PCE/Personal Income

Very good, looks like continuing muddling through with moderate growth unemployment drifting lower in a few months when there are no more hours to add to the existing labor force.

Welcome to Japan, Mr. US bond market?

Ok market for stocks, especially with Euro zone risk fading. Just China h2 risk left, seems.


Karim writes:

PCE data today was encouraging and showed the positive impact of hours on labor income.

Personal income up 0.4% with wage and salary income up 0.5%.

Personal spending up 0.3% and headline deflator unchanged, so strong advance in real consumption spending.

For all the slowdown fears, real private sector demand will be stronger in Q2 than Q1.

Core deflator up .162%, largest advance in 7mths. Recent divergence from core CPI (PCE data has been firmer) reflective of lower weight of housing in PCE data.

Not saying inflation is picking up, just that deflation fears seem overblown.

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6 Responses to PCE/Personal Income

  1. beowulf says:

    “3. Why is Krugman putting his rep on the line and calling “depression”?”

    He reads the Telegraph? :o)

    A recent paper by the San Francisco Fed argues that interest rates should now be minus 5pc under the bank’s “rule of thumb” measure of capacity use and unemployment. The rate is currently minus 2pc when QE is factored in. You could conclude, very crudely, that the Fed must therefore buy another $2 trillion of bonds, and even more if Europe’s EMU debacle goes from bad to worse. I suspect that this hints at the Bernanke view, but it is anathema to hardliners at the Kansas, Richmond, Philadephia, and Dallas Feds.
    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7857595/RBS-tells-clients-to-prepare-for-monster-money-printing-by-the-Federal-Reserve.html

    Reply

  2. dan weintraub says:

    he…not her. Sorry Karim.

    Reply

  3. dan weintraub says:

    With all due respect to my excellent and good friend Karim, her is cherry-picking and misinterpreting his data. “REAL” private sector demand has become a function of government subsidy. Credit-destruction remains a powerful force, with ongoing debt-deflation only temporized by the monetary policies (QE et al) of the Fed and Treasury. Karim’s claims of deflation fears being overblown is only defensible as Bernanke readies himself for the greatest “printing” episode in the history of fiat currency.

    Reply

    jorge rl Reply:

    I agree, not only is there Credit -destruction and criminalizing bankers for making bad loans, but the cdo/clo/cmo etc. leverage machine has been shut down ! and as Bernake “prints” Obama taxes it “back” so it has to be seen how much govt. “subsidy” is left there to boost demand.

    Banks are shut down, business is shut down and Congress is about to shut down spending…the only game in town will be Bernake… maybe the trade is to go long as much Govt. bonds as you can and wait to sell them into QE3!!!

    Reply

  4. Tom Hickey says:

    Some questions:

    1. How much of the uptick in the economic numbers is stimulus and how much investment is stepping in to replace it?

    2. These are the economic numbers. What do the financial numbers look like? Is debt deflation sill looming?

    3. Why is Krugman putting his rep on the line and calling “depression”?

    Reply

  5. Worried Sick says:

    “Very good, looks like continuing muddling through with moderate growth unemployment drifting lower in a few months when there are no more hours to add to the existing labor force.”
    ————————————————————————————
    First they have to stop adding hours to the existing labor force. And then they have to start picking up the huge slack.

    If the participation rate was the same as a year ago, the unemployment rate right now would be 10.8%.

    Moderate growth is probably enough to keep up with population growth, but not enough to make any dent in the unemployment rate. What do we need per month for population growth? About 125,000?

    I wouldn’t be surprised at all if the unemployment rate in December is 10%.

    Reply

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