Friday Economic Snapshot: Fed to continue asset purchases
Happy Friday! Wall Street is currently hyperventilating over a trading glitch at the Nasdaq, David Cassidy got himself a DUI, San Diego’s allegedly gross mayor may be heading for the exit and a massive sinkhole is swallowing up trees in Louisiana — yes, it’s officially a slow news week as we slide our way toward Labor Day.
In economic news, the Fed’s eventual tapering gained headlines, while existing-home sales spiked, unemployment claims increased a negligible amount, American manufacturing showed signs of health and the stock market exhibited very little fluctuation one way or another.
Sure, it’s quiet out there, but as we move into the tail end of the marine industry’s selling season, it’s good to know summer-like has returned and some key economic indicators are holding strong. Let’s take a look…
By far the big econ news of the week, the Federal Open Market Committee discussed the government’s ongoing asset purchases and concluded that, given the still-lackluster labor force participation, it’s still too soon to “taper” these purchases and stop directly stimulating the economy. That said, the group of Fed policy makers expressed broad support for eventually reducing asset purchases, most likely later this year.
It’s a good sign that the Federal Reserve is basing its decisions on the true employment picture, rather than just the overall unemployment rate, which masks a lot of underlying trouble in the American labor market. Workers continue dropping out of the pool, hiring remains sluggish, and many of the new jobs are low-paying work. These are not the ingredients for a full economic recovery.
Our economy is strong and getting stronger all the time, but it’s not ready to stand on its own two feet — not just yet.
From the National Association of Realtors, existing-home sales jumped solidly in July, and the median price showed double-digit year-over-year gains.
From the report: “Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 6.5 percent to a seasonally adjusted annual rate of 5.39 million in July from a downwardly revised 5.06 million in June, and are 17.2 percent above the 4.60 million-unit pace in July 2012; sales have remained above year-ago levels for 25 months.”
And that 25 months they’re talking about is the duration of our housing recovery. Mortgages have shown some significant jumps, which have yet to show an impact, so it will be interesting to watch housing data. Given some of the fears of a bubble, it might be nice to see things moderate slightly to help economists and business owners sleep better at night.
For those of you expecting the Snapshot to get into unemployment (wait for it), here’s something new, the American Trucking Associations’ Truck Tonnage Index. It’s a lesser-followed indicator, but it provides valuable inside info: a measure of home much tonnage is being shipped around American roads.
The For-Hire Truck Tonnage Index dipped 0.4 percent in July, but it has posted a 4.7 percent year-over-year gain showing that, even though the summer weather has been challenging, 2013 has been an incrementally positive year overall.
“After gaining a total of 2.2 percent in May and June, it isn’t surprising that tonnage slipped a little in July,” ATA Chief Economist Bob Costello said. “The decrease corresponds with the small decline in manufacturing output during July reported by the Federal Reserve last week.”
“Despite the small reprieve in July, we expect solid tonnage numbers during the second half of the year as sectors that generate heavy freight, like oil and gas and autos, continue with robust growth,” Costello said. “Home construction generates a significant amount of tonnage, but as mortgage rates and home prices rise, growth in housing starts will decelerate slightly in the second half of the year, but still be a positive for truck freight volumes. Tonnage gains in the second half of the year are likely to overstate the strength in the economy as these heavy freight sectors continue to outperform the economy overall.”
For once, the stock markets seem to be mirroring reality; it’s quiet out there. Unemployment ticked up ever so slightly, but the four-week average is the lowest since November 2007. The Kansas City Fed’s Tenth District Manufacturing Survey showed further strength in the manufacturing segment with exports also edging higher.
I guess the folks at Nasdaq are right: nothing big is happening and it is still August for eight more days, so let’s shut the markets down and head to the lake.