Fed hawk Hoenig downgrades recovery

Is the Fed's biggest hawk changing his tune on the economy?

Thomas Hoenig (right), the president of the Federal Reserve Bank of Kansas City, spoke Monday before a House of Representatives panel on the need to end the too-big-to-fail subsidy for big banks. Hoenig's disdain for this policy is no secret: He gave a well received speech in March 2009 called "Too big has failed."

So nothing new there. But Hoenig's remarks Monday before the House Subcommittee on Oversight and Investigations did contain one statement that's a bit of a head scratcher.

Hoenig's prepared remarks Monday refer off-handedly, in a discussion of the merits of community banks, to the "abnormally slow recovery that we've experienced over the past 2½ years."

There's nothing unusual about that statement. Just about everyone has been calling the recovery weak -- except for Hoenig, who seemed to make just the opposite case 10 days ago.

Hoenig, who has spent this year pushing his colleagues on the voting Federal Open Market Committee to end the Fed's pledge to keep short-term interest rates near zero for an extended period, made the contradictory comment Aug. 13 in a speech in Lincoln, Neb.

The last sentence in particular seems to fly in the face of Monday's "abnormally slow" comment.

While monthly data may be mixed, the trend data are consistently positive. Private job growth has been less than hoped for but positive nonetheless. Private payrolls increased 630,000 since January 1. In the first half of the year, private labor income increased in all components: hours worked, employment and wages. Hours worked have risen more rapidly than employment, which is typical for the early stages of an economic recovery. In fact, we are experiencing a better pace of recovery this time than at this point in our previous two economic recoveries.

The better pace only held up for 10 days, but it was good while it lasted.