How did we get into this mess? More precisely, how did the United States, a bastion of financial insight and innovation, manage to wind up between the economic rock and the hard place at the opening of the second decade of the 21st century?
Monthly Archives: June 2010
SATURDAY LINK LIST: 6.5.2010
Yesterday’s disappointing news on the pace of private-sector job creation sent the stock market tumbling. The S&P 500 lost more than 3.4% on the day and capital flowed into Treasuries, pushing the yield on the 10-year down to 3.2%. The risk-aversion trade is alive and kicking…again. That didn’t stop President Obama from declaring on Friday that “the economy is getting stronger by the day.” Mr. Market thought otherwise. But all’s not lost, explained one dismal scientist, who argues that the crowd simply needs an attitude adjustment. “Nothing in [the May employment report] suggests that the recovery is in trouble — the markets need to get a grip,” Bernard Baumohl, chief global economist at the Economic Outlook Group, said via The New York Times. Nonetheless, optimism is in short supply in the wake of the latest labor market update. Here’s a sampling of the chatter on the jobs front from various corners of the punditocracy…
PRIVATE SECTOR JOB CREATION SLUMPS IN MAY
Don’t let the top-line number fool you. The employment report for May was discouraging. Although total nonfarm payrolls rose by 431,000 last month—the biggest monthly gain in a decade—it was heavily padded with the government’s temporary hiring of Census workers. Stripping out the government factor reveals a tepid rise in private-sector nonfarm payrolls of just 41,000, a dramatic fall from April’s 218,000 gain in private-sector jobs. In other words, job creation in real economy is struggling…again. In fact, it looks like it hit a wall in May.
POSITIVE NEWS FOR JOBS AHEAD OF FRIDAY’S EMPLOYMENT REPORT
Today brings two bits of good news on the employment front, laying the groundwork for thinking positively about tomorrow’s jobs report for May. New jobless claims fell last week, the Labor Department advised, and nonfarm payrolls rose in May, according to the ADP National Employment Report. Are these positive changes a sign of things to come in the official employment report? We’ll have an answer in less than 24 hours.
CONSUMER SPENDING SOFT IN MAY, ACCORDING TO REPORT
A private-sector report on consumer spending advises that retail spending slipped last month. “Overall the environment in May has been relatively soft,” Mike Berry, director of industry research for MasterCard Advisors SpendingPulse, tells Reuters. “It looks like the consumer is taking a pause.”
HARRY MARKOPOLOS & THE “NEW” SEC
When Bernie Madoff’s Ponzi scheme imploded in December 2008, it unleashed two major scandals. One was simply an issue of money. Lots of losses because there were lots of victims. The tens of billions of dollars that went up in smoke rocked the financial world, thanks to the sheer size of the fraud and the fact that Madoff had snookered so many people (and institutions) for so long. The other great indignity (and arguably the bigger one) is that the world’s biggest financial con survived for years under the nose of America’s top regulatory agency: the Securities and Exchange Commission.
A RATE HIKE CLOSE TO HOME
The Bank of Canada today announced that it was raising its overnight lending rate by 25 basis points to 50 basis points. The doubling of the price of money is the first hike in North American by a central bank since the Great Recession ended.
THE MAULING IN MAY
May was the worst month for the major asset classes since the dark days of February 2009. Virtually everything suffered with more than trivial losses. Treasuries were the exception, thanks to the revived rush to safety. In turn, that helped prop up broad investment-grade bond indices. Otherwise, the red ink last month is a sign that the big, easy gains in everything is over.