Lower Oil Prices, Higher Wages & Illegal Immigrants

Economic Perspective

Domestic demand is expected to offset global drag and to power growth.

The strongly improving job market is a main source of optimism for the economy.

The Fed is laying the groundwork for rate hikes, but remains cautious in timing and magnitude.  

Non-manufacturing surveys, which are much more domestic-focused, have strengthened recently.  In addition, gains in the labor market, particularly service-oriented, show no signs of letting up.  The January jobs report was exceptionally strong, highlighting the solid underlying momentum of the U.S. economy.  In fact, the economy is doing so well that in the last three months alone it has created more than one million additional jobs.  The stock market is not exactly following in pace.  Even the decline in the unemployment rate to 5.5% was a good sign, as it was driven by greater labor force participation.  Most encouraging are the indications that the strength in hiring is finally translating into modest wage increases, with average hourly earnings posting a 0.5% gain in January. 

All things considered, there are plenty of reasons to believe that U.S. consumers are finally back in the driving seat.  It is true that retail sales have disappointed recently, and spending data suggests consumers are saving a larger portion of money from lower gasoline prices than many anticipated.  A new Visa consumer survey reported that so far only 25.0% of gas dividend is being spent, while data from Bank of America suggests the same. 

However, consumers should not be expected to spend all of the savings from lower oil prices at once.  As lower oil prices become more ingrained, and wages pick up, I believe households will likely become more confident in increasing spending levels - helping to further fuel economic growth. 

THE FED -Statements and speeches from policy-makers of the Federal Open Market Committee (FOMC) - the monetary policy-making arm of the Fed - continue to be somewhat ambiguous.  There are vastly different ranges of opinions regarding the strength of the economy, inflation, and international developments.  There is even greater uncertainty surrounding the most appropriate path of increases for short-term interest rates.  Here is an overview of some of the Fed's views:

Economy - The economy has grown strongly and the Fed's view is the most upbeat since the end of the recession (June 2009).  The Fed expects stronger economic activity in the year ahead.

Inflation - The Fed is aware that the drop in energy prices has been holding inflation down.  Although it views this as transitory, some policy-makers are concerned that other commodity prices are falling, which is helping to bring down the core inflation rate.  With the Fed's preferred measure of inflation, the Core Personal Consumption Expenditures Price Index (Core PCE) below its target rate for 25 consecutive months, the FOMC may want to wait until it sees a reversal in the downward direction of inflation before an increase in interest rates is warranted.

International Developments - The Fed is concerned about the deterioration in the global economic situation, and subsequent downside risks to the domestic economy.  That being said, the Fed is optimistic that global central banks are making the tactical moves to stimulate their respective economies - especially the European Central Banks' recent announcement of quantitative easing.  The Fed is concerned about the strength of the dollar due to the weakening of the export-related part of the economy.  Also, headlines related to China, petroleum exporting countries, Greece, Ukraine, and ISIS continue to weigh on consumer sentiment.
Monetary Policy - The Fed wants to increase interest rates.  This is not to slow the economy down, but to bring rates back to a more "normal" level.  Although there is not a clear view on the timing and approach of the first interest rates hike of the federal funds rate, the one thing that is clear is the need to be cautious in the timing and magnitude of any such hikes.  Several policy-makers (known as "hawks") note the risks of keeping interest rates near zero (as they have been since December 2008) and seek to head off inflation and help prevent a possible financial bubble.  Other policy-makers ("doves") fear a policy mistake and believe that a premature rate increase might snuff out economic expansion.  Most policy-makers are concerned whether the economy will continue to remain on solid footing after the effect of the drop in energy prices and other factors dissipates.  They believe that they can be "patient" in waiting for an interest rates lift-off.

EMPLOYMENT - The growth in employment has been astonishing.  More than one million jobs have been created in the past three months.  This is something that is extremely rare; the last period of such strong growth occurred more than 17 years ago.  The unemployment rate has ticked to 5.5% from 5.7%.  This seemingly ominous uptick actually stemmed from a positive factor - it was due entirely to a surge in the labor force, brought upon by prospective workers coming off the sidelines after many years of discouragement.   There was more good news in salaries, which got a boost in January after dropping in December, helping to assuage concerns that workers' wages will not rise despite the 11 million new jobs created since the lows of the cycle.  Wages are up 2.2% in the past year and average workweek remains at the cycle high of 34.6 hours.  The robust growth in the labor market is encouraging, especially as the steady pace of hiring is helping to increase the confidence of many households.  Expectations are for this trend to continue.  Confidence reports indicate that American households are encouraged enough by the prospect of getting a job, and have begun to look actively for work.  All of this solid momentum, along with the drop in energy prices, should serve to provide more gains in consumer spending this year.
The Reason Obama Has It Out For Netanyahu May Be More Terrifying Than You Thought Possible
When one visits Israel, you are told to report any packages left on buses or park benches because these might be terrorist bombs.  To Americans, this then seems almost unimaginable.  In the wake of 9/11, we in the West are all Israelis now, except we don't have thousands of rockets being shot at us anytime of the day or night.  In addition, we do not have dug tunnels that allow terrorists to sneak across the border; instead, we have open borders so Obama can wave them into America by the thousands.  We need to wake up and smell the danger that threatens us.  Last month, a modern Paul Revere arrived in Washington D.C., to warn us that "The terrorists are coming" to cities, we call home.    Israeli Prime Minister Benjamin Netanyahu knows this from hard experience as a battle-wounded commando; brother of commando Yonatan killed rescuing skyjacked Israelis in Entebbe, Uganda' and leader of an American ally that faces incessant terrorist attacks.
What prompts Prime Minister Netanyahu's speech before Congress is that Iran-whose theocratic Islamist rulers believe they could trigger and apocalyptic war that brings the cosmic triumph of Islam - may be within months of producing its first atomic bomb.  Iran's rulers are building missiles capable of delivering nuclear warheads onto the cities of Israel, Europe, and the United States.  For Iran, the biggest supporter of terrorism, atomic-armed terrorists may also become the delivery system of choice.  Netanyahu is very worried that Obama will guarantee the Atom Bomb for Iran because early reports indicated that Iran would have zero to stop them from doing anything they want.  Also, the Prime Minster knows what Obama may not know or care about and that is all major countries in the Middle East will also want to have atomic weapons.  This can easily cause the makings of World War III.
Boehner Submits to Obama's Executive Amnesty
'Boehner should be replaced' House Speaker John Boehner (R-Ohio) has told Republicans to call up and pass a "clean" Department of Homeland Security spending bill and give up the fight to use that bill to defund President Barack Obama's executive action on immigration.  The decision marks the end of a standoff that has lasted several weeks -- a standoff Republicans will lose to Democrats when the clean DHS bill passes.  Boehner met with other House Republicans in a closed-door meeting and as it ended, members indicated that Boehner announced that a vote on the bill could come very soon.  Republicans in Congress are weak, and they are inept at protecting our Nation. Like the Dems, they favor corporations getting cheaper labor.  Both parties compete for the same corporate dollar during elections.
IRS Defends Paying Refunds to Illegal's - Who never Filed Taxes
(Washington Times) - The IRS is defending its decision to let illegal immigrants claim up to three years' refunds on income even if they never paid income taxes, telling Congress in a new letter a few weeks ago that agency lawyers have concluded getting a Social Security number triggers the ability to go back and ask for previous refunds.  President Obama's new deportation amnesty could grant Social Security numbers to as many as 4 million or more illegal immigrants, making many of them eligible for tax refunds under the Earned Income Tax Credit even for years when they cheated on their taxes, working off the books and refusing to file tax returns.  Can an American citizen get the same treatment?  NO!!  Obama continues to punish American citizens.
Obama:  The Bottom Line
I am not "incompetent." I am destroying America more quickly than anyone thought possible...I am not "in over my head."  I am advancing totalitarianism right under your noses...I am not "stupid."  The "stupid" are those who fail to see the danger I bring...I am not "failing."  I am succeeding at every goal I have set...I am embracing your enemies and rejecting your friends...I am acting lawlessly and unconstitutionally...I am ignoring your Constitution...I am disobeying your laws...Your media is abetting me...Your Congress is not stopping me...Those sworn to defend your Constitution are not removing me...
I am "fundamentally transforming the United States of America."  Your Constitution, liberty, freedom, wealth, future & children are no longer at risk...the risk is past, they are already lost.
Spring has Sprung,  Hope the weather knows that!  Happy Easter!