Private nonfarm payrolls in the US are projected to increase by 207,000 (seasonally adjusted) in tomorrow’s August update from the Labor Department, according to The Capital Spectator’s average econometric point forecast. The projected gain is substantially higher than the reported increase of 161,000 for July. Meanwhile, The Capital Spectator’s average August projection is well above a pair of consensus forecasts, based on surveys of economists.
More Of The Same For Private Payrolls: Moderate Growth
Private payrolls increased at a relatively slow pace last month, rising by a net 176,000 in August vs. the previous month, according to the ADP Employment Report. As expected, the August gain was below July’s revised 198,000 increase. Meanwhile, the Labor Department’s latest weekly update on initial jobless claims brings better news: new filings for unemployment benefits dropped 9,000, falling to 323,000 in seasonally adjusted terms, which is near a 5-year-plus low. Yes, it looks like a mixed bag for updates on the labor market today. In fact, the news is a bit better than it appears once we focus on year-over-year trends.
Mr. Market Reconsiders Disinflation/Deflation Risk
Inflation expectations have fallen moderately this year, but the stock market has trended higher. Is this a sign that the new abnormal is history?
Macro-Markets Risk Index | 9.4.2013
The US economic trend has weakened a bit in recent weeks, but remains well above levels that signal imminent danger, based on a markets-based profile of macro conditions. The Macro-Markets Risk Index (MMRI) closed at 9.7% on Tuesday, September 3—a level that suggests that business cycle risk remains low. Although the latest 9.7% value is near the lowest readings of the year so far, it’s still well above the danger zone of 0%. If MMRI falls under 0%, that would be a sign that recession risk is elevated. By comparison, readings above 0% imply a bias for economic growth.
August ISM Index: Mfg. Expands At Fastest Pace In 2 Years
The US economic profile for August is still largely a mystery, but today’s update on the ISM Manufacturing Index offers an early clue for thinking that last month will remain firmly in the growth camp. The composite value for this widely followed benchmark inched higher last month to 55.7, the highest in more than two years. Although the gain surprised many analysts, my econometric modeling left room for thinking that we could see another decent report, as last week’s ISM preview noted. Surprising or not, today’s ISM news implies that the upbeat macro trend in July will roll on in August once all the numbers are published.
Major Asset Classes | August 2013 | Performance Review
August was a rough month for the major asset classes, with one key exception: commodities. The DJ-UBS Commodity Index popped 3.4% last month. Otherwise, red ink was the dominant theme. In fact, positive performance has become scarce on a year-to-date basis as well. US stocks are still bucking the trend, however, with a strong 17% rise in 2013 through the end of last month, based on the Russell 3000. Meanwhile, the Global Market Index (GMI), a markets-weighted, unmanaged mix of all the major asset classes, retreated 1.6% in August, which trimmed its year-to-date gain to a middling 4.9%.
Labor Market Trends As Of Labor Day
It’s Labor Day in the US, which means that the financial markets are closed and employment activity is at a minimum on the first Monday of September. The lull is the perfect excuse to briefly review where we stand on several key indicators for the labor force before retiring for the rest of the day with some R&R.
Book Bits | 8.31.13
● Bonds Are Not Forever: The Crisis Facing Fixed Income Investors
By SImon Lack
Summary via publisher, Wiley
Bonds Are Not Forever: The Crisis Facing Fixed Income Investors interweaves compelling, often amusing anecdotes from Lack’s distinguished thirty-year-career as a professional investor with hard economic data showing how we got to the point where bonds—long considered a reliable source of portfolio income—should be handled with extreme caution. Lack also provides investors with a coherent framework for understanding the future of the fixed income markets and, more importantly, answers the question: “Where should I invest tomorrow?”
Income & Spending Growth Slows In July
Today’s personal spending and income update for July is a mixed bag. There’s no smoking gun here per se, but the numbers for July certainly don’t look impressive either. The best you can say is that sluggish growth prevails and that the trend is holding up with enough strength to keep the economy out of the ditch. That’s old news, of course, but the recent changes for these crucial data sets leave minimal room for comfort should the economy suffer an unexpected shock. On the bright side, the economy overall still looks relatively resilient, or so it appears based on yesterday’s substantial upward revision in Q2 GDP growth to 2.5% from 1.7%. Nonetheless, when you factor in today’s news on consumer spending and income, it’s still hard to imagine that the US is poised to break free of its moderate-growth track any time soon.
ISM Manufacturing Index: August 2013 Preview
The ISM Manufacturing Index is expected to increase to 55.8 in next week’s August update (scheduled for release on September 3), based on The Capital Spectator’s average econometric forecast. The estimate reflects a slight rise from the previously reported 55.4 for July. Meanwhile, the Capital Spectator’s average projection is moderately higher than a consensus forecast for August that’s based on a survey of economists.