The Consensus Economic Forecast

From Bloomberg:

Payrolls probably rose by 190,000, the most in three years, after declining 36,000 in February, according to the median forecast of 62 economists surveyed by Bloomberg News before the Labor Department’s April 2 report. Other reports may show consumer spending and confidence increased, while factories expanded and home prices declined.

Am I allowed to reprint the Bloomberg survey? Yes, but go visit the article by Tim Homon.

                       Bloomberg Survey

==============================================================
                   Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
==============================================================
Pers Inc MOM%             3/29      Feb.      0.1%      0.1%
Pers Spend MOM%           3/29      Feb.      0.5%      0.3%
Core PCE Prices YOY%      3/29      Feb.      1.4%      1.3%
Case Shiller Monthly MO   3/30      Jan.      0.3%     -0.2%
Case Shiller Monthly YO   3/30      Jan.     -3.1%     -0.6%
Consumer Conf Index       3/30     March      46.0      50.0
ADP Payroll ,000’s        3/31     March      -20        40
Chicago PM Index          3/31     March      62.6      61.0
Factory Orders MOM%       3/31      Feb.      1.7%      0.5%
Initial Claims ,000’s     4/1      27-Mar     442       440
ISM Manu Index            4/1      March      56.5      57.0
Construct Spending MOM%   4/1       Feb.     -0.6%     -1.0%
Nonfarm Payrolls ,000’s   4/2      March      -36       190
Unemploy Rate %           4/2      March      9.7%      9.7%
Manu Payrolls ,000’s      4/2      March       1         15
==============================================================

So what is to be contradicted here?

Much of the employment gains are from hiring temporary census workers, the unbalanced interest rates from the Fed can distort the forecast (Money Illusion), the uncertainty of cost effects in Obamacare, and impending bankruptcies in many counties and states. Remember, state and federal interest rates to keep California afloat are a whopping 7.5% over the 30 year California bond (Congress covers 30% of the local interest costs in Build America Bonds).

Consider this other Bloomberg report by Joe Mysak:

The interest rates states and municipalities had to pay to borrow money, as measured by the Bond Buyer 20-General Obligation Bond Index, declined from a high of 6.09 percent in January 2000 to 4.21 percent in June 2003. Issuers took advantage of the drop to call or redeem outstanding high-coupon debt.

That same interest rate environment didn’t repeat in 2007 and 2008. Tax-exempt yields rose from 4.08 percent in March 2007 to a high of 6.01 percent in October 2008, before ending the year at 5.24 percent.

What this means:

Municipalities cannot take advantage of the low interest rate environment as a result of the recession. Short term cash accounts are king right now, hence there is little clear indication of a growth opportunity in the USA. This is key because depressions are historically associated with major constraints in metropolitan areas, so when local government borrowing costs are high, that means they have not yet figured out solutions.

Beware the double dip.