Blog / Economic Commentary

  • Weekly Economic Monitor – The Pandemic’s Impact on the Season

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

    The Pandemic’s Impact on the Season – The holiday shopping season is critical for most retailers. For some, the season is make or break for the whole year. The November retail sales report was weaker than expected, although amplified by the seasonal adjustment. No surprise, consumers are increasingly shopping online. The pandemic has reduced the seasonal traffic at the brick-and-mortar stores. Seasonal adjustment issues are also evident in other areas, such as manufacturing and construction. In turn, much of the recent noise may see a reverse echo in January and February.

    This Week – The third estimate of 3Q20 GDP growth is expected to be little changed from the second estimate. November personal spending and durable goods shipments data will shed some light on 4Q20 GDP. None of that may matter for the financial markets, as the focus is on the future, especially the arrival of vaccines and the fiscal support package.

    Happy Holidays and Best Wishes for the New Year!

    We will hit the ground running in the first week of January. ISM surveys for December aren’t that critical. Market participants will react to the Georgia elections, which will determine the control of the Senate. The December Employment Report will be subject to seasonal adjustment quirks (less seasonal retail hiring, fewer seasonal job losses in education).

  • Weekly Economic Monitor – Near-Term Concerns

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

    Near-Term Concerns – The news on vaccines has boosted optimism for the economy for 2021. In contrast, near-term developments have been unfavorable. COVID-19 cases have surged and in all likelihood will rise further in upcoming weeks. Lawmakers remain in a stalemate on further fiscal support as a number of benefit programs and eviction moratoriums are set to disappear at the end of this month. Investors appear willing to look beyond these concerns.

    This Week – The Federal Open Market Committee is expected to leave short-term interest rates unchanged. The Summary of Economic Projections will include new graphs on senior Fed officials’ assessments of risk and uncertainty. In the September dot plot, most expected the federal funds rate to remain near 0% through 2023. Will the news on vaccines change that? Perhaps, but not a lot. In his press conference, Chair Powell is likely to plead further for fiscal support. Retail sales are expected to have risen modestly in November (unit vehicle sales fell and gasoline prices dipped), but seasonal adjustment could magnify the effects of the pandemic.

  • Weekly Economic Monitor – The Employment Outlook

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

    The Employment Outlook – The November Employment Reports was a bit disappointing. Nonfarm payrolls rose by 245,000 (vs. a median forecast of 485,000). The increase was held back by the loss of 93,000 temporary census workers. State and local government continued to shed workers. Seasonal hiring was much lower this year, which showed up as a decline in adjusted retail jobs. The pace of improvement in the labor market has continued to slow following a sharp pickup in the late spring and summer. The current surge in COVID-19 cases is leading some states government to re-impose restrictions on in-person services, but self-isolation for individuals with health concerns is expected to restrain the recovery into early 2021. The arrival of vaccines should help to boost economic growth and the job market in the second half of the year.

    This Week – The economic calendar thins and investors will be more focused on COVID-19 and the prospects for federal fiscal support. The Consumer Price Index is expected to reflect a dip in gasoline prices (which normally rise in November). Core inflation should be moderate. Virus-related supply chain issues have added to input costs, but there appears to be little pass-through to the consumer. Pipeline pressures may be more noticeable in the PPI report.

  • Weekly Economic Monitor – Looking Back, Looking Ahead

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

    Looking Back, Looking Ahead – Monetary and fiscal policy played a significant role in lessening the pandemic’s impact on the economy. The Fed has done its part, ensuring that there is plenty of liquidity in the financial system. Further fiscal support is needed, but has been difficult to achieve. As a consequence, growth is likely to slow into early 2021. However, growth should pick up as vaccines are rolled out. Beyond that, the new administration will have an ambitious agenda.

    This Week – A feast of economic data on Wednesday, but none of it is expected to be market-moving. The estimate of 3Q20 GDP growth is likely to be revised higher and October personal income and spending should suggest a strong start to the fourth quarter (looking ahead, momentum is expected to slow as COVID-19 cases surge).

  • Weekly Economic Monitor – Episode IV, A New Hope

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

    Episode IV, A New Hope – Some very good news on vaccine development, along with expectations of a divided government, helped propel the stock market this week. The economic impact of a vaccine depends on a number of things. We still have a long way to go and there are plenty of logistical issues to be worked out, but there is hope. Yet, while the rollout of one or more vaccines is a key factor, so is the starting point. COVID-19 cases continue to surge and the near-term economic outlook is more cautious.

    This Week – The mid-month economic reports are expected to remain consistent with a moderate pace of growth. Unit motor vehicle sales edged down last month. September sales (+1.9%) were exaggerated by the seasonal adjustment (weaker back-to-school sales in August, less of letdown in September, which shows up as a seasonally adjusted gain). Industrial production should continue to improve. Residential construction activity should be unseasonably strong. None of this may matter much for the financial markets, which are likely to be focused on the virus and vaccines.