Economy | - Part 4

The Labor Department reported that U.S. employers added to their payrolls at a solid pace in May, paced by a big increase in the health care industry, and the unemployment rate was unchanged at a five-and-a-half year low of 6.3 percent.

Employment returned to pre-recession levels with the rise of 217,000 in payrolls last month that was in line with analysts’ estimates and this comes after a gain of 203,000 in March and a downwardly revised increase of 282,000 in April.

The winter slowdown is now clearly over as the three-month average payrolls gain has increased from just 150,000 in February to 234,000 in May.


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ECB Launches NIRP

Here’s European Central Bank President Mario Draghi’s press conference where he explains how the central bank plans to spur lending by charging member banks to keep their money, a policy that will soon become known as NIRP (Negative Interest Rate Policy).

Some say Draghi looks a little bit like a frog and, given that, it’s natural to recall the “frog in boiling water” analogy as it relates to monetary policy around the world.

Go back ten years and few could have imagined what central bank policy makers have already done and what they are planning to do, all in an effort to combat the biggest credit bust the world has ever seen and, importantly, one that they oversaw.

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Consumer Prices Jump 0.3% in April

The Labor Department reported that consumer prices jumped 0.3 percent in April, due largely to the rising cost of food, motor fuel, and other transportation items as the annual rate of inflation in the U.S. now stands at 2.0 percent. Excluding food and energy, prices rose 0.2 percent last month, now up 1.8 percent from a year ago.

This marked the biggest increase in the cost of living in 10 months and, after yesterday’s surge in wholesale prices as noted here, signals new concern over rising inflation, a topic that has been off-the-radar of both investors and policy makers at the Federal Reserve.

Three times in the last eighteen months annual inflation has risen to 2.0 percent, but it has not exceeded that level since late-2012 as it came down from multi-year highs in 2011 that, not coincidentally, marked the all-time nominal high for the gold price.


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The Fed’s Not-So-Hot Growth Forecasts

Via Deutsche Bank and this item from Pawel Morski’s Twitter feed comes a rather embarrassing summary in chart form of the Federal Reserve’s dismal record at predicting growth for the U.S. economy in recent years. About the only nice thing one could say about this is that they’re at least moving in the right direction.

Let’s just hope that central bank economists don’t underestimate future inflation as badly as they overestimated growth, something we may get a first hint at with tomorrow’s inflation report following today’s big upside surprise for wholesale prices as detailed here earlier.

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