(By Jeffery A Miller) Economic growth continues at weak, below trend levels just at the time the stimulus programs are wearing off. For some this implies that the next recession is just around the corner.
From another perspective the current economic growth has occurred in spite of a major drag from reductions in government programs (see Gene Epstein in this week's Barron's) and contraction in housing. If these two factors just got back to neutral, it would reduce the drag by two percent or so, revealing the true underlying strength of the private economy
Is there any hope from the housing sector? Even some stability?
I will have some ideas in the conclusion, but first let us review last week's data.
Background on "Weighing the Week Ahead"
There are many good sources for a list of upcoming events. In contrast, I single out what will be most important in the coming week. My theme is an expert guess about what we will be watching on TV and reading in the mainstream media. It is a focus on what I think is important for my trading and client portfolios.
This is unlike my other articles at "A Dash" where I develop a focused, logical argument with supporting data on a single theme. Here I am simply sharing my conclusions. Sometimes these are topics that I have already written about, and others are on my agenda. I am putting the news in context.
Readers often disagree with my conclusions. Do not be bashful. Join in and comment about what we should expect in the days ahead. This weekly piece emphasizes my opinions about what is really important and how to put the news in context. I have had great success with my approach, but feel free to disagree. That is what makes a market!
Last Week's Data
Each week I break down events into good and bad. Often there is "ugly" and on rare occasion something really good. My working definition of "good" has two components:
- The news is market-friendly. Our personal policy preferences are not relevant for this test. And especially -- no politics.
- It is better than expectations.
The general economic data was a little better this week, while earnings were softer.
- Job openings are better. I tend to view this as information about structural unemployment, but The Bonddad Blog sees it as a predictor of better employment data ahead. It is an interesting analysis. If you can figure out this chart you do not read to need the article. For the 0ther 99.9% of you, check out the whole story!
- Economists from a variety of sources see continuing economic growth. These are really intelligent people who have professional careers in trying to get this right. They are not employees of firms trying to sell stocks. Despite this, many readers will decide that these sources are misguided. They will instead listen to bloggers who have zilch as a track record (except maybe being "early" in forecasting the 2008 recession). Go figure.
"Compared to last month's assessment, the CLIs for Japan and the United States show stronger signs of improvements in economic activity, pointing towards an expansion. In the Euro area, the CLIs for France and Italy continue to point to sluggish economic activity below long term trend. The CLIs for Germany and most other Euro area economies show slightly more positive signals.