October 11, 2019
U.S. Payrolls Revisions Are More Reliable, Fed Study Shows
“Revisions to monthly U.S. payrolls figures have become more reliable over the short term while those on industrial production have become less so, according to a Federal Reserve study that finds that policy makers could build such evolutions into their real-time assessments of the economy. The volatility of the Labor Department’s revisions to its payrolls count is down by almost by half since the early 1980s — to about 50,000 currently from 100,000, Cleveland Fed research economist Mark Bognanni wrote in a report released Thursday. Thus, the data provide a more reliable read on real-time changes in employment than in the past. Meanwhile, the typical size of revisions to industrial output figures has trended up over time. “Revisions to many monthly economic indicators display systematic behaviors that policy makers could build into their real-time assessments,” Bognanni wrote. “Some indicators’ revision series have varied substantially over time, suggesting that these indicators may now be less useful in real time than they once were.” The analysis coincides with Fed Chairman Jerome Powell’s recent comment that the central bank is using big data to improve its grasp of the job market after some major revisions, citing Labor’s announcement in August that payroll gains over the year through March were likely a half-million smaller than previously reported. “Thus, the currently reported job gains of 157,000 per month on average over the past three months may well be revised somewhat lower,” Powell said Tuesday in a speech in Denver.”
Draghi Urges Governments to Align With ECB to Boost Euro Economy
“European Central Bank President Mario Draghi, battered by criticism over his latest round of extraordinary monetary stimulus, called for “alignment” between governments and central bankers to boost the economy. “Central bank independence is not an end in itself,” the ECB chief said in a speech in Milan on Friday. It “does not preclude communication with governments when it is clear that mutually aligned policies would deliver a faster return to price stability.” Draghi’s final days in office before his term ends on Oct. 31 have been marked by public dissent among Governing Council members over last month’s decision to launch yet another stimulus package. It’s the latest controversy in an eight-year term that included unprecedented measures such as bond purchases and negative interest rates that have stoked criticism in core nations such as Germany and the Netherlands. The ECB’s response is that it has spent years urging economic reforms and has lately heightened calls for governments that can afford it — such as Germany — to spend more to help the euro zone out of its current slowdown. As he prepares to hand the presidency to Christine Lagarde, Draghi doubled down on that point. “A more active fiscal policy in the euro area would thus make it possible to adjust our policies more quickly,” he said. “This is one of the reasons that interest rates in the U.S. have been able to rise sooner, while in the euro area they have been low or negative for a long time.” In defense of his policies so far, the president acknowledged that they have had adverse effects on parts of society but argued that officials must have the courage to act when needed. Outright Monetary Transactions — the crisis-busting bond-purchase plan that gave substance to his “whatever it takes” speech in 2012 — was “inescapable,” he said. “What gave us the courage to act was the conviction that there was a far greater risk if we did nothing,” he said. “Inaction would have meant nothing less than the failure of our mandate and, potentially, of the currency we had been tasked with preserving.” During the Greek crisis of 2015, shutting off central-bank liquidity for the nation’s banks would have meant “triggering events of momentous political importance” — the country’s exit from the single currency — that fall within the remit of elected governments. ”
India Factory Output Unexpectedly Declines First Time in 2 Years
“India’s factory output contracted for the first time in more than two years in August, as a sharp fall in capital goods and consumer durables production weighed on activity. The index of industrial production fell 1.1% in August, data released by the Ministry of Statistics showed Friday. That compares with an estimate for a 1.7% expansion. The decline, last seen in June 2017, underscores worsening demand in an economy expanding at the slowest pace in six years. Capital goods output dropped 21% from a year ago, while consumer durables fell 9.1%. The data comes days after the central bank cut interest rates for a fifth time this year to spur growth. The Reserve Bank of India also lowered the country’s full-year growth forecast to 6.1% from 6.9% previously.”
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