Perspectives Blog

Labor markets in the new digital age

Columbia Management, Investment Team | April 14, 2014

…d is now at 60.7%, the lowest level since 1952. The last time labor’s income share was rising was when the economy experienced near full employment. Since then, the rise in unemployment and the expanding output gap during the recession undermined the bargaining power of workers and automation made some expendable. High profit margins are (and will remain) a continuing theme as businesses directs capital to technology which substitutes for (low-sk…

Q2 fixed income outlook – Hitting for the cycle

Gene Tannuzzo, CFA, Senior Portfolio Manager | March 31, 2014

…new-issue volume Source: JP Morgan The economic cycle is favorable at this stage, but much less advanced than the credit cycle. While moderate growth continues, the economy has yet to recover all of the jobs lost during the recession, and unemployment is still above the Fed’s target. The U.S. housing market is improving on the back of reduced supply, labor market improvements and overall confidence. We believe this creates opportunities for bon…

Lifting the U.S. oil export ban – Who wins?

Jonathan Mogil, Portfolio Manager and Senior Analyst | March 24, 2014

…ducing 8.4 million barrels per day (mbpd) of oil, and importing 4.1mbpd, representing one-third of its total consumption. Over the next three decades, oil imports more than doubled, and by 2008, during the throes of the Great Recession, the U.S. was importing 66% of its total oil consumption. Since 2008, U.S. oil volumes have grown faster than anywhere else in the world as a result of the U.S. shale revolution. Oil production averaged 7.5mbpd dur…

Dovish feathers showing through

Zach Pandl, Portfolio Manager and Strategist | April 14, 2014

…t, Yellen made clear last Monday that she views the “extra slack”—that portion not accounted for by the U3 unemployment rate—as extremely costly. She said, for example: “In some ways, the job market is tougher now than in any recession”. Second, the FOMC meeting minutes hinted that the upward shift in the funds rate forecasts may have overstated the change in the views of the committee leadership (although there remains some question about exactl…

What’s the outlook for muni bonds?

James Dearborn, Head of Municipal Bonds | June 19, 2014

Strong YTD performance resulted from falling rates, a dearth of new supply and a resurgent demand by investors seeking attractive taxable-equivalent yields. We believe municipal bonds should continue to perform well in the second half of 2014. Yields on muni bonds are compelling when considering the impact of taxes on non-exempt securities. As we reach the halfway point of 2014, it’s a good opportunity to review our full-year outlook for the m…

Slack and inflation

Zach Pandl, Portfolio Manager and Strategist | July 21, 2014

…ging by this standard, the unemployment gap today is less than one percentage point, implying a small amount of remaining labor market slack and only modest downward pressure on inflation (Exhibit 1). However, the most recent recession and slow recovery have raised questions about whether this definition of full employment remains valid. Exhibit 1: Unemployment rate suggests only small amount of labor market slack Unemployment rate (%) Sources:…

Gaps, not growth

Zach Pandl, Portfolio Manager and Strategist | February 25, 2014

…ts structural rate. Okun’s Law is at the center of today’s biggest policy debate. Since the recovery began in the second half of 2009, GDP growth has increased at an average annualized rate of just 2.4%. Before and during the recession, most economists thought that potential GDP growth was greater than 2.5% (based on various forecaster surveys). Thus, the Okun’s Law equation above would have implied a worsening output gap, because GDP growth was…