Jobless claims fell slightly last week, dropping by 6,000. That’s good news. The trouble is that we’re still at an elevated 472,000 on a seasonally adjusted basis. One data point doesn’t say much, of course. What does the longer-term trend show? Lots of volatility recently, but nothing much has changed.
A BRIGHT LIGHT IN A DARK ROOM
Manufacturing activity turned up again last month, the Institute for Supply Management reported yesterday, offering the first statistical review of August’s economic profile. The crowd was pleased: stocks soared and bond prices fell. But the bigger test of the trend in August comes tomorrow, when the government’s payrolls report for last month is published.
A WARNING SIGN FROM “STICKY” INFLATION?
When we last checked in with the monthly consumer price index, headline inflation was running at an annualized 1.2% pace as of this past July, off sharply from 2.7% in January, the Labor Department reported. Clearly, the trend so far this year is down. The question is whether we’re headed for even lower rates of inflation? Or deflation?
IS THERE AN AUSTERITY TRAP?
Bloomberg has a story that suggests that fiscal austerity NOW isn’t all it’s cracked up to be. Ireland has tightened its belt, but to what end? For the moment, this isn’t an encouraging argument for going hawkish.
THE FED MUST MANAGE EXPECTATIONS
The case for thinking that effective central banking is all about managing expectations is persuasive. There are lots of formal papers arguing for no less, and the numbers confirm that this is indeed how the world works.
SPENDING & INCOME RISE IN JULY. YES, BUT…
Disposable personal income (DPI) and personal consumption expenditures (PCE) gained 0.2% and 0.4%, respectively, vs. flat performance in June, the Bureau of Economic Analysis reported today. That’s encouraging, as these things go in the summer of 2010. But as usual, the fine print leaves room for debate.
MOMENTUM PROFILE FOR THE MAJOR ASSET CLASSES
Momentum isn’t everything, but it’s hardly chopped liver. You could spend the next several months reviewing the literature published over the past two decades that make a case for showing a little respect for price momentum, or the tendency of prices to continue moving in the same direction relative to recent history. Should you focus exclusively on momentum for managing portfolios? No, of course not. But neither should you ignore it.
READING ROUNDUP FOR SUNDAY: 8.29.2010
►After the Fall
Carmen M. Reinhart and Vincent R. Reinhart/working paper presented at Kansas City Fed conference
“Real per capita GDP growth rates are significantly lower during the decade following severe financial crises and the synchronous world-wide shocks. The median post-financial crisis GDP growth decline in advanced economies is about 1 percent.”
►Hiring, Manufacturing Probably Cooled on Signs U.S. Recovery Is Stumbling
Shobhana Chandra/Bloomberg
“Hiring and manufacturing probably cooled in August, showing companies are scaling back as the U.S. recovery shows signs of stumbling, economists said before reports this week.”
THE MORNING AFTER BERNANKE’S SPEECH
At yesterday’s central banking confab in Jackson Hole, Fed Chairman outlined what the Fed can do to further juice the economy. The initial reaction from the stock market was positive, with the S&P 500 jumping 1.7% on Friday. But in a sign of the treacherous road ahead, the bond market was unimpressed. Bonds sold off yesterday and the benchmark 10-year Treasury Note yield rose to 2.65%, the highest since August 13. Yes, folks, it’s going to get complicated from here on out.
GDP REVISED DOWN TO 1.6% FOR Q2
The U.S. economy grew at a tepid 1.6% annualized real rate in this year’s second quarter, the government reported today. That’s down from the earlier estimate of 2.4% growth. The revised 1.6% rise is slightly higher than consensus forecast among economists, but there’s no getting around this uncomfortable fact: the economy slowed dramatically in Q2, falling to a 1.6% pace from 3.7% in Q1.