November’s Employment Situation Research Notes

by Jim Baird on December 2, 2016

12-2-16-blogNovember jobs report a mixed bag

Job market conditions were generally solid again in November as the economy produced 178,000 new jobs, in line with expectations for 180,000. September and October payrolls were revised modestly downward, trimming 2,000 from previously reported estimates. The net impact is that total payrolls as of the end of November was roughly in line with projections.

Perhaps the most surprising development was the sharp decline in the unemployment rate, which fell to 4.6% — a nine-year low. Economists had expected it to remain steady at 4.9%. Positive job creation certainly contributed to that drop, but unanticipated declines in the civilian labor force and the labor force participation rate reduced the estimated rolls of the unemployed by 387,000. It’s quite likely that both of those factors will move higher in the coming months. As such, it’s possible that the jobless rate could edge higher in the coming months – even if the recent trend in job creation remains positive – before resuming its downward trend.

Yesterday’s weekly report on jobless claims pointed to a slight uptick in layoffs, as initial claims increased to 268,000 for the week ended November 28, moderately above consensus expectations. However, the picture is still positive, as the report marked the 91st consecutive week of claims below 300,000, the longest such streak in over four decades.

As the jobs market continued to move towards full employment, wage growth had shown some signs of accelerating in recent months. That didn’t hold true in November, as both average hourly and weekly earnings took a step backward. Over the past year, average hourly earnings have increased by 2.5%, as compared to 2.8% a month ago. Again, this is likely to be a temporary setback, as further tightening in labor market conditions should increase competition for skilled labor and support stronger wage growth.

The bottom line is that employment conditions remain largely constructive as the economic expansion continues to support solid job creation. The story on wages appears to be one of “two steps forward, one step back”, but there are plenty of reasons to believe that an increasingly competitive labor market should drive stronger gains for workers over time.

Q3 GDP Research Notes

by Jim Baird on November 29, 2016

captureU.S. economy grew faster than expected in Q3

After a lackluster first half of the year, growth in the U.S. surged by 3.2% in Q3 as a sharp improvement in business investment and exports built on already solid consumer spending.

Today’s release exceeded expectations and added 0.3% to the previous estimate of 2.9% growth for the quarter.

For much of the past few years, consumers had been the lone meaningful contributor to the economy’s advance, as government spending cuts weighed on growth and a cautious corporate sector was hesitant to invest. At least temporarily, that has changed.

Growth in real personal consumption expenditures slipped to 2.8% during the quarter from 4.3% in the prior quarter, but remained the largest single contributor to the overall advance. Spending on services and durable goods were particularly strong.

Perhaps more noteworthy was the increase in private investment after three consecutive quarters of contraction, swinging from -7.9% in Q2 to a gain of 2.1% last quarter. Business inventories increased in Q3, contributing about 0.5% to top-line growth and reversing a five-quarter trend of inventory liquidation.

Today’s report provided further evidence that the economy picked up considerably after a disappointing start to the year and sets the table for a strong finish to the year. Optimism surrounding potential fiscal stimulus and some targeted deregulation next year have lifted U.S. equity prices in recent weeks and are nudging growth expectations for 2016 higher. While it’s too soon to determine what a Trump administration may be able to ultimately push through Congress or what the full impact might be, infrastructure spending and some form of tax reform has sufficient appeal that some degree of fiscal stimulus appears inevitable. Couple that with an increasingly enthusiastic consumer supported by stronger wage gains and the economy appears well-positioned to remain on a growth path heading into 2017.

Consumer Sentiment Research Notes

November 23, 2016

Consumer sentiment soars in November, easily beating expectations Perhaps it was a sense of relief after the fatigue of a long and particularly contentious Presidential campaign or even a sense that President-elect Trump would shake up the status quo in Washington, or perhaps it was the continuing evidence that the economy has gathered steam anew; […]

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October’s CPI Research Notes

November 17, 2016

Inflation up again in October; CPI reaches 2-year high of 1.6% Headline CPI in October increased by 0.4%, in line with expectations according to the Bloomberg survey.  On the strength of that uptick, the year-over-year rate of increase also edged higher to 1.6%, its highest point since October 2014. The core index, which strips out […]

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Consumer Sentiment Research Notes

November 11, 2016

Consumer sentiment surges in November The preliminary reading of the University of Michigan Consumer Sentiment Index rose to 91.6 in November, easily exceeding expectations for 88.0. The survey was completed prior to the U.S. Presidential election on Tuesday, so it is unclear what impact – if any – the result would have had.  That should […]

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Market Perspectives (November 2016)

November 11, 2016

Executive Summary Domestic equities retreated in October in the face of heightened volatility, increasing expectations of an interest rate hike by year-end, and the headwind to corporate earnings from a strengthening dollar. International stocks had a mixed month, with emerging market equities adding to their impressive year-to-date gains, and developed market stock returns slipping in […]

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Special Commentary

November 9, 2016

Executive Summary The 2016 election outcome surprised markets and defied polling expectations leading up to November 8, as Donald Trump won the electoral vote and will be the next President of the United States. Republicans lost a limited number of seats in Congress, but will maintain control of the Senate and House of Representatives, upsetting […]

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Q3 GDP Research Notes

October 31, 2016

US economy accelerates to 2.9% in Q3, exceeds expectations The economy accelerated markedly in the third quarter, growing at a robust 2.9% pace that easily exceeded consensus expectations. It also more than doubled the pace from the prior quarter of just 1.4%. While consumer spending carried the economy through the first half of the year, […]

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Economic Perspectives (Third Quarter 2016)

October 18, 2016

In this quarter’s Economic Perspectives, we take closer look at why the Fed continues to struggle with its “data dependent” approach to determining when to hike interest rates again.  We also explore the evolution of Fed expectations for the economy and interest rates in recent years. Read the full article>>

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September’s CPI Research Notes

October 18, 2016

Inflation rises 0.3% in September; in line with expectations Headline CPI in September rose by 0.3%, in line with economists’ expectations. The core index increased by 0.1%, softer than the projected increase of 0.2%. Over the past year, the headline index increased by 1.5%. Crude oil prices have recovered from their July decline and are […]

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