{"id":359,"date":"2014-10-30T09:14:49","date_gmt":"2014-10-30T13:14:49","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=359"},"modified":"2014-11-01T14:05:06","modified_gmt":"2014-11-01T18:05:06","slug":"third-quarter-gdp-and-weekly-jobless-claims","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=359","title":{"rendered":"Third Quarter GDP and Weekly Jobless Claims"},"content":{"rendered":"

KEY DATA:<\/strong> GDP: +3.5%; Consumption: +1.8%\/Jobless Claims: 287,000 (up 3,000)<\/p>\n

IN A NUTSHELL:<\/strong> \u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153The economy just may have shifted gears before anyone expected and the firming in the labor market provides hope the strong growth can continue.\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n

WHAT IT MEANS:<\/strong> \u00c2\u00a0I have been arguing for a while now that the underlying economic fundamentals are improving rapidly and the economy should be shifting into higher gear soon.\u00c2\u00a0 That shift may be taking place already.\u00c2\u00a0 Economic activity expanded by a better than expected pace in the third quarter and the report was not filled with too many head-scratchers.<\/em><\/strong>\u00c2\u00a0 Consumer spending remains disappointing<\/em><\/strong> and the weak link is still services.\u00c2\u00a0 Of course, this is the biggest individual component of GDP, accounting for two-thirds of consumption and 45% of all economic activity.\u00c2\u00a0 It is hard to grow rapidly if people don\u00e2\u20ac\u2122t purchase things like housing, utilities, medical care or recreation services at a decent pace.\u00c2\u00a0 So, where did growth come from?\u00c2\u00a0 Business investment was solid, growing at sustainable paces for equipment, structures and technology.\u00c2\u00a0 The housing market improved, though residential investment was nothing spectacular.<\/em><\/strong>\u00c2\u00a0 We shipped a ton of goods overseas while cutting back on our demand for foreign products.\u00c2\u00a0 Major reductions in oil imports are really a great boon to growth as we are keeping an awful lot of money in the U.S. \u00c2\u00a0The government is back in the spending business<\/em><\/strong> with national defense leading the way.\u00c2\u00a0 That was probably make-up for all the cuts made earlier in the fiscal year.\u00c2\u00a0 But nondefense purchases rose as well and state and local governments continue to translate growing revenues into increasing spending.\u00c2\u00a0 Inflation remains muted<\/em><\/strong> and actually decelerated fairly sharply. \u00c2\u00a0I suspect the Fed members were not pleased to see that.<\/p>\n

One reason I am so optimistic about the economy is my view that the labor market has already tightened and stronger wage gains are in sight.\u00c2\u00a0 While jobless claims edged up last week, the level remains extremely low and it really does look like the October jobs report could be better than the September one<\/em><\/strong>, which we all agree was quite good.<\/p>\n

MARKETS AND FED POLICY IMPLICATIONS:<\/strong> The Fed ended quantitative easing yesterday, pointing to improving economic and labor market conditions.\u00c2\u00a0 What could encourage the FOMC to start raising rates in the spring, as I expect, is continued strong economic growth, which leads to really tight labor markets.<\/em><\/strong>\u00c2\u00a0 With consumer confidence rising, falling gasoline prices creating fatter wallets, job gains accelerating, unemployment declining and incomes rising, the holiday shopping season is setting up nicely.\u00c2\u00a0 <\/em><\/strong>The National Retail Federation expects demand to rise by 4.1% this season, up from 3.1% last year.\u00c2\u00a0 I think that may be conservative.\u00c2\u00a0 I am in the 5% range.\u00c2\u00a0 That could lead to a rise in fourth quarter consumption, powering growth back to the 4% range.\u00c2\u00a0 A string of 3% or more growth rates, which the Fed will likely be staring at when it meets in January, coupled with an unemployment rate closing in on the 5.5% full employment rate, should be enough for most Fed members to throw in the towel.<\/em><\/strong>\u00c2\u00a0 Investors will have to start balancing the reality of rate hikes in the first half of next year with better growth.\u00c2\u00a0 We will find out then if it was the Fed or the economy that generated the outsized equity market gains over the past few years.<\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: GDP: +3.5%; Consumption: +1.8%\/Jobless Claims: 287,000 (up 3,000) IN A NUTSHELL: \u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153The economy just may have shifted gears before anyone expected and the firming in the labor market provides hope the strong growth can continue.\u00e2\u20ac\u009d WHAT IT MEANS: \u00c2\u00a0I have been arguing for a while now that the underlying economic fundamentals are improving … Continue reading Third Quarter GDP and Weekly Jobless Claims<\/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":[3,7,24],"tags":[],"class_list":["post-359","post","type-post","status-publish","format-standard","hentry","category-economic-indicators","category-gross-domestic-product","category-weekly-jobless-claims"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/359","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=359"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/359\/revisions"}],"predecessor-version":[{"id":360,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/359\/revisions\/360"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=359"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=359"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=359"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}