{"id":267,"date":"2014-07-30T10:41:07","date_gmt":"2014-07-30T14:41:07","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=267"},"modified":"2014-07-30T10:41:07","modified_gmt":"2014-07-30T14:41:07","slug":"second-quarter-gdp-and-july-adp-jobs-forecast","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=267","title":{"rendered":"Second Quarter GDP and July ADP Jobs Forecast"},"content":{"rendered":"

KEY DATA:<\/strong> GDP: +4.0%; Consumption: +2.5%; Consumer Prices: +2.3%\/ADP: 218,000<\/p>\n

IN A NUTSHELL:<\/strong>\u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153The strong second quarter growth supports continued solid payroll gains and a further tightening of the labor market.\u00e2\u20ac\u009d
\n<\/em><\/strong><\/p>\n

WHAT IT MEANS:<\/strong>\u00c2\u00a0The Fed is meeting and the members now know that the winter of our discontented economy is past.<\/em><\/strong>\u00c2\u00a0 Economic growth had declined sharply in the first quarter, though the latest estimate of 2.1% was not as ugly as the previous 2.9% guess.\u00c2\u00a0 Still, that size fall in activity raised questions about the true strength of the economy, an issue that is no longer a concern.\u00c2\u00a0 \u00c2\u00a0Growth rebounded sharply in the spring, led by strong vehicle sales, solid export activity, strong business investment and inventory building and renewed government spending at the state and local government sectors.\u00c2\u00a0 In other words, only the federal government remains a weight around the economy\u00e2\u20ac\u2122s neck.<\/em><\/strong>\u00c2\u00a0 On the inflation front, consumer costs accelerated, rising at the fastest pace in three years.<\/em><\/strong>\u00c2\u00a0 The pace was not great but at 2.3%, it is above the Fed\u00e2\u20ac\u2122s target of 2%.\u00c2\u00a0 Excluding food and energy it was right at the number.<\/p>\n

Friday we get the July jobs report and ADP expects it to come in a little lower than the June gain<\/em><\/strong>.\u00c2\u00a0 The economy probably still averaged at least 250,000 new jobs over the past two months and that is strong.\u00c2\u00a0 The moderation in hiring, if you can call it that, was largely in the small business component.<\/em><\/strong>\u00c2\u00a0 Payrolls rose by about 40,000 less in this component than in June.\u00c2\u00a0 That doesn\u00e2\u20ac\u2122t worry me since Paychex\/HIS reported yesterday that small businesses were adding jobs faster, so that slowing may unwind in August.\u00c2\u00a0 Still, the increases appear to be across all industry segments.\u00c2\u00a0 Consensus is for about 230,000 new positions which should support a drop in the unemployment rate to 6.0%.\u00c2\u00a0 I think job gains could be a touch better, closer to 250,000.<\/p>\n

 <\/p>\n

MARKETS AND FED POLICY IMPLICATIONS:<\/strong> \u00c2\u00a0This report was much higher than most expected<\/em><\/strong> (I was at 4.1%).\u00c2\u00a0 It should also put to rest the questions about the rebound from the winter. <\/em><\/strong>\u00c2\u00a0The economy came back and even though there may have been a little extra inventory building that could moderate third quarter growth, solid activity was so widespread that you cannot call this number an aberration.<\/em><\/strong>\u00c2\u00a0 We are likely to see growth in the 3.5% to 4% range during the second half of the year.\u00c2\u00a0 With job gains strong and the labor marketing tightening, income should begin rising faster, powering better consumer spending.\u00c2\u00a0 Chair Yellen is focusing on wages, but that is a lagging indicator which may lag even more because of business intransigence on raising compensation.\u00c2\u00a0 That is, when broad wage increases start showing up, it will be late in the process to begin dealing with the rising cost pressures.\u00c2\u00a0 That is a warning to both the Fed and business executives.<\/em><\/strong>\u00c2\u00a0 Either have plans in place soon to deal with the inevitable workings of supply and demand in the labor market or play catch up.\u00c2\u00a0 That is why I think the first rate hike comes in the first quarter of next year.\u00c2\u00a0 It is also time the bond markets begin focusing on the increasing likelihood that growth will be closer to my forecast, which is well above consensus, and as a consequence prices will accelerate faster than expected.\u00c2\u00a0 We are not talking high inflation, but inflation that exceeds Fed targets.<\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: GDP: +4.0%; Consumption: +2.5%; Consumer Prices: +2.3%\/ADP: 218,000 IN A NUTSHELL:\u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153The strong second quarter growth supports continued solid payroll gains and a further tightening of the labor market.\u00e2\u20ac\u009d WHAT IT MEANS:\u00c2\u00a0The Fed is meeting and the members now know that the winter of our discontented economy is past.\u00c2\u00a0 Economic growth had declined sharply … Continue reading Second Quarter GDP and July ADP Jobs Forecast<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21,3,7],"tags":[],"class_list":["post-267","post","type-post","status-publish","format-standard","hentry","category-adp-payroll-estimate","category-economic-indicators","category-gross-domestic-product"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/267","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=267"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/267\/revisions"}],"predecessor-version":[{"id":268,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/267\/revisions\/268"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=267"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=267"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=267"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}