by Calculated Risk on 2/02/2014 10:34:00 PM

From Jon Hilsenrath and Victoria McGrane at the WSJ: Rate Decision to Drive Yellen's Early Agenda

After she is sworn in as Fed chairwoman Monday a new question will almost immediately crowd [Janet Yellen's] agenda: Why is unemployment falling so fast and what, if anything, should the central bank do about it?
...
[Yellen] and other Fed officials worry [the decline in the unemployment rate] masks large pockets of stress still plaguing the labor market, including millions of people who want work but aren't looking anymore and therefore are no longer counted as unemployed.
...
People are leaving the labor force for different reasons— they're retiring, going back to school, joining disability rolls, giving up looking for jobs or doing other things—reducing the number of people counted as unemployed.

The trend raises hard-to-answer questions for the Fed. Will some of these people come back to work when the economy improves or have they left permanently? Do these shifts mean there is less slack in labor markets—workers available to take jobs—than they realized, or is the slack still out there, hidden in these numbers?

Understanding the decline in the labor force participation rate is very important. A decline was expected - even before the recession - but it isn't clear how much of the decline is related to demographic trends, and how much is due to the weak labor market (my view is that over half of the decline in participation is due to demographics - both people retiring, and more people staying in school).

For much more, see: Labor Force Participation Rate Update, Labor Force Participation Rate Research, Understanding the Decline in the Participation Rate and Update: Further Discussion on Labor Force Participation Rate.

Monday:
• All day, Light vehicle sales for January. The consensus is for light vehicle sales to increase to 15.7 million SAAR in January (Seasonally Adjusted Annual Rate) from 15.3 million SAAR in December.

• At 9:00 AM ET, the Markit US PMI Manufacturing Index for January. The consensus is for a decrease to 53.9 from 55.0 in December.

• At 10:00 AM, the ISM Manufacturing Index for January. The consensus is for a decrease to 56.0 from 57.0 in December. The ISM manufacturing index indicated expansion in December at 57.0%. The employment index was at 56.9%, and the new orders index was at 64.2%.

• Also at 10:00 AM, Construction Spending for December. The consensus is for no change in construction spending.

Weekend:
• Schedule for Week of February 2nd

The Nikkei is down about 0.8%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures are up 4 and DOW futures are up 37 (fair value).

Oil prices are mostly moving sideways with WTI futures at $97.16 per barrel and Brent at $106.29 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.26 per gallon (about the same as a year ago).  If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com