Boy, is this bullish.
In a note to clients following Thursday’s blockbuster initial jobless claims report, Chris Rupkey, chief financial economy at MUFG, wrote that, “Current labour market conditions are the tightest in a generation.”
Rupkey also argued that, “You have to go back not one, not two, but six recessions ago to find a stronger labour market. Madame Chair [Yellen], raise the Fed funds rate before it’s too late.”
On Thursday, the latest report on weekly initial jobless claims showed claims totaled 255,000 in the week ending July 18. This was the lowest total since November 1973, when Richard Nixon was president. Expectations were for claims to total 278,000.
Longtime readers of Rupkey notes will know, however, that he has consistently been arguing that the economy is strong enough for the Fed to raise interest rates, writing that hikes are coming “sooner than you think” for quite a while.
Of course, interest rates have been increased and still sit near 0%, where they have been pegged since December 2008. And interest rates haven’t actually been increased since July 2006.
But it seems like the Fed is insisting that it will raise rates this year, and so the debate in markets has become whether the Fed will act at its September or December meeting. (Markets have discounted October because there is no scheduled press conference with Fed chair Janet Yellen, though Yellen has emphasised that every meeting is a “live meeting” and that the Fed could hold a conference call if it chose to raise rates at or any other non-press conference meeting.)
For Rupkey, however, the time for the Fed to raise interest rates isn’t even now: it was in the past.
“To seriously question the strength of the labour market, to argue that the economy is not yet at full employment ‘good times’ levels, those arguments are simply incomprehensible,” Rupkey writes. “Unemployment claims, 5.3% unemployment rate, payroll employment trends all say the economy is fine. Third tier, bottom drawer data of the quits rate, involuntary part-timers, and the participation rate are not tried and true indicators of where we are in the business cycle. There’s no slack out there.”
Of course, Rupkey’s outlook is certainly a minority view.
For while a number of economists and strategists would certainly argue that the labour market is in good shape, calling the labour market generationally strong is the high end of US economic optimism.
There is certainly not a lot controversial in calling Thursday’s jobless claims number strong, or characterising the labour market’s performance over the last 18 months in a similar fashion, but if you want to get really excited about the US economy, you’ll have to read Chris Rupkey.