Ed’s Daily Notes for April 1st   3 comments

Bloomberg: Yellen Says Slack in Job Market Shows Need for Support

Federal Reserve Chair Janet Yellen, easing investor concern that interest rates may rise earlier than previously forecast, said the world’s biggest economy will need Fed stimulus for “some time.”

Yellen said today the Fed hasn’t done enough to combat unemployment even after holding interest rates near zero for more than five years and pumping up its balance sheet to $4.23 trillion with bond purchases.

“This extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policy makers,” Yellen said at a community development conference in Chicago. “The scars from the Great Recession remain, and reaching our goals will take time.”

Yellen spotlighted as evidence “real people behind the statistics,” describing how one person, Vicki Lira, lost two jobs, endured homelessness and now serves food samples part-time at a grocery store.

Has Yellen been taking lessons from Obama? Throwing in the example of a real person is something I would expect from him. All she needed to add was, “If you like your Fed policy, you can keep it.” In the face of tapering QE, I would call Yellen’s statement just as honest as the Obamacare lie. We already know the Fed is expecting to raise rates next year. Her statement was nothing more than an attempt to pacify markets.

Bloomberg: China Manufacturing Index Little Changed in March

Chinese manufacturing gauges pointed to weakness in the world’s second-biggest economy that could prompt the Communist Party leadership to roll out additional support measures.

A Purchasing Managers’ Index fell to 48 in March, the lowest reading since July, from 48.5 in February, HSBC Holdings Plc and Markit Economics said today. A separate PMI from the government, with a larger sample size, was at 50.3 from 50.2 the previous month.

The reports underscore what Premier Li Keqiang last week called “difficulties and risks” as he tries to control surging debt, default dangers and pollution that threatens to stoke public discontent. Li said the nation has policies in reserve to support economic growth after the cabinet said it would accelerate construction spending.

“We expect Beijing to fine-tune policy sooner rather than later to stabilize growth,” said Qu Hongbin, chief China economist at HSBC in Hong Kong. He added that the pace of first-quarter growth is likely to have fallen below the nation’s full-year target of 7.5 percent.

This is important because China is the basis for a lot of international companies’ growth projections. If China’s economy stumbles, a lot of companies as different as McDonalds and Ford Motor could have their expected growth cut.

Meanwhile, copper is still trading near one of it’s lowest levels we have seen in years:

Copper

The long-term view of the Baltic Dry Index is only slightly better than copper’s view:

BDI

The world economy isn’t on “red alert” status, but it is certainly not strong either. If China doesn’t do what all the analysts expect, things could turn south quickly.

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Posted April 1, 2014 by edmcgon in China, Economy, Federal Reserve, News

3 responses to “Ed’s Daily Notes for April 1st

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  1. Ed, if President Obama may make 38 unilateral amendments to ObamaCare why can’t the Yellen FED change it mind on a rate change that is a year away? And is this a signal it may?

    • Latetom,
      If they changed their collective mind this soon after the last meeting, they are dangerously frivolous. A more likely excuse is that Yellen is blowing sunshine.

    • I would have at least expected some collective statistics from the FED, that would have shown understanding of a problem instead of just politics.
      I’m willing to bet you can get an individual example like that at the best of times.

      Now mind you I do believe the underline statement is correct, this “recovery” has been very uneven for a lot of people, but I’m not sure how this is really going to help these people. If companies have decided that they can get along with less people, and/or with the ones they do need make them part time, so they don’t have to pay them benefits (and let good old ACA shine as they all have to go there), I don’t see how keeping the interest rate low solves that problem. The companies are just going to pocket the cash, and these people are most likely not in the market to make gains there.

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