This we watched as world events obscuring somewhat better U.S. economic data, excluding new home construction. Initial unemployment claims continue to decline (we can debate why later) a trend, which seems to be in tact.
Sadly the overall employment situation seems to be very grim indeed as the numbers revel 7.5MM fewer payroll jobs available which means even if the labour forces shrinks with people becoming detached… we’re still down a significant amount of opportunities.
In residential investment, there has been a clear pickup in home improvement and multi-family construction. We are not sure why we are seeing this, as existing home sales for the first three months of the year are simply awful. Unsurprisingly and confirmed this week, housing starts will stay low until more of the excess inventory of existing homes is absorbed.
Conclusion? As we’ve been saying here for months the economy can improve and corporations can be successful while large swaths of the US get left behind. There is, however, a point where that can no longer is the case. We are now 30 years and three recessions into the “kicking the can” experiment. We wonder aloud if we might be in the last innings.
Of course all this data was obscured by world events. Most of the focus was on the Japanese nuclear issues, but North Africa (Libya), and the Middle-East (Yemen and Bahrain) were also front-page news.
The European financial crisis eased a little last week, and the next meeting of all 27 EU leaders will be in Brussels on March 24th and 25th (this coming Thursday and Friday).
While the horizon looks very clouded with potential Black Swans we do see corporations in pretty decent shape. The smell of friction does permeate the air and we are continuing to be vigilant about systemic and exogenous forces which may be looking to upset the apple cart.
From the Philly Fed: Highest reading since January 1984 and from the NY Fed Empire State Manufacturing Survey indicates faster growth in March .
This early reading suggests the ISM index will be in the 60s again this month. These were two strong reports, although price increases remain a concern.
• Core Measures show increase in Inflation
Over the last 12 months, core CPI has increased 1.1%, median CPI has increased 1.0%, and trimmed-mean CPI increased 2.1%. This graph shows these three measures of inflation on a year-over-year basis.
These measures all show that year-over-year inflation is still low, but increasing lately.
Also, all three increased in February at a higher annualized rate: core CPI increased at an annualized rate of 2.4%, median CPI 2.4% annualized, and trimmed-mean CPI increased 3.8% annualized. This is the second consecutive month with the annualized rate for these three key measures at or above the Fed’s inflation target. With the slack in the system, I have been expecting these core measures to stay below 2% this year.
• Weekly Initial Unemployment Claims decline to 385,000
Now the question remains why is this coming down and we continue to hear about many American’s unable to find a job? Our old friend Dan Alpert seems to have a thesis on this topic and it has to do with what he is calling the Real Employment Population Ratio. This series suggests that we are really in much worse shape that the weekly or monthly’s lead on.
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