January 09, 2013 | By Scott Minerd, Global CIO
"Despite the economic headwinds resulting from the fiscal cliff concerns in December, the U.S. economy has shown surprising resilience. Data on wages and hours worked have both picked up over the past several months, which is supportive of future employment growth. Importantly, it also appears as though wage improvement will offset tax increases in the coming year. At the state and local level, the U.S. is forecasted to enjoy the most significant job growth in over half a decade. Contribution to overall GDP growth from the state and local sector is expected to finally turn positive in 2013 after being negative since 2009.
As the pent-up demand for capital expenditures and hiring from the fourth quarter enters the market, U.S. economic growth is set to continue. All of this news is particularly positive for the stock market, which has already made up losses from the fourth quarter of 2012 and is poised to continue higher."
The U.S. non-farm job reports over the past two months showed solid gains in payrolls, working hours and earnings. The aggregate weekly earnings in the U.S. non-farm private sector, which are the product of average hourly earnings, average weekly hours, and total non-farm private payrolls, increased at an annualized rate of 4.0% in 4Q2012. Since bottoming in October 2009, the aggregate earnings have increased 13.3%, of which the increase in average weekly hours contributed 2.4%, the increase in average wages contributed 6.1%, and payroll gains contributed the remaining 4.8%. The solid gains in aggregate earnings should provide substantial support for U.S. household disposable income.
Source: Bureau of Labor Statistics, Bloomberg, Guggenheim Investments. Note that level at October 2009 =100. Data as of 12/31/2012.
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Global CIO Scott Minerd and Head of Macroeconomic and Investment Research Brian Smedley provide context and commentary to complement our recent publication, “Forecasting the Next Recession.”
Anne Walsh, Chief Investment Officer for Fixed Income, shares insights on the fixed-income market and explains the Guggenheim approach to solving the Core Conundrum.
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