Initial jobless claims fell again last week, dropping for the fifth week in a row. That’s good. But the rate of descent is slowing. It’s too soon to say if this is a warning sign, but as a potential problem it deserves monitoring. As for considering the numbers in hand, today’s release offers another dose of mildly upbeat news. With new filings for unemployment benefits inching lower, the case strengthens for assuming that the downward trend that’s been in force for much of this year is intact. In turn, the continued improvement supports a forecast that the labor market will continue to heal.
Monthly Archives: November 2013
US Industrial Production: October 2013 Preview
Tomorrow’s October report on US industrial production is projected to post a 0.2% rise vs. the previous month, based on The Capital Spectator’s average econometric forecast. The expected gain represents a substantial deceleration vs. the increase in industrial output for September. Meanwhile, the Capital Spectator’s average projection for October is slightly higher than the estimates in several surveys of economists.
Squeezing Federal Spending
Is spending out of control in Washington? The answer depends on how you define your terms. There’s enough data to spin this any way you want. But let’s try to be objective. In truth, there’s no single, fully objective way to quantify the spending habits of the beast in Washington. We can, however, make a valiant effort by considering federal outlays from several perspectives. What we’ll find is a spending trend of late that’s in decline. It’s anyone’s guess if this will endure. As always, the answer relies on political decisions, which are constrained at the moment due to the automatic budget cuts that are currently the law of the land. For now, let’s consider what the current numbers tell us about the trend in budgetary matters.
Chicago Fed: Slightly Stronger Economic Growth In September
The US economy grew a bit faster in September, according to today’s delayed update of The Chicago Fed National Activity Index, a macro benchmark based on 85 indicators. “The index’s three-month moving average, CFNAI-MA3, increased to –0.03 in September from –0.15 in August, marking its seventh consecutive reading below zero,” the Chicago Fed reports. Although the expansion remains a touch “below trend,” as indicated by CFNAI-MA3’s marginally negative value, the current -0.03 level is the highest since February. That’s a sign that economic growth, while still moderate, shows no imminent signs of deterioration, or so the September numbers suggest.
Research Review |11.12.13 | Managing & Measuring Volatility
Restoring Value to Minimum Variance
Lisa R. Goldberg (University of Calif., Aperio Group), et al. | Oct. 2013
A long-only investable minimum variance strategy outperformed the S&P 500 over the four decades from January 1973 to December 2012. Through the lens of a factor model, we show this outperformance can be largely attributed to implicit style bets. Specifically, minimum variance has thrived by tilting away from size and volatility and toward value. As funds have poured into minimum variance in the wake of the financial crisis, and plausibly as a consequence of this trend, the value tilt has disappeared and a momentum tilt has emerged. This suggests that the cost of entry to minimum variance is at an historic high. We show how the value tilt can be restored to minimum variance by targeting specific exposures, and that there was a substantial long-term benefit to the restoration at most recent points of entry to the strategy.
No Sign Of Tapering In Base Money Supply Data
The inflation-adjusted year-over-year pace in so-called high-powered money—M0, as some label it—is rising at the fastest rate since 2009, when the Federal Reserve was winding down its initial monetary response to the Great Recession. The news that the growth in base money–a slice of money supply that the Fed controls directly–is accelerating arrives during a new round of chatter that the central bank will soon begin tapering its asset-buying program in the wake of last week’s upbeat economic reports. Some analysts now predict that a tapering announcement could come as early as next month, at the next FOMC policy meeting. Maybe, although a new Bloomberg survey advises that economists overall expect that the March 2014 meeting is the more likely date for a change in the monetary weather. Meanwhile, there’s nary a hint of tapering in the latest base money data. In fact, it looks like monetary policy stimulus is becoming more aggressive, or so the current numbers show.
Chicago Fed Nat’l Activity Index: Revised Sep 2013 Preview
Recession risk is projected to remain low, according to the revised projection for the three-month average of the Chicago Fed National Activity Index (CFNAI). This benchmark of the business cycle is expected to increase slightly to -0.14 in tomorrow’s delayed update for September, according to The Capital Spectator’s average econometric forecast. Today’s revised estimate incorporates new data that’s been published since last month’s government shutdown ended, although the current outlook is essentially unchanged from the earlier forecast for tomorrow’s September release.
Book Bits | 11.9.13
● White-Collar Government: The Hidden Role of Class in Economic Policy Making
By Nicholas Carnes
Essay by author via NewsObserver.com
On both sides of the aisle, the vast majority of our lawmakers come from the most privileged slice of American society. If Barack Obama, John Boehner, Nancy Pelosi, Harry Reid and Mitch McConnell sat down to talk about how to solve the budget impasse, no one at the table would have a net worth under $1.7 million.
And they aren’t alone. Working-class jobs – manual labor and service-industry positions – make up a majority of our labor force, but people from those kinds of jobs make up less than 2 percent of Congress. Meanwhile, millionaires – who make up less than 5 percent of the country – control all three branches of the federal government: They have a majority in the House, a filibuster-proof supermajority in the Senate, a 5-4 majority on the Supreme Court and a man in the White House.
The Status Quo Below The Headlines
Today’s updates on nonfarm payrolls and personal income & spending beat expectations, but when you look beyond the monthly comparisons it’s not obvious that the numbers have broken free of their recent bias for slow-to-modest growth. But let’s start with the crowd’s standard obsession: headline data, which is to say the month-over-month comparisons. Private-sector payrolls increased by substantially more than expectations, rising 212,000 in October, or nearly double the consensus forecast. Meantime, personal income in September jumped 0.5%, a sizable margin over the 0.3% prediction by economists overall. Personal consumption expenditures, however, fell in line with the consensus view and advanced by a tepid 0.2%. On the surface, two healthy upside surprises and one decent gain look like a big win and perhaps a game-changing day if you were expecting darker data. But as we’ll see, putting today’s numbers in perspective suggests that nothing much has changed.
Personal Consumption Expenditures: September 2013 Preview
Personal consumption spending for September is projected to rise 0.3% vs. the previous month in tomorrow’s delayed update from the government, based on The Capital Spectator’s average econometric forecast. Today’s average projection matches the previously reported 0.3% increase for August. Meanwhile, the Capital Spectator’s average 0.3% forecast for September is at the upper range of several consensus predictions based on surveys of economists.