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Is the Economy Really Improving?
05/09/2014 12:01 am EST
A review of the recent economic data by MoneyShow's Jim Jubak provides some insights on how investors and traders should be viewing the stock market.
For the week ahead, I think you can look forward to a return to, well, a strong muddle for the US economy. There have been some worries that the US economy was slowing. We had this really strange report on initial claims for unemployment for the week that ended April 26, which showed a big spike in initial claims—new. This has people filing for unemployment for the first time. It went up to 344,000, which is a big jump from where it had been like 320–330. People said, “hmm, what’s going on with the labor market?”
And then we got the April jobs numbers, where we had this big—normally great—drop in the unemployment rate, down about 6.3, but we had a huge number of people leaving the workforce, so that, in fact, while we had a big increase in the number of people with jobs, we had a huge decrease in the actual number of people working. It was very strange so that—and people saying, “Well, what’s going on, what’s going on with the economy? If the economy was strong, we wouldn’t be seeing these kinds of numbers?” So this has been sort of lurking in the background.
The good news has been sort of equivocal, but we’re starting to get I think a better picture. We’re starting to ooze back some seasonal problems caused by Easter and the numbers, and now, on May 8, what we had was a pretty good retail sales number. This was for April, so we had stores like Costco that were supposed to do like a 3% increase in same store sales and they were reporting 5%, so we’re getting that kind of strength going forward, not enough to really say the US economy is overheating, but enough to remove the doubts about the strength and then we had an initial claims report for the week that ended May 2, which really sort of went back to where we were before that spike, so we’re talking about 320,000, or so, new claims, which is about where we’re running—319 to be exact, which is about where we’re running, so 320, 330 is in—it corresponds with our sense of this being an economy running, as I said, a strong muddle.
Janet Yellen gave testimony that said basically, hey, you know the fed just feels okay, but we’re watching the slowing in the housing market with some concern. Again, that boils down in my mind to a strong muddle, so we’re seeing in some ways a continuation of the Cinderella economy, which is that its strong enough to be giving some promise of growth, but not so strong that it’s really making the fed think about speeding up the taper or raising short-term interest rates before the end of 2015 to 2016, so the best of both worlds. Whether that’s enough to move the stock market higher from here remains to be seen, but it’s a pretty good indication that well, at this level things are relatively comfortable for investors and traders.