Wireless equipment
Interview: Bank of America Corp---Levy, Mickey---Economist
>> after several years of an industry down turn, there are signs of recovery in the telecommunications equipment sector. lucent, chief executive patricia russo says she’s seeing capital spending on wireless equipment picking up at different rates around the world.
>> right now in north america, for example, we’re seeing some good growth in the wireless sector. we’re seeing good growth in emerging markets as they deploy new wireless networks for basic communications. we’re seeing growth in the area of voice over i.p. more in north america than we’re seeing it yet in other parts of the world.
>> just last week lucent agreed to buy internet equipment maker teleca for $295 million in stock. russo told bloomberg news that lucent paid a fair price for the company. take a look at lucent shares in today’s trading. down about 3.7%. may’s report out friday. the marketses will be closely watching to see if will is continued improvement in the job market . mickey leafy, chief economist at bank of america among those who will be watching and sorting through the data and tea leafs joins us from his firm in new york. mickey, if there were a surprise in the numbers on friday, the forecast is for continued growth in the job market . the nonparm payrolls average estimate to add $29 a,000. what if that number came in less than 200 thou. could that, at this late stage of the game, would the fed meet in the end of june corks a number less than 200,000 cause the fed to change its course? >> no. absolutely not. the fed knows that federal funds rate below inflation is not sustainable. it has every intention to begin raising rates at the june meeting.
>> and you think a quarter of a percent?
>> that’s right. one can ask could it possibly be a 50 basis point rise? and the situation under which that would occur would be -- would be an inflation number from may which come out in mid june, suggesting momentum and inflation f that happened and the markets started building in the expectationsthat could push the fed to do so. i think the highest probability is the fed to move 25 basis points.
>> the weakly jobs number coming out thursday before the monthly data comes out. this is a more up to date read. the initial jobless claims and continuing claims coming out simultaneously. your thoughts there, continued down trend in the number of first time jobless filers?
>> look, keep in mind, that’s just one sifed the equation. it’s initial unemployment claims is the amount of layoffs. it doesn’t tell you about rehiring. and that has come down quite a bit suggesting the pace of layoffs is abated. but at the same time what we’re seeing, i think we’ll see more of it on friday, is businesses are in a hiring mode. and there are key fundamental reasons for. that but that points toward a sustained healthy gains in employment.
>> let’s talk about a big number that came out today that really caught my eye. that is the mortgage application that’s were down 1.2% on week. the refinancing index was down 6.5%. but year on year, check out the chart i put together on the bloomberg, folks, if you can. this is the refinancing and the basic index coming out. i’m not sure if can you see that bracket, but they’re dun 66% and 86% preinspectively from the all-time high aze year ago. there r. there problems, mickey in, the mortgage and housing industries as a result? as the inestability of rising interest rates?
>> i don’t think there’s a problem. we’ve seen about a 1%age point backup in conventional mortgage rates. that’s not enough to upset the mortgage market . it’s not enough to upset housing. keep in mind the interest on the mortgage is tax deductable. the after tax cost is low. housing activity, while it may come off and drift down from its peak, it is still very firm and at high levels.
>> this is another favorite chart of mine i put together on the bloomberg. again, the white line is going to show the fed funds rate. it’s been at 1% since june of 2003. you can see the treasury yield rising and the s&p 500, the yellow line rising well in advance of the fed. do you think the fed is behind the curve even if they move in june? do you think they’re behind the curve in terms of raising rates and/or containing inflation?
>> they may be slightly behind the curve. keep in mind while inflation troughed and gone up the last three months, it’s still in a range that fed is comfortable with. i think what could unsettle the fed and lead the markets to perceive the fed is behind the curve is if we were to get higher inflation news. but right now, in my book, the fed is a little behind the curve because i know a negative real funds rate is absolutely unsustainable. i think the funds rate has to go to 3.5%, 4%. on the other hand, with inflation still low, i think they would argue, yes, we need to raise rates. but we’re not that far behind the curb.
>> all right. mickey leafy, thank you very much fl appreciate you joining us. folks, chief economist at bank of america. coming up, post 9/11 visa regulations are causing some businesses or costing some businesses billions of dollars. we’re going to bring you this story as well as details on the nasdaq’s first loss in eight days.
