At the end of the week, the five year constant maturity Treasury yield continued to rise along with the implied expected inflation rate; but after accounting for the estimated term premium and liquidity premium (h/t Bob), the increase in the latter since the Georgia elections is much more modest.
Wisconsin Employment Trends with Benchmark Revisions
Wisconsin month on month employment (nonfarm payroll) grows at an annualized 4.8% in January, but remains 5.1% below January 2020 levels. NFP employment levels for December are benchmark-revised up by 51.7 thousand, or about 1.8%. Details from DWD.
Recent Developments in Interest Rates and Spreads
The five year constant maturity Treasury yield has risen; but after accounting for the estimated term premium, the increase is much more modest, if not negative. Moreover, expected 5 year inflation has not on net moved much over 2021.
Oil Prices: Futures, Survey Expectations
Despite the recent runup in oil prices, measures of expectations do not spike.
The US Economic Outlook: March WSJ Survey
Forecasted GDP rises yet again, with considerable dispersion.
The Price Level Shortfall
Had we run a 2% price level target since December 2007 (the beginning of the previous recession).
Oil Prices and Oil Futures
As of March 7th:
Are Market Expectations of Inflation Really Rising?
A typical market-based measure of expected inflation is the inflation breakeven calculated by subtracting the TIPS yield from Treasury yield at corresponding maturities. The breakeven spread is shown as the blue line in Figure 1.
Interest Rate Projections
The CBO recently released long term projections for Federal budget variables, including debt. These projections rely upon the assumed path of interest rates. Here, there is considerable uncertainty. Figure 1 presents the 10 year Treasury yield, and CBO projections at various dates.
The Employment Release and Business Cycle Indicators as of 5 March
The positive surprise in nonfarm payroll (NFP) employment — 379K vs Bloomberg consensus of 182K — was good news. However, it’s important to place this in context. NFP is 9.5 million lower (i.e., 6.2% lower) than the NBER peak in February 2020. In the context of key macro indicators followed by the NBER Business Cycle Dating Committee: