More by the Same Author
2013-05-14 The Budget Deficit by Scott Brown of Raymond James
The Monthly Treasury Statement showed a large budget surplus for April. Some of that may prove to be temporary. Income was pulled forward into 2012 ahead of expected tax increases in 2013 and that was reflected in higher tax payments in April. Some of it is payback from the bailouts of a few years ago (for example, earnings from Fannie Mae and Freddie Mac). However, much of the improvement reflects a rebound from a severe recession. Tax revenues are recovering and recession-related expenses are trending lower.
2013-05-06 All's Well That Ends Well by Scott Brown of Raymond James
The economic data reports were decidedly mixed last week. However, the April Employment Report exceeded expectations, which provided a good excuse for share prices to move higher. Bonds were whipsawed, encouraged by the view that the Fed was less likely to taper its asset purchases, but then hit hard by the better-than-expected payroll figures.
2013-04-30 1Q13 GDP Growth and Beyond by Scott Brown of Raymond James
The initial estimate of real GDP growth for the first quarter was lower than expected. Details were mixed, and surprising relative to what was anticipated at the start of the quarter. Government remained a drag on overall GDP growth, which is a major difference between the current recovery and rebounds from previous recessions. The first quarter figures don’t tell us much about the pace of growth in the current quarter and beyond, but most economist have lowered their GDP forecasts for 2Q13.
2013-04-25 The End of “Expansionary Austerity?” by Scott Brown of Raymond James
A few years ago, an economic paper by Harvard professors Carmen Reinhart and Kenneth Rogoff helped fuel the push for austerity. It was met with some criticism from economists, but was widely embraced by the press and by politicians on both sides of the Atlantic. The study has now been demonstrated to have had serious flaws, but will those in power fold? Or will they double down on bad economic policy?
2013-04-18 Inflation and Interest Rates by Scott Brown of Raymond James
The Federal Reserve began its first asset purchase program in the fall of 2008, during the depth of the financial panic. Some observers feared that the Fed’s actions would fuel higher inflation. However, the Fed is now well along in its third asset purchase program and inflation (as measured by the PCE Price Index) has remained low. In fact, Fed officials expect that inflation will trend at or below the 2% target for the next couple of years. That hasn’t stopped the inflation worrywarts from predicting that inflation is still “just around the corner.”
2013-04-12 March Jobs Report: Disappointing, But Not Terrible by Scott Brown of Raymond James
The economic added 759,000 jobs in March before seasonal adjustment, that is. That translated into a disappointing 88,000 gain in the seasonally-adjusted number. Figures for January and February were revised higher. The slower March figure could reflect a lagged impact from the payroll tax hike or February may have simply borrowed some strength from March.
2013-04-01 The Arithmetic on Consumer Spending by Scott Brown of Raymond James
The 3rd estimate of 4Q12 GDP growth showed a downward revision to consumer spending growth. Less momentum heading into 1Q13, right? Guess again. Revisions to the monthly data actually showed better growth heading into the new year. Moreover, figures for January and February suggest a much stronger rate of growth in spending (and hence GDP) than was anticipated just a short time ago.
2013-03-25 Fed Outlook: Cautiously Optimistic or Just Hopeful? by Scott Brown of Raymond James
The Federal Open Market Committee’s latest policy meeting generated few surprises. The FOMC maintained its forward guidance on the federal funds rate target, which is still not expected to start rising until 2015, and did not alter its asset purchases plans ($40 billion per month in agency mortgage-backed securities and $45 billion in longer-term Treasuries). However, in his press briefing, Bernanke indicated that the pace of asset purchases could be varied as progress is made toward the Fed’s goals or if the assessment of the benefits and potential costs of the program were to cha
2013-03-19 How Strong? by Scott Brown of Raymond James
The recent economic reports have been mixed. The stock market seems to have embraced the strength and ignored the weakness. The bond market typically approaches the information in a more balanced way. How might the differences between the two markets be resolved?
2013-03-11 The Job Market: Not As Strong As It Looks by Scott Brown of Raymond James
With headwinds fading, the U.S. economic recovery appeared poised to pick up more substantially in 2013. Unfortunately, fiscal policy is going in the wrong direction.
2013-03-05 No Rest for the Wicked by Scott Brown of Raymond James
With headwinds fading, the U.S. economic recovery appeared poised to pick up more substantially in 2013. Unfortunately, fiscal policy is going in the wrong direction.
2013-02-19 On Competitive Devaluations by Scott Brown of Raymond James
Aggressive monetary policy moves in recent years have been accompanied by a growing fear of a currency war. In a currency war, or competitive devaluation, countries attempt to weaken their currencies to boost exports, but each devaluation leads to counter devaluations. That's not what's going on now. However, whether a country is purposely devaluing its currency or is merely pursuing accommodative monetary policy is irrelevant, the consequences are the same. The recent meeting of G-20 finance ministers and central bankers highlights the lack of coherent policies to boost growth.
2013-02-12 The Budget Outlook Why the Hysteria? by Scott Brown of Raymond James
President Obama will deliver his fifth State of the Union Address on Tuesday evening. These speeches tend not to be of much significance for the financial markets, although the topics discussed may be important for certain industries (healthcare, energy, defense). Obama is expected to repeat his request that the sequester, due March 1, be postponed to next year. Doing so would not result in less deficit reduction. Such a move would have to be "paid for" through an increase in tax revenues and cuts in other forms of spending. However, it would limit the economic damage that would follow.
2013-02-06 The Job Market Data and the Fed by Scott Brown of Raymond James
Nonfarm payrolls fell by 2.8 million in January before seasonal adjustment, that is. Adjusted, payrolls advanced 157,000, about as expected. However, annual benchmark revisions showed a more rapid pace of job growth over the last two years a pace at odds with the Household Survey data. How might the Fed view the range of job market data?
2013-02-01 Moving the Hurdles by Scott Brown of Raymond James
The ink of my weekly piece was not even dry last Friday, when the House announced that it would vote on a three-month delay in the debt ceiling showdown. Congress now has until May 19 to raise the debt ceiling. So, the most dangerous hurdle has been moved down the track. Other hurdles remain in place.
2013-01-23 The Washington Hurdles by Scott Brown of Raymond James
While President Obama is now beginning his second term, the new Congress isn't expected to "get down to business" until next month. There are three hurdles for Washington, which are likely to have significant implications for the financial markets.
2013-01-15 Inflation, Still Not Taking Off Anytime Soon by Scott Brown of Raymond James
A few years ago, amid exceptionally large federal budget deficit and extraordinarily accommodative Fed policy, a number of pundits warned of impending hyperinflation. Instead, inflation has stayed low. That hasn't stopped the inflation worrywarts. It's just a matter of time, they say. Inflation "has to show up at some point." That's not an argument. There are a number of reasons to expect inflation to stay low.
2013-01-08 The Cliff, the Fed, and the Economy by Scott Brown of Raymond James
The budget deal removes a major uncertainty for the financial markets. We now know what tax rates will be. However, the American Taxpayer Relief Act (ATRA) has a number of drawbacks. The December 11-12 FOMC policy meeting minutes showed a split among Fed officials, but that doesn't necessarily mean that asset purchases will end any sooner. The economic data reports have been mixed but generally indicate that the recovery is in reasonable shape.
2012-12-26 Over The Cliff by Scott Brown of Raymond James
Leaders in Washington failed to reach an agreement on the fiscal cliff. What does that mean for the 2013 outlook?
2012-12-17 The Fed: Targets, Thresholds, Guideposts, and Goals by Scott Brown of Raymond James
As expected, Federal Open Market Committee announced that purchases of Treasuries will be added to QE3 in 2013 (the Fed will continue to buy $40 billion per month in mortgage-backed securities and $45 billion per month in long-term Treasuries). Fed policymakers also announced threshold guidance on the overnight lending rate, which will make the Fed's policy intentions clearer, and that's a good thing.
2012-12-11 Fiscal Cliff-Hanger by Scott Brown of Raymond James
The recent economic data are consistent with a moderate pace of growth in the near term. The manufacturing sector is mixed, but generally weak, reflecting a global slowdown and an inventory correction. The consumer appears to be hanging in there. The Bureau of Labor Statistics said that Hurricane Sandy did not have a significant impact on the November employment data. However, other economic indicators did reflect weather-related disruptions, which appear to have been only temporary. Meanwhile, the economy heads toward the fiscal cliff.
2012-11-26 Monetary and Fiscal Policy in Early 2013 by Scott Brown of Raymond James
The fiscal cliff refers to a substantial tightening of fiscal policy in 2013. Monetary policy cannot offset the cliffs negative effect on the economy. However, it would be surprising if a deal were not reached, if not by the end of this year, then in early 2013. Due to concerns about the long-term budget picture, some of the cliff is almost certain to get through.
2012-11-19 Monetary and Fiscal Policy in Early 2013 by Scott Brown of Raymond James
The fiscal cliff refers to a substantial tightening of fiscal policy in 2013. Monetary policy cannot offset the cliff's negative effect on the economy. However, it would be surprising if a deal were not reached, if not by the end of this year, then in early 2013. Due to concerns about the long-term budget picture, some of the cliff is almost certain to get through.
2012-11-13 Addressing the Fiscal Cliff by Scott Brown of Raymond James
The 2012 election put a major uncertainty behind us. We now know that Barack Obama will remain president and that Congress will be split. However, a major uncertainty lies ahead with the fiscal cliff. The danger is that a deal wont be reached soon and may get tangled with efforts to raise the debt ceiling
2012-11-07 Job Market Improves, But Is It Enough? by Scott Brown of Raymond James
The economy plays a critical role in voter decisions. However, historically, it's been more about the direction than the level. The October Employment Report was stronger than anticipated, suggesting that we're doing significantly better than just treading water in the labor market. However, we have a lot of ground to make up and the pace is not especially strong. Regardless of Tuesday's election outcome, the data suggest that the ground may be set for further improvement in 2013.
2012-10-29 A Moderate Recovery More Of The Same by Scott Brown of Raymond James
The advance estimate of 3Q 12 GDP growth was not far from expectations. Consumer spending growth was moderately strong, while business fixed investment was a bit weak. The details suggest that some of the headwinds may be abating, although risks are tilted to the downside.
2012-10-23 The GDP Outlook by Scott Brown of Raymond James
On Friday, the Bureau of Economic Analysis will release the advance estimate of third quarter GDP growth. Theres always a lot of uncertainty in the advance estimate. The BEA will have to make assumptions about inventories, foreign trade, and a few other missing components. However, the report should continue to show the U.S. economy in recovery mode.
2012-10-10 The September Employment Report by Scott Brown of Raymond James
Nonfarm payrolls rose about as expected last month. However, figures for July and August were revised significantly higher. The unemployment rate fell sharply and unexpectedly, but one should take that with a grain of salt considering the seasonal adjustment issues (the start of the school year). Sifting through the details, the report suggests more of the same. Job gains have been roughly consistent with the pace of population growth. However, we're still not making up much of the ground that was lost during the economic downturn.
2012-10-01 More Pieces of the Puzzle by Scott Brown of Raymond James
Recent economic data have been mixed. Consumer attitude measures have improved, but manufacturing figures have softened. On balance, the numbers are consistent with more of the same: a positive, but lackluster-to-moderate pace of growth.
2012-09-17 The Fed to the Rescue? by Scott Brown of Raymond James
Citing concerns about the pace of improvement in the labor market, the Federal Open Market Committee extended and amplified its forward guidance and started a third round of large-scale asset purchases (what most people call "QE3"). The FOMC said that economic conditions are expected to warrant exceptionally low levels of the federal funds rate target through mid-2015 (vs. "late 2014" in the previous policy statement) and added that "a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens."
2012-09-10 The August Employment Report and the Fed by Scott Brown of Raymond James
The August job market report was disappointing. Nonfarm payrolls rose less than expected and previous figures were revised lower. The unemployment rate fell, but that was due to a decrease in labor force participation (dont read too much into that).
2012-09-04 The Federal Budget Outlook and the Election by Scott Brown of Raymond James
With one month remaining in the fiscal year, the federal government appears to be on track to record a deficit of about $1.130 trillion, down from $1.296 trillion in FY11 and $1.294 trillion in FY10. Such large deficits can't continue indefinitely and this year's election should, in part, be about how, and how fast, the deficit will be trimmed in the years ahead. However, it's important to look at where the deficit came from.
2012-08-27 Letter From Fed Camp by Scott Brown of Raymond James
The minutes of the July 31/August 1 Federal Open Market Committee provided clear insight into the Fed's policy debate. At that meeting "many" FOMC members felt that "additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery."
2012-08-20 The Outlook for Inflation and Fed Policy by Scott Brown of Raymond James
The odds of further accommodation from the Federal Reserve have decreased significantly in the last few weeks, as the level of fear has diminished. The financial markets now expect most of the fiscal cliff to be avoided. In Europe, leaders will still have to act against the region's crisis, but theyve also continued to express a strong resolve "to do whatever it takes" to keep the eurozone intact. Perhaps more importantly, U.S. economic data reports have generally improved.
2012-08-06 Job Outlook: Not Great, But Not Terrible by Scott Brown of Raymond James
Nonfarm payrolls rose more than expected in July, reducing fears that the economy may be headed back into recession. One shouldn't put too much weight on any one particular month, especially July. However, the figures are consistent with the broad range of data suggesting moderate growth over the near term - not especially strong, but not terribly weak either.
2012-07-24 Fed Outlook: An Itchy Trigger Finger by Scott Brown of Raymond James
Fed Chairman Bernanke's monetary policy testimony to Congress was not expected to be a big deal. The economic projections of senior Fed officials were already published and the minutes of the June 19-20 policy meeting showed the Fed in a wait-and-see attitude However, most of the economic data released since the Fed policy meeting were weaker than expected. While Bernanke did not signal that policy action was imminent, the tone of his testimony was clearly concerned.
2012-06-29 Meanwhile, Back at the Ranch... by Scott Brown of Raymond James Equity Research
With worries about Europe and the individual mandate of the Affordable Care Act behind us, we can go back to looking at the economy. At issue is whether recent signs of slowing were an illusion or more real. In particular, the June job market figures will be critical.
2012-06-04 Job Recap/How Big of an Impact from Europe? by Scott Brown of Raymond James Equity Research
Job growth has slowed. However, its unclear exactly why or even, despite all the hand-wringing on Friday, whether its something to worry about. A European recession would have a moderate impact on U.S. exports, but there are some positives.
There are a number of other possible explanations for the recent slowdown in (seasonally adjusted) job growth.Firms may be reluctant to hire for a number of reasons: political uncertainty, fiscal policy uncertainty, higher gasoline prices, and worries about the fallout from Europe.
2012-05-15 Austerity Its All In The Timing by Scott Brown of Raymond James Equity Research
One problem with designing fiscal stimulus is determining how rapidly to move back toward fiscal balance. The U.S. economy has already faced some degree of austerity. According to the National Income and Product Accounts, government consumption and investment subtracted 0.6 percentage point from GDP growth over the last six quarters, where in normal times, it would have added about 0.3 percentage point (consistent with population growth). Real GDP averaged 1.8% growth over the last six quarters. It would have been nearly a full percentage point higher if not for the contraction in government.
2012-05-07 The Labor Market Outlook by Scott Brown of Raymond James Equity Research
The April Employment Report disappointed stock market participants. However, it really wasnt a bad report. Private-sector job growth has been moderately strong this year. The Household Survey data suggest that the economic expansion has been strong enough to absorb the growth in the working-age population, but not enough to take up much of the labor market slack that was generated during the downturn. These figures tell us nothing about where the labor market is headed. Job growth over the next six months will have important implications for investors and for the November election.
2012-04-30 Growing Concerns by Scott Brown of Raymond James Equity Research
Real GDP rose less than expected in the advance estimate for 1Q12. However, the details were a mixed bag. The report added little to the debate about where the economy is headed. The first thing to remember about the advance GDP report is that the figures will be revised, and revised again. There is often a larger difference between the advance estimate and subsequent estimates. However, the underlying story behind the numbers typically does not change much. Consumer spending, which accounts for about 70% of GDP, helped by mild weather. Yet, the personal income figures suggest caution.
2012-04-23 Blowin in the Wind by Scott Brown of Raymond James Equity Research
Recent economic data have been mixed, but generally consistent with moderate economic growth. The recovery continues, but has failed to gather much steam and remains relatively fragile. Were on our way, but weve a long way to go. Over the last year, the economy has faced a number of headwinds, capping the pace of improvement. Those headwinds appear to be lessening to some extent although there are uncertainties, particularly as one looks to 2013.
2012-04-09 How high is up? by Scott Brown of du Pasquier Asset Management
Europe hopes the latest (bailout and reg) moves will help it get its act together. (Good luck with that.) China applies the brakes. Labor looks strong, but can it continue? The Fed debates the need for more stimulus (without any consensus). Facebook moves closer to IPO (and investors beg to participate). The world lectures Iran and finally takes harsh measures (stand by to help Saudi). Investors hope to keep the mo going for another quarter, while being tempted to take profits along the way. Can we finally start focusing on Obama vs. Romney?
2012-04-09 How high is up? by Scott Brown of du Pasquier Asset Management
Although performance in our portfolios was good during the first quarter, it is likely that my defensiveness might be costing us during the current rally. Right now, my allocations reflect a lack of conviction that the rally can sustain, so while cash is king is a handy catchphrase, in our case it is our best defense against the kind of draw-down that ruins portfolios. Our methodology is not to have one or more security rupture the probability of continued portfolio progress, point A to point B. In that sense, we successfully continued our steady climb in valuation appreciation.
2012-04-09 The Outlook for Earnings by Scott Brown of Raymond James Equity Research
The stock market has risen nicely this year, partly on improving economic data, but are such gains justified by the earnings outlook? The level of the S&P 500 Index does not appear to be out of line with earnings expectations, but there may be some pressure on profits over the longer term. As the election approaches, we may hear more about class warfare. Its unclear what role the distribution of income will take in this years election, but investors should pay attention.
2012-04-02 Better News On Consumer Spending, But ... by Scott Brown of Raymond James Equity Research
The monthly report on personal income and spending rarely gets much interest from the financial markets. However, the spending figures are a direct part of the governments GDP calculation. The latest numbers (through February) paint a much brighter picture than they did a month ago. While the outlook has improved from a month ago, its not enough for most Fed policymakers. It will take much more substantial economic growth to undo fully the recessions damage to the labor market. QE3 is still seen as unlikely, but its not off the table completely.
2012-03-20 Game On by Scott Brown of Raymond James Equity Research
Nothing in the recent economic data suggests that the Fed is any closer to raising short-term interest rates. However, the figures also imply that further Fed asset purchases are less likely. While the Fed did not surprise last week, the bond market had factored in some chance that the Fed would eventually undertake QE3. In the short term, the recent pop in bond yields may simply be a case of be on the bus or be under it. However, bond yields seem unlikely to rise sharply from here, at least for now.
2012-03-13 Employment Outlook Weather and Gasoline by Scott Brown of Raymond James Equity Research
Nonfarm payrolls rose more than expected in February, with an upward revision to figures for December and January. The job market figures have been strong. However, an unusually mild winter has certainly had an impact. Its difficult to isolate the effect of mild weather. The labor market is definitely improving, but recent figures may be somewhat exaggerated. Mild winter weather may pull forward some seasonal gains that would have otherwise occurred in March and April. In addition, higher gasoline prices threaten to dampen the pace of improvement in the near term.
2012-03-06 More Mixed by Scott Brown of Raymond James Equity Research
The economic data reports have become more mixed. Growth is rarely even across time and industries, but the stock market often has a hard time with conflicting evidence. For Mr. Market, the economy has to be either booming or falling apart completely. Mild winter weather has clearly been a factor in the last few months, but unusual weather often merely shifts growth from one quarter to another. Last year, the economic gears were starting to catch, but gasoline rose from around $3 per gallon at the beginning of the year to $4 per gallon in early May. Are we in for a repeat?
2012-02-28 ARRA, Three Years On by Scott Brown of Raymond James Equity Research
The American Recovery and Reinvestment Act of 2009 was signed into law on February 17, 2009. Did it help? Yes, but estimates of the impact vary. Before Barack Obama took office, he selected Christina Romer to be the chair of the Council of Economic Advisors. Romer, a professor of economics at the University of California, Berkeley and an expert on the Great Depression, is exactly the sort of person youd want advice from in combating a severe recession. Its long been rumored that Romer had requested a significantly larger stimulus package than the roughly $800 billion in ARRA.
2012-02-22 Where Things Stand by Scott Brown of Raymond James Equity Research
The economy continues to operate far below its potential, which means that an extended period of above-trend growth is needed to mop up current slack. Real GDP growth has long trended about 3% per year. This trend is not the same a potential output. In fact, potential output should be below this trend partly due to the aging of the population. However, those arguing that the housing sector has either permanently reduced potential output or overstated potential output prior to the housing correction are off base. We have a lot of ground to make up, especially in the job market.
2012-02-14 The Federal Budget Outlook by Scott Brown of Raymond James Equity Research
The White Houses Office of Management and Budget will release its revised budget outlook this week. That outlook is expected to show a substantial reduction in the 10-year budget deficit, largely due to the required discretionary spending cuts specified in last years Budget Control Act. For the most part, the legislative battle ahead is not whether to cut, but what to cut. More importantly, tax policy, and in turn, the economic outlook, remains a major uncertainty into 2013.
2012-02-07 The January Jobs Report by Scott Brown of Raymond James Equity Research
Make no mistake. The labor market is improving and theres hope for strong job growth this spring. Moreover, average weekly hours have been trending higher, consistent with an expected increase in new hiring in the months ahead. However, not to harsh your mellow, the January employment data were not as rosy as the headline figures would seem to suggest. These data should not change the picture for the Fed. We still have a lot of ground to make up in the labor market.
2012-01-31 The Fed: Dual Targets Or Dueling Targets? by Scott Brown of Raymond James Equity Research
The Fed has adopted an inflation target, as many other central banks have done long ago. However, the Fed retained its dual mandate, with a soft employment target. How will the two goals be achieved and what happens when they conflict? The Fed says is will use a balanced approach. The Fed lengthened the period for which it expects to keep short-term interest rates at exceptionally low levels. However, the five Fed governors and 12 district bank presidents have differing opinions on when the Fed should start raising short-term interest rates and what the rate target will be at the end of 2014.
2012-01-24 The Inflation Outlook by Scott Brown of Raymond James Equity Research
When the Fed embarked on its second round of asset purchases in 2010, officials were worried about the threat of deflation. The 2011 inflation results suggest that the Fed was successful in warding off deflation, but inflation did not surge as some had feared. Despite the moderate inflation results for 2011, some still believe the Feds accommodative policy will lead to a substantial increase in inflation sooner or later. However, were still a long way from a full economic recovery, and there will be plenty of time to unwind the Feds accommodation when appropriate.
2012-01-17 Fed Policy Outlook More Communication Is Good by Scott Brown of Raymond James Equity Research
The Federal Open Market meets next week to set monetary policy. Its widely expected that short-term interest rates will remain unchanged and that (for the time being) there wont be another round of asset purchases (QE3). The Fed will begin publishing the range of senior Fed officials projections of the appropriate federal funds rate target (for the fourth quarter of this year and the next few years). There are more benefits than risks in making these projections public.
2012-01-09 Steady As She Goes Into Early 2012 by Scott Brown of Raymond James Equity Research
Much like the situation last year, the economy appears to be poised for improvement. Again, there are still some headwinds and a number of downside risks to the growth outlook and much will depend on developments in Europe and in the oil market over the next few months. Theres still some prospect for further accommodation from the Federal Reserve we may see another round of asset purchases announced later this month.
2011-12-20 Some Questions For 2012 And Beyond by Scott Brown of Raymond James Equity Research
The U.S. economy is expected to advance at a moderate rate in 2012, but Europe presents a key downside risk to the outlook. That aside, there are longer-term uncertainties about potential growth over the next several years. Next year will be an election year and income inequality could be an issue. Like any good horror movie, the European crisis has carried an ongoing feeling of dread. The potential for a catastrophic collapse is palpable. For the U.S., a meltdown would hit exports, but the bigger fear is possible financial market disruptions.
2011-12-13 Fed Policy Outlook Changes On The Way? by Scott Brown of Raymond James Equity Research
The Federal Open Market Committee will meet on Tuesday to set monetary policy. The Fed is widely expected to leave short-term interest rates unchanged and the wording of the economic assessment should be largely the same as in the previous statement. However, we could see another round of asset purchases or some changes to the Feds communications. The inflation outlook is moderate. It doesnt look like well see substantially higher inflation in 2012, but (barring a large negative shock to growth) were unlikely to see a threat of deflation.
2011-12-05 Treading Water by Scott Brown of Raymond James Equity Research
The good news is that the economy does not appear to be contracting. The bad news is that its still not growing fast enough to make up much of the ground lost during the downturn. The unemployment rate fell to 8.6% in November, from 9.0% in October and 9.8% a year ago. However, more than half of that drop was due to a decrease in labor force participation. The data suggest an economy that is growing just enough to absorb the growth in the working-age population.
2011-11-22 Debt Story by Scott Brown of Raymond James Equity Research
Loan growth plays a key role in economic expansion. Simply put: no loan growth, no economic growth. However, theres a downside. Debt doesnt matter until it does. Debt has played a key part in the economic downturn and in the gradual recovery. Europes sovereign debt crisis has continued to escalate, with no easy way out. In the U.S., the government has borrowed more, but the markets have not punished it for doing so. Theres no sign that that is going to change anytime soon.
2011-11-14 Super Committee To The Rescue? by Scott Brown of Raymond James Equity Research
Hows it going? Not good. The nonpartisan Congressional Budget Office has to score the super committees recommendations and return its analysis to the committee by November 21, which would allow the committee two days to make changes before its final recommendations. The CBO was supposed to receive the bulk of the recommendations by late October or early November. Things are a little behind schedule. The committee seemed doomed to fail from its inception
2011-11-01 Feeling Better? by Scott Brown of Raymond James Equity Research
The European debt agreement puts the concerns about Greece off to the side for the present. However, its unclear exactly how much the European stabilization fund will be increased and how it will be financed. The agreement doesnt do much to head off potential problems for Italy and Spain. The government debt situation in the UK is worse than in Spain and Italy but borrowing costs for Spain and Italy are much higher. Thats because Spain and Italy do not have their own monetary policy. There is inherent fragility in the monetary union. TheECB and the EU will have to address this at some point.
2011-10-25 Fed Outlook More Asset Purchases? by Scott Brown of Raymond James Equity Research
The Federal Open Market Committee, the Feds policymaking arm, will meet on November 2-3. Clearly, there are some differences of opinion among senior Fed officials regarding the appropriate path for monetary policy. However, the dissenters (those wanting to do less) are a small minority. The FOMC will come together with a somewhat less troublesome near-term economic outlook (no recession in the near term), but there are more concerns about growth in 2012.
2011-10-18 No Recession, At Least For Now by Scott Brown of Raymond James Equity Research
Recent data have helped reduce fears that the U.S. economy is already in a recession. However, there is still a lot of uncertainty about next year. Some of that uncertainty (gasoline prices) is beyond our control, but much is about policy both fiscal policy in the U.S. and efforts to right the ship in Europe. The outlook for growth in the remainder of this year appears a bit brighter than it did a couple of weeks ago. However, the 2012 economic outlook is still troublesome.
2011-10-11 The September Jobs Report Not Bad, Not Good by Scott Brown of Raymond James Equity Research
The White Houses jobs package would aid the job market to some extent, but legislation has become bogged down in Congress and thats not all due to opposition from the Republicans. To pay for the jobs package, the White House has proposed reducing tax breaks and subsidies, the removal of which is opposed by members of both parties. So, theres not a lot of hope that well get a major jobs bill. That leaves Fed policy as the only game in town. Unfortunately, as Bernanke testified last week, theres only so much that the Fed can do.
2011-10-04 The Economic Outlook In A Holding Pattern by Scott Brown of Raymond James Equity Research
The consumer outlook is muddled. Spending growth hasnt been especially strong, but its not falling off a cliff. Real income growth has slowed, but lower gasoline prices may provide some relief over the next several months. Corporate profits and cash flows are strong, helping to support business fixed investment. However, were still facing a significant drag from fiscal policy and Europe is a major question mark. The anxieties of September are likely to continue into October and beyond.
2011-09-26 Twist And Pout by Scott Brown of Raymond James Equity Research
As expected, the FOMC opted for Operation Twist, and will sell short-term Treasuries out of its portfolio and buy longer-term Treasuries. However, the size of the Feds operation was larger than anticipated and more out-the-curve, sending yields on long-term Treasuries tumbling sharply. In addition, to further aid the housing market, the FOMC voted to recycle is maturing mortgage-backed securities and agency debt back into mortgage-backed securities. So whats not to like? By themselves, the Feds latest moves arent going to lead to strong GDP growth anytime soon, but they should help.
2011-09-20 Fed Policy Outlook Something, But What? by Scott Brown of Raymond James Equity Research
Fed policymakers meet this week at a critical juncture. Growth has slowed in the last few months no recession, but well below potential, leading to some softening in the labor market. Consumer price inflation has picked up in 2011 and August CPI figures were on the high side of expectations. In their public comments, Fed officials have been divided on the potential benefits and risks of additional policy accommodation. However, some action is expected on Wednesday. The only question is which tool the Fed will pull out of its kit.
2011-09-13 Extraordinary Measures Needed by Scott Brown of Raymond James Equity Research
While Fed officials appear to be divided the hawks are a minority. More monetary stimulus is coming but its unclear whether this will include another round of asset purchases or a lengthening of maturities in the Feds asset holdings. Looking at Europe, its difficult to quantify the probability of a banking crisis, the exit of one or more countries from the monetary union, or a complete breakup. The political environment is difficult in a different sort of way than in the U.S. Fiscal and monetary policy efforts in the U.S. may not lead to a strong recovery anytime soon, but at least we try.
2011-08-31 Policy Conundrums by Scott Brown of Raymond James Equity Research
In a week or so, President Obama will announce proposals to boost job growth and shore up the housing sector. These efforts, even if they could make it through Congress, would help somewhat, but wouldnt boost economic growth substantially. Bernankes Jackson Hole speech showed that the Fed chairman remains optimistic about the long-term prospects for the economy. Current difficulties are unlikely to affect the long-term growth potential, but he stressed that is if our country takes the necessary steps to secure that outcome.
2011-08-23 Whats A Central Banker To Do? by Scott Brown of Raymond James Equity Research
The Kansas City Feds annual monetary policy symposium in Jackson Hole, Wyoming is attended by central bankers from around the world. For U.S. investors, the focus will be on Bernankes speech on Friday 8/26. Many market participants are hoping for a repeat of last year, when the Fed Chairman signaled the possibility of a second round of asset purchases QE2. However, while the August 9 Federal Open Market Committee indicated that its members were discussing a range of policy tools to promote growth, the FOMC is unlikely to pull the trigger on another round of asset purchases anytime soon.
2011-08-10 Crisis Averted, A Re-focusing On Prior Worries by Scott Brown of Raymond James Equity Research
Fiscal policy in the U.S. and abroad is going the wrong way, weakening the prospects for global growth. What about monetary policy? In the U.S., Fed policymakers meet this week. As Chairman Bernanke testified in mid-July, even with the federal funds rate close to zero, we have a number of ways in which we could act to ease financial conditions further. The Fed could provide more explicit guidance on how long short-term interest rate would remain low and how long the balance sheet would be maintained at its current elevated level.
2011-08-03 The Advance 2Q11 GDP Report Feeling Nauseous by Scott Brown of Raymond James Equity Research
The advance estimate of second quarter GDP growth came in somewhat lower than expected. Some of the second quarter's softness was transitory, but is there a danger of hitting stall speed? Will the debt ceiling crisis contribute to weaker growth? Real GDP growth rose at a 1.3% annual rate in the advance estimate for 2Q11. It's important to remember that these are preliminary figures. However, we don't expect the story to change very much. Annual benchmark revisions delivered downward adjustments to growth to 4Q10 and 1Q11 GDP. The revised 1Q11 GDP figure looked like a misprint. No such luck.
2011-07-18 The Debt Ceiling Crisis by Scott Brown of Raymond James Equity Research
Some think that by not raising the debt ceiling the government will be prevented from spending more than it takes in. Thats a failure to understand the budget process. The money has been allocated. If the debt ceiling is not raised, interest payments would likely be made, but Medicare payments, Social Security payments, and veterans benefits may be delayed. Government workers may be sent home, but eventually paid (whether they work or not). Government contractors may not be paid on time. If this sounds like madness, well, as Forest Gumps momma said, stupid is as stupid does.
2011-07-12 The Employment Outlook by Scott Brown of Raymond James Equity Research
The June Employment Report, while disappointing, doesnt really tell us much about what to expect in the second half of the year. Its possible that seasonal job gains were shifted a bit forward this year-or perhaps higher gas prices are extracting a greater-than-expected toll in spending-or perhaps the job numbers will be revised. The June jobs data fit into the overall pattern of a slow patch. Thats also likely to be apparent in the advance GDP report released later this month. However the economy appears to have enough positive momentum to continue to grow in the second half of the year
2011-07-06 What Sort Of Rebound In 2H11? by Scott Brown of Raymond James Equity Research
The recent data have been mixed, consistent with a slower rate of economic growth in the near term. The economy faced a number of headwinds in the first half of the year. Some of those headwinds are likely to be temporary. Others will linger. Growth should pick up in the second half of the year, but the pace seems unlikely to be especially strong. The markets showed little reaction to the May figures on personal income and spending. Real consumer spending appears to be on track for an annual rate of growth of 1% or less in 2Q11.
2011-06-28 The Fed Outlook: Uncertainty and Reluctance by Scott Brown of Raymond James Equity Research
The Federal Open Market Committee policy statement and Chairman Bernankes post-meeting press conference held few surprises. Monetary policy is still accommodativeand still on hold. Theres also apparently little will at the Fed to do more to help the recovery along. Fortunately for the Fed and the consumer, we can catch a break if oil prices continue to decline. The Fed lowered its GDP forecast for this year to a range of 2.7%-2.9%. In January, the Fed was expecting 3.4% to 3.9%. Growth has slowed due to temporary factors, still the Fed lowered it's outlook.
2011-06-21 What Can The Fed Do? by Scott Brown of Raymond James Equity Research
Senior Fed officials meet next week amid what is widely seen as a slow patch in economic growth. A key question for investors, as well as for monetary policymakers, is whether this slowing will be temporary. Most likely, growth should pick up in the second half of the year. However, there are downside risks in the near term. Moreover, monetary policy appears to be handcuffed and fiscal policy is set to go in the wrong direction. The wide range of data have been consistent with a near-term slowing in economic activity.
2011-06-13 The Policy Stakes Are Raised by Scott Brown of Raymond James Equity Research
Its well known that recessions that are caused by financial crises are much more severe, are longer lasting, and are followed by gradual recoveries. Another lesson from history is that during these recoveries, policies are often tightened too soon. In 1937, efforts to balance the budget led to a recession within the Great Depression. Its said that those who dont remember the past are doomed to repeat it. Following the financial crisis, consumers and nonfinancial businesses deleveraged. However, that paydown in debt pales in comparison to the deleveraging seen in the financial sector.
2011-06-06 A Slow Patch by Scott Brown of Raymond James Equity Research
The recent economic data have been disappointing, but hardly a disaster. The broad range of indicators suggest a slowing in the pace of growth not a contraction. One month does not a trend make, but the data have generated some anxieties about whether the current slow patch could be a lot longer lasting or turn into something more severe. We started this year with a good deal of positive momentum. Inflation-adjusted consumer spending rose at a 4.0% annual rate in 4Q10. The economy still faced a number of headwinds. However, the positive momentum was expected to offset these headwinds.
2011-06-01 The Growth Outlook: Long and Short by Scott Brown of Raymond James Equity Research
For decades, GDP growth has averaged a little over 3% per year, and most of the time, the level of GDP has been within 3% of this long-term trend. Theres some debate about whether this trend will continue. If it does, then we may see much stronger growth in the next several years (as we catch up). If not, then we have something to worry about. Its unclear exactly why 3% should be the norm. GDP is simply the amount of labor input times the productivity of labor. Growth in labor input and growth in productivity vary over time. Theres no special reason that they should sum to 3%.
2011-05-23 The Federal Debt Ceiling by Scott Brown of Raymond James Equity Research
Last week, the federal government breached the current debt ceiling, $14.284 trillion. The Treasury had begun taking evasive action the week before, but warned that it couldnt do so beyond early August and Congress would have to raise the debt ceiling before then. Will the government default? The strong betting is that it wont. The bond market doesnt seem to be worried. However, the increased rhetoric could have a bigger impact on the equity and currency markets. Why does the government have a debt ceiling? For the most part, its an historical artifact.
2011-05-17 Inflation What Me Worry? by Scott Brown of Raymond James Equity Research
Despite rampant hysterics about "runaway inflation" in recent months, core inflation has remained at a moderate level, inflation expectations remain well-anchored, and there is little inflation pressure coming through the labor market. Is it time to declare victory? Not just yet, but the inflation outlook still does not appear to be particularly troublesome.
2011-05-09 Good News, Bad News, But Mostly Good by Scott Brown of Raymond James Equity Research
The April Employment Report was better than expected, reflecting a strong trend in private-sector job growth. However, the economy continues to face a number of headwinds, which should restrain the pace of growth in the near term. The establishment survey data typically show large unadjusted increases in payrolls each spring. Prior to seasonal adjustment, the private sector added 1,159,000 jobs last month, the largest April gain since 2005. Last year, the rate of job destruction trended to very low levels. This year, new hiring finally appears to be picking up.
2011-05-03 Bernankes World And Ours Too by Scott Brown of Raymond James Equity Research
There were no fireworks at Bernankes first post-FOMC press briefing. All five Fed governors and 12 district bank presidents contributed revised forecasts of growth, unemployment, and inflation last week. The central tendency forecasts exclude the three highest and three lowest projections. Fed officials lowered their outlook for GDP growth this year, reflecting a slower than anticipated rate of growth in the first quarter. Unemployment is expected to decline gradually. Inflation will be higher this year, but the Fed continues to expect that commodity price pressures will be transitory.
2011-04-12 Seizing The Narrative by Scott Brown of Raymond James Equity Research
Later this month, Bernanke will hold his first post-FOMC press conference. The press conference is meant to present the Federal Open Market Committee's current economic projections and to provide additional context for the FOMC's policy decisions. The real goal is to reclaim the narrative. The Fed was caught off guard by the criticism and second guessing it received in 2010. These press conferences should help clear things up regarding monetary policy not that well receive clear signals of future Fed policy moves rather, well get information on how the Fed will decide what to do.
2011-04-05 Good, But Its Not Enough by Scott Brown of Raymond James Equity Research
Happy days are here again. The job market is now adding jobs at a pace stronger than population growth however, not by much. Its been clear for some time that large-scale job losses are far behind us. The problem in the labor market has been weakness in hiring. Small and medium-size firms have begun to add jobs in recent months. Yet, with so many jobs lost in the downturn, there is a huge amount of ground to make up. The private sector shed a net 8.8 million jobs during the Great Recession (starting in December 2007 and bottoming in February 2010).
2011-03-28 Will The Job Market Rev Up? by Scott Brown of Raymond James Equity Research
Over the last year, the level of job destruction has trended very low. The problem has been a lack of job creation. Normally we look to small, newer firms to account for the bulk of new hiring in an expansion. However, small firms have been constrained by a variety of forces, the most significant being tight credit. That may be starting to change. The job market has a strong seasonal component. The next couple of months will be key to the outlook for jobs and the overall economy.
2011-03-23 As The World Turns by Scott Brown of Raymond James Equity Research
Japan’s earthquake/tsunami/nuclear tragedy and heightened tensions in the Middle East and North Africa have led to some concerns about the global economy, and in turn, the strength of the U.S. recovery. A weaker Japanese economy and supply-chain disruptions are detrimental to U.S. growth, but moderately and only short-term in nature. Developments in the Middle East and North Africa are more uncertain, but are likely to keep oil prices relatively elevated. None of this is expected to jeopardize the U.S. recovery, but it could keep growth from being as strong as was hoped for just a month ago.
2011-03-11 Inflation Expectations, Budget Decisions by Scott Brown of Raymond James Equity Research
Many investors fear that the recent surge in oil prices will lead to a significant uptrend in the underlying inflation rate. However, that depends on whether inflation expectations become unanchored. There's little evidence of that so far. On the deficit, lawmakers are sharply divided on the appropriate path for government spending. However, trimming nondefense discretionary spending is not going to solve the problem.
2011-03-04 The Job Market, Oil Prices, and the Fed by Scott Brown of Raymond James Equity Research
Higher oil prices have raised new concerns about the strength of the economic recovery. If sustained, the rise in gasoline prices will restrain the pace of economic growth noticeably, but does not appear to be large enough (so far) to derail the expansion. Meanwhile, a federal government shutdown looms as lawmakers bicker over the future path of expenditures. Austerity at all levels of government is well-intentioned, but is not advisable at this point in the economic recovery.
2011-02-25 Oil And Vinegar by Scott Brown of Raymond James Equity Research
Higher oil prices have raised new concerns about the strength of the economic recovery. If sustained, the rise in gasoline prices will restrain the pace of economic growth noticeably, but does not appear to be large enough (so far) to derail the expansion. Meanwhile, a federal government shutdown looms as lawmakers bicker over the future path of expenditures. Austerity at all levels of government is well-intentioned, but is not advisable at this point in the economic recovery.
2011-02-22 The Monetary Policy Outlook by Scott Brown of Raymond James Equity Research
Fed Chairman Bernanke is set to deliver his monetary policy testimony next week. There’s not much suspense. The release of the FOMC minutes from the January 25-26 policy meeting included senior Fed officials’ revised projections of growth, unemployment, and inflation, as well as a thorough discussion of the uncertainties. No change in monetary policy is expected for some time. However, the Fed will have to consider when to lose the “extended period” language and eventually move to a more normal policy position. That doesn’t look likely for 2011.
2011-02-16 Inflation Anxiety – Misplaced? by Scott Brown of Raymond James Equity Research
Commodity prices have moved sharply higher over the last several months, leading to increased worries that the Fed is “behind the curve,” “debasing the currency,” or “monetizing the debt.” Such fears are based on a poor understanding of the inflation process and how the Fed conducts monetary policy.
2011-02-08 It Doesn’t Take A Weatherman ... by Scott Brown of Raymond James Equity Research
You don’t need a weatherman to know which way the economic wind blows. Lower payroll taxes will boost disposable income in 1Q11, supporting consumer spending growth. Production should advance in response to lean inventories. The pace of the recovery should pick up, but it’s still unlikely to lead to dramatic improvement in the labor market this year.
2011-02-01 4Q10 GDP: Back To The Drawing Board by Scott Brown of Raymond James Equity Research
The advance estimate of fourth quarter GDP growth was relatively close to expectations. However, two major components, net exports and the change in inventories, were much larger than anticipated (net exports added to GDP, slower inventory accumulation subtracted). Underlying domestic demand was roughly as anticipated, but the inventory story (assuming that it holds up in revisions) implies stronger growth in the near term. Instead of GDP growth of 3.0% to 3.5% in 2011 (4Q-over-4Q), it now appears more like 3.5% to 4.0%
2011-01-25 Fed Policy Outlook: Waiting It Out by Scott Brown of Raymond James Equity Research
The economic outlook largely remains a good news/bad news story. The good news if that the recovery is continuing, even gathering a little more steam. The bad news is that the pace of growth is insufficient to push the unemployment rate down significantly. The Fed has a dual mandate: stable prices and maximum sustainable employment. While these goals may be seen to be in conflict from time to time, Fed officials (and most economists) believe that economic growth can be maximized over the long run by keeping inflation low.
2011-01-13 The December Labor Market Data by Scott Brown of Raymond James Equity Research
The ADP estimate of private-sector payrolls rose sharply in December (+297,000), leading many economists to revise their forecasts of the official BLS payroll figure higher. Instead, the BLS data disappointed (+103,000). The unemployment rate fell sharply, generating some confusion regarding the difference between the household survey and the establishment survey. In the end, nothing much has changed in the job market outlook. Economic growth is expected to continue in 2011, just not fast enough to reduce the unemployment rate more significantly.
2011-01-04 Job Growth – The Key To The 2011 Outlook by Scott Brown of Raymond James Equity Research
While the outlook for economic growth has improved, a number of headwinds remain in the near term. Lingering problems in the housing sector, tighter state and local government budgets, and the decrease in the federal fiscal stimulus will restrain overall economic growth. In addition, higher gasoline prices may dampen the pace of consumer spending growth. However, stronger job growth would help counter these pressures, providing fundamental support for the housing market and helping to lift state and local government tax receipts.
2010-12-20 What To Watch For In Early 2011 by Scott Brown of Raymond James Equity Research
One of the key themes for investors in early 2011 is likely to be a shifting economic picture. The tax cut package has taken the double-dip recession scenario off the table, but the data for the next few months are likely to be mixed, suggesting strong growth in one set of figures and more moderate growth in another. That back and forth should create some opportunities for investors.
2010-12-13 Opposing Forces by Scott Brown of Raymond James Equity Research
Economic recoveries are never straight-line expansions. They tend to be uneven across time and across sectors. That means a continuation of mixed economic figures over the near term and further volatility in the financial markets as investors attempt to gauge the underlying strength. Volatility creates opportunities.
2010-12-06 Labor Market Update: Still Struggling by Scott Brown of Raymond James Equity Research
The November Employment Report was disappointing. The holiday shopping season apparently got off to a strong start, but that failed to translate into a corresponding jump in retail employment (at least, on a seasonally adjusted basis). Manufacturing jobs were soft. State and local government continued to shed jobs, reflecting budget strains. What’s in store for 2011? The November jobs data aren’t encouraging, but the recovery is likely to remain on track.
2010-11-23 The Fed Under Attack by Scott Brown of Raymond James Equity Research
Despite hopes that the anti-QE rhetoric would die down, the noise continued last week, and unfortunately, become more political. One of the key aspects of the Fed is its independence. The Fed is answerable to Congress, and ultimately, to the American people. However, it is not controlled by Congress - nor would we want it to be controlled by Congress. Attacks on the Fed and its latest round of asset purchases aren't helping
2010-11-15 Lighten Up, Francis by Scott Brown of Raymond James Equity Research
The increase in the deficit over the last couple of years is due largely to the recession and efforts to minimize the impact of the economic downturn. Quantitative easing isn’t some hair-brained scheme, but is simply another form of monetary policy accommodation. The dollar is down, but not out of line with its longer-term trend. Stop the hysterics, please.
2010-11-09 The Fed's Asset Purchases by Scott Brown of Raymond James Equity Research
As expected, the Federal Open Market Committee has embarked on another round of planned asset purchases. There has been much criticism of the move in the financial press. Certainly, there are risks in the Fed’s strategy. However, it’s hardly reckless or ill-advised.
2010-11-02 More of the Same by Scott Brown of Raymond James Equity Research
Real GDP rose about as expected in the third quarter. Details were mixed, but remained consistent with the view that the pace of growth, while still positive, is subpar - far below a rate that would be associated with a significant reduction in unemployment. What to expect from here? More of the same, most likely. The economy continues to face a number of serious headwinds, but the recovery is likely to remain on track.
2010-10-25 Key Dates Approaching by Scott Brown of Raymond James Equity Research
The first week of November looms large for the markets. The November 2 midterm elections are expected to result in a power shift on Capitol Hill - but how much will actually change? The Fed's November 3 monetary policy decision has important implications for interest rates, the dollar, and the economy in general. The October Employment Report (due November 5) will help shape the near-term economic outlook and set expectations for future Fed policy moves.
2010-10-18 The Fed, Inflation Expectations, and the Dollar by Scott Brown of Raymond James Equity Research
Will they or won't they? The September 21 policy meeting minutes and comments by senior Fed officials suggest that the Federal Open Market Committee is leaning toward further monetary accommodation (specifically, additional purchases of long-term Treasury securities). However, it's not entirely settled. There are excellent arguments for doing more, but also a number of reasons for the Fed to be cautious. Most likely, the FOMC will pull the trigger on November 3. In the meantime, the uncertainty has added to the volatility in the financial markets.
2010-10-11 The Job Market - More of the Same... by Scott Brown of Raymond James Equity Research
The September employment report was a mixed bag. Growth in private-sector payrolls was not far from expectations and the August increase was revised higher. However, job growth is far below what we'd like to see. The unemployment rate held steady, but there was a large jump in the number of people working part time who would rather have full-time employment. There's nothing in the data to suggest a double-dip recession. However, more quantitative easing is on the way.
2010-10-05 QE II Set To Sail, But How Soon? by Scott Brown of Raymond James Equity Research
In its September 21 policy statement, the Federal Open Market Committee indicated that it was 'prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.' The key part of that phrase is 'if needed.' Growth and inflation are both too low for the Fed's comfort, but are they low enough to force the Fed's hand? Most officials appear to be leaning in the direction of further quantitative easing, but it's unclear when it will happen.
2010-09-20 A Long Recovery Road by Scott Brown of Raymond James Equity Research
It's well known that recessions caused by financial crises tend to be more severe and longer-lasting, and the recovery process is typically lengthy. In a 'typical' recession, consumers postpone purchases of homes and motor vehicles. As the economy recovers, you get a slingshot effect as that pent-up demand comes back into play. However, that's not going to happen this time. The key element in this recovery is time. Fiscal and monetary policy can help limit the downside, but there's no miracle cure. Ultimately, the recovery is dependent on the private sector.
2010-09-13 The Fed Outlook: No Good Choices by Scott Brown of Raymond James Equity Research
In his semiannual monetary policy testimony to Congress in July, Federal Reserve Chairman Ben Bernanke said that the Fed 'remains prepared to take further policy actions as needed.' In his Jackson Hole speech on August 27, he outlined possible steps the Fed could take, including expanding its holdings of longer-term securities, but cautioned that 'the expected benefits of additional stimulus from further expanding the Fed's balance sheet would have to be weighed against potential risks and costs.'
2010-09-07 August Jobs Report – No Sign of a Double Dip by Scott Brown of Raymond James Equity Research
As with most of the recent data reports, the August employment report was consistent with a near-term slow patch in economic growth, but not a double-dip. Private-sector growth in nonfarm payrolls remained positive, and figures for the previous two months were revised higher. However, while the job numbers were better than expected, the pace is nowhere near where we'd like it to be.
2010-08-31 Looking Further Into The Job Market by Scott Brown of Raymond James Equity Research
The job market has been a critical focus in the economic recovery. People tend to concentrate on net employment figures (overall payroll gains or losses). However, there's a lot going on under the surface. The underlying details hold the key to why the economic recovery is going to be gradual.
2010-08-17 How Much of a Threat is Deflation? by Scott Brown of Raymond James Equity Research
The Federal Open Market Committee voted to reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in long-term Treasury securities – which will keep the level of its security holdings steady over time. By itself, the Fed's decision is not a major move. Long-term interest rates were already very low. The move signals, however, that the Fed could do more if needed. Outright deflation is not likely, but it could result from a more substantial downturn in the overall economy. The Fed's latest move should prevent the economy from weakening a lot more.
2010-08-09 The Fed Policy Outlook - Further Efforts? by Scott Brown of Raymond James Equity Research
The economic data of recent weeks has confirmed that the recovery has hit a soft patch. Overall growth still appears to be positive, but the pace has slowed. Downside risks to growth have increased. Meanwhile, the Fed has spent much of the last several months working on its endgame. One part of that, reducing its holdings of mortgage-backed securities, could be accomplished gradually over time, by simply letting securities mature. The Fed may decide this week to use these proceeds to buy more mortgage-backed securities. This would be a small step, but it would be symbolically important.
2010-08-03 Clear as Mud by Scott Brown of Raymond James Equity Research
The details of the GDP report suggested what many had already suspected – that the recovery has slowed. The personal savings rate rose in 2Q10, consistent with near-term restraint in consumer spending growth. Inventories rose at an even faster rate in the second quarter, and while these data will be revised, the pace is unsustainable, consistent with a near-term moderation in manufacturing. There's nothing in the report to suggest a double-dip, however, just a near-term slowdown in the pace of growth.
2010-07-20 The Fed's View by Scott Brown of Raymond James Equity Research
Federal Reserve Chairman Ben Bernanke will testify on the Fed's semi-annual Monetary Policy Report to Congress this week. This is usually a big deal for the markets. However, there's much less suspense this time around. The Fed's views were already included in the minutes of the June 22-23 policy meeting. Fed officials lowered their projections of near-term growth and inflation, and about half saw the risks to their growth outlooks as tilted to the downside. However, policymakers felt that the shift in the near-term outlook did not warrant stimulus.
2010-07-13 Animal Spirits and the Economic Outlook II by Scott Brown of Raymond James Equity Research
The U.S. economic recovery appears to have entered a moderation phase, where growth is likely to remain positive in the near term but may not be as strong as was hoped for a few months ago. Recoveries from financial crises take time. This was never expected to be a sharp recovery and improvement in the labor market was projected to be very gradual. Recoveries are never smooth, but it seems clear that consumer and business psychology will play important roles in the near term.
2010-07-06 Animal Spirits and the Economic Outlook by Scott Brown of Raymond James Equity Research
Near-term economic expectations have softened over the last few months and the risks to the growth outlook have become tilted more to the downside. There's nothing to suggest that a double-dip recession is imminent or even likely over the next few quarters. However, the one element that's hard to get a handle on is psychology. Fears of a double-dip could become self-fulfilling if enough firms stop hiring.
2010-06-21 Excessive Fiscal Tightening – A Major Worry by Scott Brown of Raymond James Equity Research
Studies of past recessions show that downturns associated with financial crises tend to be more severe and longer-lasting, and have gradual recoveries. Studies also point to a common error made in these recoveries - that is, policy is often tightened too soon. Chairman Bernanke is a student of the Great Depression, so the Federal Reserve seems unlikely to make that mistake. However, there is a growing public mood to do 'something' about the federal budget deficit. While well-intentioned, excessive fiscal tightening is bad economics.
2010-06-14 Inflation Expectations by Scott Brown of Raymond James Equity Research
The Federal Open Market Committee's expectation that economic conditions are likely to warrant exceptionally low levels of the federal funds rate "for an extended period" is conditional on three things: low rates of resource utilization, subdued inflation trends and stable inflation expectations. Economic growth is not expected to be strong enough to push the unemployment rate down significantly, the trend in inflation is likely to remain benign, and despite some worries about accommodative Fed policy and large federal budget deficits, inflation expectations are also likely to remain low.
2010-05-28 The Recovery Marches On... by Scott Brown of Raymond James Equity Research
Real GDP rose at a 3.0% annual rate in the revised estimate for Q1, down from 3.2% in the advance estimate, although the story didn't change much. This was the third consecutive quarterly increase in real GDP. More importantly, the economy appears to be transitioning to a more sustainable recovery, less reliant on the shift in inventories and the government's fiscal stimulus, and supported more by consumer and business demand. Job growth, a key element in a sustainable economic recovery, has returned. Unfortunately, the economy still faces a number of headwinds in the near term.
