Economy | timiacono.com - Part 30

Ms. Yellen’s Latest Capitol Hill Appearance

New Federal Reserve Chairman Janet Yellen trudged up to Capitol Hill today to appear before the Senate Banking Committee and share a few thoughts on the U.S. economy and financial markets (note that this was originally scheduled for February 13, but was delayed due to snow). Some of the highlights are captured in this video from Reuters.

Of course, there was nothing new in anything Ms.Yellen said as she once again proved adept at talking a lot without really saying anything that everybody didn’t already know.

I’ve been meaning to look into her accent (she’s obviously from New York, but, being from Pennsylvania, all New Yorkers sound alike to me) and why her manner of speaking is so familiar, as if I’ve heard this many times before, for hours on end when I was much younger.

It didn’t take long to stumble upon Is it me or does Janet Yellen’s accent and intonation make her sound like a female Woody Allen?

Answer: No, it’s no just you – that’s exactly who she sounds like.

An Unaware Fed in 2008

The recently released Federal Reserve 2008 Transcripts and Other Historical Materials have made for some interesting reading for those whose job it is to peruse this material and write about it. It’s taken a few days to pore over it all and the reviews are in (they’re not good).

From Laughing all the way to an economic crash at Marketwatch:

“As somebody who stupidly is just going to contract on a new house because I have to please my wife, I actually thought exactly along these lines and was thinking about pulling out but then decided that my marriage was more important.” — Gov. Frederic Mishkin on falling housing prices and his marriage.

“Lehman’s short-term financing counterparties have generally proved to be patient. The financing backstop provided by the Primary Dealer Credit Facility has been cited by many counterparties as a critical element that has encouraged them to keep their financing lines to Lehman in place.” — NY Fed President William Dudley in June 2008

From that same June meeting in 2008 Fed Career Killers at Macro Business:

MR. FISHER: If Robert Frost will forgive me, the woods are not lovely, and they are indeed deep and dark on the price front. Although the tail risk of economic recession has diminished, I think it still exists. … But the risk of inflation, in my view, has assumed greater depth and breadth since we last met.

MR. LACKER: Even if we avoid outright recession, as now seems probable, the unemployment rate is likely to keep rising for a time.

Of course, as we now know, the recession was already seven months old by that time.

See also, Ben Bernanke’s Biggest Mistake and The Great Recession! It’s right behind you!

Weather Blamed for Existing Home Sales Drop

The National Association of Realtors reported that sales of existing homes fell 5.1 percent last month, from an annual rate of 4.87 million units in December to 4.62 million in January, due in large part to bad weather and low inventory.

Home prices also continued to rise and, combined with higher mortgage rates, these factors kept some buyers away as well during what is normally a very slow time of the year for home sales, requiring large seasonal adjustments that can make the data difficult to interpret.

January Existing Home Sales

The January sales rate was the lowest since July 2012 as first time buyers dropped to a record low of just 26 percent. Only 11 percent of January sales were foreclosures and 4 percent were short sales, down sharply from a year ago, as all-cash sales accounted for  33 percent of transactions. Investors were behind 20 percent of all home purchases last month with 70 percent of these being cash transactions.

Consistent with seasonal price weakness that is to be expected at this time of the year, the median existing home price fell from $198,000 in December to $188,900 last month, however, home values are 10.7 percent higher than a year ago.

Particularly after a winter like this, it’s a good idea to wait until spring to draw any conclusions about the health of the nation’s housing market.

Unemployment Now the Top Problem in U.S.

More evidence that the government’s official unemployment rate (i.e., the one that has been dropping steadily over the last year or so, but primarily as a result of people dropping out of the workforce) may not be a particularly good indicator of the health of the labor market comes via this Gallup poll where jobs vaulted into the top spot on America’s problem list.

Of course, the federal government’s recent tendency not to shoot itself in the foot about every six months has left a lot of people who, previously, thought Washington was our biggest problem looking for other problems and, as indicated below, they’ve settled in on the economy in general and jobs in particular.

Jobs Problem

Interestingly, just prior to the ill-fated launch of Obamacare, healthcare was seen as our number one problem as recently as five months ago and, of course, the government shutdown in the fall caused the spike in the black curve back in October.

Republicans have changed their views dramatically in just the last month as those saying government is our top problem fell from 26 percent in January to 15 percent in February while those citing the labor market jumped from 11 percent to 24 percent.

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