut would cause a wholesale slaughter of the dollar. Therefore the Fed does nothing and hopes the recession clouds blow over. The blame for the mess doesn't belong at the Fed. Its our stupid, arrogant, squandering, pork laden, self serving Federal government that has dug us a six foot deep hole and carved a headstone to match. Their ability to spend knows no bounds, maximizing wastefulness, debt, and promises for more spending. Bread, Circuses, and Swords. We want them all, and we want them on credit. Simply unbelievable. The Fed is doing what it can, and damned well at it under the circumstances just to avoid a dollar crisis of epic proportions.
Is there inflation? Sure. Are CPI numbers reliable? I doubt it. The high level of U.S. employment should also place and upward push on wage inflation. Companies will have to pay more both to hire new workers and to keep the trained ones. But on the other side of the scale, I see a near-future decrease in construction jobs in housing (although offset a bit because commercial building is still strong) and a definite decrease in the auto industry, which will include not only job cuts but wage deflation. Toyota might not cut jobs but the company is planning to decrease U.S. wage growth into 2011. (I think I recall one report estimated the average U.S. Toyota worker wage to be about 20% below that of U.S. auto-workers.) The inflation that we do contend with seems to me to be a lot like the frog that gets boiled alive because he can't discern the water he is in on a pot on the stove just keeps getting a little bit hotter all the time. Gas prices go up, people seem to cope. Food prices keep inching up, people seem to cope. The Core inflation claims to be under control, because it takes out volatile elements like energy and food. Volatile? They just keep going up. Personally, I find it funny that the things I require every day are excluded from a lot of inflationary data but a toaster, that I buy once every 40 years, is right in the mix. So thank you China and other developing nations for keeping U.S. core inflation "under control." Now, good luck with your own. India is already having problems finding qualified new tech workers. When the BRICK countries begin to experience wage inflation, look out! So for now, I see the FED leaving rates right where they are, probably though the end of the third quarter and possibly the end of 2007. A lot will depend on how these sub-prime mortgages go and how other loans people got caught with will stack up. I think the housing down-trend has quite a ways to go, especially in the upscale regions of the nation where 3-bedroom homes are priced at $1,000,000+.
There is almost no wage inflation in the US. For the salaried 10-12 hr days are the norm, and sure, they give you a 2 or 3% increase *IF* you are lucky enough that the company you are working for is doing well, that year, but then they take 1/2 of it away in health insurance cost increases, not to mention the cost of fuel to get to work. Asking for a raise is asking to get fired. And in a bad year, you either get sacked, or get a 10 or 15% pay cut that never returns. I'm not sure who the lucky ones are. I guess if the ones that are let go manage to find something better, it could be a good thing longer term, but the odds on that happening are stacked way against them. "But for the grace of God, there go I" Colin Powell
Oh yeah, many financial professionals know that it is BS. I will never forget hearing through the Squakbox from the S&P pit a trader's comment about the jobs report, like a year ago. He said "They talk about 300k jobs created, where the fuck are they?" Meanwhile the futures were trading stronly upwards pre-market, it was actually an up day. Like I said â PERCEPTION. The minority is not going to rock the boat. If you are in the IB business, you do not really want the recession truth out, because that signals cuts across the board at any major IB firm. Putting it out in the open that the government economic reports have been statistically engineered beyond reality would cause a political & financial panick. I would be much more worried about the political aspect of it. Even the government reports cannot show that there is any real wage growth. You have one jerk-off manager getting paid 90k, while 2 other managers were laid off, along with a whole slew of working professionals. You cannot show wage growth when whole manufacturing and tech bases are being shipped offshore and not being replaced. I have personally notated wage depression due to this trend, even for the managers. The ones you see getting the wage growth are the scumbag upper level managers who are executing these measures to a certain extent. Executives also, they have experienced very nice wage growth, all at the expense of the lower & middle level workers. Of course, the positions getting the nice wage growth are few in numbers and very hard to get, even if you are more than qualified for them. Also, let's not forget the paper pushers. IB business is doing well, although their wages are not comparable to pre-2000. Bank lending operations are always growing, many on the upper level are getting the wage growth. You did mention construction, there is some wage growth there, although most of the labor does not see much. Plus, most of the crew is temporary, only the minority stays permanent. There are a few other niche fields that I knew have some wage growth, but these positions are few and limited. Overall, there is wage depression. You're definitely correct on that point. Brazil or Mexico or just about any other large third world nation. It's pretty much there. Plenty of economically deprived areas all across this nation which serve as proof.
Hourly wages have been increasing at close to 4% each of the past two years. I'm not interested in adjusted data. Wage growth is wage growth. Until I see wages measured in present dollars slow their advance, I will presume inflation. http://www.bls.gov/news.release/pdf/realer.pdf http://www.bls.gov/news.release/archives/realer_03162006.pdf
Pabst - the data you point to are manipulated. You should believe thriftybob and hydroblunt that because they do not see any wage grow around them therefore there is no wage growth. That's basically how this thread looks like....
Gross Wage grew by $1200 last year. Payroll taxes took over $450 of that, including Fed W/H, FICA, Medicare and State W/H. The company took back $400 for increased healthcare premium, leaving $350 increase in the net pay deposit per year. Just gas alone from $2.15 to $2.85 = $.70/gal increase just for the 9800 mi to/from work 245 days at 20 mpg will eat $343 of the the increase. So, from a 3% overall increase, we ended up with 1% in the check, and nothing after including just the cost of gas only for work miles only. The company says they gave a decent increase, the government gets higher revenues, the insurance and oil companies get 1/3 and we have nothing left, BEFORE we start paying for increases in things like college tuition and food. The only thing that saves us is we have no debt and I make money in the market.