Maury Harris Quotations

We are seeing a 'soft landing' rather than a 'hard landing' in consumer spending for a couple of reasons. First, although job growth is slowing, wages are still rising, with average hourly earnings up 0.4% in October. Second, despite recent stock market turmoil, consumer spirits are holding up reasonably well.

We believe that the Fed will require both consistent solid hiring and a rise in inflation before it begins to lift rates.

What we do know is that the system manages to work -- we've been dealing with import penetration in this country for over three decades. Over that period of time, the unemployment rate has had its ups and downs, but there's been no trend increase in unemployment.

I think we're probably more adaptable now than we were in the past. Education is the key to that -- it makes you flexible.

Price pressures appear to be building at crude PPI levels, but the Fed will likely wait to respond until these pressures filter into the consumer price index. We do not expect that to occur until next year.

We now estimate that total real consumption rose at a 6.5-percent annual rate in the third quarter as a whole, above the 5.5 percent we assumed when we raised our estimate for total real GDP growth to 5.5 percent from 4.5 percent.

Today's FOMC statement did not add any new specificity or much elaboration, and the initial reaction in the bond market has been limited.

With consumption accounting for about 70 percent of GDP, the extra strength should add about 0.7 point to total GDP growth.

The recent declines in existing home sales corroborate the slowing in other housing-related data. We expect additional slowing in the housing market, including prices, in 2006. In turn, the cooling will probably result in a moderation in overall growth.

Through the volatility, the trend in claims is gradually downward again, consistent with the labor market slowly starting to regain momentum after a setback in late 2002.

Both current conditions and expectations remain above their wartime lows, but the reversal of previous gains undercuts the notion that the slowdown early this year owed only to geopolitical concerns. Consumers are clearly troubled by the absence of new hiring, and worry about income prospects.

Difficulties of seasonally adjusting the retail sector around year-end suggest that the two-month average -- about flat -- is a more reliable gauge of hiring trends.

Fed officials ... likely anticipated some fallout in fixed income markets. We believe ... that Fed officials wanted to signal a greater probability of tightening in 2004 than had been priced into markets.

It remains unclear, of course, what role economic data really are playing in markets just now. Despite evidence that the recovery continues both in the U.S. and abroad, equity markets continue to struggle.

The bond market has been moving on two things today: the movement of stocks and this speculation about the yuan.

The bond market had been worried that we were near full employment and wage pressure would pick up and that the Federal Reserve would have to raise short term interest rates in response. But now that the all important employment cost index was up just 0.6 percent, the Fed doesn't need to raise short term rates because the economy is slowing down.

The contained job gains will make it easier for the Fed to convince investors that it will not rush to tighten. We still expect tightening to start only next August.

The consumer numbers look fairly strong, although at least some of that strength is likely to fade in coming months if housing continues to weaken. The mortgage applications data suggest home prices are already weakening.

In crafting today's FOMC statement, we believe Fed officials were undoubtedly influenced by the perception that mixed signals from the Fed, and possibly some loss of credibility, accounted for some of the recent surge in bond yields.

In that context, he will lose credibility if he under-appreciates the extent to which (economic) growth is already weakening in response to earlier rate hikes.

Certainly, there was nothing in Mr. Greenspan's testimony to suggest he has seen any strong preliminary data from the April employment report.

A key issue now will be whether the latest spike in gasoline prices leads to another 'soft spot' in consumer spending.

You typically see a rebound in the labor force when the economy starts to recover. But because businesses are operating so much more efficiently, there's a limit to the number of jobs available. Unemployment could still go up a few ticks.