● US economy shows signs of heating up — but not sizzling | MarketWatch
● US business inflation expectations virtually unchanged at 1.9% | Atlanta Fed
● While Everyone Is Watching the Fed, the Economy Slips | Morningstar
● Mood brightens after latest Greek offer to creditors | Reuters
● EU Moscovici: Latest Greek Proposals Could Be Basis for Accord | MNI

The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to slip fractionally, falling slightly deeper into negative territory in the May update that’s scheduled for tomorrow (May 22), based on The Capital Spectator’s average point forecast for several econometric estimates. The projection for -0.24 is a touch below the -0.23 reading for April, which reflects a below-average pace of economic growth for the US relative to the historical trend. Only negative values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today’s estimate for May as a guide, CFNAI’s three-month average is expected to remain at a rate of growth that’s below the historical trend but still well above the tipping point that marks the start of a new recession.
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● The Mythology of Work: How Capitalism Persists Despite Itself
By Peter Fleming
Essay by author via The Guardian
It is clear that the relationship between jobs and pay is now governed by a new principle. The old days in which your pay was linked to the number of hours you clocked up, the skill required and the societal worth of the job are long over. Other factors play a bigger role in determining how much you are rewarded today. This is why we live in a world where the task of walking a millionaire’s dog through Hyde Park is considered more valuable than an NHS nurse (starting salary £21k).
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The outlook for the US economy has hit a rough patch lately, according to some indicators, but you wouldn’t know it from the weekly updates on jobless claims. This leading indicator continues to paint an upbeat profile for the labor market, which suggests that whatever’s weighing on the broad macro trend will soon fade.
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● Jobless claims fall to nearly 15-year low | USA Today
● US leading economic index rose 0.7% in May | MarketWatch
● Inflation Genie Slow to Emerge, Affirming Fed’s Gradual Path | Bloomberg
● Consumer Comfort in US Climbs After Falling Record 9 Weeks | Bloomberg
● Philly Fed Index Jumps To Six-Month High In June | RTT
● What happens next if Greece defaults on IMF? | Reuters

The Federal Reserve is talking about raising interest rates, but it’s also lowering growth expectations. No wonder the market’s uninspired to do much of anything at the moment. The benchmark 10-year yield was unchanged yesterday at 2.32%, based on Treasury.gov data. That’s still moderately elevated vs. the below-2% levels at various points in recent months. But the current rate is also below the 2.50% yield we saw earlier this month. For now, the upside bias is on hold.
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● Fed signals it’s on track for September rate hike | USA Today
● Fed holds off on interest rate hike, downgrades economic forecast | LA Times
● Mortgage applications drop 5.5% on rising interest rates | HW
● Eurozone return to inflation confirmed as energy impact wanes | Reuters
● U.K. Retail Sales Rise Unexpectedly In May | RTT
● Investors brace for more volatility as Greece eyes default | CNBC

Several economic reports in recent weeks have raised questions about the strength and durability of US growth for the near-term future, but a broad review of the numbers through May still suggest that the general trend remains positive. Certain corners of the economy paint a worrisome profile—industrial output, for example. Nonetheless, a diversified mix of indicators from across the US macro spectrum imply that NBER won’t declare May as the start of a new recession.
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● U.S. Housing Starts Pull Back, but Permits Point to Pickup | WSJ
● Preview – Fed eyes mixed bag of data as new rate “regime” nears | Reuters
● UK Jobless Remains At 7-year Low; Wage Growth Tops Forecast | RTT
● Bank of England officials unanimous in keeping rates on hold | WP
● Greek Central Bank Warns of ‘Uncontrollable Crisis’ if Bailout Talks Fail | WSJ

Is the US on the cusp of a new recession? The latest numbers on industrial production suggest that business-cycle risk is rising. Why, then, don’t we see confirming signals from other key indicators? Notably, payrolls are still rising at a solid pace (in year-over-year terms)—ditto for real personal consumption expenditures. The industrial sector is clearly weak, and getting weaker, but for the moment this appears to be an isolated downtrend. It could turn out to be something darker, although a broad review of the numbers suggests otherwise, based on current data.
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