Edge and Odds

The enemy of knowledge is not ignorance, it’s the illusion of knowledge (Stephen Hawking)

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so (Mark Twain)

Edge and Odds

Invest with smart knowledge and objective odds

NEW$ & VIEW$ (25 AUGUST 2014)

Today: Did you miss JACKSON WHOLE? Global manufacturing getting reshuffled. Earnings Watch.
Jackson Hole Theme: Labor Markets Can’t Take Higher Rates Global central bankers led by Federal Reserve Chair Janet Yellen said labor markets still have further to heal before their economies can weather higher interest rates.

The focus on jobs suggests the Fed and Bank of England will tighten policy within a year as their economies show signs of strengthening. By contrast, European Central Bank President Mario Draghi and Bank of Japan Governor Haruhiko Kuroda acknowledged they may be forced to deploy fresh stimulus. (…)

Yellen’s message was “there is room for debate over how much slack, as we say, is in the U.S. labor market,” said former Fed Vice ChairmanAlan Blinder, who now teaches at Princeton University in New Jersey. “But in her view, as she looks at all the evidence, the case is close to overwhelming that there is a significant amount left.”

Blinder said there’s a “vigorous debate” among economists and investors about how sluggish the labor market still is. Its surprising strength suggests “we are closer to Fed liftoff than we were a year ago” and rates probably will be increased early next year, he said. (…)

More Economists See Fed Policy As Too Loose Economists overwhelmingly expect the Federal Reserve to hold off raising short-term interest rates until at least 2015. But nearly a third say doing so would mean the central bank waited too long, a new survey found.

The share of economists saying the Fed should raise rates in 2014 has grown from 25% in the organization’s February policy survey.

In a separate Wall Street Journal survey released earlier this month, 91% of economists said the Fed waiting too long to raise rates was a greater risk than lifting rates too soon.

Euro Down on Draghi Comments The euro sank to its lowest level in nearly a year and European stocks climbed, after ECB President Mario Draghi signaled a shift in emphasis.

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Denmark Seen Cutting Growth Outlook as Russia Dispute Weighs
Bank of Canada won’t follow Fed’s lead on interest rates, Poloz says

“The main thing people should understand is that our policy is quite capable of being fully independent, as it has been these past few years,” Mr. Poloz said in an interview at the annual gathering of central bankers and economists at Jackson Hole, Wyo., over the weekend. (…)

While Mr. Poloz insisted he wasn’t making predictions, he offered several reasons to explain why he would feel no pressure to reflexively follow the Fed. For one, the Bank of Canada has a head start. “It’s worth reminding people that we are at 1 per cent,” Mr. Poloz said. “In this world, that’s a high number when everything is starting at zero.”

The Bank of Canada is seeking to return its benchmark interest rate to a setting that neither stokes inflation nor hurts the economy. Before the crisis, the “equilibrium rate” was understood to be about 4 per cent. The central bank now thinks scars from the crisis have lowered that rate. “When you think the equilibrium number is at some lower rate than in the past, which I do, but I don’t know yet what it might be, then at least we know that we are part way there already,” Mr. Poloz said.

The other factor is the relative strength of the two economies. The U.S. has considerable forward momentum, while Canada still is waiting on a revival in exports and business investment. Stronger demand in the U.S. should benefit Canada’s economy. Monetary policy in the two countries is so similar because of their close trade links: When the U.S. economy grows, Canada sells more exports, which boosts economic growth and puts upward pressure on inflation.

Canada’s loss of market share raises questions about whether stronger U.S. growth will boost Canada’s economy to the extent it has in the past. Mr. Poloz says he is counting on new exporters to replace those wiped out by the recession, creating an incentive to leave borrowing costs low to help those entrepreneurs get started. Canada’s job growth this year is almost entirely driven by part-time positions, while U.S. employers are adding jobs at one of the most impressive rates on record.

“The linkage between their recovery and ours is not mechanical … We still have question marks around ours,” Mr. Poloz said. “We ought to be able to strike a fully independent course determined by these other things quite independently of what theirs are.”

Like Draghi, Poloz wants (needs) a weaker currency. This is not unrelated:

The Rising—and Falling—Stars of Global Manufacturing

(…) According to a new report from the Boston Consulting Group—which for several years has tracked the competitiveness of global producers—the old assumptions of low cost versus high-cost regions is outdated. (…)

Mexico is now cheaper than China and the U.K. has emerged as a low-cost manufacturer relative to most of its European neighbors, according to the BCG calculations. Brazil, meanwhile, has become one of the world’s priciest places to make things; its cost structure is tied with those of Italy and Belgium in the BCG rankings.

The study used the U.S. as a baseline and found Brazil’s average costs went from 3% lower than in the U.S. in 2004 to 23% higher today. BCG notes Brazilian factory wages more than doubled over the decade, while productivity growth faltered. The cost of buying electricity for factories in that South American country have doubled, while natural gas prices have leapt nearly 60%.

Pointing up The clear winners in this global scramble, according to BCG, are Mexico and the U.S. The two neighbors saw their competitiveness improve more than in any other country studied. “Because of low wage growth, sustained productivity gains, stable exchange rates, and a big energy-cost advantage, these two nations are the current rising stars of global manufacturing,” the report said.

THE U.S. KEEPS ON TRUCKING

American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index rose 1.3% in July, following a decrease of 0.8% the previous month. In July, the index equaled 130.2 (2000=100) versus 128.6 in June. The index is off just 0.6% from the all-time high in November 2013 (131.0). 

Compared with July 2013, the SA index increased 3.6%, up from June’s 2.3% year-over-year gain. The latest year-over-year increase was the largest in three months. Year-to-date, compared with the same period last year, tonnage is up 2.9%.

“After a surprising decrease in June, tonnage really snapped back in July,” said ATA Chief Economist Bob Costello. “This gain fits more with the anecdotal reports we are hearing from motor carriers that freight volumes are good.”

Costello added that tonnage is up 4.9% since hitting a recent low in January.

Trucking serves as a barometer of the U.S. economy, representing 69.1% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.

(CalculatedRisk)

MORE ON THE U.K. EMPLOYMENT SURGE

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WEAK COMMODITIES TO KEEP INFLATION IN CHECK

Futures dropped a fifth consecutive week after money managers reduced net-long positions in West Texas Intermediate, the U.S. benchmark grade, by 14 percent in the seven days ended Aug. 19, the Commodity Futures Trading Commission said.

Hedge funds and other speculators cut bullish bets on Brent to the lowest level in two years, data released today by the ICE exchange show. Money managers’ wagers that prices will rise, in futures and options combined, outnumbered wagers that prices will fall by 63,079 contracts in the week ended Aug. 19, the least since July 10, 2012.

Net-longs for WTI slipped by 30,225 to 188,589 futures and options, the lowest level since the seven days ended April 23, 2013. Long positions fell 4.2 percent to 258,246, the least since June 2013. Shorts climbed 37 percent to 69,657, the highest level since December 2012.

Prices sank below $95 on Aug. 19 for the first time in seven months as U.S. air strikes in Iraq helped reverse the advance of Islamic State fighters and the country’s Kurds work to increase oil shipments. Libyan output climbed last week and exports resumed from the port of Es Sider. Refineries in the U.S. typically schedule work for September and October, when demand for gasoline declines after the summer peak, and before consumption of heating fuel picks up during winter. (…)

Iraq’s Kurds are working to quadruple the capacity of their oil-export pipeline within months, an official with knowledge of the situation said, asking not to be named because of policy. The Kurdistan Regional Government, or KRG, more than doubled daily capacity to 300,000 barrels on its link toTurkey as of Aug. 21, and is considering another increase that would allow the line to move 500,000 barrels a day to the Mediterranean port of Ceyhan within as little as three months, he said.

In Libya, production increased to 612,000 barrels a day on Aug. 21, according to Mohamed Elharari, a spokesman for National Oil Corp. Two cargoes have loaded at the reopened port of Es Sider, according to the NOC. The North African country pumped 400,000 barrels a day in July, according to a Bloomberg survey of oil companies, producers and analysts.

The increase in crude supply from Libya and Iraq comes as the EIA forecasts U.S. production will reach 9.28 million barrels a day next year, the highest annual average since 1972. (…)image

EARNINGS WATCH

Earnings season effectively over. Factset:

Of the 490 companies that have reported earnings to date for Q2 2014, 74% have reported earnings above the mean estimate and 66% have reported sales above the mean estimate. The blended earnings growth rate for Q2 2014 is 7.7%. On June 30, the estimated earnings growth rate for Q2 2014 was 4.9%. Eight of the ten sectors have higher growth rates today (compared to June 30) due to positive earnings surprises, led by the Health Care sector.

Earnings Guidance: For Q3 2014, 74 companies have issued negative EPS guidance and 27 companies have issued positive EPS guidance.

This 73% negative guidance is below that of May 22 (75%) and March 21 (84%). It is also substantially lower than that of August 22, 2013 (83%).

S&P’s tally puts Q2 EPS at $29.45 (+11.7% Y/Y), rising to $30.11 (+11.8%) in Q3 and $32.39 (+14.7%) in Q4, all only pennies lower than in previous weeks. Trailing 12-m EPS are now $111.94 (+12.8% Y/Y). They are seen rising to $115.13 after Q3 and to $119.27 after Q4, up 2.8% and 6.5% from Q2’s number respectively.

Inflation having stabilized at 2.0%, the fair Rule of 20 P/E is 18 which gives a target of 2015 for the S&P 500 Index, potentially rising to 2072 and 2150 after Q3 and Q4 respectively.

The earnings tailwind is pretty good while inflation seems to have stabilized at 2%. The market keeps bumping against the “20” valuation level without enough impetus or confidence to traverse it like it normally does (see THREE-STARRED EQUITIES). There has been no “sell in May” and no “summer swoon”. There has also been no “mid-term bust”, so far, which would break a pattern perfect since 1962. These may be comforting as we enter the more volatile months of the year…If you missed it Sunday, maybe you should read JACKSON WHOLE.

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Yield-Starved Investors Take Bigger Risks

Companies with lower credit ratings have raised $186 billion in junk loans so far this year, according to Dealogic. The riskiest tranche of that debt—so-called second-lien, or junior, loans—amounts to $3.3 billion, almost double the amount raised at the same stage last year and the most over the same period since 2007. (…)

If a borrower goes bust, junior lenders are only repaid if some other, higher-ranking lenders, get all their money back. Only unsecured creditors and shareholders are further down the queue. Companies also get better terms—junior loans are less restrictive when it comes to taking on additional leverage than senior debt, while borrowers get more flexible repayment options than bonds.

In exchange for the additional risk, investors get a better return. Interest rates on junior loans are typically 3.5 percentage points higher than senior loans, bankers say. (…)

Dealogic data show that more than half the loans that include junior debt have been used for acquisition financing, with a smaller proportion financing dividend payments. (…)

Losses on junior loans can be steep if a company fails. The average recovery rate on defaulted junior loans in Europe between 2003 and 2013 was 36%, according to Standard & Poor’s. That compares with 76% on senior loans, S&P data show.

 High-Yield Spreads Often Narrow During the Early Stages of Fed Tightenings

Ordinarily, monetary tightening is an attempt to contain the inflationary risks arising from above-trend business activity. Because of the latter, high-yield bond spreads tend to narrow at the start of a series of Fed rate hikes. However, spreads often widen considerably once activity has slowed by enough to shrink profits, threaten liquidity, and materially lift recession risk.

Regarding the four episodes of Fed rate hikes since 1993, the high-yield bond spread narrowed by -26 bp, on average, six-months after the start of monetary tightening, but would then widen by 26 bp and 118 bp, on average, 12- and 18-months after the first rate hike. (…)

Beware of averages, even more so if over only 4 cycles which include two huge bubbles. Looking carefully at Moody’s charts, I would take little solace from the “average” narrowing in spreads early on.

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S&P 500 companies reduce buybacks Corporate treasurers are wary of high stock prices

Companies in the S&P 500 bought back $120bn of shares in the quarter to June 30, down from $159bn in the first quarter, which was the second-largest amount ever, according to preliminary data from S&P Dow Jones Indices.

Market watchdog issues cyber attack warning Iosco chief says hackers have potential to trigger ‘black swan’ event

Greg Medcraft, chairman of the board of the International Organisation of Securities Commissions (Iosco), predicted that the next major financial shock – or “black swan event” – will come from cyber space, following a succession of attacks on financial players.

He warned that there needed to be a more concerted effort to tackle cyber threats around the world as current approaches varied widely. “The feedback we have had from industry in discussions is that there is not a consistency in approach,” he said.

JACKSON WHOLE

Expectations from this year’s Jackson Hole summit were so high that it is appropriate to devote a separate post to what was said, what was heard and what was understood. The media and broker narratives are just as important in gauging the impacts on market sentiment (my emphasis). If your time is limited, please at least read the segment about the U.K. experience. You may be surprised!

Job Woes Muddle Yellen’s View Federal Reserve Chairwoman Janet Yellen pointed to an improving U.S. job market, but was noncommittal about how this progress would affect monetary policy.

(…) The U.S. jobless rate has fallen sharply in the past year, to 6.2% in July, but Ms. Yellen said she was uncertain whether that drop and other improving labor-market measures indicated an economy getting closer to overheating or one still convalescing from the 2008 financial crisis.

Ms. Yellen’s tone has subtly shifted in the past few months. In a March speech she expressed confidence that inflation and wages were being repressed by slack in labor markets—such as part-time workers and long-term unemployed—reasons to keep interest rates low. Her remarks Friday show she is less wedded to this view. (…)

Taking measure of the job market has been complicated, she said, by early worker retirements, rising worker disability enrollments, a shift toward part-time work in the service sector and an assortment of other factors which make it hard to take hiring and jobless rate data at face value. (…)

Yellen Hawks Foggier Rate Future

(…) Now Ms. Yellen also is talking about the possibility of raising rates sooner and at a brisker pace in the case of a “faster convergence” toward the Fed’s labor market and inflation goals.

Additionally, Ms. Yellen noted that the labor market may not have as much slack as stagnant wages might seem to indicate. The inability of some employers to push down wages during the economic slump may have resulted in “pent-up wage deflation” that could hold worker pay down even as the labor market tightens. (…)

Even if the Fed chairwoman isn’t necessarily ready to change her thinking on labor-market slack, she is signaling that it is open to change. And that could cause the Fed to move more quickly, or forcibly, than many investors realize. 

Yellen debuts with sense of balance But shift in stance still raises possibility of earlier rates rise

(…) The main shift in Ms Yellen’s speech was towards a more neutral position on the amount of underemployment in the US economy. She gave more weight to possible structural changes in the labour market and pointed to the danger of raising rates too late as well as too early. (…)

Dan Greenhaus, chief strategist at BTIG, said: “At seemingly every turn, when articulating the view that a given indicator suggests labour market weakness or slack, she balances the observation with an alternative argument.” (…)

Ms Yellen’s bottom line was that the “underutilisation of labour resources still remains significant”, so interest rate rises are not imminent. But her remarks show how debate within the Fed is becoming more balanced, raising the risk of earlier, as well as later rate rises.

High five Wait, wait, it’s not that clear:

Yellen did say, near the end of the speech, that “if progress in the labor market continues to be more rapid than anticipated by the [FOMC] or if inflation moves up more rapidly than anticipated, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target could come sooner than the Committee currently expects and could be more rapid thereafter.”

Briefly stated:

If anything, the speech probably muddied the picture by focusing on the many difficult puzzles that come with tracking movements in inflation and labour markets — and mostly without solving any of them, for the very good reason that they remain unsolvable.

On the one hand, on the other hands:

In discussing the labor market—the confab’s focus—Yellen introduced so many qualifications that, instead of the proverbial two-handed economist, she more resembled a Hindu goddess with a half-dozen or more appendages. (Barron’s)

Pointing up AN ENGLISH LESSON:
Bank of England admits mistake over labour market growth

(…) Investors in the UK have complained about conflicting signals from the BoE about how soon interest rates might start to rise from their record low of 0.5 per cent.

Last year, the BoE said rates would stay on hold at least until unemployment fell to 7 per cent – something it predicted would take more than two years.

“We were wrong,” Mr Broadbent [deputy governor of the Bank of England] acknowledged on Saturday. “Employment grew significantly faster than we’d expected and, despite material rises in participation, unemployment reached 7 per cent only eight months later.” (…)

The end result as Markit reported in early July:

U.K.: Record rise in starting salaries as skill shortages worsen

imageStarting salaries for permanent staff and temporary worker pay rates surged higher in June, according to recruitment industry survey data. Starting salaries rose
at the fastest rate since the late-1990s and temp pay growth hit a near seven-year high as skill shortages worsened amid surging demand for staff.

Recruitments consultants, ranging from some of the largest employment agencies to small head-hunting firms, reported that the availability of candidates to fill
permanent vacancies deteriorated to an extent far greater than anything seen since Markit began collecting survey data on behalf of REC and KPMG in 1997.

The deteriorating availability of staff comes at a time when demand for staff has surged. So far this year, recruitment agencies have reported that companies’
demand for both permanent and temporary or contract staff has risen at the fastest rate seen since 1998, with a slight upturn in the growth of demand seen in June.

Upward pressure on salaries paid to people starting new permanent jobs hit the highest in the survey history in June. The survey measure of average hourly rates paid for temporary and contact staff meanwhile signalled the strongest rise for nearly seven years.

Note here that Mr Broadbent, the BOE deputy governor, said on Saturday that wage growth in the UK have been much weaker than the BoE had expected. While some of this weakness could be unwound later this year, he said, it was also possible that wage growth had adjusted to “a protracted period of low productivity growth”.

Punch Markit raises another possibility:

The weakness of the official pay statistics relative to the survey data may simply reflect the lag between the official data and the survey data. The survey measures
of pay pressures tend to move in advance of official pay data by around eight months (see chart). The survey therefore suggests that official pay growth may pick up in the second half of 2014.

However, even the weakness of the official statistics in April seems at odds with the more buoyant labour market picture. For example, construction companies are reported widespread skill shortages of tradesmen and subcontractors as the sector booms. PMI survey data show that rates paid to sub-contractors are rising at  survey record pace as a result. Official data, meanwhile show that average construction sector pay fell 0.7% on a year ago in April. Back in February it had been rising at an annual rate of 2.9%.

Similarly, although the manufacturing sector is booming to a degree not seen for two decades and taking on staff at a record pace in the second quarter, the official data suggest that average pay growth in the UK’s factories has slowed from 2.8% in February to just 2.1% in April.

Such weakening pay trends do not fit standard models of wage price behaviour. Either something is very different this time around in terms of the way companies set employee pay (that the surveys are not picking up), or the official data may be understating pay growth for reasons that we do not yet understand.

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Scary, isn’t it? See how quickly things can change. Supply is always slow to adjust and when demand gets strong enough, wages need to rise.

Ghost The U.S. construction sector is not really booming at this time but labor shortages are nevertheless reported throughout the trade. Construction worker employment rose 3.6% Y/Y in July. Manufacturing employment was only up 1.5% Y/Y in July but that was up sharply from +0.6% in March. During the last 3 months, manufacturing employment has risen at a 2.2% annual rate. But official stats may also be lagging in the U.S.: Markit’s August flash manufacturing survey was in booming territory:

The seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index™(PMI™) registered 58.0 in August, up sharply from 55.8 in July and the highest reading for over four years. All five components of the Manufacturing PMI had a more positive influence on the headline index than in July, led by a robust and accelerated increase in employment. (…)

Volumes of new work received by manufacturing companies rose at a sharp pace during August (…).

Moreover, job creation picked up since July and the latest rise in staffing levels was the fastest for almost a year-and-a-half.

In case you are wondering if the U.K. economy is growing so much faster than the U.S.:

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If it were to happen that U.S. housing would accelerate along with corporate capex (remember, manufacturing is accelerating), construction would also turn sharply up.

Finally, FYI, what the broker economists are saying (via Zerohedge):

Goldman (Jan Hatzius):

  • We think the tone from Chair Yellen’s Jackson Hole speech was broadly balanced, perhaps slightly more so than in past speeches.
  • She noted both the more rapid-than-expected pace of recent labor market improvement, as well the still-significant level of labor underutilization.
  • She continued to emphasize the “dashboard” approach to assessing the state of the labor market, while at the same time stressing uncertainties in determining exactly how much slack remains in labor markets and how price and wage developments should be interpreted.

Barclays (Michael Gapen)

  • Don’t see Yellen core views as having changed but rather see shift in tone as “normal evolution” as Fed is closer to achieving dual mandate
  • Discussion on wages signals Fed not looking for 3-4% wage growth as precondition to raise rates
  • Maintain view first rate hike to come in June 2015

Scotiabank (Guy Haselmann)

  • Yellen’s speech “was very balanced,” seemed more ambiguous about how much slack there is in U.S. economy
  • “She had more confidence about the amount of slack in the economy before, and today she admitted that it is difficult to gauge. So the speech was a bit less dovish than expectations”

Deutsche Bank (Alan Ruskin)

  • Very balanced nature of Yellen speech a disappointment to those who expected her to live up to dovish reputation
  • Surprised by more hawkish tone on wages; seemed reluctant to use soft real wages as gauge of labor market slack
  • “This was not a speech from a policy maker who was making a strong argument to ‘wait and see the whites of the eyes of inflation’ before reacting”

Brean (Russ Certo)

  • Yellen’s speech hints at “tightening faster” rather than later
  • “My takeaway is that she used to think there was X% of slack in the labor force,” now has revised her estimates “so we now have less than X%”

GMP (Adrian Miller)

  • Yellen “not dovish enough,” bond investors having  “modest temper tantrum”
  • Nod to troubles measuring slack “could be considered somewhat more hawkish than her previous firmer views”

Capital Economics (Paul Dales)

  • Yellen doesn’t seem to have changed view there’s still “significant” slack in labor market
  • If FOMC minutes signaled Fed was 2 steps closer to hiking rates, Yellen’s speech could be seen as taking one step back

CRT (Ian Lyngen)

  • Yellen seems more comfortable with idea that some of labor market utilization may be structural as well as cyclical

Renaissance Macro (Neil Dutta)

  • There’s risk of earlier rate increases, given uncertainty cited by Yellen on conditions that will gave way to rising wages and what that means for inflation
  • Even so, markets are very confident that speed, end- point of tightening cycle will be “slow and low” and that Fed will start in mid-to-late 2015
  • “In some respects, the markets continue to ignore Yellen”
MY TAKE:

Nothing reassuring from this otherwise good speech. Mrs. Yellen remains firm on her views…but is wavering on her convictions and announces flexibility (i.e. uncertainty) in future policies, acknowledging that she may be wrong. She needs more data before arriving at a more definitive conclusion. But she is using a dashboard with so many indicators that, in all likelihood, the dashboard may actually never blink in one single color. Markets may see positively the notion that she seems more likely to err on the dovish side. On the other hand(s), we are some 200 bps below neutral so the risk of getting way behind the curve is not insignificant.

I feel like in a canoe steered by unsure, hesitant skippers about to enter a series of rapids. I instinctively secure my floating device and brace myself for likely bumps and possible encounters with treacherous rocks. I am hopeful that we will make it to the end of the rapids because this is a big and strong enough boat but I don’t know if we will get there healthy enough to continue the journey.

(Frances Hopkins)

Investors don’t fancy uncertainty. Mrs. Yellen has opened the door to never ending discussions, potential bickering and open disagreements among Fed officials. Nothing to boost P/E multiples. Here’s what we got on Friday:

  • Fed’s Lockhart: Unemployment Rate Overstates Job Market Progress. The Fed can likely wait until the middle of 2015 to begin raising interest rates from rock-bottom lows, given a job market that still shows signs of weakness and inflation that remains below central bank’s 2% target, Atlanta Fed President Dennis Lockhart said Friday in an interview with The Wall Street Journal. He said he remains fairly optimistic about the economy’s growth prospects. He thinks U.S. gross domestic product will average around a 3% annual rate coming quarters.
  • Fed’s Williams: Economy Still Benefitting From ‘Strong’ Fed Support—Fox Business Network. San Francisco Fed President John Williams repeated Friday that he believes it will likely be about a year before the central bank ends its ultra-easy money stance. “The economy is still benefiting from strong support from the Fed, and we don’t want to remove that yet,” Mr. Williams said in an interview on Fox Business Network.
  • Fed’s Bullard Points to Late First Quarter 2015 Rate Increase—CNBC. St. Louis Fed President James Bullard told CNBC Friday that the debate within the central bank is now fully centered on when to end its easy-money policies. “We are pretty close“ to achieving the Fed’s job and inflation goals, Mr. Bullard said in the interview. “We’ve really had pretty strong growth, and I think the labor markets are showing that.”

Feb-March, June or Aug.-Sep.

Meanwhile, in Europe, Draghi calls for help
Draghi Signals Shift From Austerity Focus

(…) “It would be helpful for the overall stance of policy if fiscal policy could play a greater role alongside monetary policy, and I believe there is scope for this, while taking into account our specific initial conditions and legal constraints,” Mr. Draghi said in his prepared remarks.

Although Mr. Draghi’s comments didn’t constitute an endorsement of rampant deficit spending to boost euro-zone economies, they nevertheless marked a shift away from years of preaching by ECB officials that governments needed to shrink deficits and undertake economic reforms even during times of economic weakness. (…)

“The risks of ‘doing too little'” and allowing temporary unemployment to become more entrenched “outweigh those of ‘doing too much’—that is, excessive upward wage and price pressures,” Mr. Draghi said. (…)

Recent exchange-rate movements should be “sustained by the diverging expected paths of policy in the U.S. and the euro area,” Mr. Draghi said. The Federal Reserve is widely expected to raise interest rates by the middle of next year, whereas the ECB is expected to keep its main lending rate near zero for years.

“We stand ready to adjust our policy stance further,” Mr. Draghi added, an indication that large-scale purchases of public and private debt, known as quantitative easing, remain an option to keep inflation from staying too low for too long. (…)

I don’t know if Germans will respond positively to Draghi’s plea but I am sure the French got the message loud and clear…

Central bank puts are not was they used to be. Crying face