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Economy to Pick Up Steam in 2nd Half of 2013?

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    RBC Chief U.S. Economist Tom Porcelli on the outlook for the economy.

  • Duration 5:34
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Jobs report let's get to that showing the unemployment rate stayed at about seven point 8% in December after November's report.

Was upwardly revised from seven point 7% that rarely happens by the way.

Is the economy at a standstill or are there some signs of real growth in this report.

Joining us now -- -- are selling he's chief US economist for RBC Tom great to see you thank you for coming in.

We've been hearing some very optimistic.

Analyst over the past forty minutes here at at fox.

Suggesting that the market and virtually every sector sperm from finances to health care.

Is due to go up even more than it did in in 2012 do you think that optimism is well founded based on what received from this jobs report.

I think that you have to make a distinction between markets and economics yeah come from the markets for -- perspective I would argue sure why not mean the Fed is basically willing to have been.

Their pumped a tremendous amount of liquidity into the system.

As a result that's one of the reasons why you've seen such -- positive outcome from an equity market perspective.

And there is.

Every sign.

To -- reason to believe that that's going to continue as 2013 moves along I eat -- continue to pump money into the system so sure I can buy into that and -- interesting part of that conversation is lot of ways you can actually make -- agreeing that the market has decouple from fundamentals.

And -- and I would argue that based on fundamentals alone.

You probably should MBS lofty.

As you are from a neck -- respect I -- restaurant what what now fundamentals he talked about earnings are you talking about how.

Cash and position and you also dollar price.

-- based economic front fundamentals.

I -- consider this.

Let's say we were having this conversation last year at the same time and -- here's what's gonna happen in the middle of the year.

ISM is going to be below breakeven for three straight months job growth was gonna slow fairly abruptly.

And retail sales was going to be negative in three of five months I told you all of that.

The beginning of the year is gonna happen in the middle of the year what -- you told me the S&P Libya.

You -- -- fourteen county which is effectively where we work gives us on the meaningfully less -- that so that's the idea on fundamentals.

-- for the economic landscape -- 2013 in general.

We think that you're actually looking at a backdrop where you know you're you're you're struggling to gain momentum now you're not losing momentum and that's -- a victory and up -- But we're looking for about a 2% growth backdrop and I think today's payroll report.

Is is sort of a great eye opener I think for a lot of these people that have started out the year saying economic activity looks like it's going to be pretty good this year.

Because when you consider the payroll report over the last twelve months guess what we've averaged.

150000.

Jobs what was -- number -- 150 that.

You just -- things -- going to be affected they're going to get checked yes in fact you looked at the first trading day after the fiscal cliff deal was passed.

And what did you see apparel companies started plummeting a lot of the retail companies started plummeting -- their stocks did.

Why because that's where people look at their checks and say it now I'm going to lululemon.

Now I'm going to of the gap that I'm gonna buy -- T shirt or structure under a pair of jeans.

Maybe they wanna ask if they see a diminished paychecks.

I think that this is one of the crux of the problems for the US in the first half of the year -- not get a we've been talking about for months now and how much of the last couple of days we talk about this for months.

Taxes effectively rose for -- want.

Because of that the payroll tax holiday -- -- and that's one of the reasons why we built in such a soft.

Q1 in particular.

Which will weigh on first half growth but we think what you get beyond that.

You're gonna have a very bifurcated twenty each thirteen where it's sort of soft first half growth gives way to stronger second half growth.

And we feel.

Particularly now that he seems to capex.

Cycle is started to gather a bit more momentum here feel pretty comfortable with our view that you're looking at -- -- for.

It is OK Tom but one thing that the president can do without having to worry about congress for the most part.

Is increase regulations the Friday before Christmas.

We saw 77000.

Page report from the white house on new regulations that they want businesses to accommodate themselves to.

Isn't there -- costs are a lot of people say regulations is another kind of tax.

It's -- -- that can be implemented solely by one branch of government isn't out of concern for you as a drag on the economy.

Front -- are from -- perspective the fact the only alternative argument are expensive that -- more regulations you have the more money.

Companies are gonna have to suspend particularly smaller companies.

-- -- -- coming to terms with those regulations right.

Yeah I think that's absolutely true -- One of the things that are really removed does significant sort of headwind from that the corporate backed -- -- -- fact that you were actually there there's now clarity.

On the that the tax backdrop and that's critical.

-- so from our perspective.

That was the one thing that was really weighing on corporate decision making over the course.

2013 was just lack of clarity related to the fiscal cliff.

Most of that was -- -- tax policy is having clear at least to some extent or -- to be more clear tax policy there's at least now some clarity on what it's gonna look like when he thirteen.

We think that'll probably give the green light for corporations.

Particularly given the fact that the global backdrop seems to be stabilizing as well that'll give corporations that -- green -- engaging capex but again make no mistake.

You know looking for -- -- -- here you're looking for about 2% at best.

All right Tom Purcell ER BC chief US economist Tom is always a pleasure to see you thank you so much for coming thanks Tom thanks guys appreciate it.

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