The market hardly needed another piece of evidence to support the notion that the economy remains bubbling. Bonds, however, are another story, which we’ll get to in a minute. Meanwhile, Fed Chairman Ben Bernanke debuted his Congressional testimony act yesterday and added to the general suspicion that growth is still the path of least resistance for the foreseeable future, accompanied by all the usual risks for monetary policy that come with such a view.
The Federal Open Market Committee’s “central tendency” forecast of GDP growth in 2006 is about 3.5%, and slightly lower for 2007, according to the Monetary Policy Report Bernanke submitted to Congress yesterday. That compares with a 3.1% rise in GDP for 2005. Consistent with that outlook is FOMC’s expectation that the jobless rate will decline a bit in 2006 from 2005’s 5.0%. For the moment, that guess on the jobless level looks like a safe bet in light of the fact that January’s unemployment rate dropped to 4.7%.
Beyond Bernanke, there’s no shortage of statistical props for arguing that the economy’s humming along nicely. That includes this morning’s release of initial jobless claims for the week through February, which are running below 300,000 for the fifth consecutive week. Meanwhile, continuing claims for jobless benefits remain impressive too, with the fifth straight week of below-the-2.6 million level. Together, the two trends are putting labor-market pessimists on the defensive. As Nomura Securities chief economist David Resler writes from New York today, “As much as job and income growth are the key ingredients to a healthy consumer, the outlook remains relatively bright, peering into 2006.”