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What recession? Recent economic indicators hint, contrary to bearish prognostications, that the U.S. economy may dodge a deep or protracted downturn. That would be good news for Canadian jobs, house prices and stock-market portfolios.
The good tidings included the release of U.S. payroll data showing job losses of only 20,000 in April against the consensus forecast of 75,000 losses. Also, estimates for first-quarter gross domestic product (GDP) growth came in positive, at 0.6 %.
However, it would be premature to breathe a sigh of relief. Disaggregated data can paint a different picture. The payroll survey showed marked increases in part-time work and decreases in work hours, developments that reveal less work to go around and the possibility of deeper cuts to come in payroll jobs.
Moreover, GDP estimates are subject to revision. “These numbers are going to be revised several times over the next year and those revisions are almost always to the downside during times of economic slowdown,” said Lakshman Achuthan, managing director of the Economic Cycle Research Institute, on CNN television.
It thus appears worthwhile to continue monitoring the state of the U.S. economy. In my previous column, several indicators were presented. Let’s gather up five more to get a fuller sense of where things are and where they are going.
1. U.S. mortgage market
Recovery in the U.S. housing market is influenced by mortgage rates, with downtrends obviously supportive. There are many places to get data on mortgage rates. One is Bankrate.com.
Usually, when the Federal Reserve eases rates, mortgage rates follow suit. So far, they have not fallen anywhere near to the same extent. In fact, rates on some mortgages have risen: those for “jumbo” amounts over $417,000 (U.S.) presently stand at 7.2%, more than a full percentage above the level a year ago.
2. Commodity prices
Commodity prices can have an impact at key points in the U.S. economic cycle. As Legg Mason mutual fund manager Bill Miller remarked in his latest quarterly report: “If commodities … continue to move steadily higher, they have the potential to destabilize the global economy ...”
A good source for commodity prices is Scotiabank’s quarterly Commodity Price Index publication. The April 24 issue reported a 5% jump in the All-items Commodity Price Index to a record high. Most sectors posted price gains, with the oil and gas index leaping most at 11.8%.
3. Bank lending
When central banks slash interest rates, it lowers the cost of borrowing. Commercial banks transmit the stimulus of lower rates to the economy by making more loans.
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