Bob Dieli of NoSpinForecast.com emailed me an intriguing chart earlier this week: the ratio of nonfarm payrolls to the unemployment rate. The ratio, which is based on monthly data, has an especially intriguing relationship with the business cycle, namely: it peaks just ahead of recessions.
Strategic Briefing | 7.25.12 | Is The Fed Set To Roll Out QE3?
Fed Leaning Closer to New Stimulus if No Growth Is Seen
The New York Times | July 24
A growing number of Federal Reserve officials have concluded that the central bank needs to expand its stimulus campaign unless the nation’s economy soon shows signs of improvement, including job growth. The question is expected to dominate the agenda when the Fed’s policy-making committee meets next week, with some members pushing for immediate action while others seek to delay a decision at least until the committee’s next meeting in September, so they can see a few more weeks’ worth of economic data.
Is The Poverty Rate Set To Reach A 40-Year High?
Poverty is a hardy perennial. But while no one will be surprised to learn that eradicating poverty is difficult, perhaps impossible, there was at least some modest progress over the last several decades. But now even that thin reed appears headed for the dustbin of history as the U.S. poverty rate looks set to return to heights last seen in the 1960s.
Chicago Fed National Activity Index: No Recession For U.S. As Of June
The Chicago Fed National Activity Index (CFNAI) for June rose modestly, suggesting that recession risk eased. Although the 3-month moving average of the index increased to -0.20 last month from -0.38 in May, the June number was the fourth straight month of below-zero readings, which “suggests that growth in national economic activity was below its historical trend,” the Chicago Fed reports.
Strategic Briefing | 7.23.12 | The Spanish Risk Factor
Spanish Yield Reaches Record on Regional Bailout Concern
Bloomberg | July 23
Spanish bonds slumped, with 10-year yields climbing to a euro-era high, after El Pais said six regions may ask the central government for financial assistance, increasing concern the nation will need additional aid…. “The probable bailouts of some Spanish regions is weighing on markets and pushing up yields,” said Craig Veysey, head of fixed income at Principal Investment Management Ltd. in London, part of Sanlam Group, which manages $72 billion. “There is concern that Spain might be looking for a sovereign bailout sooner rather than later as a result of having to bail out the regions. Yields at current levels aren’t viable for Spain.”
Book Bits | 7.21.2012
● Moods and Markets: A New Way to Invest in Good Times and in Bad (Minyanville Media)
By Peter Atwater
Summary via publisher, FT Press
Leading consultant and Minyanville contributor Peter Atwater has helped institutional investors, corporations and policymakers map changing social moods to emerging market shifts, and use that knowledge to identify huge new market opportunities. Now, Atwater shows you how to use the same powerful Horizon PreferenceTM approach to select your own high-performance investments. Utilizing what is often in plain sight, but overlooked and underestimated, Horizon Preference helps you understand how we narrow our physical, time and relationship horizons to the “local” in bad times, and widen them to the “global” in better times — and then translate that knowledge into better investment decisions. Atwater’s Moods and Markets offers powerful new insights into everything from market bubbles to the real challenges of making mergers work… why “farm to table” and “locavore” movements are booming now, and what’s likely to happen next… why Americans now want to rent homes even though it’s become far more affordable to buy them… why the “Arab Spring” is bullish, and higher education is in deep trouble… which businesses prosper in a downturn, which prosper most in an upturn — and why.
What’s Next For The Link Between Stocks & The Inflation Outlook?
The stock market and the Treasury market’s inflation forecast seem to be going their separate ways. We haven’t seen this movie in quite some time. Is that significant? It may be. To understand why, a brief history lesson.
Seasonal Distortion In Jobless Claims: The Sequel
Last week’s sharp rise in new jobless claims looks ominous, but there’s a good reason to reserve judgment at this point. Recall that the previous weekly update in new filings for unemployment benefits tumbled dramatically to a new four-year low. But as several analysts warned, the fall was probably due to a seasonal factor linked to summer shutdowns of auto plants. Fast forward a week and it appears that the seasonal distortion has been effectively corrected. In sum: the latest reading on jobless claims (for the week through July 14) is more or less unchanged from the late-June figures, which implies that the roller coaster ride in the interim was a lot of noise about nothing.
A Four-Year High For Housing Starts In June
Today’s update on housing starts and new building permits for June delivers another day of upbeat economic news, following yesterday’s encouraging report on industrial production for last month. June overall is still a mixed bag of economic data (retail sales, ISM Manufacturing Index, and payrolls in particular were disappointing). But it’s hardly trivial that the housing market continues to grow—a trend that appears intact, based on today’s news for permits and starts.
Industrial Production Rebounds In June
Several of the June updates on the economy to date have brought discouraging news (retail sales, the ISM Manufacturing Index, and payrolls). Today’s report on industrial production offers a refreshing change for the better. The Federal Reserve advises that industrial production rose 0.4% last month, a respectable rebound from May’s 0.2% decline. Even better, the year-over-year change through June perked up slightly to 4.7% vs. 4.4% through May. Is the moderately better news for industrial production enough to blow away the worries dispatched by less-encouraging news from elsewhere in the economy? No, but it’s enough to keep the debate open about what happens next.