Visiting with some construction clients in the last week, First Union economist Mark Vitner was reminded one more time that all the talk of tighter monetary policy and tighter credit quality has yet to make a real dent in the real world.
Yes, customers want to know how much First Union expects the Federal Reserve to raise rates this year and yes, homebuilders would like to see mortgage rates come down.
But "right now," Mr. Vitner said, "virtually no one is saying credit is tough to get."
The pipeline of ready credit is surely bothersome news for the Fed - which knows that it could get the slowdown it desires a lot faster if only the banks would cooperate by becoming more restrictive.
And if it's bothersome for the Fed, what does it mean for the earnest investors who bid up bank stocks last week - driven at least in part by the hope that the Fed's tightening cycle was nearing its end?
Despite last week's economic data that appeared to bolster the case that a slowdown was in progress, several economists, including Mr. Vitner, just don't buy it. And they see no real evidence to convince them otherwise.
For one thing, the falloff in areas like auto sales and consumer spending could easily have represented a natural adjustment from the furious pace of economic activity in the first quarter of the year. For another, it is simply too early for economists to say whether the central bank's actions have been effective.
"Our view," said the First Union economist, "is that this apparent slowdown isn't attributable to the Fed's rate hikes," which should require a year to 18 months to actually take hold in the economy. "Although it may all play right into the Fed's hands, the only thing that seems to be happening is a bit of a payback" for a string of outsized economic gains.
More important, there is no sign yet that the labor market has cooled off enough to satisfy the Fed, economists, or, for that matter, anyone looking to plug personnel holes in their organizations. First Union's customers, Mr. Vitner said, still appear far less concerned with finding money than they are with finding people.
"You ask businesses about what their concerns are and it's not credit, it's labor," he said. "Everyone talks about how higher rates are going to hit the housing market. But the one thing that will really hit the economy is when growth in employment begins to slow."
The home-building sector may actually provide the most dramatic evidence of how much pressure still remains in the economy. First Union's experience in some still-sizzling housing markets like Atlanta, Charlotte, and Washington shows that by most measures, demand for new construction is still extremely strong.
"Aside from a few builders who report slightly lower traffic through their models, we haven't seen anything" resembling a slowdown, he said. "Inventories of higher priced homes are almost nonexistent and given what's happened in the stock market, that's where you would have expected to see some effects."
It seems the only areas really pressured by the Fed tightening cycle are the capital markets, where new issuance has dried up, and in debt refinancings. "We're seeing very little refinancing in mortgages, in corporates or the public sector."
Consumer credit, which typically lags spending levels both on the way up and on the way down, remains robust, Mr. Vitner said. One element Mr. Vitner singled out for attention on the consumer credit front was gasoline prices because customers for the most part seem to maintain their consumption levels when prices rise, putting it all on plastic as usual.
Which is pretty much the way homebuyers have responded to rising mortgage rates through the Fed's first six monetary tightenings.