From Tim Duy: On Lowering the Unemployment Target. Professor Duy’s conclusion:
Policymakers would like to normalize policy by moving away from asset purchases to interest rates. Emphasizing forward guidance is part of that process. Incoming research suggests not only that threshold based forward guidance is effective, but has room to be even more effective. That should be a comfort to policymakers who worry that ending asset purchases will excessively tighten financial conditions; they have a tool to change the mix of policy while leaving the level of accommodation unchanged. Whether they use it or not is another question. There has clearly been some discomfort among policymakers regarding changing the unemployment threshold. This suggests it would not necessarily be an immediate replacement for ending asset purchases. That said, it is difficult to see how the current threshold is meaningful at all if the Fed is still purchasing assets when the threshold is breached. Indeed, the current low level of unemployment relative to the threshold, combined with clear indications that the Fed has no intention of raising rates anytime soon, argues by itself that a change in the thresholds is a likely scenario in the months ahead.
Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 335 thousand from 340 thousand last week.
• Also at 8:30 AM, the advance estimate for Q3 GDP from the BEA. The consensus is that real GDP increased 2.0% annualized in Q3.
• At 10:00 AM, the Mortgage Bankers Association (MBA) Q3 2013 National Delinquency Survey (NDS).
Click on graph for larger image.
This graph shows the percent of loans delinquent by days past due through Q2 2013.
Loans 30 days delinquent decreased to 3.19% from 3.21% in Q1. This was just above the long term average. Delinquent loans in the 60 day bucket decrease to 1.12% in Q2, from 1.17% in Q1.
The 90 day bucket decreased to 2.65% from 2.88%. This is still way above normal (around 0.8% would be normal according to the MBA). The percent of loans in the foreclosure process decreased to 3.33% in Q2 from 3.55% in Q1 and was at the lowest level since 2008.
• At 3:00 PM, Consumer Credit for September from the Federal Reserve. The consensus is for credit to increase $12.0 billion in September.