The market has been anxious about the Fed’s next move since last Friday when the jobs report blew away consensus and the wage needle finally moved.  Coupled with comments from Janet Yellen just days before that December was “live,” the news seemed to make a rate hike fait accompli.

But it’s still not 100% even though a recent survey by the Wall Street Journal pegs the probability at 64%. I think it’s more like 50-50 with six weeks before the next gathering.

This week we saw export & import data that was deflationary and that doesn’t help.  It also doesn’t help there isn’t velocity of money, which used to be really important when I began on Wall Street, along with money supply.  In its simplest explanation, money isn’t moving through the economy at nearly the rate the Fed has pumped it out.  This helps to explain the lack of official inflation as its perfect illustration of how most Americans feel about this so-called recovery.

Doves with Talons

Fed Speaks	Times
James Bullard	9:05
Janet Yellen	9:30
Jeffrey Lacker	9:45
Charles Evans	10:15
William Dudley	11:45
Stanley Fischer	6:00

So with this in mind, there’s a litany of Federal Reserve officials speaking today.  The key is to see if doves become hawkish.

The market could be all over the place as the biggest Fed voice takes center stage.  Yellen will kick it all off at the opening bell, but perhaps the second most influential commenter from the Fed, Stanley Fischer, doesn’t speak until 6PM.

The Federal Reserve has really put itself in a pickle by not hiking sooner and giving so many mixed signals that its credibility hangs by a thread.

There’s also the political angle which is real and means the Fed will be loath to take any action during a presidential election year.

We’ll get a much better idea by the end of the day or at least I hope we will- one way or the other.

Race for the White House

Minimum wage is a huge issue in this country but for all the wrong reasons.  First, here are the facts. Only a very small percentage of Americans work at minimum wage.

• 1.5 million Workers at $7.25
• 1.8 million Workers less than min wage (tip workers, full time students, disabled)
• 75.9 million Hourly workers total
• 50.4% 16 – 24
• 24.0% 16 – 19
• 77% White
• 64% Part-Time

Forcing small businesses to pay $15.00 minimum wage is crazy and will only retard risk-taking and reward and encourage mediocrity.  To that point, this week Gov. Cuomo of New York hiked the states minimum wage $15.00 for state workers.   He’s calling for a livable wage, yet won’t allow fracking that could create jobs paying significantly more than minimum wage.   It’s not economic justice, but instead economic suicide of the private sector if forced to follow.

Most low-income workers live in households, with other low-income earners.  Higher wages means that while one or two might get a bump in pay, a third contributor to the household could lose their job making the net result a disaster.  Moreover, as businesses adjust for the federal government intrusion onto their income statement, it means higher prices for those very households the actions purport to help.

That’s not economic or social justice.

Another problem is the government would force the rewarding of mediocrity and actually pay people not to get the skills otherwise needed in the knowledge economy.  Case in point, Detroit has been a hotbed of higher minimum wage as a livable and social justice issue, and yet, the area is home to 171,000 high tech jobs.  It would be wiser to usher folks into those jobs by demanding they take greater control of their lives and get an education.

At the end of the day it’s all about education.

Education

Then there’s education which is the central issue when it comes to the economy.   Currently, there are 5.2 million job openings in America, and yet, few workers are willing to quit their jobs, and employers complain about a skills gap.   The nation needs to go on a push for education excellence.   Watered down curriculum, and complicated yet ineffective schemes like common core, aren’t getting the job done. Consequentially, we are falling further behind.

There is a major education crisis that only gets worse with common core and budgets that focus on union benefits rather than really churning out graduates prepared to grab those millions of jobs.   I don’t hear either political party discussing this topic in a manner that gives me confidence they’ll get it right.  I agree the federal government should be out of education business.  But the President of the United States should set the tone and use the Bully Pulpit to promote the kind of workforce that can compete in the new century.

Today’s Session

The market is going to open under pressure as there is a sea of red across the indices and oil is lower again. Let’s see what the Fed has to say and how the morning fairs.

Comments

Velocity of M2 Under the current circumstances isn't the ultra low interest rate suppressing money velocity? It costs more to push the money around than one gains back in interest? Nick on 11/12/2015 10:30:20 AM

I have great suspicion RE the job data. The move to decrease hours to stay below the ACA minimum nearly guarantees 2 jobs available for what used to be a single position. Numbers alone do not tell the whole story. Scott Manhart on 11/12/2015 1:05:05 PM

I was born and educated in New York State. Twenty-six years ago I left and now reside in Florida. The primary reason I left was the tax burden. Between income, property, sales and other taxes, I was shelling out a lot and getting little in return (other than a big tax deduction.) Now I have no income tax, reasonable property taxes and comparable sales taxes. Oh, did I mention no snow. Life is good. Chris Reinhardt on 11/12/2015 1:51:50 PM

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