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Who's To Blame for the Shrinking Economy?

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    Jefferies chief economist Ward McCarthy gives his outlook for the markets and economy.

  • Duration 3:24
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We'll be economy.

Is contracting.

Disappointing GDP numbers showing the economy shrank by a tenth of percentage point in the final quarter 2012 -- both the rise of -- One point 1% joining us Jeffries chief economist ward McCarthy.

Board thanks for being what -- the White House claims hurricane sandy for this what do you think.

I don't think that.

In fact if anything I think sandy.

Contributed TQ four growth.

Consumer spending was up 2.2 percent overall and durable goods spending -- spending on durable goods including automobiles was up thirteen point 9%.

Think contributed one percentage point to growth and we did have pretty good car sales over the -- The -- course of the fourth quarter.

And some of that was due to replacement sales are because of Sandy's so.

I'm not sure where you can look at this data do you believe -- sandy -- do you believe this number I was shocked to see an actual decline in GDP do you believe it do you think -- -- be revised upward to a positive.

-- -- they could be revised to read a small positive -- however I think the best way to look at the second half of last year.

-- -- average the third and fourth quarters which gives you growth of about one and a half percent.

Q3 was boosted because we had.

A somewhat inexplicable 10% increase in federal government spending -- nine and a half percent actually Q3.

And then Q4 always.

-- down by the fact that federal government spending fell by fifty and a half percent so.

There are a lot of things that are I think temporary fact -- That affected both Q3 and Q4 but I think if you took a look at the average growth rate of one and a half percent I think that pretty much characterize of what was happening in the economy.

Now the Dow down all of sixteen point still only about sixty points away from 141000.

Kind of surprised that that -- -- -- reaction if the Fed.

Which we've worrying lately that maybe they're gonna stop.

Those of bonded PO quantitative easing purchases.

Sometime soon.

Might these numbers and these poll numbers make the Fed not do that and shouldn't stocks be up if that were true well -- I don't think.

The Fed is going to stop the open -- Q read any point in time.

And I think you're dead right one of the reasons that they won't.

Stop the QE is numbers like we saw this morning on the economy.

But -- really has been a break between -- performance of the financial markets and the economy.

You know for quite some time here and I think it primarily reflects the the fact that the Fed has been doing Q -- Which has helped the performance of -- assets including the stock market okay yep it's called hope that gap between.

The economy and those markets my friend and lastly that ADP jobs number 192000.

Jobs better than expected would you think.

Well it was pretty close to what I think people -- looking for and I think that will see -- nonfarm payroll number on Friday that -- You know in the ballpark of that maybe a little less I think payrolls will be -- a 170000.

You can't really use the ADP has a great barometer of month to month changes in nonfarm payrolls because you know periodically it pulls the rug out from Monday -- but I think that's probably a good indication of of what's happening in the labor market we generating jobs may be little faster than before.

But it's really not what any of us would like to see not nearly enough Bret thanks for being with us -- -- -- good good -- --

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