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.
ISM Manufacturing Index: November 2013 Preview
The ISM Manufacturing Index is expected to post a marginal decline to 56.2 in Monday’s November update (scheduled for release on Dec. 2), based on The Capital Spectator’s average econometric forecast. The estimate compares with the previously reported 56.4 for October. Meanwhile, the Capital Spectator’s average projection is moderately higher than a pair of consensus forecasts for November via surveys of economists.
Happy Thanksgiving!
The Capital Spectator will go dark for the next few days to indulge in a bit of Puritan feasting, followed by a radical agenda of nothing in particular. The usual fun with macro and finance returns anew on Monday, December 2. Meanwhile, it’s time to roast the bird, cut up the squash, and count our blessings. Have a great holiday!
A Pair Of Positive Macro Reports On Thanksgiving Eve
Today’s updates on initial jobless claims and the Chicago Fed National Activity Index bring encouraging news for the US economy as the nation prepares to celebrate the Thanksgiving holiday. New filings for jobless benefits dropped again last week, falling to the lowest level since late-September. Meanwhile, the three-month average of the Chicago Fed National Activity Index (CFNAI-MA3) inched ahead in October, reaching the highest level in eight months. Taken together, these two numbers bring a slightly stronger positive aura to the US economic outlook. It’s still premature to argue that growth overall is set to accelerate, but the data du jour suggest that it’s not getting any easier to be a pessimist when it comes to big-picture macro analysis.
Is The Latest Rise In Housing Permits A Sign Of Things To Come?
Yesterday’s surprisingly strong update on newly issued housing permits is a convincing signal for expecting that the residential real estate market will continue to grow in the near term. The double-shot releases of September and October data for permits beat expectations by a healthy margin. Last month’s number was especially strong, with permits rising to a 5-year high. The release of the hard data on housing starts, which usually accompanies the permit numbers, has been postponed until Dec. 16. But since permits and starts tend to track one another through time, yesterday’s upbeat news suggests that it’s likely that the triple play of September, October and November starts data that we’ll see next month will tell an encouraging tale.
Chicago Fed Nat’l Activity Index: October 2013 Preview
The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to increase slightly to 0.04 in tomorrow’s update for October (scheduled for release on November 27), according to The Capital Spectator’s average econometric forecast. In the previous release for September, the three-month average was estimated at -0.03. Values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Based on today’s estimate, CFNAI’s three-month average is projected to remain at a level that’s historically associated with economic expansion and at a marginally higher-than-average trend rate.