The recent landscape of the U.S. economy has posed challenges for maintaining an optimistic perspective. However, there remains a bright spot amidst the mixed signals: initial jobless claims continue to show a positive trend. According to today’s report, new unemployment benefit claims rose slightly last week but still hover around a 15-year low. While some economic indicators appear shaky, new jobless claims stand out as a significant exception, signaling sustained growth in the labor market.
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Are the impressive gains of sector ETFs reaching their peak for this cycle, or is this just a temporary slowdown before the rally picks back up? At present, nearly all major U.S. equity sector ETFs remain in positive territory for the past year (252 trading days). However, several have recently traded below their 50-day moving averages for the first time since February. This recent dip may simply be market noise, yet it comes alongside mixed economic signals, suggesting that concerns surrounding the U.S. macroeconomic outlook may be contributing to this current sell-off.
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● ADP: April sees second consecutive month of less than 200k jobs added in the U.S. | USN&WR
● U.S. Job Creation Index reaches a new high of +31 | Gallup
● Largest drop in U.S. productivity in decades sends concerning signals | Bloomberg
● Eurozone retail PMI registers the highest level in 10 months for April | Markit
● Strong growth in global economic output and new orders during April | Markit
● German factory orders show recovery in March | RTT
● Industrial production in France unexpectedly declines in March | RTT
According to the latest ADP Employment Report, private-sector payrolls saw a modest increase of 169,000 in April. This uptick marks the weakest growth rate in 15 months and falls significantly short of the anticipated increase of over 200,000 based on Econoday.com’s consensus forecast. Such disappointing figures raise new questions about the robustness of the U.S. economy and what to expect from Friday’s official jobs report from the Labor Department.
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The Washington Post questions whether the U.S. has entered a new recession. This inquiry stems from the stagnant growth observed in first-quarter GDP, which only increased by a mere 0.2%. This fractional growth, when assessed on a quarter-over-quarter basis, indicates virtually no advancement. However, is this method of quarterly comparison the best approach for assessing GDP in terms of potential macroeconomic threats? It’s an important consideration, especially as the annual change in GDP for the first quarter indicates a considerably stronger trend. In fact, the GDP’s year-over-year increase of 3.0% reflects an acceleration, demonstrating the highest pace in over a year.
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● Growth in U.S. service industries suggests a rebound: ISM | Bloomberg
● Service sector job growth in the U.S. accelerates to a 10-month high in April: PMI | Markit
● U.S. trade deficit hits a six-year high | USN&WR
● Eurozone March retail sales fall short of expectations | Reuters
● Eurozone growth maintains momentum as production rises across major economies: PMI | Markit
● Growth in Chinese business activity is driven by the service sector in April: PMI | Markit
● EU raises growth and inflation forecasts for the Eurozone amid positive trends | RTT
For the upcoming April edition of the ADP Employment Report, private nonfarm payrolls in the U.S. are expected to see an increase of 195,000 (seasonally adjusted). This median forecast, based on multiple econometric estimates, indicates a slight uptick compared to February’s performance.
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Chicago Fed President Charles Evans advocates for delaying interest rate hikes until 2016. In his remarks yesterday, he emphasized the necessity of solid evidence indicating that wages are rising robustly before considering a rate increase. Presently, he noted, such evidence is lacking. Nevertheless, it appears that the Treasury market may not fully share Evans’ sentiments. Government bond yields have been trending upward, even in light of recent mixed economic reports.
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● U.S. factory orders see a solid rebound, though the overall trend remains soft | Reuters
● Global Manufacturing PMI drops to a 21-month low | Markit
● Producer prices in the Eurozone show signs of recovery | MarketWatch
● Reserve Bank of Australia lowers cash rate to a historic low of 2% | SMH
● Inflation expectations begin to rise | WSJ
● EU raises its growth outlook as ECB counters Greek uncertainty | Bloomberg
In April, the anticipated risk premium for the Global Market Index (GMI) decreased slightly for the second month in a row. The GMI, an unmanaged, market-value weighted mix of the major asset classes, is expected to yield an annualized 3.7% over the “risk-free” rate in the long term. This updated estimate reflects a decline of 10 basis points from last month’s projection of 3.8%, based on data through the end of last month.
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The U.S. economy has been under scrutiny recently, with mixed signals emerging from various sectors. Despite this, certain indicators, particularly initial jobless claims, continue to provide hope for ongoing growth in the labor market. The latest data suggests that while challenges exist, there are still areas of resilience worth noting.
In conclusion, while uncertainties remain in the economic landscape, monitoring key indicators will be essential for understanding future trends and making informed decisions. As we navigate this evolving situation, it is imperative to stay informed and adaptable.