Blog / Economic Commentary

  • Weekly Economic Monitor -- Spending, Deficits, and Debt

    By: Scott J. Brown, PH.D., Raymond James

    Spending, Deficits, and Debt – On Monday, the Treasury Department is expected to report a March budget deficit of about $658 billion, bringing the 12-month total to nearly $4.1 trillion, about 19% of GDP. Proponents argue that the added spending, with more to come, will help to ensure the recovery. Critics charge that it’s overkill, likely to push aggregate demand ahead of supply. The debate over infrastructure spending will amplify these divisions.

    This Week – The March CPI report should show a year-over-year gain of around 2.4%, reflecting “base effects” (a rebound from the low figures of a year ago, as the CPI fell 0.3% in March 2020) – nothing to worry about. The March reports on retail sales, industrial production, and residential construction should each show a strong rebound from the effects of February’s bad weather.

  • Weekly Economic Monitor -- Jobs!

    By: Scott J. Brown, PH.D., Raymond James

    Jobs! – As the pandemic recedes and the economy reopens, we can expect strong job growth in the months ahead. The March figures were a start. We may soon see monthly gains in nonfarm payrolls of a million or more. However, as employment rebounds, labor market frictions are more likely to come into play, reflecting the scarring that has occurred over the last several months. It is unclear how much of this will lead to higher wage and price inflation, but pressures ought to be transitory.

    This Week – The economic data calendar is lighter. We could see some market reaction to the ISM Services Index (Monday). The report on producer prices (Friday) should continue to show inflation pressures at the earlier stages of production. For those interested in the global economic outlook, the IMF will revised its World Economic Outlook on Tuesday and Fed Chair Powell will speak on the topic on Thursday. FOMC minutes (Wednesday) aren’t likely to add much to the monetary policy outlook, but you never know (the financial press often pulls quotes out of context).

  • Weekly Economic Monitor – The Job Outlook

    By Scott J. Brown, Ph.D., Raymond James

    The Job Market Outlook – The U.S. economy lost 2.77 million jobs in the initial estimate for January, which is on par with what we saw a year ago (-2.79 million). Seasonally adjusted, this was recorded as a 49,000 gain (with private-sector payrolls up just 6,000). Still, accounting for the seasonal noise, the recent data indicated that the job market has cooled off significantly following a sharp rebound in the late spring and summer (payrolls averaged a 29,000 monthly gain over the three months ending in January). The slowdown reflects the pandemic surge (and efforts to contain it). The bigger test for the job market occurs from February to June, when payrolls normally ramp higher. The pandemic is likely to restrain job growth in the near term, but we ought to see stronger gains once vaccines become more widely distributed.

    This Week – The economic calendar thins out, with the Consumer Price Index being the only major data release. An increase in gasoline prices is expected to drive the CPI higher in January, while restraint on rents should keep core inflation on a moderate trend. Fed Chair Powell will speak to the Economic Club of New York on Wednesday. The topic is the current state of the job market.

  • Weekly Economic Monitor – GDP

    By Scott J. Brown, Ph.D., Raymond James

    GDP – Real GDP rose at a 4.0% annual rate in the advance estimate for 4Q20, a much more moderate pace of recovery than was seen in the third quarter. Details were mixed, but consumer spending showed a significant loss of momentum and monthly figures reflected weakness in November and December. The surge in the pandemic and efforts to contain it dampened holiday sales and travel. This may, in turn, give way to seasonally adjusted strength in 1Q21, as there should be less of a fallback in the unadjusted data. However, as the Federal Open Market Committee noted in its January 27 policy statement, “the path of the economy will depend significantly on the course of the virus, including progress on vaccinations.”

    This Week – There is more than the usual uncertainty in the Employment Report. Annual benchmark revisions to the establishment survey data (payrolls, hours, wages) are expected to be small, but seasonal adjustment could exaggerate the January figures. The January ISM surveys should reflect moderate strength, although the headline figures are likely to remain exaggerated by the pandemic’s impact on supplier delivery times.

  • Weekly Economic Monitor – The Fiscal Policy Outlook

    By Scott J. Brown, Ph.D., Raymond James

    The Fiscal Policy Outlook – As expected, the new administration has hit the ground running. In his first two days in office, President Biden issued executive orders which rescinded a number of previous directives or were aimed at ending the pandemic and easing the pandemic’s economic impact. For investors, the bigger issue seems to be the prospects for further fiscal support. Biden has proposed a $1.9 trillion package. That’s on top of the $900 billion passed at the end of last year. Passage of a bill this size will be an uphill battle, as the Democrat’s advantage in the House and Senate are as narrow as they can get. Still, it’s worth taking a step back and looking at fiscal policy over the last decade and what lies ahead after the pandemic has passed.

    This Week – The Federal Open Market Committee is widely expected to leave short-term interest rates unchanged and to maintain the current monthly pace of asset purchases ($120 billion). In his press conference, Chair Powell is likely to repeat that the pace of asset purchases will continue until there is “substantial” improvement in the labor market (that is, not anytime soon). Real GDP is expected to have risen at a more moderate pace in the advance estimate for 4Q20), reflecting strength into the early part of the quarter (1Q21 GDP growth should be more modest). Weekly jobless claims should begin to settle back (although still elevated).