New Home Sales Flatline

New home sales rose an almost imperceptible 0.2% in September, after being revised down sharply for the month of August. While new home sales are a notoriously volatile data series, estimated from a very small sample and subject to large revisions, sales have continued to trend modestly higher Read More »


Inflation Still Too Low

The Consumer Price Index (CPI) edged up 0.1% in September, after falling slightly the month prior. Increases in food prices tempered the drag from plummeting energy prices. This raises issues for consumers at the grocery store, as they will likely divert some of the money they are saving at the pump to deal with higher prices for proteins, like meat. The other option is to substitute lower-cost rice and pasta, which all too many families are already doing as they struggle with constrained wage gains. Indeed, real average hourly earnings actually contracted Read More »


Primer for October 29 FOMC Meeting

The Federal Open Market Committee (FOMC) is slated to wrap up the large-scale asset purchase program (aka “QE3”) on October 29 with as little fanfare as possible. Federal Reserve officials believe they have prepared financial markets for this change and, despite recent market volatility, can still end the current purchase program quietly.

The statement at the end of next week’s meeting will acknowledge that the economy has improved enough to discontinue further expansions to the Fed’s $4.4 trillion balance sheet for the moment. However, the Fed is expected to maintain the current size of the balance sheet by backfilling, Read More »


Home Sales Edge Higher

Existing home sales edged higher in September after losing ground in August. We are still trying to regain ground lost, however, in the wake of last year’s “taper tantrum” over Federal Reserve talk of ending its asset purchasing program; that pulled a lot of sales into the third quarter of 2013. Hence, sales remain below the highs hit a year ago in September, despite markedly lower mortgage rates today.

All-cash buyers remained abundant but investors appear to be losing interest in a market with fewer foreclosures Read More »


Housing Starts Recross Million Mark

Housing starts moved back above the one million unit threshold again in September, after being revised up slightly for August. Multifamily starts accounted for nearly the entire comeback after starts cratered in August. Read More »


Industrial Production Surges

Industrial production surged 1.0% in September, more than double market expectations, despite a small downward revision to August. Moreover, gains were fairly broad-based with the exception of the auto industry, which took a breather but is expected to pick up again later in the year. Electronics also took a hit, Read More »


Retail Sales Disappoint

Total retail sales slipped 0.3% in September after surging in August. A drop in vehicle sales from a post-recession high was one reason for the weakness. Core retail sales, which exclude the volatile vehicle and gasoline components, also dipped slightly during the month. That was despite a sharp drop in prices at the pump and some freeing up of income for discretionary purchase Read More »


2014 Nobel Prize for Economics: Jean Tirole

This is the time of year when economists become self-referential, turn inward and assess the state of the discipline by celebrating the recipient of the highest honor in the profession: the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. (It is not one of the original prizes established by Alfred Nobel, but in all that matters, it is nonetheless a Nobel prize.)

This year the recognition went to Jean Tirole, a French economist (educated at the Massachusetts Institute of Technology) Read More »


Job Openings at 13-Year High

Job openings hit a 13-year high in August, while hiring slowed and the number of people quitting a job stabilized. This suggests one of several scenarios: 1) the workers applying for jobs are woefully under qualified; 2) new applicants cannot pass their drug tests; 3) employers are deliberately not filling open positions to increase flexibility to hire up once economic conditions become more robust; Read More »


Five Themes to Start the Week

Economic developments abroad were not in short supply during the past weekend, nor will they be in the week ahead.

1.    The first round of the Brazilian presidential election was, as expected, inconclusive, but somewhat surprisingly the center-right candidate Aécio Neves placed second behind incumbent President Dilma Rousseff. Now he will vie for the presidency in the runoff on October 26. According to the preliminary count of Sunday’s vote, Rousseff received 41% of the votes and Neves 34%. The socialist candidate, Marina Silva, who was rapidly rising according to the polls, finished a disappointing third with 21%. Because Neves is perceived as more pro-market and pro-growth than Rousseff or Silva, markets reacted with a rally. Nevertheless, our baseline expectation is that President Rousseff will succeed in securing the backing of Silva’s supporters and win a second mandate as Brazilian president. Since we deem president Rousseff a policy disappointment, (and we do not see signs of a change in course) our outlook for Brazil remains moderately pessimistic, Read More »