Perspectives Blog

Snow job!

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | January 13, 2014

…prior month data are continuing and this data will surely be revised. The BLS is only 90% confident that the actual monthly change is within 90,000 plus or minus of what they report. Despite the cheery news of the drop in the unemployment rate to 6.7% in December from 7.0%, there were warnings flags in this report as well. The Labor Force Participation Rate fell to 62.8%, the lowest since 1978. Behind this, the ranks of the unemployed fell by 490…

The Fed’s outlook and leadership in flux

Zach Pandl, Portfolio Manager and Strategist | August 1, 2013

Fed policy outlook looks increasingly fluid, including changes in the consensus on the leading candidate for next Fed Chair. There has been increasing speculation around changes to the so-called “Evans Rule”—the Fed’s commitment to keep short-term interest rates low as long as the unemployment rate remains above 6.5%. For the upcoming FOMC meeting, we think a likely outcome would be emphasis that the QE tapering decision will depend on the inco…

U.S. rates — View update

Zach Pandl, Portfolio Manager and Strategist | April 4, 2014

…growth also slipped to 2.1% year-over-year. However, we would caution against reading too much into a single jobs report. Based on demographic trends, we estimate that “breakeven” payroll growth—the amount needed to lower the unemployment rate—is around 75-100k per month. If job growth continues around 200k per month, it’s very likely the unemployment rate will keep falling. More importantly, the bigger issue is not the month-to-month details but…

What investors should know about Fed forward guidance

Zach Pandl, Portfolio Manager and Strategist | March 24, 2014

…reliance on Summary of Economic Projections (SEP) forecasts to fade over time. Last week, at Janet Yellen’s first meeting as Fed Chair, the FOMC revised its forward guidance for the funds rate, dropping its reference to 6.5% unemployment and instead stressing the committee’s qualitative assessment of the economy. The change was a symbolically important step, but did not alter the broader outlook for policy rates, in our view. The existing guidan…

FOMC December meeting scouting report

Zach Pandl, Portfolio Manager and Strategist | December 16, 2013

…t this week’s meeting—although we would emphasize that we see this as a close call. First, incoming data continue to improve. Nonfarm payroll growth has picked up to a three-month average growth rate of about 200,000, and the unemployment rate has declined to 7.0%—down from 8.1% at the time the program was announced. With the improvement in retail sales in November, economists estimate that gross domestic product (GDP) growth in the second half o…

QE – When and how will the curtain come down?

Zach Pandl, Portfolio Manager and Strategist | November 25, 2013

…e, as we see the combined odds of these two outcomes as reasonably high. It is difficult to envision QE continuing at the current speed deep into 2014 if we see more of the same in the data—i.e. 2% growth and a slowly falling unemployment rate. Second, the committee rejected two popular proposals for strengthening the forward guidance for the federal funds rate: lowering the unemployment threshold and introducing an inflation floor. The unemploym…

Another look at disability and labor force participation

Zach Pandl, Portfolio Manager and Strategist | April 7, 2014

…ing participation rate and historically low employment-to-population ratio. There are two main sources of disability statistics: (1) the Current Population Survey (CPS), which is the same underlying data used to calculate the unemployment rate, and (2) disability benefit recipient data from the Social Security Administration. The two measures are not exactly the same, and the CPS does not use DI or SSI benefits to determine disability status. How…