Yesterday’s announcement by the Federal Reserve that it will embark on a new and open-ended bond-buying program until job growth is stronger has many implications for the markets and the economy. One is deciding what the latest chapter in monetary stimulus means for the new abnormal.
Monthly Archives: September 2012
Jobless Claims Rose Last Week, But The Annual Trend Is Still Encouraging
Initial jobless claims rose 15,000 last week to a seasonally adjusted 382,000–the highest since July. But the Labor Department advises “that several states have reported increases in initial claims (approximately 9,000 in total) for the week ending September 8, 2012 , as a result of Tropical Storm Issac.” Does that mean that last week’s rise is temporarily skewed with storm-related noise? Possibly, although only time will tell. Meantime, one reason for thinking positively: the unadjusted claims data on a year-over-year basis is still falling by 10% as of last week, a rate that’s in line with recent history. That’s a sign that it’s premature to read too much into last week’s seasonally adjusted jump.
Is The Decline In Positive Payrolls Revisions A Warning Sign?
Most economic reports should come with a warning: the data is subject to revision. Today’s glowing number that’s the toast of the punditocracy is tomorrow’s statistical detritus. But if the world is always eager to move on to the next number du jour, and forget yesterday’s news, informed analysts recognize that monitoring the initial estimates of a data series, and tracking its path through time, offers another layer of intelligence. For example, a recent study by the Philadelphia Fed found a “small positive (but statistically significant) association between the revision to job gains and the level of job gains.”
It’s The Government’s Shrinking Payrolls, Stupid
Mark Perry, an economics professor at the University of Michigan, writes that the weak labor market “can be traced to the biggest loss of government jobs since WWII.” The evidence is certainly damning if we compare government payrolls with private payrolls, which have been rising at nearly 2% a year over the past two years.
A Model For GDP Forecasting
The government’s first estimate of the nation’s economic growth for the third quarter doesn’t hit the streets until October 26. Meantime, the burning question: Does the sluggish 1.7% annualized pace in Q2 for GDP imply more of the same during for Q3? Or will see a stronger reading in the next quarterly report? The world is awash in guesses, and now there’s one more. Today marks the start of a new feature on The Capital Spectator: a regularly updated “nowcast” of the next quarter’s GDP using standard econometric techniques.
Book Bits | 9.8.2012
● The Price of Politics
By Bob Woodword
Review via the Associated Press/Newsday
A combination of miscalculations, ideological rigidity and discord within the leadership of both political parties brought the U.S. government to the brink of a catastrophic default during the 2011 showdown over the federal debt ceiling, according to a new book by journalist Bob Woodward. “The Price of Politics,” Woodward’s 17th book, chronicles President Obama’s contentious and still unresolved fiscal policy battle with congressional Republicans that dominated the White House agenda for nearly all of 2011. The book is scheduled for release on Tuesday. Woodward is a Washington Post associate editor. As the nation’s leaders raced to avert a default that could have shattered the financial markets’ confidence and imperiled the world’s economy, Obama convened an urgent meeting with top congressional leaders in the White House. According to Woodward, House Speaker John Boehner pointedly told the president that the lawmakers were working on a plan and wouldn’t negotiate with him.
A New Old Story For Jobs: Slow Growth
Today’s employment report for August from the Labor Department is a disappointment, but not enough to sink the case for expecting slow growth for the economy overall. Nonetheless, after yesterday’s 201,000 increase via ADP, this morning’s weak 103,000 gain for private nonfarm payrolls is a wet rag.
Two Encouraging Updates For The Labor Market
We have two new updates on the labor market today and both sets of numbers are encouraging. The ADP Employment Report advises that nonfarm private payrolls rose a respectable 201,000 in August, up from July’s 173,000 increase and the highest since March. Meanwhile, initial jobless claims dropped last week, falling by a seasonally adjusted 12,000—the biggest weekly decline since July. You still can’t assume much in economic analysis these days, but for the moment we’re batting a thousand when it comes to the data points du jour.
A Primer On Defining Indexing Methodologies
Indexing used to be simple. In the old days, a representative sample of securities was rolled into a portfolio, weighted by the respective market values, and left to drift with the market’s tide. This methodology—market cap indexing—is still used, of course. In fact, most of the planet’s assets linked to indexing reside under this conceptual framework. But it has plenty of competition these days. The challenge is figuring out which indexing methodology will be superior, given a particular set of investor expectations, goals, risk tolerance, etc. Before you can even begin to answer, however, you need a clear understanding of what’s on the menu. Where to start? A new research note from the folks at 1741 Asset Management sorts out the basics: “Alternative Beta: Catergorisation of Indices — Do All Roads Lead to Rome?”
ISM Index: Manufacturing Is Sluggish For 3rd Straight Month
Manufacturing activity in the U.S. contracted for the third month in a row in August, the Institute for Supply Management reports. That’s a sign that economic growth has been sluggish and is likely to remain so. The ISM Manufacturing Index dipped ever so slightly to 49.6 last month vs. 49.8 in July. Any reading under 50 implies that manufacturing, a key sector of the economy, is contracting. But the below-50 reading is shallow, which suggests that manufacturing is closer to treading water rather than shrinking per se. That’s hardly an encouraging reading. But given the ongoing growth elsewhere in the economy (assuming it holds up), it’s not yet clear if the moderately weak readings for this indicator are the last word on what happens next for the broader economy.