Academic journal article
By Tainer, Evelina
Business Economics , Vol. 31, No. 2
This paper describes the fourfold role of a business economist with a futures commission merchant: short-term economic analysis for brokers and trading customers; long-term analysis for the asset management division; marketing the firm's expertise; and strategic planning as a member of the firm's executive committee. The author's earlier diversified training and experience are of considerable help in her current position.
In the fall of 1995, The Wall Street Journal wrote an article about the shrinking demand for business economists. In the first week of 1996, the Journal followed-up with the news that demand for academic economists is also on the wane. Changing demographics may play a key role in the academic environment, but corporate re-restructuring in the U.S. economy has certainly done a job on staff positions, where most economists are located. This trend underscores the importance of adapting our skills so as to minimize the probability of extended unemployment spells. Moreover, we should become more ingrained in the core business of our firms in order to contribute directly to the bottom line. In this article, I will describe my current position as the chief economist for Indosuez Carr Futures, a futures commission merchant with global presence and how my previous experience helped me to get where I am today.
Trained as a labor economist (although I have spent most of my career in the macroeconomic forecasting business), I should know better than most that general training such as a college education teaches us to be flexible in our careers and allows us to pursue different avenues. More specific training, such as graduate training in economics, hones our skills and narrows our field of pursuit. Furthermore, the skills we learn on the job tend to be even more specific in nature, but often chain-linked (somewhat like the new chain-weighted GDP measure). In retrospect, my career path from bank economist to finance professor and consultant to chief economist for the financial futures markets seems natural. My current role as an economist for a French-owned futures broker benefited from my earlier experiences even to the extent of my foreign language skills. I studied French in high school and college, speak Italian because of my ethnicity, and even dabbled in Spanish.
AN ECONOMIST IN THE FUTURES INDUSTRY
As you might expect, a major portion of my day involves commenting on the behavior of financial markets. Our customers are involved in the fixed-income market, the currency market and the equity market. Some are also interested in commodities such as industrial metals, energy, and agricultural products. The Chicago headquarters is allowed to deal only in financial futures at this time, so I mostly answer questions on the direction of the long bond, the shape of the yield curve, the direction of the dollar, and the strength (fragility) of the stock market. Our foreign offices in Europe and Asia don't fail to ask their own set of challenging questions on major commodity markets or American politics.
Participants in the financial futures market react to economic indicators (which are typically released only ten minutes after the market opens), forecasts of economic indicators (in the case of outlandish predictions), rumors (often on a slow news day), or on the comments of Federal Reserve governors. I am frequently reminded that prices also react to technical, rather than fundamental, factors. At these times, I must rely on the word of the technical analyst who claims that major "resistance" levels are being tested.
Like most market economists, part of my day is spent worrying about economic indicators. It is interesting to see how the importance of economic indicators has changed over the years, with some becoming less important or new ones emerging. For example, the unemployment rate was a major market mover in the early 1980s. Yet, by the mid-1980s, financial market participants had finally learned (persuaded by market economists) that nonfarm payrolls were a better gauge of changing employment conditions than the jobless rate. …