Citigroup on GDP and Jobs

Citigroup was out with a note today on GDP and a look ahead to the Friday jobs number. Their view on GDP was somewhat tepid, with a few key takeaways below: -Although third quarter real GDP increased by a solid 3.5 percent, the details of the report suggest a somewhat softer tone than the headline. The strength was concentrated in two sectors that are not likely to continue to contribute to growth in coming quarters – government spending and net exports. -Private domestic demand was lackluster, only increasing by 2.3 percent. Consumer spending was fairly light, rising by just 1.8 percent. Business investment posted a healthy rise of 5.5 percent, but was softer than we had projected, given the 17 percent rise in nondefense capital shipments. Housing expanded by just 1.8%. Normally, these sectors are the backbone of growth. The job outlook, according to Citigroup, was definitely brighter, as evidenced in some key observations: - estimate that payrolls expanded by a healthy 230K in October, with most of the gains in services. - think the payroll trend is gradually rising and now is firmly above 200K. -anticipate a slight improvement in the trade deficit, due to lower petroleum prices -the gains in business output in the GDP report indicate a healthy rise in labor productivity