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On Jobs, Import/Exports and Fed Reserve Plans


Thursday, January 12, 2017

New data on Initial Jobless Claims and Import/Export Prices were released before the bell today, and both speak favorably on our current economic condition. Jobless claims reached 247K for the week, Import prices rose 0.4% month over month and Exports rose 0.3%.

Although jobless claims rose 10K from the upwardly revised 237K the previous week, this figure remains well within an historically strong range, as well as the second straight week under 250K claims. Continuing claims, which we had seen rising from sub-2 million several weeks ago, fell from just under 2.12 million two weeks ago to just under 2.09 million last week. All of this is consistent with the strong U.S. labor market numbers we’ve seen in the monthly BLS non-farm payroll reports.

Import prices, while up on the month, are still down 0.2% year over year. Exports reversed course from a -0.1% read in November. These figures come as new developments about import and export taxes is taking place as the Trump administration takes shape. The basic idea is that imports will be taxed while exports won’t be. Clearly helpful to the American farm belt economy, this measure also looks to be an arrow in the quiver of repatriating U.S. resources.

However, this winners/losers scenario could result in the dollar rising as much as 20%, which would negate much of the positive aspects of this policy. Considering that globally we remain in a low interest rate environment, sending the value of the U.S. dollar skyrocketing may create future headwinds that the market — with a Dow now fewer than 50 points from that coveted 20K level — may not have fully factored in yet.

This evening, Fed Chairwoman Janet Yellen will host a town hall meeting in Washington DC, in which she will address educators. Presumably she will also speak to current economic conditions and the likelihood of Fed interest rate hikes this year. Her appearance will cap a day where we hear from 5 Fed presidents, a week and a day before Donald Trump is sworn in as president.

St. Louis Fed President James Bullard said he doesn’t see any need to rush to raise rates in the near-term. Even as Trump solutions to economic stagnation — deregulation, corporate tax reform, etc. — are implemented, he sees these measures as more deeply affecting the 2018 economy, and less in 2017.

On the flip side, Philadelphia President Patrick Harker sees three rate hikes this year, stating that the U.S. economy is “displaying considerable strength.” In the interest of keeping inflation and jobs growth within their desirable ranges — which most analysts would agree we’ve currently achieved — it’s important for interest rates to reflect current realities.

Mark Vickery
Senior Editor

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