Less Strength but More Resiliency
- This week’s light compliment of economic reports shows the economy continuing to expand at a modest pace and further diminish the downside risks. The trade deficit was smaller than expected, hiring plans increased to their highest level since June 2008 and weekly unemployment claims declined.
- Nonfarm productivity grew at a 1.6 annual rate in Q2 but rose just 1.1 percent over the past year. With the labor force growing just 1.1 percent over that period and average weekly hours unchanged, the economy needs to grow only 2.2 percent in order to keep the unemployment rate from rising.
- Import prices fell 0.6 percent, with petroleum prices falling 1.6 percent. Excluding food and energy, prices fell 0.4 percent.
Is This The Calm That Precedes The Tempest?
- Global markets have taken a breather during this week after a volatile environment during the previous week when "help-ison-the-way" commentaries by European officials did not come to fruition. This calm does not seem real or based on an understanding that all is well now and that we should not be concerned with the potential effects of a worsening of the Eurozone crisis.
- During the 2008 and 2009 crisis, fear and a rush to prevent a total collapse of the world economy worked as catalysts to move governments to action across the world. Such distress does not exist today and thus, in its absence, policymaking will remain cautious.