Employment Figures Add to Pressure for New Zealand Rate Hike

With employment numbers improving, one of the last areas of concern for New Zealand’s central bank is vanishing, opening the way for a series of cash rate increases in 2014.

A year ago the unemployment rate was at 7.2% and concern was growing that the strong New Zealand dollar would decimate the export sector. But those concerns are now a distant memory, with the latest data supporting the view that there has been a sharp pickup in growth in the three months through Sept. 30.

Unemployment in New Zealand was at 6.2% in the third quarter, down from 6.4% in the previous quarter. But the real surprise was the level of employment, with the number of employed rising 1.2% for the quarter and 2.4% from the year-earlier period.

BOJ Minutes Show Ripples of Fed U-Turn on QE

Bank of Japan board members voiced concern over potential fallout from a shift in U.S. monetary policy at their own policy meeting in early October, showing how market volatility caused by the Federal Reserve’s surprise decision in September to maintain its bond-buying program has put Japanese officials on alert.

The BOJ’s Oct. 3-4 policy meeting took place about two weeks after the Fed decided not to start pulling back on its $85-billion-a-month bond-buying program. The Fed’s stance rocked markets and — in an unnerving development for Japan’s exporters — stopped the dollar’s uptrend against the yen.

“Some members” of the BOJ’s nine-person board said market participants now considered U.S. monetary policy “harder to predict,” according to meeting minutes released Wednesday. Those members added that “it is necessary to pay attention to the risk that the markets could again become highly volatile depending on the course of U.S. monetary policy.”

Fed’s Williams: Jobs Growth a Key Question for Bond-Buying Program

Federal Reserve Bank of San Francisco chief John Williams said Tuesday a key question for him on the central bank’s $85 billion-per-month bond-buying program is whether the jobs market can continue improving without additional help from the program.

Mr. Williams, speaking to reporters after a conference, said he wants to see “a pretty convincing case” that the economy can grow faster than its recent trend without additional monetary stimulus before the Fed reduces the bond-buying program, which is also known as quantitative easing, or QE.

The Fed has said it will continue the bond program until the outlook for the labor market has improved “substantially.” Mr. Williams said, in his mind, there are two parts to that statement: first, how much progress has been made since the Fed launched the latest round of bond-buying more than a year ago, and, second, the extent to which the Fed can expect continued progress.

Rising Corporate Debt May Be Reaching Dangerous Levels

Corporate debt is rising to potentially dangerous levels in Europe and some emerging markets, according to a new global banking group study.

While many firms across the globe have used years of low-interest borrowing from central banks to bolster their balance sheets, some companies have gone deeper in debt in the hopes of tiding their finances over until better times. Others have borrowed against growth prospects.

They could be a deadly strategies.

“After six years of abundant liquidity and near-zero policy rates, additional easing of monetary conditions could increasingly lead to financial distortions and pockets of bubbles in asset markets,” the Institute of International Finance said in its November Capital Markets Monitor.

(The full report will be made public at www.iif.com on November 8.)

Nominees Fight Looks Unlikely to Hold Up Yellen

An unresolved Senate fight over a handful of President Barack Obama’s judicial nominees could escalate, but will likely not ensnare his pick to lead the Federal Reserve, lawmakers and aides said this week.

Senate Majority Leader Harry Reid (D., Nev.) told reporters Tuesday he plans to take procedural steps this week to bring up two of Mr. Obama’s choices for a key federal appeals court, potentially inflaming last week’s clash over presidential nominees. But lawmakers and aides on both sides of the aisle said they hoped to keep that debate separate from the closely watched confirmation process of Janet Yellen, nominated to succeed Ben Bernanke after his second term as chairman ends in January.

Stock Bubble Driven by Central Banks to Burst in 2014, Analyst Warns

As Federal Reserve officials pursue the most aggressive monetary policy stimulus campaign in their institution’s history, they are mindful of the unintended consequences their actions can have on financial markets.

But as it now stands, most remain confident that huge injections of money into the economy haven’t created any bubbles big enough to threaten the overall course of the recovery. That has allowed them to press forward with their aggressive agenda of bond buying, which is aimed at pushing up asset prices in a bid to boost growth and lower unemployment.

Treasury Departures Leaves International Division Shorthanded

The departure of two of the U.S. Treasury’s top international officials will leave the Obama administration shorthanded on financial diplomacy.

Fortunately for Secretary Jacob Lew, the exits come amid a lull in international economic turmoil. And with other stalwarts helping to fill the gap, Treasury’s foreign statecraft shop should survive unscathed — barring another global crisis.

Treasury’s undersecretary for international affairs Lael Brainard, who helped guide the global response to the worst financial catastrophe since the Great Depression, is stepping down later this week. Her departure follows the exit of her lieutenant Charles Collyns, the former assistant secretary for international finance, at the end of July.

That leaves Marisa Lago, assistant secretary for international markets and development, as the most senior political appointee in the International Affairs division, handling the day-to-day management of the office while replacements are found for Mr. Collyns and Ms. Brainard.

How’s Life? Could be Better, Report Says

Life is better than it was 20 years ago but still far from good in many countries. According to “How’s Life?,” a report out Tuesday from the Organisation for Economic Co-operation and Development, the financial crisis of 2008 slowed some of that uneven progress, particularly in parts of the euro zone.

While no country earned top marks in all areas, the top 20% of performers were: Australia, Canada, Denmark, Norway, Sweden, Switzerland and the U.S.

The lowest 20% were: Chile, Estonia, Greece, Hungary, Mexico, Portugal and Turkey.

The other 20 countries surveyed — including France, Germany, Japan, Spain and the United Kingdom — fell in between the two groups.

The OECD gauged nations not just by economic benchmarks such as unemployment rates or gross domestic product, but by official and non-official data in 11 dimensions of well-being, such as housing, income, social connections, health, personal security and work-life balance. The survey period ran through last year, and turned up a number of “on the one hand-on the other” conclusions. The gender pay gap appears to be narrowing, the researchers found, but still exists. While women earn less than men and hold fewer top jobs in companies, they live longer and are getting better educated.

Distressed Home Sales: Rising or Falling? It Depends on the Source

A report from data firm RealtyTrac released last month showed that sales of distressed homes increased in September compared with one year ago. One problem: the RealtyTrac conclusion is contradicted by many other sources.

Home prices have rebounded over the past year in part because of the shrinking share of distressed sales, so the question of whether they are rising or falling gets to the heart of where home prices are headed. Home prices soften during periods when distressed sales rise, and they can appear stronger in periods when the share of distressed sales is falling.

One possible reason for the outlier is the tracking methodology used by RealtyTrac, said Daren Blomquist, vice president at RealtyTrac. He said the company tracks homes that aren’t sold on multiple-listing services and that it builds its tally by searching sales deeds in some 2,300 counties nationwide.

Vital Signs: Full Shelves but Order Books Are Fuller

Service companies are stocking up on the supplies they need. For now it looks as if the growth in demand justifies the inventory buildup.

The Institute for Supply Management said Tuesday that non-manufacturers, mostly service providers, were busier in October, despite some worries about the government shutdown. A key positive in the report was the continued string of high new-orders readings that began in July.

High levels of demand have led to companies laying in more supplies, such as retailers stockpiling merchandise to sell. Last week’s ISM factory report also showed manufacturers are booking more orders and building up inventories.