Wall Street is regrouping. Easy money has been made. The fiscal stimulus has been priced in for a long time. The Fed is an ongoing game, but the slightly easing price pressures along the U.S. yield curve are signaling surprisingly stable inflation expectations.
The current mix of easy fiscal and monetary policies has produced an improving outlook for jobs and incomes: the two variables that, along with credit costs, drive three-quarters of the U.S. economy.
Despite some areas of persisting weakness, the labor market situation is probably as good as it will ever get over the near term. At this point in the business cycle, we are witnessing a fully-employed economy hitting the limits of a disappointingly low labor supply.
The growth of household incomes is also picking up. A 2 percent annual growth of inflation-adjusted after-tax incomes in the first four months of this year is a noteworthy improvement over a 1.7 percent gain during the prior four-month period.