Today, we go back even further up the causation ladder, to look at the question "How can we anticipate when Consumer Spending is about to slow?"
It turns out there’s a reliable tell that gives lots of warning prior to a Consumer Spending slowdown: Real hourly earnings.
Real hourly earnings downtrends of a year or longer have been a generally reliable leading indicator of consumer-spending downtrends. Real hourly earnings gave particularly notable advance warning of the 2000–2002 economic downturn.
Real hourly earnings are reported on a pretax basis. Therefore, in the mid-1980s and 2003-early 2004, strong gains in consumer spending despite slowing real earnings were an anomaly reflecting federal tax cuts in those periods.
This is the article that the Greenspan quote came from that popped the market today; I don’t know how accurate it is (holographic image?) but
Gold price riding high on fear of terrorism, says Greenspan
Leo Lewis, Tokyo
February 09, 2006
"ALAN Greenspan, who stepped
down last week as chairman of the US Federal Reserve after 18 1/2 years, has
blamed the threat of terrorism for the high gold price, in his first private
sector speech since being let off the leash of officialdom.
members of his audience of international investors – watching a holographic
image in Tokyo as he spoke in New York – Greenspan said the high cost of gold
did not reflect inflation or the strength of commodities, but rather a fear
among investors of a major geopolitical conflict. There were people who believed
that a nuclear weapon could be detonated within five years, the former American
central bank supremo said.
The low probability of such an event occurring would not necessarily avert a
spike in the gold price, he added.
Greenspan went on to discuss a range of topics, including the problems
created by a lack of investment in refining capacity by the oil industry. He
said this failure by the oil majors meant that the era of cheap energy was
almost surely over.
The former Fed chairman is also said to have indulged in a moment of
self-criticism over the central bank’s failure to prevent the market bubble in
the late 1990s.
That may explain Gold’s $20 whackage yesterday, but what about all the rest of the metals and commodities?
Also, if you missed this, you MUST read it:
GREENSPAN SENDS MIXED SIGNALS IN FIRST DAY AT HOME
Former Fed Chief’s Inscrutable Statements Baffle Wife
Its a hoot!
and on the chance the article disappears, I’ll archive it after the jump . . .