In the chart below we take a look at the relationship between lumber prices and private nonfarm payrolls. Clearly they tend to move together on a monthly basis. One of the transmission mechanisms of monetary policy is the impact of interest rate changes on the construction sector, which has historically been a leader of past economic recoveries.
This is clearly not the case in the current balance sheet growth recession, so we are not as confident in the lumber price/nonfarm payroll relationship. Nevertheless, lumber futures have been under heavy pressure since the end of March, down over 30 percent, no doubt, partially the result of the double dip in housing prices. It will interesting to see how, or if, the correction in lumber shows up in the private nonfarm payroll number tomorrow.
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