This will be a quick post because I am actually on vacation today and for the rest of the week, but am still reading the papers and thought I would write a quick note.
The big news, in all of the papers, is the reduction in rates by the European Central Bank and by the Chinese central bank. In addition, the U.K. central bank committed to additional bond buying. The expansion of monetary easing around the world suggests that while solvency may remain a problem, the authorities have determined that liquidity will be less of one. How quickly and extensively the stimulus created by the lowered rates will percolate through the economies is open to question, but, at least, the monetary authorities are moving. In my opinion, this is particularly good news in Europe, which needs the stimulus.
In the U.S., there are also positive signs—in this case, that the summer employment slowdown might not be as bad as feared. After a strong first quarter and relatively weak second quarter, employment growth seems to be coming back. The ADP employment survey came back with an increase of 176,000, suggesting that employment is starting to grow more quickly again. The decline in initial jobless claims to 374,000 from the previous week’s 388,000 also suggests that the weakness might be passing.
Finally, while the release of the Institute of Supply Management (ISM) non-manufacturing index was somewhat disappointing, with a decline from 53.7 in May to 52.1 in June, it remains positive; and the employment component of the index actually rose, from 50.8 to 52.3, suggesting that employment growth may start to pick up again. We will know more tomorrow, but at this point the signs are encouraging for employment growth.
It’s a beautiful day and I will be taking my son to the pool shortly, so I am going to leave it at that. Hopefully we will have more good news tomorrow. Have a great day!