MORGAN STANLEY: Here's Your Guide To Monitoring The Economy Just Like Janet Yellen

On Tuesday, Federal Reserve Chair Janet Yellen promised the House Financial Services Committee “a great deal of continuity” in monetary policy as she fills the shoes of Ben Bernanke.

However, Yellen is not Bernanke. And depending on her read on the economy, she will use her powers to influence the direction of monetary policy via the Federal Open Market Committee.

So what is Yellen watching out for?

Morgan Stanley economists Dane Vrabac and John Abraham answer this question in this new presentation distributed to clients.

It’s a catalogue of 31 charts that have individually been cited by Yellen as informing her view.

Thanks to Morgan Stanley for giving us permission to feature this presentation.

These indicators cover labour, income, and inflation among other things.

Yellen is a big fan of the unemployment rate, but not in isolation.

Duration of unemployment is important because the longer you're out of the job, the more your skills erode.

Few follow the JOLTS report as closely as Yellen.

We can't ignore the underemployed, which include the folks who aren't captured by the main unemployment rate.

There's always controversy about how inflation is computed, so it's good to follow few different.

GDP growth is only as robust as its components.

Income is tied to consumption, which is the largest component of GDP.

The housing market is about more than home prices.

The Taylor Rule argues that the Fed should raise rates as inflation and employment rises.

The Beveridge Curve measure labour market efficient by showing the evolving relationship between unemployment and job openings.

Okun's Law relates falling unemployment rates to rising GDP.

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