The US Economy Is Wobbly, But Will It Stumble?

The US economy is struggling to regain momentum after GDP growth stumbled in the first quarter to the slowest pace in two years. The preliminary numbers available to date for last month paint a mixed profile for Q2’s start (see here and here, for instance), but economists are expecting that today’s employment report for April (due later today at 8:30am eastern) will reaffirm that moderate growth will prevail. If the crowd is wrong and labor-market growth falters—as it did in ADP’s estimate for April—the news will add more stress to an already wobbly macro trend.
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Initial Guidance | 6 May 2016

● US Jobless Claims Rise to Highest Level in 5 Weeks | Bloomberg
● Challenger: US job cuts accelerated in April | CNBC
● US Consumer Comfort Index falls to lowest level since Dec | Bloomberg
● US job market at a crossroads? | Reuters
● Hedge funds haven’t delivered on their promise | The Economist
● US Mortgage Rates Back Near 2016 Lows | MarketWatch
● Trump says he would likely replace Yellen once her term ends | AP

US Jobless Claims & Job Cuts Rise In April

It’s not terrible, but today’s updates on layoffs for April imply that growth is fading for the US labor market. Deciding if the deceleration will roll on–or give way to firmer numbers–is unknown at this point. Until or if upcoming releases bring deeper clarity, for good or ill, it’s still reasonable to assume that modest growth is the path of least resistance. But this morning’s numbers follow yesterday’s surprisingly weak profile of US private-sector payrolls via ADP’s estimate. The negative news is partly offset by upbeat survey reports for the US services sector for April. Nonetheless, the employment data isn’t moving in the right direction at the moment. Will tomorrow’s official job report for April tell us otherwise? Yes, according to the consensus forecast via Econoday.com. While we’re waiting for Friday’s news, let’s dig into the details on the latest figures for jobless claims and job cuts.
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Initial Guidance | 5 May 2016

● ADP reports US private-sector job gains slowed in April | MarketWatch
● US ISM Non-Mfg Index climbs to 4-month high in April | Bloomberg
● PMI: US service sector growth in April accelerates to 3-mo high | Markit
● US factory orders rose modestly in March | AP
● US Productivity Fall in Q1 for 2nd straight quarter | Bloomberg
● US mortgage applications fell 3.4% last week | CNBC
● Survey based US Job Creation Index steady in Apr, near record high | Gallup
● China Services PMI growth slows to a crawl in April | Markit
● Global air passenger traffic slows in March | IATA

ADP: US Job Growth Stumbled In April

Employment growth at US companies slowed in April to the weakest gain in three years, according to this morning’s update from ADP. The private sector added only 156,000 positions to payrolls last month in seasonally adjusted terms—well below expectations for a gain of nearly 200,000. Today’s data raises new questions about expectations for a second-quarter rebound in economic activity following the weak Q1 GDP report. The numbers du jour also revive the focus on a question I asked last week: Will Job Growth Kill The Bear-Market Signal For Stocks?
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Bogle Says Indexing Destined To Win The Battle Of The Quants

Vanguard founder John Bogle gave a powerful speech last month at the Q Group’s Spring Seminar that lays out the case (again) for favoring basic indexing and shunning complexity in matters of portfolio design and management. As Morningstar’s John Rekenthaler points out, Bogle wields the weapon of “basic math” with devastating effect on the expectations of investment managers who aspire to rocket science in the pursuit of performance glory. Anyone who’s familiar with Bogle’s long-running advice to keep it simple and favor plain-vanilla index funds will find the usual red meat here. Nonetheless, the latest sermon from one of index investing’s founding fathers makes for awkward reading for those inclined to challenge the great man. As a sample, consider the following excerpts from last month’s oration on “David and Goliath: Who Wins The Quantitative Battle?”:
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Initial Guidance | 4 May 2016

● US auto sales recover in April | MarketWatch
● Redbook: US retail sales growth edges lower in last week of Apr | TradingEco
● European Commission trims growth forecast | IBT
● Revised PMI Composite for Eurozone signals slow growth in Apr | Markit
● Global mfg remains in slow growth gear during April | Markit
● Atlanta Fed President encouraged by employment data | MNI
● Trump Becomes Presumptive Rep Nominee as Cruz Exits Race | Bloomberg
● How Slow Growth Could Thwart a Clinton Presidency | Fiscal Times