Watch for full employment to be redefined


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It’s about that time of the cycle for ‘learned’ academic papers to start popping up claiming the NAIRU, the ‘non accelerating inflation rate of unemployment’ (or something like that) is in actual fact more like 7% rather than the currently believed 5%.

And expect these findings to show that it’s always been closer to 7%, but that a temporary glut in global supply, due to the removal of prior international trade constraints, temporarily permitted lower unemployment rates to not trigger accelerating inflation.

Now, however, this ‘slack’ has been used up.

That will suggest that inflation will continue to accelerate until the unemployment rate is over 7%, much like it is in the eurozone.


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2008-06-12 US Economic Releases



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2008-06-12 Import Price Index MoM

Import Price Index MoM (May)

Survey 2.5%
Actual 2.3%
Prior 1.8%
Revised 2.4%

The Fed sees this as imported inflation pouring through the $ channel.

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Import Price Index X Petro (May)

Survey n/a
Actual 113.8
Prior 113.2
Revised n/a

Just in case you thought it was all oil.

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Import Price Index YoY (May)

Survey 17.2%
Actual 17.8%
Prior 15.4%
Revised 16.3%

The Fed sees this as a relentless assault on inflation expectations.

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Import Price Index X Petro YoY (May)

Survey n/a
Actual 6.6%
Prior 6.6%
Revised n/a

[comments]

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Import Prices TABLE (May)

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Advance Retail Sales (May)

Survey 0.5%
Actual 1.0%
Prior -0.2%
Revised 0.4%

Another better than expected report, and the previous month revised up as well.
If anything, the Fed sees the downside risks to growth are diminishing.
Rebate checks may be doing more than the Fed anticipated.

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Advance Retail Sales ALLX (May)

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Retail Sales Less Autos (May)

Survey 0.7%
Actual 1.2%
Prior 0.5%
Revised 1.0%

Seems to be broad based spending, though still moderate.

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Retail Sales X Auto, Building Materials, & Gas Stations (May)

Survey n/a
Actual 247.7
Prior 245.7
Revised n/a

[comments]

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Initial Jobless Claims (June 7)

Survey 370K
Actual 384K
Prior 357K
Revised 359K

Back up to the higher end of the ‘new’ range, as the 4 week average remains very steady.

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Continuing Jobless Claims (May 31)

Survey 3118K
Actual 3139K
Prior 3093K
Revised 3081K

The highest report of this cycle, but still far below recession levels. Also, with GDP prospects looking up, the Fed is getting concerned that unemployment isn’t high enough to keep inflation in check.

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Business Inventories (April)

Survey 0.3%
Actual 0.5%
Prior 0.1%
Revised 0.2%

Higher than expected and prior month revised up as well. At the point in the cycle this probably indicates inventory is being built to meet higher sales expectations, rather than inventory accumulating due to sales falling short. Inventories have been on the low side, and rebuilding them adds to GDP.

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