The Economist recently asked: “Are financial markets useful indicators of how an economy is about to perform?” The answer, of course, is yes… sometimes, depending on the data sets and the econometric techniques. Generally speaking, however, real-time asset pricing provides a deep well of intelligence for estimating the state of the business cycle. But there are plenty of traps here. Separating the signal from the noise, as they say, requires some effort. There are no silver bullets, but one tool that deserves to be on everyone’s short list is a statistical measurement known as cross correlation (CC), which quantifies the relationship between two time series across a series of time lags.
Continue reading →

Private nonfarm payrolls in the US are projected to increase 187,000 (seasonally adjusted) in tomorrow’s March update from the Labor Department, according to The Capital Spectator’s median econometric point forecast. The expected rise is moderately above the previously reported increase of 162,000 for February. Meanwhile, The Capital Spectator’s median projection for March is below a pair of consensus forecasts, based on surveys of economists.
Continue reading →

The labor market is on the mend… again. Private-sector employment increased 191,000 in March, the best monthly comparison so far this year, according to the ADP Employment Report. That’s in line with the consensus forecast via economists, although the gain was sharply higher than The Capital Spectator’s median econometric prediction. There was also some good news in the revisions: February’s tepid 139,000 advance was revised up to a moderately better 178,000 in today’s ADP release. More importantly, the data continues to show that the year-over-year trend in private payrolls is advancing by nearly 2%. That’s an encouraging signal for thinking nothing much has changed for payrolls, namely, moderate growth prevails.
Continue reading →

Private nonfarm payrolls in the US are projected to increase 139,000 (seasonally adjusted) over the previous month in tomorrow’s March release of the ADP Employment Report, based on The Capital Spectator’s median econometric point forecast. The projection is substantially below a pair of consensus forecasts via surveys of economists.
Continue reading →

March brought another round of healing for assets in emerging markets. For the second month in a row, stocks and bonds in these nations posted handsome gains. Equities led the way in the first quarter’s closing stretch: the MSCI Emerging Markets Index advanced 3.1% last month, closely followed by government bonds in emerging nations, which added 2.8% (Citigroup ESBI). At the other end of the performance spectrum, stocks in developed markets led the red-ink parade by shedding 0.6% in March, based on the MSCI EAFE Index.
Continue reading →

The ISM Manufacturing Index is expected to remain unchanged at 53.2 in tomorrow’s update for March vs. the previous month, based on The Capital Spectator’s median econometric forecast. Meanwhile, this median projection is moderately below three consensus forecasts via surveys of economists.
Continue reading →

It’s all about supply and demand–the first, last, and everything for estimating the projected path of prices. Geopolitics can and does intrude, of course. This is oil, after all. But the raw numbers of economics have the last word eventually—even for the world’s most valuable commodity.
Continue reading →

● Capital in the Twenty-First Century
By Thomas Piketty
Review via The New Yorker
In the stately world of academic presses, it isn’t often that advance orders and publicity for a book prompt a publisher to push forward its publication date. But that’s what Belknap, an imprint of Harvard University Press, did for “Capital in the Twenty-first Century,” a sweeping account of rising inequality by the French economist Thomas Piketty. Reviewing the French edition of Piketty’s book, which came out last year, Branko Milanovic, a former senior economist at the World Bank, called it “one of the watershed books in economic thinking.” The Economist said that it could change the way we think about the past two centuries of economic history. Certainly, no economics book in recent years has received this sort of attention.
Continue reading →

Optimism got a break with today’s release for personal income and spending in February. As expected, modest growth prevailed last month as Americans spent a bit more vs. January. The gain marks the second monthly increase in a row. February’s 0.3% rise for both disposable personal income (DPI) and personal consumption expenditures (PCE) isn’t particularly impressive, but the fact that both indicators posted a decent rise in a month that suffered a heavy blow from Old Man Winter is an encouraging sign. More importantly, the year-over-year comparisons remain comfortably above zero, which implies that the recent fears of the worst for the business cycle have been excessive after all.
Continue reading →

Tomorrow’s report on US personal consumption spending for February is projected to show a gain of 0.3% vs. the previous month, based on The Capital Spectator’s median econometric forecast. That’s slightly below January’s 0.4% increase. Meanwhile, the Capital Spectator’s median forecast for February matches the consensus predictions in three surveys of economists.
Continue reading →