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Fed wage
gauge impacted by demographics….New Bloomberg News article makes the case
that shifts in demographics are rendering traditional wage growth analysis less
useful as an indicator of inflation or labor market pressures.
What’s the point? The Federal Reserve
has historically closely followed wage growth as an early indicator of
inflation. The article makes the case that the combination of more baby boomers
working for lower pay and millennials working for entry-level pay is keeping
wage pressures contained. It is an interesting analysis, but the ultimate
reality is not changed: wage growth (for a variety of reasons) appears to
remain subdued. Is it still a valid indicator for the Fed? We’d say yes. This also has long-term implications for
growth in consumer discretionary spending, which we believe will remain below
previous cycles. The analysis also supports thesis that pockets of labor shortages
in specialized areas could exert some inflationary impact over time. However,
as of now there appear to be too many offsetting factors for this to turn into
sustained, broad based inflation. Link: http://money.msn.com/business-news/article.aspx?feed=BLOOM&date=20140721&id=17790854
·
NABE
Survey looking strong….National Association of Business Economist July
survey results indicate improving sales outlook, steady employment outlook, and
strong Q3 outlook.
What’s the point? Strength of the July
NABE survey is good leading indicator for business and earnings looking into
the third quarter. It supports our view that the pace of economic growth should
accelerate in 2H-14, and along with that, corporate earnings. This is also
another factor that should support higher stock prices, although we remain
concerned about market sentiment and certain technical indicators that we
believe have increased the risk of a market correction. We remain positive on
the longer-term outlook for stocks. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140721&id=17789487
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