Today’s economic reports look strikingly bipolar. First the good news: retail sales rose a healthy 0.7% in November vs. the previous month—a bit faster than The Capital Spectator’s average econometric forecast but in line with the consensus outlook. This morning’s update on initial jobless claims is another story. Filings for unemployment benefits surged 68,000 last week to a seasonally adjusted 368,000—the highest since early October. What’s going on here? Should we cheer, cry, or take the middle road and assume that we’re in another period of mixed messages and rising uncertainty? For some perspective, let’s dive into the numbers.
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It seems that crowd is increasingly inclined to expect that the Federal Reserve will begin to slow its bond-buying program next week, at the conclusion of its FOMC policy meeting on Wednesday, Dec. 18. Yesterday’s sharp drop in the US stock market is one sign that the Mr. Market is preparing for a change in the monetary weather in a few days. But is this fate? One reason for remaining a skeptic: inflation, which still looks quite low relative to the Fed’s target.
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