As I predicted a couple of weeks ago, October Leading Economic Indicators (and revisions to September) came in at +0.3, the seventh positive reading in a row. This suggests that economic growth will continue through this quarter and the first quarter of 2010 as well.
To repeat what I said then: typically, even in the last two "jobless recoveries", jobs began to be added to the economy when the YoY LEI was up +5% or better. This month will replace the awful -1% of October 2008, meaning that for the last 7 months, the LEI is up 5.9%, and up 4.2% YoY. If the LEI simply print flat for November and December, the YoY growth will be +5.0%, consistent with jobs being added in December or January.
In view of this week's poor housing permits number, that should prove interesting.
'Keynes on Laissez-Faire'
47 minutes ago
9 comments:
But remember, the LEI's are being artificially inflated by the fed's ZIRP. I would back out at least half of the yield curve factor to get a more accurate reading on the LEI's.
SOz:
If memory serves correctly, the prior iteration of the LEI required the yield curve to be sloped positively by at least ~1% to be a positive contribuiton to the LEI. So it would still be a positive number even under that criteria.
Also, now that we are going to get inflationary rather than deflationary YoY readings, the yield curve returns to its more normal predictive power.
Bottom line: the LEI may have been enhanced by the ZIRP earlier this year, but they would still be positive by a substantial margin.
New Deal democrat,
Been following your blog for the past couple of months and really appreciate all the info. (Found out about your site from DailyKos). I have one itty bitty request.. I have an economics degree and currently work as a market analyst at a forex broker, but I feel like I do not have a very good understanding of the "yield curve".. Is there a book or two you can recommend that might wrap my head around the bond market?
n1K:
A pretty good explanation and examplar graph of the yield curve can be found at Answers.com.
You can see how the yield curve has moved over the last 8-10 years at the dynamic yield curve on stockcharts.com.
You can also pull up graphs for the various maturities of treasury bills and bonds over time at the St. Louis FRED site.
Hope that helps.
Thanks for the good links and ill read up on the different articles on answers.com.
I guess what Im looking for, and only if you can think of some offhand, a book that explains the yield curve from a little bit of a historical context and how its behavior impacts the financial markets and what it says about the economy, hopefully in a more layman's approach. I can (and will) obviously research this myself, just figured you might have a title or two you recommend to people searching for such a thing..
Thanks again,
Good bond market stuff --
Anything by Frank Fabozzi. It's very wonkish, but sme of the best stuff out there.
Controlling and Managing Interest Rate Risk by Cornyn
Good bond market stuff --
Anything by Frank Fabozzi. It's very wonkish, but sme of the best stuff out there.
Controlling and Managing Interest Rate Risk by Cornyn
great!,
just what I was looking for., Ill start with Cornyn and Fabozzi.,
appreciate it, and will use this comment section more often for actual economics questions =-)
Jobless claims will be 484,000 next week,,,,
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