With the clock ticking down on the December 13 deadline set for a budget deal, the bet in Washington is that a very modest package will come out of negotiations led by Republic Representative Paul Ryan and Democratic Senator Patty Murray. The package would repeal some of the spending cuts imposed by the sequester in fiscal 2014
The market reaction to this morning’s jobs numbers is actually more interesting than the numbers themselves. Unlike other days this week when good economic numbers have pushed stocks and bonds downward–because the good news raised fears that the Federal Reserve might decide to begin to taper off its $85 billion in month asset purchases early—today’s good news is being treated as good news for the financial markets.
The U.S. stock market seems to like the lower than expected number of initial claims for unemployment reported today by the Labor Department. The problem is that the Labor Department has flagged the drop as, possibly, the result of seasonal adjustments from the November 11 Veterans Day holiday.
It wasn’t much of a hurdle, but it looks like companies jumped it in the third quarter. With 90% of the Standard & Poor’s 500 reporting, earnings are up 3.7% year over year for the quarter. Going into the third quarter, companies were projected by Wall Street analysts to show 1% earnings growth.
The GDP and jobs numbers have left the economy, the Federal Reserve, and the stock market pretty much where they all were before the data hit. The economy isn’t falling off a cliff but it isn’t growing fast enough to lead the Fed to move up the date of its taper from sometime in 2014.
Surprise. Actually two of them. First, the U.S. economy grew at a faster than expected 2.8% year over year pace in the third quarter. That’s up from the 2.5% rate for the second quarter. Second, the European Central Bank cut its benchmark interest rate to 0.25% this morning from 0.5%. That takes the benchmark rate to a new historic low.
If, as the Federal Reserve keeps saying, the decision on when to begin tapering off the central bank’s $85 billion in monthly asset purchases is data dependent, then this morning’s data really doesn’t provide a signal. The third estimate on second quarter U.S. GDP came in much as expected and so did the weekly claims for unemployment numbers
The U.S. economy added 169,000 jobs in August. That was slightly below the 177,000 jobs economists surveyed by Briefing.com were expecting. But aggregate earnings grew by 0.6%, signaling that consumption will stay strong enough to drive the economy
