The private sector created a surprisingly high number of jobs last month, the Labor Department reports. Private payrolls increased 273,000, or well above the consensus forecast of 213,000 (according to Econoday.com) and substantially higher than March’s revised 202,000 advance. It’s good news, of course, but today’s upbeat release is primarily a clue for thinking that the labor market is again growing at the trend rate that prevailed before the harsh winter took a toll.
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The New York Times reminds us not to take today’s jobs report too seriously. Why? The standard glitch will likely infect the data: statistical noise. “Even when the economy is moving in a clear direction, the noise in month-to-month changes can be big enough to obscure any trend,” Neil Irwin and Kevin Quealy write on the paper’s Upshot blog. To drive home the point, the article includes a simulation of how short-term fluctuations could play havoc with our ability to interpret the data point du jour. What the article didn’t mention is that this caveat applies to every economic indicator.
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Private nonfarm payrolls in the US are projected to increase 210,000 (seasonally adjusted) in tomorrow’s April update from the Labor Department, according to The Capital Spectator’s median econometric point forecast. The expected monthly rise is moderately above the previously reported increase of 192,000 for March.
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April was kind to the major asset classes, at least in relative terms. All corners posted gains. The big winner: US REITs, which topped the list with a strong 3.3% total return, based on the MSCI US REIT Index. In fact, US REITs have been firing on all cylinders lately—so far this year, the asset class is comfortably in the performance lead with a hefty 13.7% advance in 2014 through the end of April. In close pursuit: commodities, which have rebounded sharply this year, gaining nearly 10% via the broadly defined DJ-UBS Commodity Index. In other words, portfolio strategies with low-to-zero weights in US REITs and commodities have endured substantial opportunity costs in recent months.
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The pace of jobs creation in April improved for the third month in a row, according to the ADP Employment Report. “The 220,000 US private sector jobs added in April is well above the twelve-month average,” noted ADP’s president and chief executive officer. “Job growth appears to be trending up and hopefully this will continue,” said Carlos Rodriguez.
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What’s your return expectation for your investment portfolio? That’s a tough question to answer because there are many ways to estimate future performance. Meanwhile, let’s not forget that every forecast is probably wrong in some degree and so it’s a good idea to crunch the numbers from multiple angles. As a first step with modeling multi-asset-class strategies, I like to begin with what’s known as equilibrium risk premiums.
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Here’s the second installment of excerpts from my new book Nowcasting The Business Cycle: A Practical Guide For Spotting Business Cycle Peaks Ahead Of The Crowd. Earlier this month I published the Preface.
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Private nonfarm payrolls in the US are projected to increase 198,000 (seasonally adjusted) over the previous month in tomorrow’s April release of the ADP Employment Report, based on The Capital Spectator’s median econometric point forecast. The expected rise is slightly below a pair of consensus forecasts via surveys of economists.
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US economic growth will slow in this year’s first quarter, according to a range of projections. The consensus view via the Wall Street Journal’s April survey of economists anticipates a 1.5% annualized gain for real GDP in the first three months of this year—a substantially lower pace than the reported 2.6% rate for last year’s fourth quarter. The Capital Spectator’s revised median nowcast for Q1:2014 GDP also reflects a slowdown, but a considerably milder one vs. the crowd’s outlook. In fact, today’s updated outlook for 2.4% (real seasonally adjusted annual rate) is modestly above the previous 2.0% nowcast that was published here on March 25. What’s changed? The economic numbers have improved since our last update.
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● Emerging Markets in an Upside Down World: Challenging Perceptions in Asset Allocation and Investment
By Jerome Booth
Summary via publisher, Wiley
The world is upside down. The emerging market countries are more important than many investors realise. They have been catching up with the West over the past few decades. Greater market freedom has spread since the end of the Cold War, and with it institutional changes which have further assisted emerging economies in becoming more productive, flexible, and resilient. The Western financial crisis from 2008 has quickened the pace of the relative rise of emerging markets – their relative economic power, and with it political power, but also their financial power as savers, investors and creditors.
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