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January 16, 2012

4Q 2011 Market Environment

U.S. Economy

The “third” estimate for third quarter GDP was released showing a growth rate of 1.8%, a 0.2% decrease over the prior estimate. This change primarily reflects a downward revision to consumer spending which grew 1.7% during the quarter compared to a previous estimate of 2.3%. Despite lower consumer spending levels, personal consumption contributed 69% to GDP growth during the quarter. Nonresidential fixed investment, exports, and federal government spending had positive contributions to GDP growth for the quarter. The change in business inventories subtracted 1.35% from GDP as private inventories decreased by $2B during the third quarter. Nondefense and State and Local Government spending continued to trend downward. The unemployment rate fell to 8.5% in December, the lowest rate since February 2009. The number of unemployed is currently 13.1M and the number of long-term unemployed is 5.6M. The average duration of unemployment in December is 40.8 weeks. Non-farm payroll employment gained 200K jobs in December while private payroll employment added 212K jobs. Over the past twelve months, non-farm payroll employment has gained 1.6M jobs.

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