Mark Vitner
Mark Vitner
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We're just now realizing how badly off the economy was in the second quarter, ... The wider trade gap, along with the weakness we saw in the business inventory numbers that came out this week and weaker construction spending, will probably result in a second-quarter revised GDP number that will be zero or even slightly negative. It will be an eye-opening number, but it's no more worrisome than what we've seen.
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The Miami economy is the strongest it has been in my memory as a professional economist, which goes back 22 years. International trade is booming. Population growth is strong. And all that growth is creating tremendous demand for services.
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The upward revision results from the slightly lower than previously estimated trade deficit. We've already seen in July data that trade deficit has worsened in the third quarter.
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Demand in the U.S. economy is reasonably strong and retailers are probably optimistic about the holiday shopping season so they are starting to order from abroad now. The trade deficit is going to take some time to turn around. It may not happen until next year.
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Exports are off in virtually every category. I don't see much near-term improvement for the trade deficit. The trade deficit will probably shave about 0.5 percent off of third quarter Gross Domestic Product.
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We're going to have plenty of weak economic reports over the coming months. If they respond to every one, they'll get down to zero percent interest rates pretty damn quick.
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We're seeing both the quantity and quality of the jobs being created improving.
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There is no operating manual that says what a neutral fed funds rate is, but the Fed knows that it's higher than 3 percent,
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The problem with the November employment numbers is hiring for the holiday season. It's hard to get a gauge of what it's going to be. They do a seasonal adjustment to the number to account for that, but the seasonal adjustment causes wider swings. And this year Thanksgiving came later in the month, so hiring might have started after the November data was collected.
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Overall this year the economy moved past the bursting of the stock market bubble. Tech companies finally started growing again and that's really benefited the Triangle.
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Overall supply and demand are moving into much better balance. With that, we're likely to see far less price appreciation than we saw in 2005.
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Recent trends show the price pressures are well contained, with the exception of oil, ... The core CPI rose at just a 1.8 percent annual rate over the past three months, which is slightly below the 1.9 percent year-to-year gain. That means the core CPI is unlikely to accelerate in the next few months and allows the Fed to continue its policy of just gradually pushing up interest rates.
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Markets are rational and forward-looking. However, they can also be wrong.
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It either means the economy is losing momentum or the (Bureau of Labor Statistics) is losing touch what's actually happening in the economy. Right now I don't know what side to come down on. My sense is that job growth has been stronger than reported.