Are Their Own Data Sources Paralysing The Fed???

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Are Their Own Data Sources Paralysing The Fed???

The Fed is using a new indicator, the “Labor Market Conditions Index” to dictate its outlook on employment. Given its recent adoption and the Fed’s almost manic “on and off” opinions on rate increases one has to wonder if they are only seeing short term trends and not the larger employment picture??? If you look at longer term charts, it clearly better:

Despite unprecedented retirements of the boomers (~10k per day), the employment to population ratio is climbing:

Employment, rolling along:

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Personal Income….up and to the right:

Unemployment duration continues to fall:

The unemployment rate still falling:

So why then does the Fed seemingly change its message on rate hikes almost weekly???

“Davidson” submits:

There are 19 inputs to this indicator. Those which are % of population or nominal changes in avg hourly wages without some adjustment to normalize to account for 1) Baby Boomer retirement at 10,000/day or 2) inflation impact on wages means the numbers are less useful than they could be.

 

Here is the chart of what the Fed is seeing now. No wonder the Fed is ‘On again-Off again’ about its own actions. They do not know how to look long term and it appears that they are short term momentum decision makers.

Screen Shot 2016-06-07 at 11.30.04 AM

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Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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