New filings for unemployment benefits skidded last week by a healthy 24,000, settling at a seasonally adjusted 334,000 through July 13. That leaves new claims near the lowest level in more than five years. The year-over-year decline continues to look encouraging as well, with last week’s unadjusted claims data (before seasonal adjustment) dropping more than 10% vs. the year-earlier level. The main takeaway: the labor market continues to heal and this leading indicator suggests that modest economic growth is still on track for the near term.
Author Archives: James Picerno
June Was A Rough Month For Housing Construction
Residential construction in the US tumbled last month, according to the Census Bureau’s June report. Housing starts dropped a hefty 9.9% to a seasonally adjusted annual rate 836,000, the lowest since last August. The decline was substantially below expectations, and the red ink is compounded by the fact that newly issued building permits also retreated, retreating by 7.5% vs. May.
Blinded By Correlations
Neil Irwin at The Washington Post’s Wonkblog has some fun at the expense of hedge funds. In a tongue-in-cheek announcement of a new hedge fund strategy that focuses on football betting in Vegas, he points out that the expected return “is not affected a whit by whether the stock market rose or fell that year. In the world of investing, a ‘non-correlating’ asset like my hedge fund is particularly desirable. You want things that zig when the rest of the markets zag, or at least where the zigs and zags happen randomly.”
Slow But (Mostly) Steady Growth For Industrial Production
Industrial production increased by 0.3% in June, in line with expectations. Although the advance was modest, last month’s rise was the highest since February, the Federal Reserve reports. The upturn was enough to boost the year-over-year gain to 2.0% through June, or slightly better than May’s 1.7% annual rate. The cyclically sensitive manufacturing component also turned higher last month, gaining 0.3%, which is also the best monthly advance since February.
Macro-Markets Risk Index | 7.16.2013
US economic conditions continue to stabilize at relatively lower levels vs. the first five months of 2013, according to a markets-based profile of the macro trend. The deterioration that persisted through most of June has faded in recent weeks, giving way to a comparatively subdued trend. Despite the sharp decline in the Macro-Markets Risk Index (MMRI) in June, this benchmark closed yesterday (July 15) at 8.8%–a level that suggests that business cycle risk remains low. Although MMRI is near its lowest value since last August, it remains well above the danger zone of 0%. If MMRI falls under 0%, that would be a sign that recession risk is elevated. By comparison, readings above 0% imply economic growth.
US Housing Starts: June 2013 Preview
Housing starts are expected to total 940,000 in tomorrow’s update for June, based on The Capital Spectator’s average econometric forecast (seasonally adjusted annual rate). The projection represents a moderate increase vs. the previously reported 914,000 for May. Meanwhile, The Capital Spectator’s average projected gain for June is slightly below the numbers in several consensus forecasts drawn from surveys of economists.
A Slower Rate Of Growth For Retail Sales In June, But The Annual Pace Rises
Retail sales increased 0.4% in June, which is below the consensus forecast, but that shortfall is less about a weaker pace of spending vs. overly optimistic expectations among economists for this morning’s number. In any case, don’t pay too much attention to one number, particularly one that has little relevance for assessing the broader macro picture. On the other hand, take note that the year-over-year trend in retail spending inched higher for the third month in a row, offering another clue for thinking that business cycle risk remains low.
US Industrial Production: June 2013 Preview
Tomorrow’s report on industrial production for June is projected to post a 0.2% gain vs. the previous month, based on The Capital Spectator’s average econometric forecast. The expected increase represents a modest improvement vs. the unchanged reading for the previously reported May figure. Meanwhile, the Capital Spectator’s average projection for June is in the middle of expectations relative to three consensus forecasts based on surveys of economists.
What Should We Expect For Long Run Risk Premiums?
If you built a portfolio with a market-value weighted mix of all the major asset classes, what risk premium would you expect? I’m looking for a 5.2% return, give or take. To be more precise, my current equilibrium-based forecast of total return (less the risk-free rate) for the Global Market Index (GMI) is 5.2% these days.
Book Bits | 7.13.13
● Act of Congress: How America’s Essential Institution Works, and How It Doesn’t
By Robert G. Kaiser
Review via The New York Times
It’s no surprise this institution would attract Robert G. Kaiser, who grew up in the capital and has spent half a century at The Washington Post. Kaiser’s new book, “Act of Congress,” chronicles the making of the enormous financial reform bill that became law in 2010. Although Kaiser constantly bemoans the lack of civility and rise of petty politicking in Congress, it’s clear that at its most functional, the body reminds him of the Washington of his youth, when serious-minded men of good will toiled in the national interest. Financial reform is proof that even in its current, degraded form, Congress can still occasionally serve this higher purpose.
