It seems that everyone is feeling a little better about the economic future in the United States in recent days.
I feel better as of today especially because we got news that my husband has found a new job after the old job was lost in January due to a support center closure. This is a big deal, not just in terms of personal stress from uncertainty, but his search was very short compared to the job search problems I encountered back in 2008 and beyond.
I was not reemployed for four years! And that experience left psychological scars that oft reminded me of their presence during my husband’s job search, even though I tried to ignore the thoughts of panic as they popped out of nowhere and for no real reason at all, and painted on a smile. I may be one of more esoteric people around because I am not uncomfortable talking about what it felt like to be unemployed and job searching during the Great Recession. It seems like economic depressions are termed that way for reasons that have to do with much more than negative growth. If one is interested in what it feels like to be sitting around waiting for death a depression is the best time to be unemployed.
My husband was turned down for two jobs before landing the third, and he would send me text messages like, “I must just suck” as the news we didn’t really want to hear rolled in. It was then that I had to remind him that I was turned down by nearly every employer in the area including Walmart and the neighborhood convenience store! Really, what are the qualifications for a Walmart greeter for Christ’s sake?? I understood my place, and I kept the snark out of earshot. But Walmart sent me a Dear Jones letter anyway. I think the convenience store manager threw my application into the wastebasket as soon as I walked out the door. Even through all of that I feel completely justified in announcing that I am not an unemployable non-ape. My husband’s retort to my version of a pep talk was, “It was an entirely different economy back then…” At the time, it seemed like he had a point but I couldn’t say for sure. But turned down for two and landing the third is pretty good results by comparison to the phone not ringing at all, and when it does they say something that I heard as ‘you suck’ for years.
My other point for this post was to talk about how much better those at the Fed are feeling these days. The minutes from the March FOMC meeting were released a few days ago. Watching the DOW that day was pretty interesting because there was some positive news about the ObamaCare repeal perhaps getting another look and it was it was up by lot, and then 2 PM ET rolled around when the minutes were released that show discussions about balance sheet unwinding that can be described as nothing less than zealous, and the DOW took a triple digit dive where it has remained. The WTI took a hit too. Has the FOMC learned nothing from the 2015 rate hike at all or are the walls of the ivory tower still very thick?
To put it this way, my objection to any rate hikes (the way they do it with tighter money) at all in the current state is the opportunity cost involved with an asymmetrical inflation target. And I get the idea that is exactly what it is because headline PCE reached 2.1% in March from the previous year – and now we get to suffer through prolonged inflationophobic balance sheet drama. The absolute horror of 2.1% headline PCE calls for it in the hardcore inflation targeters’ “Good Book” (*cough*).
But of course, am I am at least somewhat rational about what I think I know. I can tolerate mild harm verses vast harm, and I am wise enough to understand what I cannot change. I can stomach the idea of letting bygones be bygones as the FOMC nibble around the edges of keeping up the natural rate. But the balance sheet thing is not only not necessary, it is harmful. The markets are telling us that much. We do not need to destroy more wealth or randomly impoverish one more person. There is no reasonable justification for it.
If I have to settle for rate hikes as the natural rate rises, I will live. Selling assets at this point in balance sheet unwinding after we were told those securities would be held to maturity, in addition the other things already being done to hike short term nominal rates, however, is simply one bridge too far. Way too much and very much too soon.