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Results 501–550
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Employment Outlook Weather and Gasoline
by Scott Brown of Raymond James,
Nonfarm payrolls rose more than expected in February, with an upward revision to figures for December and January. The job market figures have been strong. However, an unusually mild winter has certainly had an impact. Its difficult to isolate the effect of mild weather. The labor market is definitely improving, but recent figures may be somewhat exaggerated. Mild winter weather may pull forward some seasonal gains that would have otherwise occurred in March and April. In addition, higher gasoline prices threaten to dampen the pace of improvement in the near term.
More Mixed
by Scott Brown of Raymond James,
The economic data reports have become more mixed. Growth is rarely even across time and industries, but the stock market often has a hard time with conflicting evidence. For Mr. Market, the economy has to be either booming or falling apart completely. Mild winter weather has clearly been a factor in the last few months, but unusual weather often merely shifts growth from one quarter to another. Last year, the economic gears were starting to catch, but gasoline rose from around $3 per gallon at the beginning of the year to $4 per gallon in early May. Are we in for a repeat?
ARRA, Three Years On
by Scott Brown of Raymond James,
The American Recovery and Reinvestment Act of 2009 was signed into law on February 17, 2009. Did it help? Yes, but estimates of the impact vary. Before Barack Obama took office, he selected Christina Romer to be the chair of the Council of Economic Advisors. Romer, a professor of economics at the University of California, Berkeley and an expert on the Great Depression, is exactly the sort of person youd want advice from in combating a severe recession. Its long been rumored that Romer had requested a significantly larger stimulus package than the roughly $800 billion in ARRA.
Where Things Stand
by Scott Brown of Raymond James,
The economy continues to operate far below its potential, which means that an extended period of above-trend growth is needed to mop up current slack. Real GDP growth has long trended about 3% per year. This trend is not the same a potential output. In fact, potential output should be below this trend partly due to the aging of the population. However, those arguing that the housing sector has either permanently reduced potential output or overstated potential output prior to the housing correction are off base. We have a lot of ground to make up, especially in the job market.
The Federal Budget Outlook
by Scott Brown of Raymond James,
The White Houses Office of Management and Budget will release its revised budget outlook this week. That outlook is expected to show a substantial reduction in the 10-year budget deficit, largely due to the required discretionary spending cuts specified in last years Budget Control Act. For the most part, the legislative battle ahead is not whether to cut, but what to cut. More importantly, tax policy, and in turn, the economic outlook, remains a major uncertainty into 2013.
The January Jobs Report
by Scott Brown of Raymond James,
Make no mistake. The labor market is improving and theres hope for strong job growth this spring. Moreover, average weekly hours have been trending higher, consistent with an expected increase in new hiring in the months ahead. However, not to harsh your mellow, the January employment data were not as rosy as the headline figures would seem to suggest. These data should not change the picture for the Fed. We still have a lot of ground to make up in the labor market.
The Fed: Dual Targets Or Dueling Targets?
by Scott Brown of Raymond James,
The Fed has adopted an inflation target, as many other central banks have done long ago. However, the Fed retained its dual mandate, with a soft employment target. How will the two goals be achieved and what happens when they conflict? The Fed says is will use a balanced approach. The Fed lengthened the period for which it expects to keep short-term interest rates at exceptionally low levels. However, the five Fed governors and 12 district bank presidents have differing opinions on when the Fed should start raising short-term interest rates and what the rate target will be at the end of 2014.
The Inflation Outlook
by Scott Brown of Raymond James,
When the Fed embarked on its second round of asset purchases in 2010, officials were worried about the threat of deflation. The 2011 inflation results suggest that the Fed was successful in warding off deflation, but inflation did not surge as some had feared. Despite the moderate inflation results for 2011, some still believe the Feds accommodative policy will lead to a substantial increase in inflation sooner or later. However, were still a long way from a full economic recovery, and there will be plenty of time to unwind the Feds accommodation when appropriate.
Fed Policy Outlook More Communication Is Good
by Scott Brown of Raymond James,
The Federal Open Market meets next week to set monetary policy. Its widely expected that short-term interest rates will remain unchanged and that (for the time being) there wont be another round of asset purchases (QE3). The Fed will begin publishing the range of senior Fed officials projections of the appropriate federal funds rate target (for the fourth quarter of this year and the next few years). There are more benefits than risks in making these projections public.
Steady As She Goes Into Early 2012
by Scott Brown of Raymond James,
Much like the situation last year, the economy appears to be poised for improvement. Again, there are still some headwinds and a number of downside risks to the growth outlook and much will depend on developments in Europe and in the oil market over the next few months. Theres still some prospect for further accommodation from the Federal Reserve we may see another round of asset purchases announced later this month.
Some Questions For 2012 And Beyond
by Scott Brown of Raymond James,
The U.S. economy is expected to advance at a moderate rate in 2012, but Europe presents a key downside risk to the outlook. That aside, there are longer-term uncertainties about potential growth over the next several years. Next year will be an election year and income inequality could be an issue. Like any good horror movie, the European crisis has carried an ongoing feeling of dread. The potential for a catastrophic collapse is palpable. For the U.S., a meltdown would hit exports, but the bigger fear is possible financial market disruptions.
Fed Policy Outlook Changes On The Way?
by Scott Brown of Raymond James,
The Federal Open Market Committee will meet on Tuesday to set monetary policy. The Fed is widely expected to leave short-term interest rates unchanged and the wording of the economic assessment should be largely the same as in the previous statement. However, we could see another round of asset purchases or some changes to the Feds communications. The inflation outlook is moderate. It doesnt look like well see substantially higher inflation in 2012, but (barring a large negative shock to growth) were unlikely to see a threat of deflation.
Treading Water
by Scott Brown of Raymond James,
The good news is that the economy does not appear to be contracting. The bad news is that its still not growing fast enough to make up much of the ground lost during the downturn. The unemployment rate fell to 8.6% in November, from 9.0% in October and 9.8% a year ago. However, more than half of that drop was due to a decrease in labor force participation. The data suggest an economy that is growing just enough to absorb the growth in the working-age population.
Debt Story
by Scott Brown of Raymond James,
Loan growth plays a key role in economic expansion. Simply put: no loan growth, no economic growth. However, theres a downside. Debt doesnt matter until it does. Debt has played a key part in the economic downturn and in the gradual recovery. Europes sovereign debt crisis has continued to escalate, with no easy way out. In the U.S., the government has borrowed more, but the markets have not punished it for doing so. Theres no sign that that is going to change anytime soon.
Super Committee To The Rescue?
by Scott Brown of Raymond James,
Hows it going? Not good. The nonpartisan Congressional Budget Office has to score the super committees recommendations and return its analysis to the committee by November 21, which would allow the committee two days to make changes before its final recommendations. The CBO was supposed to receive the bulk of the recommendations by late October or early November. Things are a little behind schedule. The committee seemed doomed to fail from its inception
Feeling Better?
by Scott Brown of Raymond James,
The European debt agreement puts the concerns about Greece off to the side for the present. However, its unclear exactly how much the European stabilization fund will be increased and how it will be financed. The agreement doesnt do much to head off potential problems for Italy and Spain. The government debt situation in the UK is worse than in Spain and Italy but borrowing costs for Spain and Italy are much higher. Thats because Spain and Italy do not have their own monetary policy. There is inherent fragility in the monetary union. TheECB and the EU will have to address this at some point.
Fed Outlook More Asset Purchases?
by Scott Brown of Raymond James,
The Federal Open Market Committee, the Feds policymaking arm, will meet on November 2-3. Clearly, there are some differences of opinion among senior Fed officials regarding the appropriate path for monetary policy. However, the dissenters (those wanting to do less) are a small minority. The FOMC will come together with a somewhat less troublesome near-term economic outlook (no recession in the near term), but there are more concerns about growth in 2012.
No Recession, At Least For Now
by Scott Brown of Raymond James,
Recent data have helped reduce fears that the U.S. economy is already in a recession. However, there is still a lot of uncertainty about next year. Some of that uncertainty (gasoline prices) is beyond our control, but much is about policy both fiscal policy in the U.S. and efforts to right the ship in Europe. The outlook for growth in the remainder of this year appears a bit brighter than it did a couple of weeks ago. However, the 2012 economic outlook is still troublesome.
The September Jobs Report Not Bad, Not Good
by Scott Brown of Raymond James,
The White Houses jobs package would aid the job market to some extent, but legislation has become bogged down in Congress and thats not all due to opposition from the Republicans. To pay for the jobs package, the White House has proposed reducing tax breaks and subsidies, the removal of which is opposed by members of both parties. So, theres not a lot of hope that well get a major jobs bill. That leaves Fed policy as the only game in town. Unfortunately, as Bernanke testified last week, theres only so much that the Fed can do.
The Economic Outlook In A Holding Pattern
by Scott Brown of Raymond James,
The consumer outlook is muddled. Spending growth hasnt been especially strong, but its not falling off a cliff. Real income growth has slowed, but lower gasoline prices may provide some relief over the next several months. Corporate profits and cash flows are strong, helping to support business fixed investment. However, were still facing a significant drag from fiscal policy and Europe is a major question mark. The anxieties of September are likely to continue into October and beyond.
Twist And Pout
by Scott Brown of Raymond James,
As expected, the FOMC opted for Operation Twist, and will sell short-term Treasuries out of its portfolio and buy longer-term Treasuries. However, the size of the Feds operation was larger than anticipated and more out-the-curve, sending yields on long-term Treasuries tumbling sharply. In addition, to further aid the housing market, the FOMC voted to recycle is maturing mortgage-backed securities and agency debt back into mortgage-backed securities. So whats not to like? By themselves, the Feds latest moves arent going to lead to strong GDP growth anytime soon, but they should help.
Fed Policy Outlook Something, But What?
by Scott Brown of Raymond James,
Fed policymakers meet this week at a critical juncture. Growth has slowed in the last few months no recession, but well below potential, leading to some softening in the labor market. Consumer price inflation has picked up in 2011 and August CPI figures were on the high side of expectations. In their public comments, Fed officials have been divided on the potential benefits and risks of additional policy accommodation. However, some action is expected on Wednesday. The only question is which tool the Fed will pull out of its kit.
Extraordinary Measures Needed
by Scott Brown of Raymond James,
While Fed officials appear to be divided the hawks are a minority. More monetary stimulus is coming but its unclear whether this will include another round of asset purchases or a lengthening of maturities in the Feds asset holdings. Looking at Europe, its difficult to quantify the probability of a banking crisis, the exit of one or more countries from the monetary union, or a complete breakup. The political environment is difficult in a different sort of way than in the U.S. Fiscal and monetary policy efforts in the U.S. may not lead to a strong recovery anytime soon, but at least we try.
Policy Conundrums
by Scott Brown of Raymond James,
In a week or so, President Obama will announce proposals to boost job growth and shore up the housing sector. These efforts, even if they could make it through Congress, would help somewhat, but wouldnt boost economic growth substantially. Bernankes Jackson Hole speech showed that the Fed chairman remains optimistic about the long-term prospects for the economy. Current difficulties are unlikely to affect the long-term growth potential, but he stressed that is if our country takes the necessary steps to secure that outcome.
Whats A Central Banker To Do?
by Scott Brown of Raymond James,
The Kansas City Feds annual monetary policy symposium in Jackson Hole, Wyoming is attended by central bankers from around the world. For U.S. investors, the focus will be on Bernankes speech on Friday 8/26. Many market participants are hoping for a repeat of last year, when the Fed Chairman signaled the possibility of a second round of asset purchases QE2. However, while the August 9 Federal Open Market Committee indicated that its members were discussing a range of policy tools to promote growth, the FOMC is unlikely to pull the trigger on another round of asset purchases anytime soon.
Crisis Averted, A Re-focusing On Prior Worries
by Scott Brown of Raymond James,
Fiscal policy in the U.S. and abroad is going the wrong way, weakening the prospects for global growth. What about monetary policy? In the U.S., Fed policymakers meet this week. As Chairman Bernanke testified in mid-July, even with the federal funds rate close to zero, we have a number of ways in which we could act to ease financial conditions further. The Fed could provide more explicit guidance on how long short-term interest rate would remain low and how long the balance sheet would be maintained at its current elevated level.
The Advance 2Q11 GDP Report Feeling Nauseous
by Scott Brown of Raymond James,
The advance estimate of second quarter GDP growth came in somewhat lower than expected. Some of the second quarter's softness was transitory, but is there a danger of hitting stall speed? Will the debt ceiling crisis contribute to weaker growth? Real GDP growth rose at a 1.3% annual rate in the advance estimate for 2Q11. It's important to remember that these are preliminary figures. However, we don't expect the story to change very much. Annual benchmark revisions delivered downward adjustments to growth to 4Q10 and 1Q11 GDP. The revised 1Q11 GDP figure looked like a misprint. No such luck.
The Debt Ceiling Crisis
by Scott Brown of Raymond James,
Some think that by not raising the debt ceiling the government will be prevented from spending more than it takes in. Thats a failure to understand the budget process. The money has been allocated. If the debt ceiling is not raised, interest payments would likely be made, but Medicare payments, Social Security payments, and veterans benefits may be delayed. Government workers may be sent home, but eventually paid (whether they work or not). Government contractors may not be paid on time. If this sounds like madness, well, as Forest Gumps momma said, stupid is as stupid does.
The Employment Outlook
by Scott Brown of Raymond James,
The June Employment Report, while disappointing, doesnt really tell us much about what to expect in the second half of the year. Its possible that seasonal job gains were shifted a bit forward this year-or perhaps higher gas prices are extracting a greater-than-expected toll in spending-or perhaps the job numbers will be revised. The June jobs data fit into the overall pattern of a slow patch. Thats also likely to be apparent in the advance GDP report released later this month. However the economy appears to have enough positive momentum to continue to grow in the second half of the year
What Sort Of Rebound In 2H11?
by Scott Brown of Raymond James,
The recent data have been mixed, consistent with a slower rate of economic growth in the near term. The economy faced a number of headwinds in the first half of the year. Some of those headwinds are likely to be temporary. Others will linger. Growth should pick up in the second half of the year, but the pace seems unlikely to be especially strong. The markets showed little reaction to the May figures on personal income and spending. Real consumer spending appears to be on track for an annual rate of growth of 1% or less in 2Q11.
The Fed Outlook: Uncertainty and Reluctance
by Scott Brown of Raymond James,
The Federal Open Market Committee policy statement and Chairman Bernankes post-meeting press conference held few surprises. Monetary policy is still accommodativeand still on hold. Theres also apparently little will at the Fed to do more to help the recovery along. Fortunately for the Fed and the consumer, we can catch a break if oil prices continue to decline. The Fed lowered its GDP forecast for this year to a range of 2.7%-2.9%. In January, the Fed was expecting 3.4% to 3.9%. Growth has slowed due to temporary factors, still the Fed lowered it's outlook.
What Can The Fed Do?
by Scott Brown of Raymond James,
Senior Fed officials meet next week amid what is widely seen as a slow patch in economic growth. A key question for investors, as well as for monetary policymakers, is whether this slowing will be temporary. Most likely, growth should pick up in the second half of the year. However, there are downside risks in the near term. Moreover, monetary policy appears to be handcuffed and fiscal policy is set to go in the wrong direction. The wide range of data have been consistent with a near-term slowing in economic activity.
The Policy Stakes Are Raised
by Scott Brown of Raymond James,
Its well known that recessions that are caused by financial crises are much more severe, are longer lasting, and are followed by gradual recoveries. Another lesson from history is that during these recoveries, policies are often tightened too soon. In 1937, efforts to balance the budget led to a recession within the Great Depression. Its said that those who dont remember the past are doomed to repeat it. Following the financial crisis, consumers and nonfinancial businesses deleveraged. However, that paydown in debt pales in comparison to the deleveraging seen in the financial sector.
A Slow Patch
by Scott Brown of Raymond James,
The recent economic data have been disappointing, but hardly a disaster. The broad range of indicators suggest a slowing in the pace of growth not a contraction. One month does not a trend make, but the data have generated some anxieties about whether the current slow patch could be a lot longer lasting or turn into something more severe. We started this year with a good deal of positive momentum. Inflation-adjusted consumer spending rose at a 4.0% annual rate in 4Q10. The economy still faced a number of headwinds. However, the positive momentum was expected to offset these headwinds.
The Growth Outlook: Long and Short
by Scott Brown of Raymond James,
For decades, GDP growth has averaged a little over 3% per year, and most of the time, the level of GDP has been within 3% of this long-term trend. Theres some debate about whether this trend will continue. If it does, then we may see much stronger growth in the next several years (as we catch up). If not, then we have something to worry about. Its unclear exactly why 3% should be the norm. GDP is simply the amount of labor input times the productivity of labor. Growth in labor input and growth in productivity vary over time. Theres no special reason that they should sum to 3%.
The Federal Debt Ceiling
by Scott Brown of Raymond James,
Last week, the federal government breached the current debt ceiling, $14.284 trillion. The Treasury had begun taking evasive action the week before, but warned that it couldnt do so beyond early August and Congress would have to raise the debt ceiling before then. Will the government default? The strong betting is that it wont. The bond market doesnt seem to be worried. However, the increased rhetoric could have a bigger impact on the equity and currency markets. Why does the government have a debt ceiling? For the most part, its an historical artifact.
Inflation What Me Worry?
by Scott Brown of Raymond James,
Despite rampant hysterics about "runaway inflation" in recent months, core inflation has remained at a moderate level, inflation expectations remain well-anchored, and there is little inflation pressure coming through the labor market. Is it time to declare victory? Not just yet, but the inflation outlook still does not appear to be particularly troublesome.
Good News, Bad News, But Mostly Good
by Scott Brown of Raymond James,
The April Employment Report was better than expected, reflecting a strong trend in private-sector job growth. However, the economy continues to face a number of headwinds, which should restrain the pace of growth in the near term. The establishment survey data typically show large unadjusted increases in payrolls each spring. Prior to seasonal adjustment, the private sector added 1,159,000 jobs last month, the largest April gain since 2005. Last year, the rate of job destruction trended to very low levels. This year, new hiring finally appears to be picking up.
Bernankes World And Ours Too
by Scott Brown of Raymond James,
There were no fireworks at Bernankes first post-FOMC press briefing. All five Fed governors and 12 district bank presidents contributed revised forecasts of growth, unemployment, and inflation last week. The central tendency forecasts exclude the three highest and three lowest projections. Fed officials lowered their outlook for GDP growth this year, reflecting a slower than anticipated rate of growth in the first quarter. Unemployment is expected to decline gradually. Inflation will be higher this year, but the Fed continues to expect that commodity price pressures will be transitory.
Seizing The Narrative
by Scott Brown of Raymond James,
Later this month, Bernanke will hold his first post-FOMC press conference. The press conference is meant to present the Federal Open Market Committee's current economic projections and to provide additional context for the FOMC's policy decisions. The real goal is to reclaim the narrative. The Fed was caught off guard by the criticism and second guessing it received in 2010. These press conferences should help clear things up regarding monetary policy not that well receive clear signals of future Fed policy moves rather, well get information on how the Fed will decide what to do.
Good, But Its Not Enough
by Scott Brown of Raymond James,
Happy days are here again. The job market is now adding jobs at a pace stronger than population growth however, not by much. Its been clear for some time that large-scale job losses are far behind us. The problem in the labor market has been weakness in hiring. Small and medium-size firms have begun to add jobs in recent months. Yet, with so many jobs lost in the downturn, there is a huge amount of ground to make up. The private sector shed a net 8.8 million jobs during the Great Recession (starting in December 2007 and bottoming in February 2010).
Will The Job Market Rev Up?
by Scott Brown of Raymond James,
Over the last year, the level of job destruction has trended very low. The problem has been a lack of job creation. Normally we look to small, newer firms to account for the bulk of new hiring in an expansion. However, small firms have been constrained by a variety of forces, the most significant being tight credit. That may be starting to change. The job market has a strong seasonal component. The next couple of months will be key to the outlook for jobs and the overall economy.
As The World Turns
by Scott Brown of Raymond James,
Japan?s earthquake/tsunami/nuclear tragedy and heightened tensions in the Middle East and North Africa have led to some concerns about the global economy, and in turn, the strength of the U.S. recovery. A weaker Japanese economy and supply-chain disruptions are detrimental to U.S. growth, but moderately and only short-term in nature. Developments in the Middle East and North Africa are more uncertain, but are likely to keep oil prices relatively elevated. None of this is expected to jeopardize the U.S. recovery, but it could keep growth from being as strong as was hoped for just a month ago.
Inflation Expectations, Budget Decisions
by Scott Brown of Raymond James,
Many investors fear that the recent surge in oil prices will lead to a significant uptrend in the underlying inflation rate. However, that depends on whether inflation expectations become unanchored. There's little evidence of that so far. On the deficit, lawmakers are sharply divided on the appropriate path for government spending. However, trimming nondefense discretionary spending is not going to solve the problem.
The Job Market, Oil Prices, and the Fed
by Scott Brown of Raymond James,
Higher oil prices have raised new concerns about the strength of the economic recovery. If sustained, the rise in gasoline prices will restrain the pace of economic growth noticeably, but does not appear to be large enough (so far) to derail the expansion. Meanwhile, a federal government shutdown looms as lawmakers bicker over the future path of expenditures. Austerity at all levels of government is well-intentioned, but is not advisable at this point in the economic recovery.
Oil And Vinegar
by Scott Brown of Raymond James,
Higher oil prices have raised new concerns about the strength of the economic recovery. If sustained, the rise in gasoline prices will restrain the pace of economic growth noticeably, but does not appear to be large enough (so far) to derail the expansion. Meanwhile, a federal government shutdown looms as lawmakers bicker over the future path of expenditures. Austerity at all levels of government is well-intentioned, but is not advisable at this point in the economic recovery.
The Monetary Policy Outlook
by Scott Brown of Raymond James,
Fed Chairman Bernanke is set to deliver his monetary policy testimony next week. There?s not much suspense. The release of the FOMC minutes from the January 25-26 policy meeting included senior Fed officials? revised projections of growth, unemployment, and inflation, as well as a thorough discussion of the uncertainties. No change in monetary policy is expected for some time. However, the Fed will have to consider when to lose the ?extended period? language and eventually move to a more normal policy position. That doesn?t look likely for 2011.
Inflation Anxiety ? Misplaced?
by Scott Brown of Raymond James,
Commodity prices have moved sharply higher over the last several months, leading to increased worries that the Fed is ?behind the curve,? ?debasing the currency,? or ?monetizing the debt.? Such fears are based on a poor understanding of the inflation process and how the Fed conducts monetary policy.
It Doesn?t Take A Weatherman ...
by Scott Brown of Raymond James,
You don?t need a weatherman to know which way the economic wind blows. Lower payroll taxes will boost disposable income in 1Q11, supporting consumer spending growth. Production should advance in response to lean inventories. The pace of the recovery should pick up, but it?s still unlikely to lead to dramatic improvement in the labor market this year.
4Q10 GDP: Back To The Drawing Board
by Scott Brown of Raymond James,
The advance estimate of fourth quarter GDP growth was relatively close to expectations. However, two major components, net exports and the change in inventories, were much larger than anticipated (net exports added to GDP, slower inventory accumulation subtracted). Underlying domestic demand was roughly as anticipated, but the inventory story (assuming that it holds up in revisions) implies stronger growth in the near term. Instead of GDP growth of 3.0% to 3.5% in 2011 (4Q-over-4Q), it now appears more like 3.5% to 4.0%
Results 501–550
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