A Welcome Surprise on Employment

Diane Swonk | February 3, 2012 | Leave a comment

Payroll employment jumped by a much stronger-than-expected 243,000, driven by strong gains in services, excluding the financial sector. Robust gains in temporary employment were particularly encouraging; they tend to lead to permanent hires and suggest that employers are beginning to redeploy the cash they have hoarded, and finally hire. We also saw strong gains in manufacturing employment, much of it related to the auto industry, including the opening and retooling of idled plants Read More »

Productivity Slows on Downward Blip in Manufacturing

Diane Swonk | February 2, 2012 | Leave a comment

Productivity growth slowed in the fourth quarter, most notably from a year ago. Much of the slowdown can be attributed to a quarter-to-quarter decline in the manufacturing sector. This was driven by the restocking of inventories and catch-up in production in the auto sector, which should reverse course again as we move into 2012. Read More »

Update on Europe

Adolfo Laurenti | February 1, 2012 | Leave a comment

The European Union (EU) successfully completed another step in the long, slow process toward greater fiscal integration. In a meeting last week, further agreement was reached on the new “fiscal compact” (they call it a “treaty on stability, coordination and governance in the Economic and Monetary Union”) that will govern budget discipline going forward. In order to avoid the trap of austerity at a time of recession, the European leaders also put forth a much-needed plan for growth and jobs. As is always the case in these complex multilateral agreements, there are positive and negative aspects: Read More »

Construction Surprise; Manufacturing Disappointment

Diane Swonk | February 1, 2012 | Leave a comment

Construction spending rose at a surprisingly strong, 1.5% pace in the month of December, driven by gains in the private sector. Non-residential construction outpaced gains in apartment construction, which has been one of the few bright spots in housing.  Public sector gains were more muted as fiscal stimulus from the Federal government is playing out, while spending by state and local government remains constrained. Read More »

ADP Employment Less Robust in January

Diane Swonk | February 1, 2012 | Leave a comment

According to the ADP payroll report, private sector jobs grew by 170,000 in January, well below the downwardly-revised December level of 292,000, and in-line with expectations. Small businesses continued to dominate gains with an increase of 95,000. Those jobs were mostly in the services sector and match some optimism we have seen in small business lending. Read More »

Consumers Save Instead of Spending in December

Diane Swonk | January 30, 2012 | Leave a comment

Real personal consumption expenditures (adjusted for inflation) actually declined 0.1% in December, further confirming our view that consumers remain extremely cautious about how and where they spend. This is despite a rebound in real income growth, which was driven by a rise in temporary hires, particularly in the transportation sector: 42,000 of the 200,000 job gains that we saw in December were for couriers and messengers, who appeared to be let go at the start of the new year. Read More »

Fourth Quarter Growth Disappoints

Diane Swonk | January 27, 2012 | Leave a comment

Real GDP growth disappointed, falling short of the 3.0% threshold and growing at a 2.8% rate in the fourth quarter. Sharp declines in both federal (defense spending), in addition to state and local governments, were the primary drag on growth. Both consumer spending and business investments were also more tepid than many expected. Read More »

Durables Goods Up, Jobless Claims Stabilize

Diane Swonk | January 26, 2012 | Leave a comment

Durable goods orders rose at a 3.0% pace in December, stronger than many had expected, and was revised up for the month of November. About a third of the gains came from a pickup in aircraft orders, which have long lead times and provide little insight into the near-term outlook for business investment. Capital goods orders excluding defense, which provide a better gauge of investment over the next several months, rose at a more robust 5.8% pace in December. Read More »

Fed Downgrades Outlook, Releases Rate Forecast

Diane Swonk | January 25, 2012 | Leave a comment

The Federal Reserve’s shift in its statement, delaying eventual monetary tightening from “at least mid-2013″ to “at least late-2014,” is predicated on a slightly lower forecast for growth, not a recession.  Indeed, Chairman Ben Bernanke said that there is room for the economy to surprise on the upside and the forecast on interest rates still to be consistent.

The spectrum of monetary policy moves suggests that the majority of participants at the meeting truly believe that the economy needs more support. There is also, however, still a significant minority Read More »

FOMC Resets Easing Expectations to Late 2014

Diane Swonk | January 25, 2012 | Leave a comment

The Federal Open Market Committee (FOMC) revised its statement to say that it intends to hold short-term rates at essentially zero until at least LATE-2014. That is a full 18 months later than the Federal Reserve had previously stated and more consistent with the forecast that Chairman Ben Bernanke presented at his last press conference in November.

The Fed is operating off the lessons learned from the deflation experiences in  Japan and during the Great Depression; Read More »