The U.S. economy is struggling on a number of fronts, but it’s also encouraging (and surprising?) that the economic turmoil in Europe hasn’t taken a deeper bite out of America’s moderate growth path of late. That could change, of course, but for now there’s still optimism that we’ll sidestep a new recession.
Jobless Claims Data (Still) Suggest Modest Job Growth Ahead
Today’s weekly jobless claims report seems to be telling us that the labor market isn’t fatally wounded. New filings for unemployment benefits fell 12,000 last week to a seasonally adjusted 377,000. That’s not far from the post-recession low of 361,000 in mid-February, when optimism was considerably stronger about the economy’s prospects. One good report in the weeks ahead could take us to a new low and revive expectations that the future looks okay after all. Analysts are inclined to think otherwise, however, courtesy of the disappointing employment report for May. But today’s claims update suggests that maybe, just maybe, it’s too soon to write the obituary for economic growth.
The New Abnormal Returns…
Actually, it never left. A month ago I wondered: “Is The Recent Fall In Inflation Expectations A New Warning Sign?” The answer, we now know, is “yes.”
A Fine Balance: Core Funds & Rebalancing
“Maybe it’s time for world-stock funds, rather than ones that focus separately on the U.S. and overseas,” advises a story in The Wall Street Journal. It’s a good idea—up to a point. The strategy of using core funds, perhaps even a super core for the entire asset allocation process, has merit. But there’s a danger of going too far. The problem is that if you put too much in a core fund, rebalancing opportunities are limited if not short-circuited completely, depending on the core fund you hold and how much it represents of your allocation in that asset class.
Chart Chatter: Wage Growth & The Business Cycle
The relationship between real (inflation-adjusted) wages and the business cycle is “inconclusive,” a recent study reminds. For example, the empirical literature “finds that the wages of newly hired workers are more cyclical than wages of workers in ongoing employment relationships,” notes a 2010 paper from the Federal Reserve Bank of Richmond. But if you’re inclined to see a procyclical link between wage growth and the economy generally, Friday’s income and spending update for April holds out the possibility that all’s not yet lost for expecting growth.
Strategic Briefing | 6.4.12 | Jobs & The Economy
Growth Slowdown Seen for Third Year in U.S. Dodging a Recession
Bloomberg | June 4
The U.S. economy looks set to deliver a repeat performance in 2012: for the third straight year, it may suffer a swoon yet not slip into a recession.
“I don’t think the slowdown will be any more consequential than the past two years,” said John Ryding, a former Federal Reserve researcher who is chief economist at RDQ Economics LLC in New York. “There are positives out there in the economy. We’ll avoid a recession.”
Book Bits | 6.2.2012
● The Unfair Trade: How Our Broken Global Financial System Destroys the Middle Class
By Michael J. Casey
Summary via publisher, Random House
A wake-up call for middle class Americans who feel trapped in a post-crisis economic slump, The Unfair Trade is a riveting exposé of the vast global financial system whose flaws are the source of our economic malaise. Our livelihoods are now, more than ever, beholden to the workings of its imbalances and inequities. The trillions of dollars that make up the flow of international finance—money that is often steered away from the people who deserve it the most—have not just undermined the lives of working and middle class Americans. It is a world-wide phenomenon that is changing the culture of Argentina; destroying the factory system in Northern Mexico, enabling drug cartels to recruit thousands of young men into their gangs; that has taken down the economies of Iceland, Ireland, Spain, Greece, and possibly Italy; and is driving American companies such as a 60-year-old family owned manufacturer of printed circuit boards to shutter all but one of its factories. Veteran journalist Michael Casey has traveled the world—from China to Iceland, Spain to Argentina, Indonesia to Australia—recounting extraordinary stories about ordinary people from one continent to another whose lives are inextricably linked.
A (Partial) Antidote For Today’s Disappointing Jobs Report
Employment growth remained weak in May, the government advised earlier today, but the day’s other economic news offers more encouraging fare. Personal income and spending for April were strong enough to stabilize the year-over-year pace of growth. Meanwhile, the ISM factory index for May continues to signal growth–wobbly, perhaps, but growth just the same. Taken together with disappointing jobs report, it all adds up to a mixed bag, but that’s better than definitive, across-the-board evidence that the cycle has taken a turn for the worse.
Another Month Of Slow Job Growth In May
Job growth remained sluggish in May, the Labor Department reports. Nonfarm private-sector payrolls rose by a slim 82,000 on a seasonally adjusted basis last month. That’s the smallest increase since last August. It’s also a sign—confirmation!—that economic growth overall slowed in the spring.
Major Asset Classes | May 2012 | Performance Review
May was a rough month for financial and commodity markets—the worst, in fact, since September 2011. Most of the major asset classes slumped last month. The main exception: U.S. Treasuries, which buoyed the Barclays Aggregate Bond Index. Inflation-indexed Treasuries in particular performed handsomely, jumping 1.7% in May. Otherwise, red ink in varying degrees dominated.