Thursday Fed Reports on SOMA and the Balance Sheet
On Thursdays at 16:30 ET, the Federal Reserve releases a variety of data on the System Open Market Account (SOMA) holdings and reserve balances at the Fed. Our calculation for the average maturity in months for the SOMA holdings in the week ended December 11 was 124.1, unchanged from the prior week. The Federal Reserve's balance sheet rose $21.2 billion in the week. The change was mainly on a gain in Treasurys (+$13.3 billion) and Agency MBS (+$6.2 billion). For details, see our updates on December 12.
Revisiting the IOER Debate
Since the release of the Oct 29-30 FOMC minutes we have received a number of inquiries regarding the prospects for a cut in the IOER. To-date, we have been rather dismissive of the prospects. Alan Blinder in Wednesday's Wall Street Journal has an Op-Ed note in which he reviews the benefits of lowering, possibly into negative territory the IOER. We still think lowering teh IOER is a bad idea, and in this note we explain why.
Federal Reserve Research
FOMC Preview for December 17-18: A Definite Maybe on Tapering
* The final meeting of 2013 will include an update to the Summary of Economic Projections and the Chairman's press briefing -- presumably the last Ben Bernanke will hold in conjunction with an FOMC meeting.
* We anticipate some change to the asset purchase program -- either a small reduction in the size, or a reframing of the program into something close-ended, or possibly both.
* The statement may be recrafted a bit to try to achieve the simple and clear communication the FOMC is striving for.
Flow of Funds: The Wealth is Nice, But Show Me the Income
--Household net worth increased $1.9 trillion to another record level in the third quarter.
--The increase in net worth was due mainly to an increase in the value of financial assets, along with another gain in the value of real estate assets.
--Outstanding mortgage debt increased for the first time since 2008.
--Homeowners' equity share in real estate climbed to 50.8%, the largest stake since 2007.
--Gains in wealth have been unevenly distributed, with large variations among income groups and regions.
--Record levels of net worth haven't done much to boost consumer spending. Consumer spending tracks gains in income much more closely.
Inferences From October Job Openings And Labor Turnover Survey (JOLTS)
(1) Openings Up, Hires, Separations and Layoffs Down
(2) Openings highest since May 2008
(3) Hires Down on Professional & Business Services
(4) Layoffs Lowest on Record
(5) Gross Turnover Down
(6) Net Turnover at +260,000 Strongest Since February
(7) Beveridge Curve Continues to signal higher structural unemployment