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Over the past year, payroll employment has increased by just 1.1 million, reversing only a small number of the 8.3 million jobs lost during the recession. What makes the labour market recovery even more disappointing, however, is that those limited job …
27th January 2011
Our econometric model suggests that payroll employment increased by around 125,000 in January. That would be in line with the average gain in the previous three months and suggest that the recent rebound in economic growth has yet to translate into much …
December's durable goods figures are frankly very suspicious looking. According to the report, new orders for non-defence aircraft dropped from $5,019 million in November to an impossibly low $24 million in December. Nonsense. … Durable Goods Orders …
The tone of the Fed's latest policy statement suggests that neither the most recent pick up in economic growth nor the continued surge in commodity prices have had much of an impact on officials. Worried by the still elevated unemployment rate and low …
26th January 2011
This week's release of GDP for the fourth quarter will confirm that the real economy has finally returned to the size it was before the recession struck. But it will be some years yet before the US recovers all of the output and jobs "lost" as a result of …
24th January 2011
Rapidly rising commodity prices are beginning to have a marked impact on inflation, real spending and the external trade balance. Over the past six months, agricultural commodity prices have increased by more than 60%. The rise in energy prices has been …
20th January 2011
We don't anticipate that the stronger tone of the incoming economic data will prompt the Fed to curtail its plan to buy $600bn of Treasury securities by June at the next FOMC meeting, which concludes next Wednesday (26th January). Indeed, even with the …
19th January 2011
The continued weakness of US jobs growth can partly be explained by offshoring. Tempted by lower labour costs and lower corporate taxes overseas, multinational firms are expanding employment abroad rather than in America. Employment by US multinational …
18th January 2011
The Fed's QE2 programme of Treasury purchases is yet to have any impact on the broader monetary aggregates, let alone price inflation. The annual growth rate of our Capital Economics' measure of M3 remains in negative territory, while the growth rate of …
17th January 2011
The unexpected dip in the NFIB gauge of small business optimism in December has reignited fears that smaller firms are missing out on the recovery. As we have pointed out before, however, the NFIB survey puts far too much weight on the construction and …
December's retail sales and consumer price reports together suggest that real consumption growth accelerated to 3.8% annualised in the fourth quarter, from 2.4% in the third. If our calculations are correct, that would be the strongest quarterly growth in …
14th January 2011
November's trade figures support our view that annualised GDP growth in the fourth quarter of last year was at least 4%, better than the consensus forecast of just over 3%. Meanwhile, December's producer prices data provide little evidence that price …
13th January 2011
The second downward leg in house prices, which began last year, is likely to have a smaller impact on consumer spending than the initial plunge both in proportionate and absolute terms. Nonetheless, we suspect that falling house prices are one of a few …
10th January 2011
The 103,000 gain in payroll employment in December was very disappointing after the spectacular 297,000 gain touted by the ADP survey. Admittedly, the drop in the unemployment rate, from 9.8% in November to a 19-month low of 9.4%, is more encouraging. But …
7th January 2011
The latest ISM non-manufacturing and ADP private payroll surveys both suggest that the economic recovery picked up some significant momentum towards the end of last year. Growth should remain fairly robust in the first half of this year, boosted by the …
5th January 2011
The sharp decline in the number of initial jobless claims towards the end of last year should not be interpreted as a sign that the labour market recovery is gaining momentum. Nonetheless, the 39,000 increase in non-farm payroll employment in November …
4th January 2011
The improvement in December's ISM manufacturing index, along with the rebound in construction spending in November, suggests that the recovery is regaining some of the momentum lost during the Summer. … ISM Manufacturing Index …
3rd January 2011
In the last US Weekly of the year we want to flag up the main risks surrounding our new forecast that GDP will grow by 3.0% in 2011, before slowing to 2.0% in 2012. The main upside risk is that we are overstating the restraining impact that the balance …
27th December 2010
The data releases today support our estimate that GDP growth probably accelerated to 4.0% annualised in the fourth quarter, from 2.6% in the third. The main difference is the pick up in consumption growth, which is more than offsetting a slowdown in the …
23rd December 2010
The conventional wisdom is that America has avoided a repeat of the recent Japanese experience because its policymakers acted much more quickly and aggressively to prevent the economy slipping into a deflationary spiral. We're not quite so convinced. … …
21st December 2010
Annualised GDP growth is on course to accelerate to around 4% in the fourth quarter, from 2.5% in the third. Moreover, the new fiscal stimulus means that we now expect growth to average 3% in 2011. Nevertheless, while the stimulus will provide a temporary …
20th December 2010
The recent run of stronger economic data has prompted us to raise our fourth-quarter GDP growth forecast to 4% annualised, from 2.5%. Based on the higher starting point for GDP going into next year and the new fiscal stimulus, which is worth an additional …
The Fed was always going to leave the size of the second round of quantitative easing (QE2) unchanged today as it is too soon to judge whether it has been a success or a failure. If we are right in expecting the unemployment rate to remain very high and …
15th December 2010
Consumer price inflation remained unusually weak in November and, given the large amount of excess capacity in America's economy, we expect it to continue trending gradually lower over the next couple of years. … Consumer Prices & Industrial Production …
The rate of decline in our Capital Economics' measure of M3 has eased, while the growth rates of M1 and M2 have picked up again slightly. However, there is nothing here to suggest that inflation is about to accelerate. … Monetary Indicators Monitor …
14th December 2010
The Holiday shopping season appears to have got off to a very good start, suggesting that fourth-quarter consumption growth will be strong. But without a meaningful acceleration in real income growth, this tentative consumer revival cannot last. … Retail …
The fall in the proportion of homeowners in negative equity in the third quarter offers little comfort since it was driven by foreclosures rather than a rise in prices. The second downward leg in prices that is now well underway may mean that more …
13th December 2010
The proposed favourable change to the tax treatment of capital expenditure raises the question of whether it will actually be businesses, rather than consumers, that rescue the economy from a number of years of subdued growth. However, while some further …
The sharp decline in the international trade deficit to a nine-month low of $38.7bn in October, from $44.6bn, suggests that our 2.5% forecast for annualised fourth-quarter GDP growth will need to be revised higher. (We'll wait for next week's data deluge …
10th December 2010
The latest Flow of Funds accounts from the Fed show that the public sector is now accumulating debt at a faster pace than the private sector is paying it down. … Flow of Funds …
The package of tax proposals agreed by the Obama administration and Republican leaders constitutes an additional fiscal stimulus worth slightly less than $300bn, or 2% of GDP, above and beyond what we had previously allowed for in 2011. This additional …
8th December 2010
After announcing it would purchase an additional $600bn of Treasury securities at the last FOMC meeting in early November, it is very unlikely that the Fed will change course at next Tuesday's meeting. We suspect that officials will have been disappointed …
7th December 2010
"Never bet against the US consumer" proved to be a valuable maxim during the last decade. The latest data suggest that the US consumer might be slipping the superhero cape back on, ready to save the world again from the perils of deficient demand. Real …
6th December 2010
November's Employment Report was a painful reality check for those hoping that a meaningful acceleration in economic activity was underway. The truth is that the economic recovery is going nowhere at a time when companies are unwilling to boost hiring …
3rd December 2010
The housing market recovery appears to have stalled before it even really began. Home sales fell back in October and the renewed downward trend in prices appears to have gathered pace. This is all happening at a time when mortgage rates have remained …
2nd December 2010
The resilience of the ISM manufacturing index and the improvement in the ADP employment survey together suggest that the economy is starting to emerge from its summer soft patch. Unfortunately, there is also nothing in the data to suggest that the …
The rise in consumer confidence in November is not consistent with a sustained acceleration in consumption growth at a time when income growth is weak, the unemployment rate is high and a double dip in house prices is underway. … Cons. Confidence (Nov.) & …
30th November 2010
While the health of European banks is once again in question, the financial crisis is becoming a distant memory for US banks. So far this year, they have enjoyed a decent rise in net income. Moreover, US banks’ exposure to Europe has fallen. They remain …
29th November 2010
Our econometric model suggests that payroll employment increased by around 130,000 in November. That would be consistent with other evidence showing that labour market conditions have yet to improve by enough to reduce the unemployment rate significantly. …
24th November 2010
The US economy once again has to contend with a faltering housing market, in which both prices and activity are falling. Thankfully, this second downward leg should be shorter and less severe than the one that brought the financial system to its knees a …
October's durable goods orders and personal spending data suggest that households have started to pick up the baton of growth from businesses. Whether households will be able to carry the burden on their own is another matter. … Durable Goods Orders & …
The economy appears to have emerged from its summer soft patch, with the growth of employment and retail sales both accelerating at the start of the fourth quarter. But economic growth is still constrained by the damage done to the balance sheets of …
23rd November 2010
Our Capital Economics' measure of M3 is falling year-on-year, albeit at a slower rate. The M2 aggregate is growing at an unusually slow pace, and credit is contracting. Over the past 12 months, the 3.2% expansion in M2 has only just matched the growth in …
22nd November 2010
The US economic recovery shows few signs of any meaningful acceleration, suggesting that unemployment will remain chronically high and inflation will continue to edge towards zero. There is now a greater than 50% chance that underlying inflation will turn …
Fears that the Fed has put the economy on the path towards rampant inflation looked even more misguided last week when it was announced that core CPI inflation fell to a record low of just 0.6% in October. The real danger is that the economy is heading …
The recent sharp rises in agricultural commodity prices will boost inflation a little, help keep real consumption growth subdued and narrow the trade deficit. But the gains in prices seen so far are not big enough to lead to rapid inflation or extinguish …
18th November 2010
October's consumer price inflation figures support the recent argument made by several Fed officials, that they would have launched QE2 even if the Fed's mandate was to target price stability alone. Those officials are just as worried about the threat of …
17th November 2010
After almost completely petering out over the past few months, October's industrial production data suggest that the manufacturing recovery may be gathering momentum again, driven by demand for capital equipment. … Industrial Production & Producer Prices …
16th November 2010
October's retail sales are a fairly encouraging sign that consumption growth may be starting to gain some traction. But households' real spending power will soon be hit by higher gasoline and food prices. … Retail Sales (Oct.) & Empire State Index …
15th November 2010
The Fed's quantitative easing may be unconventional, but it is designed to work through the same channels as conventional changes in short-term interest rates; by lowering long-term interest rates, increasing confidence, boosting asset prices and lowering …
