No Confidence Vote – Raging RHINO

FOMC Voting Member Esther George issued a vote of confidence for the economy, despite financial turmoil returning across asset markets again today. With front month WTI back under $30, her idea of a strong economy and anchored inflation expectations is still highly imperiled. She remains completely dogged, however, undeterred for further “normalization” of monetary policy largely as the US economy is doing, by her estimation, really well:

“The fundamentals of the U.S. economy currently appear strong enough to sustain positive growth going forward,” George said in a speech to a business group in Kansas City, Missouri.

The brief article that appeared on her speech did not devote enough about the details for these “fundamentals”, but we can easily guess that they leaned heavily on the words “job growth” and “unemployment rate.” It matters little that neither of those terms prevented the current state of “financial turmoil” nor that such disorder itself is indicative of worsening fundamental states ahead, to economists the BLS’s imputations and trend-cycle optimism are all that counts for economic interpretation.

That was, of course, the same position she took in March of last year, as economists are quite consistent no matter how little the unemployment rate appears to matter for lengthy stretches of only further deterioration.

The U.S. economy is expanding at an above-trend growth rate, which I expect to continue through the end of the year. A strong dollar and certain aspects of the foreign outlook pose some risks, but the economy appears well positioned to withstand such headwinds…

Importantly, this improved outlook for consumers and businesses suggests that momentum in the labor market will likely continue going forward. The economy added more than 3 million jobs in 2014, the highest level since 1999, and the rapid pace of job creation has continued into the beginning of 2015. 

Along with this strong employment growth, we’ve seen significant improvement in the unemployment rate, which has fallen from 6.7 percent in December 2013 to 5.7 percent in January of this year. The current level is less than one-half percentage point away from what many view as the long-run normal rate.