U.S. Data Today Add to the Dismal Overnight Releases

June 23, 2011

Weak European data and the befuddlement of officials set a gloomy market tone before the United States opened.  Three U.S. economic indicators released this morning haven’t helped the mood.

  • New jobless insurance claims totaled 429K in the week of June 18 and averaged 426.5K over the past four reported weeks.  In sequential four-week periods, the average had previously risen from 391K in the four weeks to March 19 to 409K in the 4 weeks to April 23, and 439K in the four weeks to May 21.  In a time not long ago, U.S. labor market conditions would be totally unacceptable.  The prevailing view in both major political parties feels that little can be done to expedite the jobs recovery other than let time pass.  A week labor market will hamper efforts to fix the long-term fiscal problem.


  • New home sales slid 2.1% in May to 319K, which was near expectations.  The big story here is the level, not the change.  Averaging 317K annually over the past three months, new home sales were 72.5% below their average of 1.156 million in 2003-06.  The continuing punk performance of the U.S. labor and housing markets is keeping the U.S. recovery in an awfully low and casts doubt on the new Fed GDP growth projections for the rest of this year and 2012.  The United States may shift up a gear, but it will be a hard pace to sustain so long as housing and jobs stay ill.  Even Japan has experience dynamics spikes of activity — on-year GDP advances of 3.9% in 4Q97, 4.2% in 1Q04 and 5.6% in 1Q10 — within a fifteen-year average expansion rate of 0.9%.  The spikes mean nothing.  Solid expansion has to be sustained, and that’s difficult when key parts of an economy are broken.


  • The Chicago Federal Reserve’s National Activity Index printed at minus 0.37 in May and posted an average reading of minus 0.47 in April-May, which was 0.55 points worse than the average score of +0.08 in the first quarter of 2011.  True, the auto industry was hammered by the Japanese natural disasters, which severed key supply lines, but these overall levels connote a weak underlying position.  Not enough service-sector jobs exist to absorb America’s growing working-age population, and it’s doubtful they ever will.  America has shown an impressive inventiveness and ability to apply new technologies to designing products that people like.  Sadly, this new industrial revolution has not translated into superior macroeconomic trends. 

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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