U.S. Economic Highlights Don Rissmiller Strategas Research Partners 212-906-0134 drissmiller@strategasrp.com
Data updated: April 13, 2015
Three Key Macro Issues • Global recoupling in a “good” way. • Tailwind from lower energy prices & lower interest rates (with a lag). • Monetary policy divergence: Fed needs to normalize.
Base Case: Economic Global Recoupling • • • •
No China hard landing. Euro-area economic data improving. Japan deflation ending? U.S. growth remains solid after 1Q soft patch. – Housing – Government
U.S. Housing Showing Pent-Up Demand
U.S. Govt a Source of Growth: Major U.S. Policy Risks in the Rearview Mirror • U.S. Debt Ceiling – still one more fight? • Government Shutdown • Fiscal Drag
Bottom Line: Politicians respond to polls the way market participants respond to prices • Polling results were weak around government brinkmanship. • Suggests less risk moving forward. • Transition to a focus on the private sector. – Good news: wages heading higher.
Wage Growth has Started to Pick Up Employment Cost Index: Compensation: Civilian Wor ker s % Change - Year to Year
SA, Dec-05=100
6
6
5
5
4
4
3
3
2
2
1
1 85 90 95 00 05 Sour ce: Bur eau of Labor Statistics /Haver Analytics
10
15
Unemployment Doesn’t Go “Flat”
Labor Force Participation Declining
Fed Funds Rate Odd on Both “X” and “Y” Axes Feder al Funds [effective] Rate % p. a. 12
12
10
10
8
8
6
6
4
4
2
2
0
0 85 90 95 00 05 Sour ce: Feder al Reser ve Boar d /Haver Analytics
10
15
Even the First Fed Rate Hike Will Be Notable After this Flat-line Feder al Funds [effective] Rate Differ ence - Year to Year
% p. a.
4
4
2
2
0
0
-2
-2
-4
-4
-6
-6 85 90 95 00 05 Sour ce: Feder al Reser ve Boar d /Haver Analytics
10