Beige Book Supports Idea Economy Is Improving

United States Federal Reserve
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United States Federal Reserve

The headlines from the just-released Fed Beige Book supports the thesis of a slowly improving economy.

1) Hiring Slightly Higher, Some Difficulty In Finding Skilled Workers

2) Manufacturing Continued To Expand At Steady Pace Across U.S.

3) Nonfinancial Service Activity Remained Stable Or Increased

4) Consumer Spending Generally Positive, Sales Outlook Upbeat

5) Residential Real Estate Improved Somewhat In Most Districts

Elsewhere: The markets are saying Ben Bernanke — and everyone else — is done easing. For now. Until later. Maybe.

Going into Mr. Bernanke's testimony, most traders assumed the Fed was oriented toward easing. Today, Bernanke did not come off as dovish as some had expected ("We have seen some positive developments in the labor market") and so we saw a bond and commodity selloff, dollar rally, and a decline in commodity related stocks.

Other central banks are sending similar signals. Bank of England policymaker Martin Weale said the BOE does not have any reason to continue its quantitative easing program after it is completed in May. ECB insiders seems to be hopeful they will not need a third round of 3-year loans any time in the future.

One final question: if QE is less likely, and stocks like QE, why are all the major indices in positive territory? Why didn't stocks sell off as much? The short-term negative of no more QE or Operation Twist is offset by the stronger economy. And that is as it should be.

All of this, of course, will change if the global economy nosedives again. They will keep the spigots running, if they have to.

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