Contributor: Stephen J. Douglass
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Construction Activity is Weak Despite Data Centers
In response to a recent post, several readers expressed their surprise that data center construction wasn’t creating more jobs. We understand the sentiment, given the ubiquity of data center construction across the media landscape and ample anecdotal evidence of booming labor demand for the projects. A deeper dive into the construction spending data helps reveal…
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September FOMC: Stand and Deliver
The FOMC raised their policy rate by 25 bps today, by unanimous vote as we expected. Like Volcker, Greenspan, Bernanke, Yellen and Powell before him, Chairman Warsh’s first policy action is a hike. The Fed is signaling a series of 2-3 rate hikes for this adjustment cycle. We still think these hikes are unnecessary, but…
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Chairman Warsh Has Painted Himself Into a Corner
The Fed appears likely to hike rates at this week’s policy meeting. We think this is a mistake. The proximate catalyst was the August CPI report, which appeared hot on the surface but was distorted higher by one idiosyncratic component. Core CPI increased by 0.29% in the month, but 0.097% of that increase was due…
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Strong Payrolls Report Doesn’t Change our Fed Outlook
August was a strong month for job creation. Nonfarm payrolls increased by 162,000 and the prior two months were revised higher by 55,000 total. Local government education payrolls increased by 42,000 to mostly reverse a decline of 50,000 reported in July. Smoothing through this distortion shows 3-month moving average job creation at 71,000, which is just slightly above the breakeven rate. Job creation was broad across industries as the 1-month…
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Bessent Embraces Activist Treasury Issuance
Treasury’s plan to double long-end buybacks may flatten the curve for a while, but is unlikely to offset the forces pushing long-term yields higher.
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Data Center Construction Jobs
We’re often asked about the impact of AI on the labor market. We’ll probably spend the next decade debating the productivity gains from the technology itself, but for now, the clearest impact can be seen in the construction jobs created by the infrastructure buildout. Nonresidential construction employment has increased by 2.8% over the past year,…
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July CPI Report Encouraging but Inconclusive for the Fed
Consumer prices rose 0.07% m/m in July, weighed down by a 1.48% decline in energy prices. The Iran war is driving sustained volatility in retail gasoline prices, the largest component of the energy basket. A decline in gasoline prices in July may seem counterintuitive to those who recently filled their tank, but bear in mind…
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July Payrolls Report is a Win for the Hold and Hope Caucus
The July payrolls report printed below expectations and weakened the case for a rate hike at the September meeting. The U.S. economy lost 23,000 jobs in the month of July, the net result of a 30,000 increase in private payrolls and a 53,000 decline in government jobs. The decline in government payrolls was explained by…
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The Sound of Silence: Warsh Communication Regime Leaves Bond Market Guessing
This is an exciting week for Fedwatchers. The odds of a rate hike at tomorrow’s FOMC meeting were down to 34% this morning amidst continued volatility in energy prices and tech stocks. But those odds touched 40% yesterday, which was the highest level of market-implied uncertainty in the two days prior to an FOMC meeting…
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Talk Less, Smile More: A New Era of Fed Communications
NISA’s latest Quarterly Economic Webinar focused on the communications changes that new Federal Reserve Chairman Warsh has implemented in his first month on the job. The June FOMC Statement – which was the shortest since 1994 – provided one conspicuous example of the central bank’s newly taciturn style. During the webinar, David and I recapped…