Ethan Harris Quotations

What we're looking for is evidence of the corporate side of the economy gaining confidence and making real commitments in its own spending. There, I'd say the news is at best mixed,

We knew we would have a very weak number because of a collapse in auto sales after two big months in a row and the incentives kind of stop working ... But if you look at the rest of the report, every single major component was up. It was very broad-based growth across many components.

Ultimately, for the economic recovery to sustain itself, we have to see the labor market improve. As the tax-cut benefits fade, consumers will look for more fundamental reasons to spend money, and there will have to be some job growth.

What we're assuming is that as the Fed hikes rates, the bond market gets pulled along.

We reached the point where we don't trust our model anymore. That's why we were below the consensus.

We needed 20 percent economic growth in the third quarter to get rid of all of the excess capacity in the economy. The Fed is still going to be concerned about disinflation.

Obviously we have a pretty weak economy and this was not unexpected. We knew they were going to have to revise it downward.

More and more of the job losses are in industries that are effectively closing down domestically. This has been a gradual process since the 1950s, but it seems to have accelerated.

Now you are entering a much more uncertain period.

People will wake up and realize the war on terror has just moved one step forward,

Only with very weak U.S. growth or a major drop in the U.S. dollar will the trade deficit improve on a sustained basis. The reason you need these dramatic movements is that the U.S. has, according to almost every study, an incredible appetite for imports.

If we have an economy that functions O.K., with a little help from the Fed, in that case gridlock is quite good for the market,

Imagine you're a bank. The corporate sector isn't interested in borrowing, so you can't lend to it. So where do you go? Well, mortgages. They pay a reasonable rate. They're seen as a safe investment. Load up on mortgage-backed securities.

If the Fed isn't happy, the market isn't happy.

There is a history both in appointments under the Bush administration and the Fed chairmanship itself of people off the list being picked. Bush does seem to have a proclivity to pick people with a more business background for his economic positions.

We've been trying to see whether the improvement of the economy and financial market will carry the day in terms of consumer confidence, or if worries about labor will dominate. It looks like the 'glass-half-full' view is winning.

We've gone from a period where there was a reasonable chance the Fed might cut rates just four months ago to one in which the Fed is very much comfortably just sitting on hold for now.

I think that (high inflation readings) would be almost the last straw to convince the Fed.

I think the economy is already in the process of slowing to a more moderate pace. Oil has both an immediate impact on spending and lagging impacts. Even though oil has stabilized in recent weeks, we still have to play out effects. We're still waiting for the shock value of the winter heating bills hitting people.

It is gradual step towards a little more flexibility. Inflation, the economy and the markets will dictate how much further they go. They say the economy is strong and that inflation risks are tilted a little to the upside. There is nothing yet in the data that will stop the Fed.

I think we know corporate profit growth can't stay at the rate we've seen in recent quarters. They (employers) have been squeezing the work force pretty aggressively, squeezing productivity out of workers and holding the line on wages. It's a matter of how much corporate profits slow down.

I think what people will see is that commentary from Fed officials will sound almost identical to their commentary prior to this meeting. Nothing's really changed at the Fed.

It generally just adds to the case for investors taking a little more cautious view on risk and demanding higher returns on investments.

Our feeling is that because you have a new central banker, they are going to want to err on the side of restraint against inflation.

Rising rates could have a tremendous impact on slowing consumer spending. Consumer spending has been about 6 percent, when adjusted for inflation. Rising rates could bring it down to 2 or 3 percent.

Payrolls were well below the whisper number, so there's been a big sigh of relief in the market,

That basically, in my mind, cancels out the benefits of the lower tax rates,

My rule of thumb is to look at both the household and payroll surveys together, giving three-quarters weight to the payroll survey and one quarter to the household survey.

We now believe that the first Fed rate hike will not come until December, and we continue to worry the Fed may be forced to ease again before it begins hiking rates,

Whoever is chosen, the new chairman will go through a proving period.

Usually the federal government takes a much more limited role in natural disasters.

We are obviously experiencing slower growth and the payroll numbers don't really reflect that yet, which is why they will be an important indicator. Companies have been cutting back the number of hours their workers put in and in some cases cutting back their workforce altogether, and that is what people will be looking for in the numbers.

We're not going to be in a recession if the economy reverses quickly. But if the war keeps going on, recession is a major risk.

We think the ISM services number is one of the worst monthly pieces of data there are. On a month-to-month basis, it has no correlation with service sector employment, and on a quarter to quarter basis, it has no correlation with service sector gross domestic product.

When you get a new chairman in place you're going to have a more democratic and less predictable, less transparent Fed. The new chairman won't get the same automatic respect Greenspan has. It's not that (central bankers) will turn into a bunch of farm-yard animals, but there will be a more normal discussion going on.

The reason the recovery was so feeble was you still had these hangover effects from the real estate and banking sectors, ... Real estate was still reeling from excess capacity and the whole thrift industry had been decimated by bad loans.

Firms have cut back on their capital spending budgets to the point where some of them are not even replacing worn-out equipment. It's been quite a dramatic pullback, and in some sense there's some pent-up demand out there for capital equipment.

But the obvious effect is on utility consumption, which will affect industrial output in the economy. People consume more electricity, that places more demand on natural gas, coal, power, and electrical systems.

While the Fed is more than one person, Mr. Greenspan's retirement means less confidence in the Fed, with somewhat greater risk of both financial market instability and inflation.

You are seeing a nice rebound from the hurricane-distorted fourth quarter, with strength broadly based across the economy.

This was the big match to get. You just want to get to (today), no matter what it takes.

With inflation trending up, we believe the Fed will want to stay on the tight side of neutral for an extended period.

What happened is that initially the market breathed a sigh of relief when the storm was downgraded to a Category 4 and missed New Orleans, ... they are starting to look at the damage more seriously. We are seeing further upward pressure on oil prices. People are starting to think about the many aspects of the destruction here.

What's happened between now and then is that we've accomplished everything we've set out to achieve, ... Then they were trying to get the economy to the state it is in now, so the attitude now is, 'lets not screw anything up.'

With few signs that consumer prices are about to break to the upside ... along with signs that aggregate demand remains robust, we expect the Fed will not only vote to keep rates constant, but will leave the growth and inflation bias statements unchanged.

We think inflation is going to remain benign going forward.

We see a number of reasons for the Fed to drop its 'measured pace' language.

We are going to get some follow-through, some hiring, but it will be slow. I don't see wage growth coming back in the next year.

Even in a healthy economy, you have layoffs. The Challenger number is more useful as a story telling device than an indicator.

Even in a healthy economy, you have layoffs, ... The Challenger number is more useful as a story telling device than an indicator.

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.

These continued claims are a sign the unemployment rate is still on an upward trajectory. There are still a lot of people out of work out there.

The surplus creates an environment where there's a tremendous amount of saving being freed up for private investment every time the government pays down its debt, that frees funds to flow into private investments. That has created this strong growth economy that we have.

The third quarter was the sweet spot for profits from an economic perspective. You had this pickup in growth, but you didn't have the pickup in costs. In terms of growth, this is the best quarter we're going to see.

Rubin was a great Treasury Secretary. Nobody in the Bush administration comes close.

Real estate is a topic that has vaulted to center stage, ... The real reason the topic is hot and belongs on the front page of research reports is that the housing market is becoming more of an engine of economic growth, but is also the biggest risk to future growth if the boom goes bust.

The national economy usually weathers these storms with relatively minor damage. Second, the hurricane is a 'supply shock' -- a disruption to productive potential -- not a 'demand shock.' The same factors that threaten growth -- higher commodity prices, shipping bottlenecks, reduced local productive capacity -- also threaten inflation.

The one thing that companies can do quickly without laying people off is reduce the number of hours per week; as the economy slows, that's the natural place for a company to cut back. It's a little harder to pull back quickly on job hiring.

Some economists give a lot of weight to these surveys, but my feeling is that a survey's only good until the real data come out. The surveys are exaggerating the strength of the manufacturing sector.

Companies have been able to maintain incredible productivity growth for a low-growth economy. It does look like firms are finding ways to use technology and make do with fewer workers.

Companies are paying more compensation and getting less productivity growth.

A negative reading would be a noticeable headline. Some people will quickly discount it, say it's old news, but it could reawaken concern about the economy.

Are the economic indicators looking like a recession? Absolutely. But you can still hold out hope that the war is resolved in a month or so and the economy can stage some kind of recovery.

Apparently the Fed's new policy of 'transparency' has taken the shock value out of monetary policy.

You've had obviously a rise in gasoline prices, which is the visible price in the economy, ... There's (also) a tendency of the public to look at the unemployment rate that actually rose in March, while Wall Street looks at payrolls (which showed a large jump in the number of people working.)

You're not talking about a full-blown business-cycle recovery here, which is something like 6 percent GDP growth for a year. To get that, you'll need the whole economy operating in full-growth mode, and clearly the consumer isn't.

You're going to see continued cost discipline. So when growth comes it won't be spent on things like wage increases, but will flow to the bottom line.

You probably want to subtract about two-tenths of a percent from first-quarter GDP growth. But that's looking like very old history, with the Fed having eased twice since the first quarter. From the market's perspective, you feel like you're in a different world already. The first quarter looks very distant, indeed.

This is a sector that should be one of the engines of growth and should keep the economy healthy in the face of the weakening housing market.

This is a nice, clean post-Katrina read. You wouldn't know there'd been a hurricane by the way they're talking about the economy,

This is another of these little hints that we won't get a strong employment number on Friday.

This is one of the very-easy-to-interpret reports. In this one, everything lined up like the planets.

The U.S. pointing to China is a bit like the pot calling the kettle black. The deficit with China reflects poor policy on both sides of the Pacific.

This is a feel-good report. When you get a strong growth number and a low inflation number, it's hard to get a better combination than that for the economy.

This has been a fundamental problem with the Fed's whole approach to policy making, ... By changing their language so frequently, they make it impossible to figure out what they're doing.

They're voting with their wallets and they're spending. There's always a concern that people just don't like what they're seeing, but they are still buying.

A lot of things have to go right even to get 2.3 percent growth for the year,

You don't want to force the new chairman to open his term by having to make a a 50 basis point rate hike.

There's a chronic risk to the bond market from global economic recovery. Probably the most potent story is Japan.

This large inflow is an important prop for the Treasury market, helping keep yields in their current low trading range. Not only is the inflow large relative to new Treasury supply, it may also help stabilize the market when it comes under pressure. If investors start to shy away from the U.S. market, the dollar comes under downward pressure and the Asian central banks pile in to support the U.S. market.

This kind of adds to the sense of a rookie in the institution. They are going to have to learn the ropes for a while before they are going to be influential.

This is why people talk about radical moves down in the dollar. They just can't see an improvement of the trade balance happening any other way.

They're adding to the intellectual firepower of the board of governors in terms of regulatory and financial markets issues, but initially they won't be important players in the monetary policy front.

There's definitely going to be nervousness around the event and a kind of inertia. My wife has already asked me not to come into work that day.

At every stage in the past three years, employment has disappointed relative to overall activity. It's a chronic issue, and there's been a tendency for economists to hope this will finally be the month when improvement occurs. But I have no reason to believe it will.

It suggests moderate growth in the year ahead, but I don't think there's much risk of a 'double-dip' recession.

It's true there's been a shift of income distribution, with a lot of income gains accruing to upper income individuals. The labor market is paying a bigger and bigger premium for being well educated, ... At the other end of the distribution, if you look at Joe Six-Pack, you've seen a big decline in big paying, low skill jobs in manufacturing.

The number itself wasn't very surprising, ... (Federal Reserve Chairman Alan) Greenspan's comments last week that the trade gap might start getting smaller raised attention and some hopes. But I didn't agree with him about that.

It's the toughest weight class in the state, by far. Everyone here is so tough. There are just some studs in this weight class, so it's going to be the best man who comes through with the title.

Even with this dip, the unemployment rate is still about a percentage point above the level where it might threaten inflation. That means there's plenty of wiggle room for the Fed on policy. They're going to be patient and not change the wording of their statement next week.

Even with a resolution to the situation in Iraq, the economy will still be suffering from some fairly significant headwinds.

Even with a positive outcome in the war, the economy is going to have lost a lot of momentum by the time it's over. We're not going to see a few weeks of weak data -- we'll see a few months of weak data.

Eventually that will slow down the U.S. consumer. We've got the seeds of a slowdown coming out of the housing market, but it hasn't really had that much impact yet on the economy.

That's the big lingering risk factor sitting out there on the horizon. Will we have a gradual adjustment, where the trade deficit gradually improves, or will we have an accident along the way?

That's about the right feel for the economy,

It's much too early for the Fed to be thinking about hiking interest rates. It would be a very dangerous action on their part in this fragile initial stage of the recovery.

It's not as friendly as some of the other inflation numbers, but it's just one indicator. We have no inflation warning signals from any of the other major inflation indicators.

It's not a question of a sudden explosion in prices. It's more an erosion of the low-inflation psychology.

Everyone is all zeroed in on the consumer now, but the truth is that the consumer isn't the driver now. Confidence is picking up, but still at average levels. Wage growth is slow and the bulk of the tax cut is already in place. Finally, with all the debt people have taken out over the past several years the burden of paying monthly bills is leaving less for discretionary spending.

The bond market went into this report looking for disaster. I think there's a sense of relief in the bond market.