July Jobless Claims Down But June 2012 Foreclosures Up, World Central Banks Ease – Cut Rates:
Jobless claims dropped by levels not seen in several months as less Americans applied for unemployment benefits. Initial jobless claims fell by 26,000 to a seasonally adjusted 350,000 the Labor Department said today. The fall in initial jobless claims brought this important barometer of the U.S. economy to the lowest levels since March 2008 but this is only one data point after several weeks of weak jobs growth. The jobs data does give some hope that the economy isn’t on the brink of double dipping into recession in the short run.
Housing Foreclosures Rise
Housing data took away some of the positive sentiment from the jobs report. Foreclosures are up according to data released today from RealtyTrac Inc. with California taking the lead on a year over year basis. Foreclosures in California jumped 18 percent from June 2011 while the national average increased 9 percent quarter to quarter and 6 percent year over year. The halt in foreclosures due to the Robo-signing scandals across the country only slowed down the inevitable as people still haven’t returned back to work and incomes aren’t growing.
World Banks Cut Rates, China GDP Could Drop Below 8 Percent
We expect more housing woes as more supply comes to the market which decreases prices. Investors are snapping up homes at fireside sale prices but finding less income earners and working people to sell or rent to. The data released today suggests the economy is still in need of more stimulus and fiscal policies that can help the economy turn around before the election in November. The Bank of Japan agreed yesterday to purchase more short term securities, Brazil’s Central Bank lowered interest rates and South Korea’s Central Bank also cut rates yesterday.
China will be releasing important numbers early this morning but with two rate decreases in less than a month after holding rates constant for four years, there is a possibility growth may come in under 8 percent. We believe there is a 60 percent chance number could come in at 7.5 percent or lower.
The Fed now has more ammunition to ease further and follow trends that are happening worldwide with central banks adding needed liquidity to the global financial system. Jobs trends won’t turn around soon enough to buttress an economy that’s teetering toward recession. We are still looking carefully at semiconductors and the dollar to monitor the impact on risk, technology and small caps.