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Author Topic: US Economics, the stock market , and other investment/savings strategies  (Read 219070 times)
Crafty_Dog
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« Reply #1200 on: December 07, 2016, 03:39:36 PM »

Nonfarm Productivity Increased at a 3.1% Annual Rate in the Third Quarter To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 12/6/2016

Nonfarm productivity (output per hour) increased at a 3.1% annual rate in the third quarter, unchanged from last month's preliminary report. Nonfarm productivity is unchanged versus last year.

Real (inflation-adjusted) compensation per hour in the nonfarm sector increased at a 2.2% annual rate in Q3 and is up 1.8% versus last year. Unit labor costs rose at a 0.7% annual rate in Q3 and are up 3.0% versus a year ago.

In the manufacturing sector, productivity rose at a 0.4% annual rate in Q3, slower than among nonfarm businesses as a whole. The smaller gain in manufacturing productivity was due to slower growth in output. Real compensation per hour increased at a 2.0% annual rate in the manufacturing sector, while unit labor costs rose at a 3.3% annual rate.

Implications: Nonfarm productivity growth was unrevised at a 3.1% annual rate in the third quarter. That may seem odd given the upward revisions to real GDP growth for Q3, but the number of hours worked were revised up as well, leaving output growth per hour unchanged. Still, that 3.1% annualized gain in productivity for the third quarter represents the fastest gain in two years, a break from the trend in declining productivity readings over the prior three quarters, and a clear improvement from the 2% annualized pace of productivity growth seen over the past twenty years. But despite the healthy rise in Q3, productivity remains unchanged from a year ago. We believe government statistics underestimate actual productivity growth. Have you ever had to call a cab or a limo to come pick you up on short notice? Now, with the press of a button, UBER sends a car directly to your door. And it's faster, easier, and often cheaper than ever before. Meanwhile Yelp gives you instant restaurant reviews and Facetime lets you talk face-to-face with people thousands of miles away. The benefits from these technologies have been immense. But because many of these incredible new technologies are free, they aren't directly included in output measures, making their impact on productivity difficult to measure. So while our quality of life continues to rise, it's not completely showing up in the government statistics. As the tax and regulatory environment improves, expect productivity growth to pick up in the next couple of years. In particular, a lower tax rate on corporate America will encourage greater efficiency. In addition, continued employment gains are pushing down the unemployment rate and putting rising pressure on wages, which give companies a greater incentive to take advantage of the efficiency-enhancing technology that entrepreneurs have been inventing in troves.
 
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Crafty_Dog
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« Reply #1201 on: December 22, 2016, 12:30:40 PM »

Real GDP Growth in Q3 was Revised to a 3.5% Annual Rate To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 12/22/2016

Real GDP growth in Q3 was revised to a 3.5% annual rate from a prior estimate of 3.2%, beating the consensus expected 3.3%.

The upward revision was due to stronger business investment and personal consumption. Other categories were either unchanged or changed only slightly.

The largest positive contribution to the real GDP growth rate in Q3 came from consumer spending. The weakest component of real GDP was residential investment.

The GDP price index was unrevised at a 1.4% annualized rate of change. Nominal GDP growth – real GDP plus inflation – was revised up to a 5.0% annual rate versus a prior estimate of 4.6%. Nominal GDP is up 2.9% versus a year ago and up at a 3.1% annual rate in the past two years.

Implications: Today's final GDP report for the third quarter showed real economic growth at a 3.5% annual rate, slightly better than consensus expectations, and the fastest growth in two years. The upward revisions were due to business investment and personal consumption, which means the "mix" of growth was favorable for the year ahead. Although corporate profits were revised down slightly, they were still up 5.8% in Q3 and up 2.1% from a year ago. The lull in profits over the past year and a half has been an energy story. But as energy prices are well off their lows from earlier this year, we expect higher profits in the quarters to come. Meanwhile, plugging the new profits data into our capitalized profits model suggests US equities remain cheap, not only at today's interest rates but even using a 10-year Treasury yield in the 3.5% - 4% range. In terms of monetary policy, the Fed should see today's report as a confirmation that they made the right decision to raise short-term rates last week. Nominal GDP growth (real growth plus inflation) was revised to 5% annual rate in Q3 from a prior estimate of 4.6%. Nominal GDP is up 2.9% in the past year and up at a 3.1% annual rate in the past two years, leaving the Fed plenty of room for rate hikes in 2017. Monetary policy will not be restrictive until the federal funds rate is moved close to nominal GDP growth. That's still a long way off. In other news today, the FHFA index, which measures prices for homes financed with conforming mortgages, increased 0.4% in October. In the past year, these home prices are up 6.2% versus a 6.0% increase in the year ending in October 2015. Look for continued gains in home prices in the year ahead, as jobs keep expanding, wage growth accelerates, and any headwind created by an increase in mortgage rates is offset by expectations of faster future economic growth.

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DougMacG
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« Reply #1202 on: December 22, 2016, 04:41:30 PM »

"Real GDP growth in Q3 was revised to a 3.5% annual rate from a prior estimate of 3.2%, beating the consensus expected 3.3%."

I must admit I was wrong when I predicted the growth estimate would be revised downward after the election.  Still, this and the current quarter will conclude 8 years of lethargic, pathetic and ARTIFICIAL growth.

Nominal growth is 3% and our inflation target is 2%.  The difference is a rounding error; we aren't better off.

What would the real growth rate be without 10 trillion in new fiscal deficit stimulative spending?  What would it be without quantitative easing, asset re-purchases and 8 years of near zero interest rate policy?  Zero growth or worse, I suspect.

Easy money when it shouldn't be was a major cause of the last financial meltdown:  https://economicsone.com/2016/12/09/unconventional-monetary-policy-normalization-and-reform/
Have we learned anything?

What would the growth rate be if we didn't tax corporations at the highest rate in the world?  If we didn't pour two dozen new tax increases on the economy with Obamacare, or if we didn't add tens of thousands of new pages of regulations onto what used to be a relatively free economy?  If we hadn't dropped out of the top ten freest countries in the world in the Heritage Freedom Index?

Stay tuned.  Maybe we will find out.
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G M
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« Reply #1203 on: December 22, 2016, 08:04:10 PM »

We are hardly out of the woods yet. I am hoping the boom will be soon enough and big enough to start to mitigate the looming collapse.

http://chicagoboyz.net/archives/54412.html

Can Donald Trump Prevent the Economy from Falling Into a Black Hole?

Posted by Kevin Villani on December 13th, 2016 (All posts by Kevin Villani)

Interest rates will eventually rise without an even more devastating policy of financial repression. When they do, rising interest costs will produce a vicious cycle of ever more borrowing. We are already approaching the “event horizon” of spinning into this black hole of an inflationary spiral and economic collapse from which few countries historically have escaped. A substantially higher rate of growth is the only way to break free.

National economic growth is typically measured by the growth of GDP, and citizen well being by the growth of per-capita GDP. The long run trend of GDP growth reflects labor force participation, hours worked and productivity as well as the rate of national saving and the productivity of investments, all of which have been trending down.

The population grows at about 1% annually and actual GDP growth averaged 2% overall for 2010-2016 (using the new World Bank and IMF forecast of US GDP at 1.6% for 2016), hence per capita GDP grew at only 1%. Moreover the income from that 1% growth went primarily to the top one percent while 99% stagnated and minorities fell backwards.

Why we are approaching the Event Horizon
The Obama Administration annually predicted a more historically typical 2.6% per capita growth rate, consistent with the historical growth in non-farm labor productivity. How could their forecasts be so far off?

The Obama Administration pursued the most massive Keynesian fiscal and monetary stimulus ever undertaken. Such a policy generally at least gives the appearance of a rise in well being in the near term, as the government GDP statistic (repetitive, as the word “statistic derives from the Greek word for “state” ) reflects final expenditures, thereby imputing equal value to what governments “spend” as to the discretionary spending of private households and businesses in competitive markets. But labor productivity gains stagnated at only about 1%, most likely reflecting the cost and uncertainty of anti-business regulatory and legislative policies that dampened investment, something the Administration denied, trumping even a short term boost to GDP.

As a result the national debt approximately doubled from $10 trillion to $20 trillion, with contingent liabilities variously estimated from $100 to $200 trillion, putting the economy ever closer to the event horizon. Breaking free will require reversing the highly negative trends by reversing the policies that caused them.

Technology alone isn’t sufficient
Obama Administration apologists argued that stagnation is “the new normal” citing leading productivity experts such as Robert Gordon who dismissed the potential of new technologies. Many disagree, but Gordon’s findings imply even greater reliance on conventional reform.

Fiscal policy won’t be sufficient
Raising taxes may reduce short term deficits but slows growth. Cutting wasteful spending works better but is more difficult.

The list of needed public infrastructure investments has grown since the last one trillion dollar “stimulus” of politically allocated and mostly wasteful pork that contributed to the stagnation of the last eight years. Debt financed public infrastructure investment contributes to growth only if highly productive investments are chosen over political white elephants like California’s bullet train, always problematic.

Major cuts in defense spending are wishful thinking as most geopolitical experts view the world today as a riskier place than at any prior time of the past century, with many parallels to the inter-war period 1919-1939.

The major entitlement programs Social Security and Medicare for the elderly need reform. But for those in or near retirement the potential for savings is slight. Is Medicare really going to be withheld by death squads? Are benefits for those dependent on social security going to be cut significantly, forcing the elderly back into the labor force? Cutting Medicare or SS benefits for those with significant wealth – the equivalent of a wealth tax – won’t affect their consumption, hence offsetting the fall in government deficits with an equal and offsetting liquidation of private wealth. Prospective changes for those 55 years of age or younger should stimulate savings and defer retirement, improving finances only in the long run.

The remaining bureaucracies are in need of major pruning and in numerous cases elimination but they evaded even budget scold David Stockman’s ax during the Reagan Administration.

Americans will have to work more and consume less
That is the typical progressive economic legacy of excessive borrowing from the future.

The first Clinton Administration created the crony capitalist coalition of the political elite and the politically favored, e.g., public sector employees and retirees, subsidy recipients and low income home loan borrowers. The recent Clinton campaign promised to broaden this coalition, which would have accelerated the trip over the event horizon.

Reform that taxes consumption in favor of savings and a return to historical real interest rates could reverse the dramatic decline of the savings rate. Regulations redirecting savings to politically popular housing or environmental causes need to be curtailed in favor of market allocation to productive business investment.

Repeal and replace of Obama Care could reverse the trend to part time employment. Unwinding the approximate doubling of SS Disability payments and temporary unemployment benefits could reverse the decline in labor force participation.

Service sector labor productivity has been falling since 1987, the more politically favored the faster the decline. Legal services are at the bottom, partly reflecting political power of rent-seeking trial lawyers, followed by unionized health and then educational services. Union favoritism through, e.g., Davis Bacon wage requirements and “card check” increases rent seeking, particularly rampant in the unionized public sector.

Competition, of which free but reciprocal trade has historically been a major component, has traditionally provided the largest boost to well being by realizing the benefits of foreign productivity in a lower cost of goods while channeling American labor into employment where their relative productivity is highest. The transition is often painful, but paying people not to work long term is counterproductive. Immigration of both highly skilled and low cost labor (but not dependent family) generally contributes to per capita labor productivity in the same way as free trade.

None of this will be easy. The alternative is Greece without the Mediterranean climate or a sufficiently rich benefactor.

—-

Kevin Villani, chief economist at Freddie Mac from 1982 to 1985, is a principal of University Financial Associates. He has held senior government positions, been affiliated with nine universities, and served as CFO and director of several companies. He recently published Occupy Pennsylvania Avenue on the political origins of the sub-prime lending bubble and aftermath.



"Real GDP growth in Q3 was revised to a 3.5% annual rate from a prior estimate of 3.2%, beating the consensus expected 3.3%."

I must admit I was wrong when I predicted the growth estimate would be revised downward after the election.  Still, this and the current quarter will conclude 8 years of lethargic, pathetic and ARTIFICIAL growth.

Nominal growth is 3% and our inflation target is 2%.  The difference is a rounding error; we aren't better off.

What would the real growth rate be without 10 trillion in new fiscal deficit stimulative spending?  What would it be without quantitative easing, asset re-purchases and 8 years of near zero interest rate policy?  Zero growth or worse, I suspect.

Easy money when it shouldn't be was a major cause of the last financial meltdown:  https://economicsone.com/2016/12/09/unconventional-monetary-policy-normalization-and-reform/
Have we learned anything?

What would the growth rate be if we didn't tax corporations at the highest rate in the world?  If we didn't pour two dozen new tax increases on the economy with Obamacare, or if we didn't add tens of thousands of new pages of regulations onto what used to be a relatively free economy?  If we hadn't dropped out of the top ten freest countries in the world in the Heritage Freedom Index?

Stay tuned.  Maybe we will find out.
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ccp
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« Reply #1204 on: January 01, 2017, 10:47:37 AM »

I remember when Peter Gold (?) told us he was buying gold after the tech crash in the early 2000s on a previous forum pre Dog Brothers:

http://www.macrotrends.net/1333/historical-gold-prices-100-year-chart
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Crafty_Dog
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« Reply #1205 on: January 03, 2017, 03:53:48 PM »

The ISM Manufacturing Index Rose to 54.7 in December To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 1/3/2017

The ISM manufacturing index rose to 54.7 in December, beating the consensus expected level of 53.8. (Levels higher than 50 signal expansion; levels below 50 signal contraction.)

The major measures of activity were mostly higher in December, and all stand above 50, signaling growth. The new orders index surged to 60.2 from 53.0 in November, while the production index increased to 60.3 from 56.0. The employment index moved higher to 53.1 from 52.3, while the supplier deliveries index declined to 52.9 from 55.7 in November.

The prices paid index increased to 65.5 in December from 54.5 in November.

Implications: Manufacturing ended 2016 on a high note, with the ISM manufacturing survey hitting the highest reading in two years. And December's increase represents the fourth consecutive month that the index has moved higher, signaling faster growth. Both the new orders and production indices hit multi-year highs, suggesting that 2017 should hit the ground running as factories gear up to fill increased demand. Some of this may be in part due to President-Elect Trump's focus on the manufacturing sector, but we think the likelihood of tax and regulatory reform are boosting confidence across industries and will benefit both the manufacturing and service sectors. The employment index also hit a 2016 high in December after being the only major indicator to decline in November. That said, manufacturing remains a small portion of total employment. We tend to focus on other signals of labor force strength (initial claims, earnings growth, and consumer spending) which have shown constant strength even through some turbulent times for the manufacturing sector. On the inflation front, the prices paid index skyrocketed to 65.5 in December from 54.5 in November, with eighteen commodities rising in price while just three declined. So any claims that rising prices are just a reflection of the rebound in oil prices are missing the mark. Yes, energy prices have been on the rise since bottoming in mid-2014, but rising economic activity is starting to put pressure on a wide variety of inputs. This, paired with rising energy, is likely to push inflation above the Fed's 2% target in 2017. As a whole, today's report shows the Plow Horse manufacturing sector starting to hit its stride as the nation prepares to pass the reins to a new President. In other news this morning, construction spending increased 0.9% in November (+0.8% including revisions to October). New single-family home building led the way, while hotel construction and public schools also increased.
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Crafty_Dog
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« Reply #1206 on: January 04, 2017, 01:06:15 PM »

http://scottgrannis.blogspot.com/2017/01/off-to-good-start.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29
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