Kamis, 02 Mei 2013

Claims: it just doesn't get much better

The number of people getting laid off these days is very close to as low as it is ever going to be. U.S. businesses have just about completed their adjustment to the new realities set in motion by the Great Recession. The adjustment chapter of this business cycle is closing, and now the focus turns to the growth and expansion chapter. So far it's not very exciting at all; quite dull in fact. But the stage is set for some impressive growth if Congress can get the right policies in place. What's needed: continued cutbacks in government spending; entitlement reform; reduced regulatory burdens; lower and flatter taxes; and yes, repeal of Obamacare. 

The first chart above shows the seasonally adjusted level of claims, which has reached a new post-recession low. The second chart shows the actual level of claims, which hasn't been this low at this time of the year since 2007. Claims might drop a bit more by the end of the year, to around 250K, but it's unlikely we'll see anything lower. 

The number of people receiving unemployment insurance has been falling at a 20% annual rate for over six months. In the past year, almost 1.3 million more people are either working or have an increased incentive to find and accept a job. This is a very healthy change on the margin.

Announced corporate layoffs have been very low for over 3 years.

If there is one important message here it is that based on very timely data (weekly claims, reported with less than a one-week lag) there is absolutely no sign of any sudden economic weakness or impending recession. This economy is highly likely to continue to grow, even if at a relatively slow rate. In the absence of recession, and with continued growth very likely, it is very unlikely that corporate profits are going to sag, or that corporate cash flows are going to dry up. Equities and corporate bonds thus look very attractive relative to the almost-zero yield on cash.

The Fed is trying hard to encourage people to take on more risk, and the data coming from the economy makes a compelling case. If Congress could get its act together we'd be off to the races.

Tidak ada komentar:

Posting Komentar