As the late Albert Collins once sang, he has a “Cold, Cold Feeling.”
Or feeling hot, hot, hot, depending on which measure you are looking at.
Take NAIRU, the natural rate of unemployment for the USA (white line). Historically, when the U-3 unemployment rate (orange line) falls below the natural rate of unemployment, the economy is growing “hot, hot,hot” and The Fed raises their target rate. Check out the green boxes.
What is happening now? The U-3 employment rate has fallen below the natural rate on unemployment (see pink box). But this time around, The Fed began raising their target interest rate BEFORE this happened.
The Fed is raising rates as US Average Hourly Earnings All Employees Total Private Yearly Percent Change SA exceeds 3% for the first time since 2009.
While wage growth is relatively hot, hot, hot, housing is getting that cold, cold feeling.
How about corporate debt growth (blue line)? Cold.
Getting cold enough?