May Day or Mayday?

Today is the first of May or “May Day” which is also known as International Workers' Day. Given the economic news yesterday, I was wondering whether some might be thinking that today should not be seen as a commemoration of the Haymarket Riot of 1886 in Chicago, which came to signify the social and economic achievements of the international labor movement, but rather the emergency code word used internationally as a distress signal. (The later term derives from the French
venez m'aider, meaning 'come to my aid'/"come [to] help me.)

Although the month of April was a winner for US stocks (up approximately 4-5%, depending on the index), it appears that people are still feeling doubtful about the economy. Consumer confidence is at multi-year lows and yesterday Fox News released the results of its Dynamic Poll, which compared how people are feeling now versus how they felt in August, 2001--the last time we were in a recession.

The results show that people are pretty down right now--54% believe that we are in a recession and 38% say it’s a downturn—but that’s just semantics—92% are not feeling particularly upbeat. Back in 2001, the numbers were 23% and 50% respectively. So people think the economy is in the tank, yet the Commerce Department said that gross domestic product rose at a seasonally adjusted 0.6% annual rate January through March, equal to the fourth-quarter rate. It wasn’t great, but it least it was positive. Pessimists might note that it was the weakest two-quarter performance since 2001, when the economy was in recession.

The Fed evidently got the nuance of the mixed messages when it delivered the results of the FOMC meeting. As expected, the central bankers cut the target for the federal funds rate by ¼ point to 2%. But the statement accompanying the decision indicated that while the Fed still sees the economy under great stress, noting that “Economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress.”

But the economy is not falling off a cliff and therefore, the Fed dropped the phrase “downside risks to growth” remain, suggesting that inflation risks have escalated and will be important in the decision-making matrix in the near-term. The Fed also said it "will act as needed to promote sustainable economic growth and price stability," but it no longer feels it necessary to do so in a "timely manner," suggesting that the anxiety of the past few months has receded.

All of this Fed speak does seem encouraging, but so too is the reality that many people are not feeling too good. Again, according to the Fox News poll, when asked “How are you and your family doing financially?” the responses were as follows:
Great 15%Okay 61%Lousy 23%
For some, today is a celebration, while for others, it is a scary time. Depending on your situation, you can decide whether to celebrate May Day or to scream “Mayday, Mayday, Mayday!”