The labor market expanded again last month: private payrolls increased 196,000 in November, moderately more than expected, based on The Capital Spectator’s average econometric projection. Even so, last month’s gain fell short of October’s revised 214,000 rise, although the pace of growth in November still suggests that the economy is creating jobs at a slightly faster rate these days compared with the lesser gains in recent history. Meanwhile, today’s update on personal income and spending brings mixed news. Personal consumption expenditures advanced 0.3% in October—in line with expectations. Disposable personal income, however, retreated 0.2%–the first monthly instance of red ink since January.
Monthly Archives: December 2013
Today’s Upbeat Macro Reports Probably Overstate Growth Prospects
This morning’s economic updates for the US paint an encouraging profile, but it may be a bit misleading. The Bureau of Economic Analysis revised second-quarter GDP up by a hefty degree, estimating that the nation’s output of goods and services increased 3.6% for the three months through September (seasonally adjusted annualized real rate). That’s substantially higher than the 2.8% gain in the advance estimate for Q3.
Personal Consumption Expenditures: October 2013 Preview
US personal consumption spending for October is projected to rise 0.3% vs. the previous month in tomorrow’s update from the Bureau of Economic Analysis, based on The Capital Spectator’s average econometric forecast. Today’s average projection is slightly above the previously reported 0.2% increase for September. Meanwhile, the Capital Spectator’s average 0.3% forecast for October matches the projections in three surveys of economists.
US Nonfarm Private Payrolls: November 2013 Preview
Private nonfarm payrolls in the US are projected to increase by 180,000 (seasonally adjusted) in tomorrow’s November update from the Labor Department, according to The Capital Spectator’s average econometric point forecast. The projected gain is substantially below the previously reported increase of 212,000 for October. Meanwhile, The Capital Spectator’s average November projection falls between a pair of relatively wide-ranging consensus forecasts, based on surveys of economists.
ADP: Job Growth “Appears To Be Picking Up”
The US economy added a net 215,000 private-sector jobs last month, according to this morning’s ADP Employment Report—the biggest monthly gain in a year. The upbeat news suggests that the better-than-expected October payrolls report from the Labor Department isn’t a fluke after all.
Wrong Models, Good Forecasts, And The Search For Useful Guidance
The Economist asks the question that never goes out of style: Who’s good at forecasts? “That question is both obvious and critical. And yet, in most instances, we really don’t know the answer.” I prefer the view that no one and everyone is good at this guessing game. No one in the sense that the future is unknowable. Everyone because even a broken forecasting model can be right at times, albeit for the wrong reason: luck. It’s the gray area between those extremes that’s dangerously seductive and occasionally useful.
Research Review |12.03.13 | Forecasting: Markets & Macro
Do Asset Price Drops Foreshadow Recessions?
John C. Bluedorn (IMF), et al. | Oct 2013
This paper examines the usefulness of asset prices in predicting recessions in the G-7 countries. It finds that asset price drops are significantly associated with the beginning of a recession in these countries. In particular, the marginal effect of an equity/house price drop on the likelihood of a new recession can be substantial. Equity price drops are, however, larger and are more frequent than house price drops, making them on average more helpful as recession predictors. These findings are robust to the inclusion of the term-spread, uncertainty, and oil prices. Lastly, there is no evidence of significant bias resulting from the rarity of recession starts.
Major Asset Classes | November 2013 | Performance Review
Red ink is splattered across November’s performance profile, presenting a contrast with the easy money gains in September and October. The leading exception: the US stock market, which advanced 2.9% in November on a total return basis. Meanwhile, last month’s big loser among the major asset classes: US REITs, which shed a hefty 5.2% for the month just passed.