Control Panel: Soft landing in progress?

Investment Analysis Clubs Macro Economic Trends and Risks
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At last week’s meeting the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate by 1/4 percentage point, bringing the target range to 5-1/4 to 5-1/2 percent.
The Fed is also continuing the process of significantly reducing their securities holdings. This is Quantitative Tightening which impacts longer duration interest rates than the short-term fed funds rate. This is a gradual process which was temporarily reversed during the recent banking crisis but is restarted.

Real Gross Domestic Product in 2Q23 grew 2.4% (annualized), a healthy growth rate.

The recession that was predicted due to the Fed’s campaign of raising interest rates hasn’t materialized. The MSM has published several articles discussing the soft landing that Jerome Powell mentioned during his speech last week.

Transcript of Chair Powell’s Press Conference
July 26, 2023

…
Since early last year, the FOMC has significantly tightened the stance of monetary
policy. Today, we took another step by raising our policy interest rate 1/4 percentage point, and we are continuing to reduce our securities holdings at a brisk pace.We have covered a lot of ground, and the full effects of our tightening have yet to be felt. …

July 26, 2023 Chair Powell’s Press Conference PRELIMINARY
Page 2 of 28
supply and demand in the labor market are coming into better balance. The labor force
participation rate has moved up since last year, particularly for individuals aged 25 to 54 years.
Nominal wage growth has shown some signs of easing, and job vacancies have declined so far this year. While the jobs-to-workers gap has narrowed, labor demand still substantially exceeds the supply of available workers.
Inflation remains well above our longer-run goal of 2 percent. Over the 12 months
ending in May, total PCE prices rose 3.8 percent; excluding the volatile food and energy
categories, core PCE prices rose 4.6 percent. In June, the 12-month change in the Consumer Price Index, or CPI, came in at 3.0 percent, and the change in the core CPI was 4.8 percent.
Inflation has moderated somewhat since the middle of last year. Nonetheless, the process of getting inflation back down to 2 percent has a long way to go…

So, the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession. … [end quote]

Could a Recession Still Be Years Away? Steady Growth, Moderating Inflation Improve Odds of Extended Expansion

If Fed achieves a soft landing, history suggests economy could keep growing four or five more years
By Greg Ip, The Wall Street Journal, Updated July 27, 2023

…
On Wednesday, Fed Chair Jerome Powell said a soft landing has long been his base case, and his confidence in it had grown. “We’ve seen so far the beginnings of disinflation without any real costs in the labor market,” he told reporters after the Fed’s policy meeting. “That’s a really good thing.”

Powell also disclosed that the Fed staff, which earlier this year projected a recession, no longer does. The staff forecast doesn’t necessarily reflect policy makers’ own views. …

Still, there is a plausible case this time is different. In the past, inflation was usually caused by excess demand. This time, a bigger culprit is disrupted supply—of goods, transportation, commodities, labor—in the wake of the pandemic and Russia’s invasion of Ukraine.

Supply is returning… [end quote]

Greg Ip’s optimistic article cautiously predicts a soft landing and several years before the next recession.

The Control Panel shows that the rising interest rates have not put a damper on the rising stock market. The Fear & Greed Index is in Extreme Greed. The trade is risk-on as stocks and junk bond prices are rising while Treasury prices are falling (interest rates are rising).

The USD is in a falling trend. Oil is rising while natgas has stabilized at a low price level. Gold suddenly popped.

Yellow, the beleaguered trucking company that received a $700 million pandemic loan from the federal government, notified staff on Friday that it is shutting down and laying off 30,000 employees at all of its locations. Yellow is one of the largest freight trucking companies in the United States, and its downfall could have a ripple effect across the nation’s supply chain.

Disrupting supply chains could increase inflation. Only time will tell whether the impact will be enough to affect the Fed.

The METAR for next week is sunny.
Wendy

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This is in front of troubled earnings reports in the warehouse commercial RE space. Which is in front of other commercial RE problems and the banks.

Who me worry?

August dont count. Someone needs to tell Powell that.

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@WendyBG

I am a big proponent of the FED and independent central banking.

This is the first time I will say this. I will revert after this mess. But it might not be the last time I say this…RIGHT NOW…do not trust the FED at all.

I get your weather reports for for immediate consumption every Sunday night. But your reporting materials span more than this week. I am replying.

This is very damning. That the FED sees things as more or less rosy is crapola.

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Yellow is a union shop. Any bets a PE group will buy the assets, and relaunch Yellow as a non-union shop? Some of us remember Consolidated Freightways, a union shop. Management started a non-union company, Con-Way. Management then transferred business from C-F to Con-Way. The union C-F was then spun off. C-F went bankrupt and liquidated 6 years later. Con-Way was then sold to a logistics company, and, I would expect, the management that had organized all this received a nice golden parachute.

Steve

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I did not know that history.

I have not dug into Yellow’s story. Seems from scanning things Yellow has deeper problems.

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The stock rebound this year has caused my stocks to catch up to my cash that I hoarded at the end of 2021 - except the cash is earning between 3-5 percent now. A soft landing would indicate that I was over cautious and could have left it all in equities. But I remain cautious and hdged because I am cautious by nature.

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The main component of their teamsters contract is very decent health care coverage, average hourly is below standard for their current contract.
It’s really all about the golden parachutes; and denying more Americans good health care coverage.

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For some 40 years of supply side econ we made our company numbers more and more crushing. We have not produced enough to afford healthcare for everyone.

We have really taken one hard for the team capitalism listening to people spout enormous amounts of crapola and lies about tax cuts and supply side econ.

We need a massive factory buildout. We are getting a massive factory buildout.

We need to put our wallets second. Paradoxically that is putting our wallets first.

We need to take care of everyone in our nation first. Paradoxically that is our wealth we will acquire.

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Yeah, that’s the thing that makes me skeptical. On one day I saw “soft landing” in the headlines in the Times, Wall Street Journal, Barron’s, and Washington Post. That’s got to kill it, I would think.

That much consensus is hardly ever right :wink:

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So you are going long? I’d suggest all in.

After all what does a newspaper reporter know?

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One of the best indicators over recent decades is the “Barron’s Front Page Font” indicator. When they publish something in HUGE font, that’s usually an indicator to take the opposite action. So if the headline is a large “The Coming Crash”, you can go all in. If the headline is a large “No Recession, Soft Landing is Here” then get ready for a recession. Etc.

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What you have to kill is the strong labor market.

https://www.cnn.com/2023/07/25/economy/consumer-confidence-july/index.html
A strong labor market and cooling inflation are helping to keep Americans upbeat about both the current and near-term prospects of the economy, according to the report.

DB2

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That is not going to happen for a few decades.

People who believe as you do have not studied much econ. It is old propaganda stuff that labor is the problem.

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What I have observed is that the unemployment rate starts climbing about a year before a recession. It seems that as long as people have jobs they keeps spending, and as long as they keep spending the economy keeps chugging along.

DB2

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From a glance at that chart, almost none of them show any appreciable rise in unemployment in the year before a recession!

I’d guess that’s because the people who decide on “recession” or “no recession” usually backdate the start date of the recession to when unemployment begins its ascent.

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“You don’t have a recession when you have 500,000 [new] jobs and the lowest unemployment rate in more than 50 years.”

Also:
Since 1969 the unemployment rate low occurred nine months before the business expansion peak, as determined by the NBER.

DB2

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Since 1969 we have been switching over to supply side econ. In 1981 we full throttled it.

You need to study the 1949 to 1965 period. Particularly 1950 to 1965. It is different from what you are saying. It is the demand side period.

The ideas in supply side econ were never really honest nor at all well thought out.

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This is usually true. I can’t think of a single instance in which it was not true. The only worrisome thing is … what happens if you hire all those people, but they aren’t producing anything more than was produced before they were all hired?

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Labor productivity is a different topic from that statement. Productivity being how much per worker gains in the rate of production v nominal output per worker being equal.

I do realize output per worker has dropped slightly. I heard a blurb on this two weeks ago on NPR.

My analysis not NPR’s. The issue is employee turnover. So many people have less expertise on the job. They are new hires or promoted employees to new positions. That is not the same as what you are trying to demonstrate.

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They were very well thought out. Also very dishonest. But it served the exact purpose they wanted it to – send money up and convince the masses it would do the opposite.

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