All posts by joel

April Consumer Prices, Housing Starts and Industrial Production

KEY DATA: CPI: +0.4%; Less Food and Energy: +0.2%/ Starts: +6.6%; Permits: +3.6%/ IP: +0.7%; Manufacturing: +0.3%

IN A NUTSHELL: “With inflation accelerating slowly, housing rebounding slowly and manufacturing activity improving slowly, it is clear the economy is picking up steam slowly.”

WHAT IT MEANS: The Fed’s dual mandate means it has to target maximum employment at stable prices i.e., an unemployment rate in the 4.75% to 5% range and inflation at about 2%. We have pretty much been at the full employment target for several months and now inflation is making its way to the 2% rate. Consumer prices rose sharply in April led by a jump in energy costs. With oil prices steadily increasing, we should be in for some additional solid gains for a while. The rise in inflation was not just gasoline. Prices for food, medical care, shelter and transportation services rose as well. There were also a number of categories, though, where costs did decline, such as clothing, vehicles and, most importantly, cupcakes. In other words, there is an upward trend in inflation, but it is not across all categories.

On the housing front, conditions did improve nicely in April. Housing starts surged and permit requests rose solidly. But the level of construction is still well below the recent peak recorded in June 2015. Strangely, the problem has been in multi-family activity. With the rental market so strong, it was expected this segment would lead the way – and it did in April. But for the first four months of the year, multi-family starts were below the same period last year. And that was true for permit requests, so this segment seems to have stalled a bit. Looking forward, starts exceeded permits for the past three months, so don’t expect any major acceleration in building.

Manufacturing production rebounded in April as well, but the story is the same here. We get one negative month, one flat month and one positive month, and the cycle repeats. This sector is not showing a major upturn, though it does look like the declines could be over. The summer driving season is projected to be really strong and that could lead to additional output of gasoline. As for energy production, prices probably need to rise a little more before wells start coming back on line, but maybe the shut downs will cease.

 MARKETS AND FED POLICY IMPLICATIONS: Inflation is accelerating, but not at a rapid rate. Over the year, headline consumer costs were up 1.1%, which is still below target. However, one year ago, prices were falling. Excluding energy, though, prices were up 2%. At current levels, energy turns positive in September and the yearly rise accelerates for six months. In other words, by the fall, even the headline number should be above the Fed’s target. Excluding food and energy, the more common comparison, prices were up 2.1% over the year, marking the six consecutive months that core consumer inflation was at or above the Fed’s 2% goal. In other words, the Fed’s dual mandate is within its grasp. But Fed Chair Yellen is likely to hang on to the mediocre growth in housing and manufacturing to argue that a rate hike is not yet needed. And given that real earnings actually declined in April, as prices rose faster than wages, she can also say that wage pressures are not yet critical. So, these reports may hint that the Fed will have to do something in a few months, but the data don’t require that a rate hike occur in June.

April Retail Sales and Producer Prices

KEY DATA: Sales: +1.3%; Excluding Vehicles: +0.8%; Core: +0.9%/ PPI: +0.2%; Less Food and Energy: +0.3%

IN A NUTSHELL: “Reports of the consumers’ demise appear to be premature.”

WHAT IT MEANS: It’s been an ugly year for a lot of retailers and that showed up in the first quarter earnings numbers. But some hope may have appeared in today’s retail sales report. Households went out and hit the stores pretty heavily in April, even when you take out the rebound in motor vehicle sales. Almost every major category was up sharply. The only group that experienced a sales decline was building materials. However, those stores had been booming during the first quarter of the year and the year over year rise is still the highest of any of the categories except Internet sales. General merchandise demand was flat and restaurants saw a more modest increase, though that was good news given the declines they had suffered. So-called “core” retail sales, which exclude vehicles, gasoline, building supplies and food services were up sharply. The core closely follows the consumption number in the GDP, so they are looked at as an indicator of consumer demand.  

On the inflation front, wholesale prices rose moderately as goods costs led the way. It’s funny how rising energy prices changes the picture of inflation, isn’t it? Not really. By the fall, we could be seeing year-over-year energy price gains rather than declines and while we are talking producer prices here, those quickly make their way into consumer prices. That is also true on the food side and the drop in wholesale food costs is good news for consumers. An interesting change is the deceleration in services inflation. Prices did rise, but modestly. Service inflation, which is nearly two-thirds of producer costs, has been decelerating this year. When you look at the details, and this report has about fifty different special indices, there are no categories where inflation is high.

MARKETS AND FED POLICY IMPLICATIONS: Has the consumer decided that it is time to spend again, or are was the April uptick just a bump in the mediocre growth trend? I think it is real. Incomes are growing solidly and household balance sheets are in good shape. The job market is tight and people are quitting their jobs again, a sign of confidence. Consumer confidence seems to be soft, though, and it is unclear exactly why that is the case. My guess is that this is just one of those times where the data are strange and as we go through the rest of the spring and summer, we will see households actually spending their funds. That is, April is likely the start of something good. For the Fed, though, it’s not the start but the follow through that matters. One month is not enough for anyone to say happy days are here again for retailers. However, producer inflation is no longer declining and while it is hardly a worry, the trend is up. All-in-all, today’s reports tell the Fed that conditions are not nearly as soft as the GDP data seemed to indicate and while they have time when it comes to inflation, they may not have as much time as they thought as well.  

April Jobs Report

KEY DATA: Payrolls: +160,000; Private: 171,000; Unemployment Rate: 5% (unchanged); Wages: +0.3%

IN A NUTSHELL: “Job growth is not too hot, not too cold but not just right.”

WHAT IT MEANS: The economy has grown by just over a 1% annualized growth rate during the past six months, but job gains during that time frame were strong – probably stronger than would be expected given the economy. What has worried economists is that firms would not be able to sustain all that hiring, so the April increase in payrolls was a disappointment. But is it a warning sign? Maybe not. The last time job gains were this modest was last July, but that report was followed by six months of solid increases. One number doesn’t mean much. Second, it’s always about the details and those were mixed, not soft. On the positive side, manufacturing stopped its steep slide and actually added a few jobs. Health care was solid as was leisure and hospitality, while there were plenty of professional services positions were added. On the negative side was the government. Not surprisingly, the postal service continues to shrink and strangely, there were layoffs in local education. Why April? Got me. The energy sector is still in free-fall while retailers cut, rather than added employees. The retail decline happens periodically, but it is something to watch.

But the really good news for workers, and the issue for the Fed, was that wages rose sharply and the gains are accelerating. In addition, hours worked were up and that implies that income growth in April was strong. One of the reasons wage gains are picking up is that the unemployment rate is near full employment. Yes, it remained at 5%, and yes, the labor force shrunk, but it is up 1.2% over the year. That is well above a demographically supportable, sustainable rise. What appears to be happening is that people are indeed coming back into the workforce, as would be expected when the labor market tightens. A one-month decline in the labor force or the participation rate means nothing as both are rising over the year.

MARKETS AND FED POLICY IMPLICATIONS: This was one of those reports where the headline number and the details were largely in synch. There were good parts and weak parts but it was mezza mezza overall. The level of job gains, while mediocre, is still large enough to stabilize if not keep the unemployment rate slowly falling. There are clear signs the tight labor market is causing firms to finally pay up for workers, and that really is the story here. Workers are starting to quit again and businesses continue to complain about their inability to find suitable workers. That raises the question whether the soft job gains in April was the result of a lack of demand or a lack of supply. If you cannot the workers you need, you cannot hire more workers. That translates into higher wages in order to retain workers. Chair Yellen has made the argument that soft wage gains is an indicator of a labor market that has yet to reach full employment. This report doesn’t force her to say that full employment is here, but it brings us much closer to that point. Even if the May report duplicates the April wage increase, I don’t think a rate hike at the June 14-15 meeting is likely at all. But unlike others, I believe the July 26-27 one is a possibility. If both the May and June reports contain strong wage gains, Chair Yellen will have problems supporting her stand. Also, as I have argued before, she wants to show that all meetings, not just ones with press conferences, are options for rate hikes. The July meeting would be a suitable one to prove her point. As for the markets, a report that is less than expected on job growth but more than expected on wage growth is a real conundrum. Maybe the less than stellar earnings numbers will remind traders that if demand is not good, earnings will not grow strongly. Instead, they should hope for a good economy, even if it means rising rates, rather than a weaker one that implies no rate hikes.

Layoffs, Jobless Claims, April Jobs, Productivity and Help Wanted Online

KEY DATA: Layoffs: 65,141/ Claims: up 17,000/ ADP Jobs: 156,000; Productivity: -1%; Labor Costs +4.1%/ Help Wanted: +39,000

IN A NUTSHELL: “The labor market is tight, but the tightening process may be slowing.”

WHAT IT MEANS: If Janet Yellen is laser-focused on the labor market, the data released over the past two days don’t indicate that conditions are firming sharply. Of course, tomorrow we get the jobs report, so everything could change. But until then, let’s review the recent data, starting with today’s the jobless claims report. While there was a pop in the number of people filing for unemployment insurance last week, that is not unusual. These data bounce around a lot. The four-week average is still at a level that says firms are doing everything they can to keep workers. That said, Challenger, Gray and Christmas reported an April surge in layoffs, led by the ever-shrinking energy sector. The total for the first four months was the highest since the 2009. Before you panic, the 2009 total was nearly three times this year’s number. Also, we have no idea where or when or even if they will occur. Still, firms seem to be announcing cut backs at a surprisingly high pace given the unemployment claims numbers and yesterday’s report by the Conference Board that online want ads rebounded.

Yesterday, there were a number of labor market reports. ADP’s monthly reading of April job gains came in below expectations as mid-sized businesses added workers at a lower than typical pace. However, the level was the same as the July 2015 number and job growth was very solid during the second half of last year. We may get a lower than expected number tomorrow.

But for me, the biggest eye-opener was the productivity and costs report. I have argued that the monthly hourly wage number is worthless, even if the markets want to make believe it contains useful information. I prefer to look at the more complete compensation data that is contained in the productivity and Employment Cost Index reports. Productivity continues to falter as firms are hiring but output is largely going nowhere. With compensation gains holding fairly steady, labor costs surged.  

MARKETS AND FED POLICY IMPLICATIONS: The labor market is tight but it doesn’t seem to be in the grips of a major shortage situation just yet. Firms are doing everything they can to keep their workers. Challenger, Gray and Christmas indicated companies are resorting to stay, not exit interviews. Instead, they might try raising pay, but of course that still is a non-starter for most firms. And that is the point. No matter how tight the market may be, companies are still willing to go without new hires and limit pay increases. For me, that is the biggest reason productivity is so weak. Let me say this again, wage increases drive productivity not just productivity drives wage increases. This is a simultaneous process that firms seem to think is a one-way relationship – productivity first, wage gains, maybe, second. Until workers have reasons to work harder (i.e., greater compensation), they will find ways not to work harder. That is human nature and failing to understand that will keep productivity and earnings down. But the Fed will worry about compensation growing slowly and say the labor market is not tight. And the Fed will see productivity is weak and say the economy is at risk. What the members will miss is the interaction of the two and by doing so, miss what are some of the real problems in the economy.

April Supply Managers’ Survey and March Construction

KEY DATA: ISM (Manufacturing): -1 point; Orders: -2.5 points; Hiring: +1.1 points/ Construction: +0.3%; Private: +1.1%

IN A NUTSHELL: “The manufacturing sector is expanding, but just barely.”

WHAT IT MEANS: If you were hoping for a rebound in the manufacturing sector, well don’t hold your breath. While it looks like the sector is still expanding, it is not doing so at a rapid pace. The Institute for Supply Management reported that activity slowed a touch in April as order growth decelerated. It should be noted that demand remains quite solid. It’s just that the pace of gain was just not as rapid last month. There was a pick up in export orders, a possible indication that the problems in the rest of the world are easing. Or, it may be due to the declining dollar. Regardless, it was nice to see that export demand was accelerating. Production grew slower and order books expanded at a modest pace. In other words, the sector is moving forward but we have the tortoise, not the hare in this race. One sign that Friday’s employment report may be okay was the rise in the employment index. While it didn’t show that payrolls were increasing, it did hint that the large decline in manufacturing employment posted in March may not be repeated in the April data. Also, inventories shrank for the tenth consecutive month. It is not clear if the inventory rationalization process we have been seeing is over, but that is a fairly long time for inventories to contract. I suspect we are nearing the end of that process, which would help with second quarter growth.

Construction activity was up in March led by a solid rise in private sector residential and nonresidential building. On the other hand, the government did its best to slow the economy down as construction spending was off sharply during the month.

MARKETS AND FED POLICY IMPLICATIONS: March was not a great month for the economy and April didn’t start off that well either. Still, this week we get a number of key labor market numbers. The biggie, of course, is Friday’s employment report.  But I am very interested in Wednesday’s productivity and labor costs numbers, which could show that worker expenses accelerated sharply in the first quarter. Chair Yellen is a big believer in labor costs as an indicator of future inflation, so watch these data closely. If we see rising labor costs in the Friday’s hourly earnings numbers as well, that could be a warning to the Fed Chair that the slack in the labor market that she has talked about may be disappearing. Tomorrow’s vehicle sales numbers should tell us if the March decline was just an aberration or a sign of soft times ahead. I expect a sharp rebound in vehicle purchases and that could set us up for a very good second quarter consumption number. So today’s manufacturing report, though not a good one, shouldn’t worry the markets a whole lot.

First Quarter GDP and Weekly Jobless Claims

KEY DATA: GDP: +0.5%; Consumption: +1.9%; Income: +2.9%; Core Consumer Inflation: +2.1%/ Claims: +9,000

IN A NUTSHELL: “The economy eked out a gain in the first quarter but with incomes rising solidly, we should see better growth in the quarters to come.”

WHAT IT MEANS: Phew! We dodged the negative bullet. Whoopee! Okay, a growth rate of less than one percent is not something to be happy about and no one is. But let’s discuss the details first to determine if this is a turning point that leads to better growth or a report that warns a recession is coming. Consider consumer spending, which was okay, at best. The big problem was durable goods, which was basically flat. A “weaker” than normal March vehicle sales number was the reason. On the other hand, services demand, which I see as a true indicator of consumer attitudes, remains strong. Looking forward, incomes, especially wages and salaries, are growing at a pace that should fund solid, if not strong consumption. That could happen even if the savings rate continues to filter upward. On the investment side, it was largely the energy complex cutbacks that kept investment down. Residential construction was a major positive for the economy, though that may add less going forward. One other factor points to a better growth rate ahead: The inventory adjustment process, which has restrained growth for the three quarters, looks to be largely over. The inventory build was more “normal”, even if it did subtract one-third percentage point from growth. The trade deficit widened, not surprisingly, as the world economic problems and the strong dollar led to a decline in exports. Imports were largely flat. Finally, sequestration is doing its job and federal spending for defense items was down. Looking at inflation, the top line consumer inflation rate rose minimally. Excluding food and energy, it increased at a 2.1% pace in the first quarter, just above the Fed’s target, and by 1.7% over the year. If oil remains in the $45 per barrel range, the huge year-over-year declines we have seen in energy costs will disappear by fall. That would move the top line number close to the Fed’s target as well.

Jobless claims rose last week. Since the previous week’s level was the lowest on record, when adjusted for the labor force, that was hardly an issue. The labor market is tightening further and that bodes well for income growth, which we saw in the first quarter was already strong.  

 MARKETS AND FED POLICY IMPLICATIONS: The economy essentially stalled in the first quarter, but that doesn’t mean it is faltering. If oil prices stabilize near where they are currently, or even rise modestly, the massive cutbacks in the energy sector would dissipate. Households have the income to spend and they are likely to do that. With the dollar retracing some its rise, the negative effects on exports should ease as well. For all these reasons, growth is likely to accelerate going forward. Of course, Janet Yellen wants to see it before she will believe it, and yesterday’s FOMC statement made it clear that weak growth is a major factor in the Fed’s thinking. But for me, the issue is inflation. Right now, it is so low, at least on the headline number that the Fed has all the freedom it needs to keep rates at current levels. But wage gains are accelerating and with productivity gains largely nonexistent (and probably negative in the first quarter), businesses may need to recoup their rising labor costs by raising prices. It would not take much for the inflation rate to go above the Fed’s target of 2% if the energy price restraint disappears and business increase prices even modestly faster than they have. This report is why the Fed signaled a June rate hike is likely off the table. But it also contains enough information to suggest that a rate hike this summer remains a possibility.

April 26, 27 2016 FOMC Meeting

In a Nutshell: “Moderating economic growth and consumer spending keep the Fed on hold.”

Rate Decision: Fed funds rate range maintained at 0.25% and 0.50%

The FOMC members came, they talked, and they didn’t do much other than signal that they will continue to do not much for a while.

Going into the latest Fed gathering, there was some uncertainty over what the Committee would signal. Was Chair Yellen’s dovish tone going to hold sway or would the members try to signal that a rate hike could be on the table in June? Well, those who were worried that interest rates could go up, shouldn’t have been concerned.

Right off the bat the statement noted that “growth in economic activity appears to have slowed” and “growth in household spending has moderated”. Yes, there were some comments about income gains holding up and consumer sentiment being high, but weakening growth and softening household demand are not generally considered circumstances where you would expect to see rate hikes.

There was also no statement that the risks to the forecast were equally balanced. I guess they just didn’t want to say that what the risks were, and that failure to discuss where the economy might likely go is another indication that the members are uncertain where the economy might go. And uncertainty about how strong the economy might be going forward doesn’t breed rate hikes.

Today’s statement was probably a little more dovish than most people expected. Chair Yellen has been yelling that she was willing to wait longer than others before raising rates and if anyone doubted it, it is now clear that she has the biggest voice in the room. There was only one dissent and that too was a bit of a surprise. She is doing a good job in herding the cats on the Committee.

Okay, what does this all mean? We still have two more jobs reports and a slew of other labor market, inflation and economic data coming out before the next meeting on June 16-17. But those reports, as well as data from Europe and Asia, will have to be really strong for the Fed to consider raising rates at that meeting. The opportunity after June would be July 26, 27. I actually believe that is a possibility despite the fact there is no press conference afterward. Chair Yellen has made it clear that all meetings are live meetings, whether or not there is a press conference scheduled. I suspect she will take the first chance to prove that point. July could be it, but we need a whole stream of solid economic and inflation numbers to make that happen.

(The next FOMC meeting is June 14-15, 2016.)

March Durable Goods Orders, April Consumer Confidence and Nonmanufacturing Activity and February Housing Prices

KEY DATA: Orders: +0.8%; Capital Spending: 0%/ Consumer Confidence: -1.9 points/ NonManufacturing Activity: -0.4 points/ Housing Prices: +0.4%

IN A NUTSHELL: “March went out like a lamb and April was baaad as well.”

WHAT IT MEANS: If the Fed was hoping for a spring rebound, it will have to wait a little longer. The recent data have hardly been great and today’s numbers continued that trend. Durable goods order rose solidly in March, but were up less than expected. Part of that may have been due to the oddity that Boeing reported a sharp increase in orders but the government had civilian aircraft demand falling. Don’t ask me why, I just don’t know. The rest of the report was mixed. Orders for machinery and communications equipment were up while demand for computers, electrical equipment and motor vehicles declined. Private sector non-aircraft capital goods orders were flat, which was disappointing given they had cratered in February and a bounce back had been expected. Order books are not filling, so don’t expect any great surge in production anytime soon.

The Philadelphia Fed reported that activity in the non-manufacturing portion of its regional economy expanded slightly slower in late March and early April.   Yet this was not a bad report. Hiring, the workweek and wages and benefits all were up solidly, indicating that activity is solid. It is also pointing to a growing labor shortage in the Mid-Atlantic area. In addition, expectations, especially about business activity, were up solidly, pointing to growing confidence that the region’s economy should do well in the months to come.

The Conference Board reported that consumers were a touch less optimistic in April. It was interesting to see that the current conditions index rose nicely, but expectations dropped even more. Maybe everyone is just depressed about the primaries. I don’t know.

Finally, home prices continued to rise, as the S&P/Case Shiller national home price index moved up solidly in February. Gains were across the nation, with Portland and Seattle posting double-digit increases over the year. Still, the rise is slowing, which is good news for potential buyers.

MARKETS AND FED POLICY IMPLICATIONS: The FOMC begins its two-day meeting today and none of the numbers released today should change anyone’s thinking about the condition of the economy or whether rates should be increased. The really interesting reports come out later this week. It is very likely that Thursday’s GDP report will show that there was tepid economic growth in the first quarter. However, on Friday, the Employment Cost Index release could indicate there was a sharp acceleration in wages and salaries. We saw a hint of that in the Philadelphia Fed’s survey. Chair Yellen is watching labor costs as a key indicator of labor market tightness and the Employment Cost Index is one of the better measures of those pressures. Labor costs had cooled, surprisingly, during the second half of 2015, but I think that was not the case early this year. If that forecast is accurate, eyes will turn to next week’s jobs report and wages. While I think the hourly wage number is largely meaningless, it is viewed by the markets as containing some information. That too could be show accelerating wage pressures. But until we see that labor costs are indeed on the rise, Chair Yellen will be able to say that there is still a lot of room for the Fed to stand pat – which is what I expect tomorrow’s statement to indicate.

March Leading Indicators, April Philadelphia Fed Manufacturing Index and Weekly Jobless Claims

KEY DATA: Leading Indicators: +0.2%/ Phila. Fed: -14 points: Expectations: +13.4 points/ Claims: down 6,000

IN A NUTSHELL: “The economy is continuing to expand slowly and the labor market is tightening, but the manufacturing sector remains weak.”

WHAT IT MEANS: Next week the Fed meets and will evaluate what is going on. So, what is going on? Not much. The Conference Board’s Index of Leading Indicators rose in March after having declined the previous two months. On net, this report points to a continued expansion in the months to come, but hardly a break out into strong growth.

On the manufacturing front, the Philadelphia Federal Reserve’s survey of manufacturers took a steep dive in April. Just about every component was down sharply from its March level. Normally, that would be a warning sign that something not so great was going on in the manufacturing sector. However, that might not be the case. While current conditions cratered, optimism improved sharply. Respondents were more optimistic about future demand and as a consequence, expect to hire more people and work them longer. This improving outlook for the future seems to indicate that the current slowdown may not last long.

On the labor front, we have a totally different picture. Unemployment claims dropped to their lowest level in nearly 43 years. Adjusting for the size of the labor force, it was the lowest level ever. Firms are holding on to their workers as tightly as they ever have, a clear sign of growing labor shortages.

 MARKETS AND FED POLICY IMPLICATIONS: Yes, the economy is expanding. Yes, manufacturing seems to be lagging. But can we really say that economic activity is faltering if the labor market is still tightening? Probably not. I say probably because unemployment tends to be a lagging indicator, though more recently the length of the lag has likely shortened. The economy starts to turn before firms figure it out, both on the upside and the downside. Regardless, next week’s FOMC meeting will not be interesting as far as its outcome: There will not be any change in rates. But the statement will matter. Since there is no press conference or dot chart or forecast estimates, the parsing of the words in the statement will be all we have to go on. I don’t expect any major change from the previous statement, since the economy has not rebounded sharply enough to cause anyone to say growth is accelerating. Thus, the members could save some money by phoning it in. Okay, I am kidding. There will be some dissent as some members are still leaning toward moving sooner rather than later, but we will not know about their views until the minutes come out a three weeks later. As for the markets, today’s reports, other than the surprisingly low claims number, should not have a major impact on investor thinking. We are still in earnings season and oil and Europe and just about everything other than fundamental economic data should drive decisions.

March Existing Home Sales

KEY DATA: Sales: +5.1%; 1-Familly: +5.5%; Condo: +1.8%; Prices (Year-over-Year): +5.7%

IN A NUTSHELL: “Home sales rebounded in March, but the lack of inventory is likely to keep gains down for some time to come.”

WHAT IT MEANS: Housing is dominating the data this week and the mixed results don’t point to a vibrant market. Yesterday, we saw that housing starts were soft, which came on top of a stagnant homebuilders’ confidence. Today’s existing home sales numbers were better than expected, but really not that great. Sales rose in March quite solidly, rebounding from a down February. Single-family activity was somewhat stronger than the condo market. The increases were across the nation, with every region reported a rise in closings. Still, we are below the sales pace posted in December and January and the rise from March 2015 was a modest 1.5%. Condo sales were actually down from last March, though it is not clear why. The big problem remains the supply of homes on the market. There are only about a 4.5 months supply at the current sales pace. That is way too low. With supply low, it is not surprising that price gains remain quite strong.

MARKETS AND FED POLICY IMPLICATIONS: The housing market is doing okay, and I mean just okay. There is some hope that sales may accelerate. Demand for high-priced units was soft in March. That may reflect the uncertainty created by the stock market volatility we saw in January and early February. Since these data reflect closings, it may be a few more months before upscale demand rebounds. With the equity markets coming back nicely, an upturn in the upper end of the market is likely. Until then, we can only forecast a better market and that is something many Fed members are unwilling to bet on. As for the markets, stronger than expected economic data are usually not viewed positively by traders, and this report was a little higher than projected. But it was mixed, so I don’t expect any major reaction to these numbers, especially give it is earnings season.