Janet Yellen leads her final Federal Open Market Committee meeting of 2017 and will hold her final Press Conference as Chair on Wednesday.



With Jerome Powell set to take the reins of the Federal Reserve (Fed) from Janet Yellen next year, we wanted to analyze Chair Yellen’s economic legacy and give an assessment of the economy that Mr. Powell will inherit.


Labor Market


Last Friday’s November Employment report showed that 228,000 jobs were added during the month and the unemployment rate, at 4.1%, has fallen to its lowest level since the early 2000s. Though this number grabs all the headlines, we wanted to look at another measure of the labor market, the U-6 rate. This metric includes people marginally attached to the labor market plus people who are employed part-time. As you can see in the chart below, the U-6 rate has returned to its pre-crisis levels.

Source: U.S. Bureau of Labor Statistics


Equity Markets


Equity markets have seemingly shrugged off Chair Yellen’s monetary tightening efforts. As you can see in the chart below, the Dow Jones Industrial Average has climbed to all-time highs, rising approximately 58% during Yellen’s time as Chair.


Source: S&P Dow Jones Indices



It has been five years since inflation reached the Fed’s preferred level of 2%. Throughout her time as Chair, Yellen held firm to the thought that a tightening labor market would eventually push inflation higher. However, as the chart below displays, that has not been the case. Inflation remains below the 2% target.

Source: U.S. Bureau of Economic Analysis



Wage growth has been surprisingly weak compared to the early 2000s, but has risen during Yellen’s time as Chair. The Atlanta Fed’s wage tracker (chart below) focuses on continuously employed workers and presents a more bullish number than the Average Hourly Earnings of All Employees released by the U.S. Bureau of Labor Statistics (approx. 2.5%).

Source: Current Population Survey, Bureau of Labor Statistics


The history books will show that under Janet Yellen employment grew, the stock market rose, wages ticked up, and inflation remained low and stable.




Date Report Period Survey Prior
Monday, Dec 11: JOLTS Oct 6,093
Tuesday, Dec 12: FOMC Meeting Begins
PPI Final Demand M/M Nov 0.4% 0.4%
PPI Ex Food & Energy M/M Nov 0.2% 0.4%
PPI Ex Food, Energy & Trade M/M Nov 0.2% 0.2%
PPI Final Demand Y/Y Nov 3.0% 2.8%
PPI Ex Food & Energy Y/Y Nov 2.4% 2.4%
PPI Ex Food, Energy & Trade Y/Y Nov 2.3%
Monthly Treasury Budget Statement Nov -$135B -$63.2B
Wednesday, Dec 13: FOMC Meeting Ends
CPI M/M Nov 0.4% 0.1%
CPI Ex Food & Energy M/M Nov 0.2% 0.2%
CPI Y/Y Nov 2.2% 2.0%
CPI Ex Food & Energy Y/Y Nov 1.8% 1.8%
Thursday, Dec 14: Weekly Jobless Claims Dec 9 236K
Retail Sales M/M Nov 0.3% 0.2%
Retail Sales Ex Auto M/M Nov 0.7% 0.1%
Retail Sales Ex Auto & Gas M/M Nov 0.3% 0.3%
Import Price Index M/M Nov 0.8% 0.2%
Import Price Index Y/Y Nov 2.5%
Export Price Index M/M Nov 0.0%
Export Price Index Y/Y Nov 2.7%
Business Inventories Oct -0.1% 0.0%
Friday, Dec 15: Industrial Production M/M Nov 0.2% 0.9%
Empire State Manufacturing Survey Dec 18.0 19.4
Source: Bloomberg


Based on shorter-term expectations, the “tactical” allocation within portfolios is overweight stocks versus bonds.


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Kevin Caron, CFA, Senior Portfolio Manager
Chad Morganlander, Senior Portfolio Manager
Matthew Battipaglia, Portfolio Manager                                                                                                                                                                                                                                                                                   Suzanne Ashley, Analyst

(973) 549-4052



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