Recent assessments suggest that the slowdown in economic growth may be a temporary issue spurred by an unusually cold winter, rather than an indication of a deeper cyclical challenge. While this analysis is still evolving, thus making it too early for definitive conclusions, the preliminary data for March appears promising. As always, the economic outlook is subject to adjustment based on forthcoming data.
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The Economist reports that capital is shifting away from emerging markets towards riskier investments in frontier markets. Interest in these so-called frontier markets is growing as GDP growth in China, Brazil, and India has slowed. According to Charlie Robertson of Renaissance Capital, an investment bank, the excitement that once surrounded emerging markets in the 1990s is now shifting to frontier markets.
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The US economy has shown stable and positive trends in recent weeks, as indicated by a market-based assessment of macroeconomic conditions. The Macro-Markets Risk Index (MMRI) recorded a level of 9.4% on Monday, April 7, which suggests that the risk of a business cycle downturn remains low. An MMRI reading below 0% would signal a heightened risk of recession, while readings above 0% indicate expected economic expansion in the near term.
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After nearly three years of research and writing, my new book has finally been released — Nowcasting The Business Cycle: A Practical Guide For Spotting Business Cycle Peaks Ahead Of The Crowd. This concise volume (154 pages) can be viewed as a companion guide to the macro updates on The Capital Spectator (see here and here, for instance). The methodology explained in the book serves as the econometric foundation for the monthly releases of the US Economic Profile.
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● Flash Boys: A Wall Street Revolt
By Michael Lewis
Review via The Guardian
Michael Lewis asserts that the US stock market is skewed in favor of high-speed electronic trading firms, which exploit their advantages to extract vast sums from investors in his latest work. In Flash Boys: A Wall Street Revolt, Lewis contends that these firms capitalize on their speed to profit at the expense of other participants, reaping tens of billions of dollars.
“They can detect your intent to purchase shares in Microsoft, buy them ahead of you, and then sell them back at a higher price,” Lewis stated during his appearance on the television program 60 Minutes on Sunday.
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As projected, private payrolls grew significantly last month, rising by 192,000 in March compared to February, according to the latest update from the US Bureau of Labor Statistics. This marks the most substantial monthly increase since last November. While it’s reassuring to see improved employment growth, which has been consistent over the past three months, the advancements remain modest, indicating a return to trend rather than a surge hinting at a significant shift in momentum.
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The Economist recently posed the question: “Are financial markets reliable indicators of upcoming economic performance?” The answer is yes… sometimes, based on various data sets and econometric methods. In general, real-time asset pricing offers valuable insights into assessing the state of the business cycle. However, there are numerous pitfalls involved. Effectively distinguishing the signal from the noise requires effort, and while no perfect solutions exist, one useful tool is a statistical measure known as cross-correlation (CC), which measures the relationship between two time series across various time lags.
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Private nonfarm payrolls in the US are anticipated to rise by 187,000 (seasonally adjusted) in the upcoming March update from the Labor Department, as indicated by The Capital Spectator’s median econometric forecast. This expected increase surpasses the prior reported rise of 162,000 for February. However, the median projection for March falls short of several consensus forecasts derived from economist surveys.
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The labor market is showing signs of recovery once again. Private-sector employment rose by 191,000 in March, marking the best monthly performance of the year to date, according to the ADP Employment Report. This figure aligns with the consensus forecasts from economists, although it noticeably exceeds The Capital Spectator’s median econometric estimate. Additionally, revisions revealed that February’s previously weak advance of 139,000 was adjusted up to a more favorable 178,000 in today’s ADP report. More importantly, the year-over-year trend in private payrolls is advancing at nearly 2%, which is a reassuring indicator that moderate growth continues.
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The upcoming March release of the ADP Employment Report is projected to show a seasonally adjusted increase of 139,000 in private nonfarm payrolls, according to The Capital Spectator’s median econometric forecast. This forecast is significantly lower than two consensus predictions arising from economist surveys.
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In summary, the ongoing analysis of economic data reveals a complex landscape. While there are signs of improvement, caution remains prudent. The interplay between changing indicators continues to shape the broader economic narrative, warranting careful observation moving forward.
