It's The Economy Stupid: Mayans, GDP & Jobs

Why is it when we get to the end of our calendar we consider it an occasion to party, but when we get to the end of the Mayan’s calendar we think it could be the end of the world.  Please! To the Mayan’s December 21st was probably the functional equivalent of our December 31^st.  Perhaps they blew it out at the local jungle juice & mescal emporium (bar) on the 21st and just forgot to turn over the stone tablet to the new year.  I mean if they were really that good at forecasting the future don’t you think that maybe they could have foreseen the end of their own civilization and avoided it?  Wait!  They were probably the world’s first economists!!!  Anyway, just in case, it’s been real and it’s been good!  But I digress…

 

Economic Event	Period	Economic Survey	Actual Reported	Original Prior	Revised Prior
GDP QoQ Annualized	3Q T	2.8%	3.1%	2.7%
Personal Consuption	3Q T	1.4%	1.6%	1.4%
GDP Price Index	3Q T	2.7%	2.7%	2.7%
Core PCE QoQ	3Q T	1.1%	1.1%	1.1%
Initial Jobless Claims	DEC 15	360K	361K	343K	344K
Continuing Claims	DEC 8	3200K	3225K	3198K	3213K

 

Surprise!  Surprise!  GDP was not a Grinch!  U.S. Economy Grew 3.1% in Third Quarter, More Than Forecast

 

The U.S. economy grew at a 3.1 percent annual rate in the third quarter, more than previously reported, reflecting the first gain in state and local government spending in three years, more consumer purchases and

a smaller trade gap.  The revised gross domestic product reading exceeded the highest projection in a Bloomberg survey and compared with a previously estimated 2.7 percent gain. The median estimate of economists called for a 2.8 percent advance.  Projections from the 80 economists surveyed ranged from gains of 2.6 percent to 3 percent. NO ONE PREDICTED A 3.1% NUMBER!  Today’s figure marked the third reading for the quarter. The economy expanded at a 1.3 percent pace in the prior three-month period.

 

Okay, but let’s be real people!!!  We will hard-pressed to maintain that pace of growth this quarter as global demand cools and companies limit spending and hiring ahead of looming tax increases and spending cuts. While a stronger housing market will provide some cushion, the Federal Reserve is pursuing record stimulus aimed at driving bigger gains for the expansion.

 

The Initial Jobless Claims and the Continuing Jobless Claims came in just about as expected.  Initial Jobless Claims was at 361K, Continuing Claims at 3225K, both in line with economist’s estimates.

 

Here’s hoping there’s economic news to report tomorrow!

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

 

It's The Economy Stupid: CPI not so much

Consumer Prices in U.S. Declined More Than Forecast in November

 

Economic Event	Period	Economic Survey	Actual Reported	Original Prior	Revised Prior
Consumer Price Index MoM	NOV	-0.2%	-0.3%	0.1%
CPI Ex Food & Energy MoM	NOV	0.2%	0.1%	0.2%
Consumer Price Index YoY	NOV	1.9%	1.8%	2.2%
CPI Ex Food & Energy YoY	NOV	2.0%	1.9%	2.0%
Consumer Price Index NSA	NOV	230.341	230.221	231.317
CPI Core Index SA	NOV		231.254	230.994

 

Right now, today, inflation is largely a non-issue.

 

The cost of living (as defined by CPI as opposed to as defined by an average human being pocket book) fell more than forecast in November as energy prices dropped, a sign U.S. inflation remains in check.

 

The 0.3 percent decrease in the consumer-price index was the first drop since May and followed a 0.1 percent gain the prior month. The median estimate of 80 economists surveyed by Bloomberg called for a 0.2 percent drop. The core index, which excludes volatile food and energy costs, climbed less than projected.

 

Bloomberg survey estimates for the consumer-price index ranged from a drop of 0.3 percent to an increase of 0.1 percent.

 

In the 12 months ended in November, consumer prices rose 1.8 percent, today’s report showed.   The core CPI reading increased 0.1 percent last month following a 0.2 percent gain in October. For the past 12 months, core prices were up 1.9 percent, compared with a 2 percent advance for the year through October. The core measure was restrained by a 0.1 percent gain in medical care, that reflected a record drop in drug costs. In addition, clothing and used-car prices fell.  Falling energy costs, including cheaper gasoline, are keeping inflation in check. Energy costs decreased 4.1 percent in November, the biggest drop since May. Gasoline plunged 7.4 percent, the largest decrease since December 2008.

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Bridgewater Daily Observations - "Consistent with expectations, the Fed announced yesterday that it will start outright purchases of long-term Treasuries in 2013 ..."

Consistent with expectations, the Fed announced yesterday that it will start outright purchases of long-term Treasuries in 2013, after its current Twist purchases expire at the end of the year. Allowing the Twist purchases to expire without replacing them would have constituted some degree of tightening in our view, and given there is a high probability of fiscal tightening going into next year, avoiding a monetary tightening at the same time is sensible. The Fed will now buy $45bn in long term US Treasuries a month, the same amount that it was buying under the Twist. However, unlike the Twist these will be outright purchases - the Fed will not sell any shorter-term Treasuries to offset them, and they will be financed through the creation of new excess reserves and the expansion of the Fed's balance sheet. These purchases will be in addition to the Fed's ongoing purchases of $40bn in agency MBS per month. In other words, through these purchases the Fed will be injecting new cash into the economy at a rate of about $1 trillion per year. With yesterday's announcement, the Fed has fully shifted from a calendar-based approach, where it announces ahead of time when it plans to end its purchases, to a more flexible and open-ended approach whereby it will change the amount of stimulation it provides as conditions transpire. And it allows the Fed the needed flexibility to push a little harder on the gas or let up as conditions change.


" And it allows the Fed the needed flexibility to push a little harder on the gas..." What if the car stalls or won't start???

It's The Economy Stupid: A Bunch of Stuff

 

Economic Event	Period	Economic Survey	Actual Reported	Original Prior	Revised Prior
Advance Retail Sales	NOV	0.5%	0.3%	-0.3%
Retail Sales Less Autos	NOV	0.0%	0.0%	0.0%
Retail Sales Ex Auto & Gas	NOV	0.4%	0.7%	-0.3%	-0.1%
Retail Sales "Control Group"	NOV	0.3%	0.5%	-0.1%	0.0%
Producer Price Index MoM	NOV	-0.5%	-0.8%	-0.2%
PPI Ex Food & Energy MoM	NOV	0.1%	0.1%	-0.2%
Producer Price Index YoY	NOV	1.8%	1.5%	2.3%
PPI Ex Food & Energy YoY	NOV	2.2%	2.2%	2.1%
Initial Jobless Claims	NOV 16	369K	343K	370K	372K
Continuing Claims	NOV 17	3210K	3198K	3205K	3221K

 

 

Retail Sales are better, and that’s good.  Producer Prices were mixed, not rising greatly, and that’s a good thing.  Jobless Claims are down, and that could be a good thing, if the people are finding jobs and not falling out of the workforce.

 

After sleeping on it for a night, I think the Fed’s message was basically:  “We seem to be at a new normal, where long term structural unemployment has gone from 4.5% (the old normal) to 6.5% (the new normal), and we are going to keep rates low until we can move the lousy unemployment numbers down to the new normal and we are going to forget about the old normal for now.” 

 

The only problem is that as the Fed layers on more and more stimulus, each layer seems to produce less and less results.  So we are going to inflate the Fed balance sheet by another Trillion Dollars, and we are very likely to get less bang for our buck.  And my confidence in the Fed being able to unravel all of these Trillions of Dollars in security trades without serious negative side effects is near zero.  They may be good at what they do, but they are not that good.

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

Street Address:

445 North Blvd, 7^th Floor

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One City Plaza, 7th Floor

Corner of North Blvd & 4th Street

Exit 1B I-110 Convention Street,

Turn Left to get to North Blvd,

Turn Right on North Blvd

 

It's The Economy Stupid: Fed Statement on Interest Rates

So basically, what the Fed is saying, if the unemployment rate stays above 6.5%, we could have 0.25% interest rates forever???

 

 

 

Wire: Bloomberg News (BN) Date: Dec 12 2012  11:30:06

Fed Boosts QE With $45 Billion in Monthly Treasury Purchases

 

 

By Joshua Zumbrun and Jeff Kearns

     Dec. 12 (Bloomberg) -- The Federal Reserve said it will buy

$45 billion a month of Treasury securities starting in January,

expanding its asset-purchase program, and it linked the outlook

for its main interest rate to unemployment and inflation.

     “The committee remains concerned that, without sufficient

policy accommodation, economic growth might not be strong enough

to generate sustained improvement in labor-market conditions,”

the Federal Open Market Committee said today at the conclusion

of a two-day meeting in Washington.

     The Fed said interest rates will stay low “at least as

long” as the unemployment rate remains above 6.5 percent and if

inflation “between one and two years ahead” is projected to be

no more than 2.5 percent. The committee “views these thresholds

as consistent with its earlier date-based guidance.”

     Chairman Ben S. Bernanke is using his unlimited authority

to buy Treasuries in an unprecedented effort to stoke growth and

reduce 7.7 percent unemployment. The Fed acted in its last

regular meeting of the year as lawmakers and the Obama

administration continue talks to avert more than $600 billion of

automatic spending cuts and tax increases that threaten to throw

the country into a recession.

     The buying announced today will be in addition to $40

billion a month of mortgage-debt purchases. The FOMC said asset

buying will continue “if the outlook for the labor market does

not improve substantially.”

     The latest move will follow the expiration at the end of

this year of Operation Twist, in which the central bank each

month has swapped about $45 billion in short-term Treasuries for

an equal amount of long-term debt. That program kept the total

size of the balance sheet unchanged, while the new purchases

will expand the Fed’s holdings.

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

Street Address:

445 North Blvd, 7^th Floor

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One City Plaza, 7th Floor

Corner of North Blvd & 4th Street

Exit 1B I-110 Convention Street,

Turn Left to get to North Blvd,

Turn Right on North Blvd

 

It's The Economy Stupid: Unemployment Rate Changes

Economic Event	Period	Economic Survey	Actual Reported	Original Prior	Revised Prior
Change in Nonfarm Payrolls	NOV	85K	146K	171K	138K
Change in Private Payrolls	NOV	90K	147K	184K	189K
Change in Manufact. Payrolls	NOV	-4K	-7K	13K	10K
Unemployment Rate	NOV	7.9%	7.7%	7.9%
Avg Hourly Earning MoM All Empl	NOV	0.2%	0.2%	0.0%
Avg Hourly Earning YoY All Empl	NOV	1.7%	1.7%	1.6%
Avg Weekly Earning YoY All Empl	NOV	34.4	34.4	34.4
Change in Household Employment	NOV		-122	410
Uderemployment Rate	NOV		14.4%	14.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unemployment Rate drops to 7.7% from 7.9%

Underlying trend in payrolls stays at around 150K

 

Payrolls rose more than anticipated in November and the jobless rate fell to an almost four-year low, indicating superstorm Sandy had little effect on the U.S.

labor market.   Employment climbed by 146,000 following a revised 138,000 gain in October that was less than initially estimated. The unemplyment rate dropped to 7.7%.   The unemployment rate in November was forecast to hold at 7.9 percent, according to the survey median. Projections ranged from 7.9 percent to 8.1 percent.

 

Gains in hiring indicate consumer spending, the biggest part of the economy, will keep expanding.  At the same time, concern about more than $600 billion in fiscal tightening (the “Fiscal Cliff”, feel free to quote this) slated for early next year threatens growth and may set back employment, one reason Federal Reserve policy makers are weighing increasing stimulus.

 

The poll of households, used to calculate the jobless rate, showed that 369,000 people were not at work because of bad weather during the survey week. The average of the last 10 Novembers was 70,000. The Labor Department said it conducted the survey a week earlier than typical because of the Thanksgiving holiday.

 

 

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

Street Address:

445 North Blvd, 7^th Floor

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One City Plaza, 7th Floor

Corner of North Blvd & 4th Street

Exit 1B I-110 Convention Street,

Turn Left to get to North Blvd,

Turn Right on North Blvd