Economy | timiacono.com - Part 30

Deer Panicked by Hawkish Tone of Fed?

As expected, the gathering of Federal Reserve officials in Washington yesterday resulted in no change to monetary policy, though some analysts think the policy statement was more hawkish. (Before anyone gets carried away in interpreting slight changes to their latest policy statement, it’s worth remembering how badly everyone misread the Fed last month).

But, in Cincinnati, OH, there was excitement at the Fed as the local deer population may have already concluded the central bank will taper their money printing effort sooner, rather than later, one of these animals charging head first into the local Fed branch.

The poor deer had to be euthanized after severely injuring itself (be careful not to watch the video too closely), a fate that the U.S. economy and asset markets will hopefully avoid.

Declining Auto Sales Push Retail Sales Lower

The Commerce Department reported(.pdf) that retail sales fell 0.1 percent in September after a gain of 0.2 percent in August as a sharp decline in auto sales more than offset other gains. Excluding autos, sales rose 0.4 percent after a gain of 0.1 percent the month prior.

On a year-over-year basis, overall retail sales rose just 3.2 percent, equaling the level of March that marked the weakest annual rate since August 2010.

Retail Sales

Autos sales fell 2.4 percent after surging 5.8 percent the month prior and, along with clothing store sales (-0.5%) and miscellaneous store sales (-1.2%), this was one of only three major categories to indicate declines.

Sales at grocery stores and restaurants/bars rose 0.9 percent to lead the advancing categories as other gains were more modest, not nearly enough to offset the big decline in sales of trucks and automobiles.

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The Farmland Bubble and Missing Workers

Here are a couple of charts that, at first glance, don’t seem to have much in common but, combined, they add important context to the U.S. economy, offering more evidence of the growing divide between the rich and poor.

First, from a story at Marketwatch comes this graphic about a U.S. asset bubble that is even more durable than the Canadian housing bubble – farmland.

There are many reasons for rising farmland prices and easy money is at or near the top of the list, however, this characteristic of the modern day U.S. financial system clearly (surprise!) has a much bigger positive impact on asset prices than jobs.

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You May as Well Stay in School…

More evidence that the dramatic rise in student loan debt will probably end very badly someday comes via this CNN/Money report on America’s youth who, increasingly, have opted to stay out of the labor market. A weak economy has been an important factor in recent years but, as shown below, other secular trends are well established, so much so that you have to look hard to pick out where the 2008-2009 recession occurred.

Young Americans in the Labor Force

More students attending college and pursuing advanced degrees is another key driver of this trend as 25 percent more Americans are seeking higher education today than in 2000, about double the population growth during that time. Amid soaring college costs, access to student loans has remained the easiest type of credit to get in the U.S. and this has facilitated the big increase in college attendance.

Per the latest Labor Department data for Americans age 25 and older, the jobless rate falls from 10.3 percent for those with no high school degree to just 3.7 percent for those with a bachelor’s degree or higher, so, there is a strong case to be made for higher education, however, that education now comes with a much higher price tag.

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