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Business Cycle Indicators as of December 1st

Summary:
With the release of monthly GDP numbers, we have the following picture of some of the key indicators followed by NBER: Figure 1: Nonfarm payroll employment (dark blue), Bloomberg consensus for employment as of 11/25 (light blue square), industrial production (red),  personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (12/1 release), NBER, Bloomberg, and author’s calculations. The picture is consistent with growth at a greatly decelerated rate. The Bloomberg consensus for November employment growth rate is 4.0% (annualized, log terms), compared to the actually recorded October rate

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With the release of monthly GDP numbers, we have the following picture of some of the key indicators followed by NBER:

Business Cycle Indicators as of December 1st

Figure 1: Nonfarm payroll employment (dark blue), Bloomberg consensus for employment as of 11/25 (light blue square), industrial production (red),  personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (12/1 release), NBER, Bloomberg, and author’s calculations.

The picture is consistent with growth at a greatly decelerated rate. The Bloomberg consensus for November employment growth rate is 4.0% (annualized, log terms), compared to the actually recorded October rate of 5.4% (annualized). The November expected growth rate keeps on getting marked down; it was 4.5% about a week ago, that itself down from about 5% from a couple weeks ago. Some high frequency indicators suggest a negative growth rate for the end of November; here’s the Weekly Economic Index (Lewis-Mertens-Stock), released today, applying to the week ending 11/28:

Source: FRED, accessed 12/1/2020.

Personally, given the Covid-19 surge, current administration incompetence/obstructionism, and no imminent deal on another fiscal recovery package, I remain pessimistic on Q4/Q1 growth.

Menzie Chinn
He is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

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