Economic Comments

United States

Stephen Davis of U of C Economist recently analyzed job listings. It’s taking 27.4 days to fill a job listing versus 12.6 days in 2010. Sluggishness overall in the job market is affecting growth The 400,000 “job growth months” of previous recession recoveries haven’t happened yet and may not in this trend. Growth is muted. On June 17th the Federal Reserve met and held off raising interest rates. They stated they are waiting for the economy to show strength, which may be a while. The international problems, discussed below are causing even more concern.


The May economy added 201,000 jobs in line with the 200,000 estimates, yet the unemployment rate rose from 5.4% to 5.5%. At the beginning of a sustained recovery unemployment will often go up due to new entrants into the job market as things begin to feel better. We hope to see job growth and hiring on a sustained path going forward, yet expect the unemployment rate to rise a bit at the same time.
The first quarter showed negative gross domestic product growth GDP growth – if we have two quarters of negative growth that is officially a recession. We will see the April thru June quarter in early July and see if the economy recovered form the 1st quarter.




Greece is the big story as we enter July. The slow unwinding of an economy and a society remains on display every day, generating disturbing headlines. We are sad for the Greek population and hope this problem is solved soon. All that said we are not concerned about the Greek meltdown related to overall economic growth. Greece is a small country and should not effect the European GDP any more than the Detroit meltdown effected the overall US Economy in the last decade.



We are more concerned about China. China is recessing. We feel that given the bias toward population growth in China, and all the economic growth that this naturally causes, that economic growth below 5% level is probably a recession for China. Things have turned south in China. Exports are down 2.5% year over year and imports are down 17.6% also, after a tough April, where imports dropped 16.2%. We have been repeatedly told that the Chinese government can handle all and can manage the downturn. That increasingly doesn’t appear to be true. China is a manufacturer and also an end market for the world, as their citizens are buying goods and services that most developed countries already have. China is still, for sure, an emerging market. The risks here for US Investors are simply that the Chinese economy slowdown causes disruption in the rest of the developed world. In short, if China sneezes further, we all catch a cold! We will watch official and unofficial information sources to keep abreast of this trend. Stay tuned for more!




US Stock Markets through June 30th

Through the end of June, the Markets have been sluggish in the US.
SPX down 0.99% for June up 0.20% YTD
COMP up 0.31% for June and up 5.30% YTD
DJIA down 1.44% for June and down 1.14% YTD
RUT up 0.75% for June and up 4.75% YTD


Leading Sectors: Health Care up +9.65% YTD; Cons Cyclical up +6.90% YTD.
Lagging Sectors: Utilities down -11.86% YTD; Energy down -5.95% YTD


June was a sloppy month, but trends have not fundamentally changed. All our indicators are still positive and remain in an uptrend. This is a sluggish period for the US markets. Various short term reactions might turn into a buying opportunity.
International Markets through June 30th

MSCI EAFE (Europe Asia Far East) – up +3.81% YTD
MSCI EEM (Emerging Markets) – up +1.67% YTD



In US dollar terms, International stock indexes are acting better than US indexes, with the bias leaning toward developed markets over emerging markets. If this trend continues, and the international relative rally continues, this could be the signal that in the next 6-12 months the European and developed economies also begin to recover.



Comments we have Heard

“The markets have called all ten of the last 2 recessions”

Translation: Markets can react sharply to future expectations in the short run, but expectations can often be overdone and the panic fades. A market pullback, like we have seen in June, does not necessarily signal an economic collapse.