ECONOMIC DOLDRUMS – AT 9:39 A.M. ET: Clearly, the economy has hit some speed bumps in recent weeks, with two bad labor reports in a row. The renewed worries are reflected in dissension within the Federal Reserve, whose actions, or lack of actions, can have serious political implications in November. From Bloomberg:
Federal Reserve officials widened a rift over a commitment to keep rates near zero through late 2014 as an unexpected increase in claims for jobless benefits added to evidence of a weakening labor market.
William C. Dudley, president of the New York Fed, and Vice Chairman Janet Yellen said the 2014 time-frame is needed to lower unemployment from 8.2 percent. Minneapolis Fed President Narayana Kocherlakota said rising inflation may prompt an interest-rate increase as early as this year, while Philadelphia’s Charles Plosser said policy should hinge on economic performance, not a calendar commitment.
Central bankers next meet in two weeks to consider policy for an economy that Dudley and Yellen said may be sapped by cuts in government spending and the European debt crisis. Dudley and Yellen backed Chairman Ben S. Bernanke’s view that progress in reducing joblessness may not be sustained as growth cools.
“There is a debate going on, but right now the power rests with the chairman and governors” favoring the 2014 rate outlook, said Joseph Lavorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. Even so, the comments suggest “the Fed does not feel it has to take additional easing,” he said.
COMMENT: If things don't improve by November, Obama will be at a distinct disadvantage. It's being said by some pundits that Obama can't win the election, but the Republicans can lose it. There may be truth in that.
But don't underestimate the Obama political team. They move quickly, and they're deadly. Yesterday, they threw big-time Dem activist Hilary Rosen under the bus after she said that Ann Romney, a stay-at-home mom, never held a job. Rosen's political obituary has been written. The only thing left is a memorial service. These boys play rough, and they're effective.
April 13, 2012