Finance Matters

Posts Tagged ‘GDP’

Most people are aware that the labor participation rate — the percent of the population that is both unemployed and unemployed (i.e. the total labor force) — has declined precipitously since the recession,  now standing at 64 percent.

Take out the unemployed, and that ratio declines even further.

This figure, called the unemployment-population ratio, stood at 58.5 percent in December — a 6.6 percent drop from 2007.

Credit Suisse’s Neal Soss and Henry Mo recently wrote a paper discussing what effect this decline will have on GDP.

A long stretch of low employment-population ratio suggests that the economy loses the productivity that would have come from those “idle” workers. This syndrome reduces potential GDP, the only ultimate wellspring of fiscal solvency and economic well-being.

Why is the emp-pop rate falling?

They first point out that population has been aging significantly. Due to these structural factors, the rate’s been declining since 1996.

But the Great Recession has put the decline on steroids.

The authors found that only one-third of the ratio’s recent acceleration can be chalked up to shifting demographics (ie aging population). The rest results were brought on by cyclical factors (ie plummeting demand from a weak economy).

Soss and Mo believe the only way to address this problem is with counter-cyclical policies, which leads to the author’s final prediction: QE3 remains likely.

The FOMC’s decision to push its forward guidance on exceptionally low rates from “at least through mid-2013” to “at least through late 2014” underscores members’ sense of urgency in taking more counter-cyclical policy. In our view, QE3 is still likely. We expect a program to commence in the next few months with a heavy emphasis on buying mortgage-related securities.

Now click here to see the only states that have regained most jobs lost during the recession >

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Monday opens up a busy few days, although few corporates will release at the start of the trading week. However, that rapidly changes as the days progress and nearly 20% of S&P 500 listed companies announce quarterly results.

But more than just earnings, Monday is filled with a series of important macro announcements, including reports out of Japan, Italy, Germany, and the U.S. 

Here’s what you need to know.

• The Philippines start the day off with fourth quarter GDP. Economists expect the nation to see an annualized rate of 3.80%, which would represent an acceleration from the third quarter.
• At 3:00 a.m. EST Taiwan will announce unemployment, which is seen roughly flat at 4.33%.
• Attention then shifts to Europe, where at the same time, Slovakia and Spain will announce consumer confidence and GDP, respectively. Slovakian confidence last stood at -40.8. A reading below zero represents negative expectations. In Spain, the economy is expected to contract 0.2% quarter-on-quarter.
• Italy takes center stage at 4:00 a.m. EST, when it announces business confidence. Expectations are for the headline indicator to decline 20 basis points to 92.3. 
• At 5:00 a.m. the European Central Bank will report its own confidence readings for a variety of sectors. Expectations are for consumer confidence in the region to remain flat at -20.6, while business conditions improve marginally to -0.25 from -0.31.
• Economic announcements move to Latin America for the next several hours, when Chile and Brazil release data. Brazilian inflation is expected to rise to 0.3%, from a negative reading in December. Chile will announce industrial production at 7:00 a.m. EST, with economists forecasting a rise, albeit at a lower pace. The headline figure is forecast at 1.2%.
• The United States releases personal income and spending at 8:30 a.m. EST. Economists polled by Bloomberg see incomes expanding by 0.4%, with spending increasing 0.1%. 
• Then, at 10:30 a.m. EST, the Dallas Federal Reserve will announce manufacturing activity in the region, which covers Texas, northern Louisiana and southern New Mexico. The reading is expected to rise to zero, from -3 in December.
• Closing out the day are relatively early announcements in Asia, which can still impact after-hours trading in the U.S. At 4:00 p.m. EST South Korea will report industrial production. Economists see production surging 1.1% in December, from a -0.4% reading a period earlier. Then, at 4:30 p.m. EST, Japan will announce its jobless rate, which is expected to remain flat at 4.5%, followed by industrial production 20 minutes later, which is seen reversing a decline last month and growing 2.9% in January.

U.S. corporates reporting quarterly results on Monday include Gannett and Wendy’s. Below, a roundup of tomorrow’s big announcers.

Wendy’s (WEN): $0.04
Gannett (GCI): $0.69
McKesson (MCK): $1.38
Diamond Foods (DMND): $0.73

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• Good News: Trading In Asia Starts Friday In The Green

ORIGINAL POST, SEE UPDATE BELOW: Earlier we made the argument that the Obama recovery has been much more impressive than the Reagan recovery since A) The conditions Obama inherited were wildly worse and B) Federal government spending under Obama didn’t grow as fast as it did under Reagan.

But we were just looking at Federal Government spending.

Here’s a look at annual government spending growth at all levels: Federal, state, and local.

Here it’s even more lopsided. In Reagan’s first four years in office, government spending grew by at least 7.5%, and in the first two years, government spending grew by over 10% year over year. Obama hasn’t had one year of government spending growth over 7.5%, and the growth in government spending in 2011 appears to be the second smallest is actually the third smallest since WWII.

Although GDP has been mediocre under Obama, he’s achieved a rebound in growth with much less stimulus than Reagan did, and, it should be noted, that despite predictions from many economists, there’s been no double dip, unlike with Reagan.

Again: Obama 1, Gipper 0.

UPDATE: It’s been noted by some that it’s unfair to compare government spending growth under Obama and Reagan this way, since it doesn’t account for inflation, which was obviously much higher in the early 80s.

Using real dollars, adjusting for inflation, we get a slightly different picture, but only just slightly different.

The growth in real government spending during Obama’s first two years were ahead of Reagan’s first two years, but following that, Reagan really kicked it into overdrive, especially in the mid 80s. Government spending, while it got an initial jolt under Obama, is now shrinking at the fastest pace since the late 60s.

Furthermore, at no point has government spending growth under Obama been unusually high, as you can see in the second chart, which dates back to 1947.

And here’s that same chart going back to 1954, which further emphasizes how restrained spending has been under Obama.

Again, given all this, the  economic rebound under Obama looks extremely impressive.

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This post originally appeared at 24/7 Wall St. 

HTC, Motorola (NYSE: MMI), LG and Nokia (NYSE: NOK) might as well curtail their efforts in the smartphone arena. The industry has only two companies left with the ongoing opportunity for extremely large sales — Samsung and Apple (NASDAQ: AAPL).

A new study from Strategy Analytics shows that in the fourth quarter Apple shipped 37 million smartphones and overtook Samsung to become once again the world’s number one smartphone vendor by volume. Global sales of smartphones were up 54% to 155 million units. Between Apple and Samsung, sales were almost 74 million for the period — nearly half of the total.

Samsung announced its fourth-quarter earnings about the same time as Strategy Analytics released its figures. Its net income rose 17% over last year’s quarter to $3.6 billion. Over the course of 2011, the South Korean company shipped 300 million handsets. Apple’s recently announced earnings were even more impressive.

Read the rest of the story at 24/7 Wall St.

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• Yet More Reasons To Be Blown Away By Apple’s Earnings
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• 2011 GDP: 1.7%

In 2011, union membership increased 49,000 last year to 14.76 million.

However, the Union membership rate declined by just 10 basis points in 2011 to 11.8% according to BLS data.

In 1983, the first year for which comparable data is available, union membership stood at 20.1%.

Among the survey’s other findings:

• Public sector workers had a union membership rate five times higher than the private sector — 37 % versus 6.9 %.
• Teachers and librarians had the highest unionization rate at 36.8 %, while sales workers had the lowest at 3 %.
• Demographically, Black men showed the highest rate at 17%, while Asian men showed the lowest at 10.1 %.
• Among states, New York was first with 24%, while North Carolina was last with 2.9%.
• Utility workers saw the greatest drop in union membership, declining 4.6% from 2010. Motion picture and sound recording professionals saw the greatest gain, 3.5%.

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• Indiana House Has Dealt A Huge Blow To Unions In The In Rust Belt
• 2011 GDP: 1.7%
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