The year’s economic news is ending on a high note, or at least a relatively encouraging note. Initial jobless claims declined by a hefty 34,000 last week to a seasonally adjusted total of 388,000. That’s the first reading under 400,000 since the summer of 2008. Is it real? Maybe, although the timing raises some doubts.
PEAK OIL & CRUDE WAGERS
Peak oil is back in the news, mostly for its apparent failure. The story starts with a five-year-old wager.
MACRO REVIEW
The year is coming to a close, which inspires looking at recent history for some perspective on the year ahead. The past is hardly a flawless window into the future, but it’s a good place to start for considering the possibilities for 2011. The following charts, courtesy of the economics database at the St. Louis Fed, summarize some of the key macro trends over the past year.
JOBS & INFLATION: THE CRITICAL VARIABLES IN THE FED’S EXIT STRATEGY
Inflation is still low and so the Fed is in no rush to raise interest rates. The market is expecting no less. Fed fund futures expiring next November are priced for only a slight rise in Fed funds—roughly 38 basis points vs. the current target rate of zero to 25 basis points. Cheap money won’t last forever, but almost no one thinks higher rates are imminent. Still, it’s not too soon to consider the future, including the possible triggers that launch the Fed’s exit strategy.
THE GREAT DIVERGENCE
Faster economic growth in emerging markets compared with mature countries has been celebrated as a rare bright spot in the global economy in recent years. Without the robust expansion rates of China, India and other emerging nations, the fallout from the Great Recession surely would have been deeper and linger longer.
MERRY CHRISTMAS
Joyeux Noel
Zalig Kerstfeast
Frohe Weihnachten
Feliz Navidad
Kala Christouyenna
Buone Feste Natalizie
READING ROOM FOR FRIDAY: 12.24.2010
►Economy brightens as consumers spend and layoffs slow
Christopher S. Rugaber/Associated Press/Dec 24
Economic reports Thursday suggested that employers are laying off fewer workers, businesses are ordering more computers and appliances, more people are buying new homes, and consumers are spending more confidently. Combined, the latest data confirm that the economy is improving, though the job market remains a problem with unemployment at a stubbornly high 9.8 percent. “The recovery is moving into higher gear,” said Jim O’Sullivan, global chief economist at MF Global Ltd., of New York.
►Consumers Lift Economy
Justin Lahart/Wall Street Journal/Dec 24
“It looks like we’ve transitioned into a period of solid consumer spending,” said Barclays Capital economist Dean Maki. “That makes it hard not to be optimistic about economic growth.”
HAS SPENDING & INCOME HIT A CEILING?
Personal income and spending continued rising at a moderate pace last month, the U.S. Bureau of Economic Analysis reports. Disposable personal income rose by 0.3% for the second consecutive month and personal consumption expenditures gained 0.4%, logging the fifth straight month of higher spending. The revival in economic growth that the bond and stock markets have been anticipating in recent months was confirmed once more with a fresh batch of data. Good news, to be sure, but is there also a glimpse of the new normal in the data?
MACRO SURVEILLANCE FOR WEDNESDAY: 12.22.2010
What IHS predicts for global economy in 2011
The U.S. recovery will pick up steam as the year progresses. In 2011, the U.S. economy is likely to be firing on more cylinders. Housing investment will begin to recover and the United States will enjoy export-led growth. Additional fiscal stimulus will add 0.6 percent to growth in 2011 and push the unemployment rate below 9 percent by year’s end.
International Business Times, Dec. 22
Economic outlook: GDP growth expected
Analysts expect US third-quarter GDP to be revised higher to show annualised growth of 2.8 per cent, up from the previously reported 2.5 per cent.
Financial Times, Dec 19
THE TREND VS. THE NEW NORMAL
The third and final estimate for third-quarter U.S. GDP that’s scheduled for release tomorrow is expected to report a rise of 2.7%, economists predict, according to the consensus forecast via Briefing.com. If accurate, the gain represents a slight improvement over the previously reported 2.5% increase. That’s still modest, but the trend at least looks friendly.