Let’s review the numbers. On Monday April 15th, the S&P 500 Index1 closed within 0.86% of its September 20th high (St. Louis Federal Reserve data).
- The index is up 15.9% year-to-date (as of April 15).
- From its December 24th low, the index is up 23.6%.
- Growth has slowed but data aren’t pointing to a recession.
- Favorable headlines suggest a U.S./China trade deal is more likely than not.
- The Fed isn’t projecting any rate hikes this year and plans to stop shrinking its balance sheet by September – sooner than expected.
- Early read on Q1 earnings season – firms are topping low expectations (Refinitiv through 4/16/19).
The U.S. economy slowed late last year, and the economic data we’ve received since has been mixed. By mixed, it’s not that U.S. growth has stalled. If this were a baseball game, we’d be getting a mix of strikeouts, singles, and doubles. Still, with one important exception, our hitters aren’t knocking the ball out of the park as they were last year.
That important exception – first-time claims for unemployment insurance, which is a key leading indicator of economic activity. It can be volatile on a weekly basis, but the recent trend has been to the downside.
On Thursday, the Dept of Labor reported first-time claims fell 8,000 to 196,000 in the week ended April 6. It’s not only the lowest of the cycle, but it’s the first time claims have fallen below 200,000 in 50 years.
What is this telling us? It suggests fewer layoffs may be tied to a pickup in business activity. Note the rise in claims late last year (Figure 1). It reflects the slowdown in business activity.
Q1 earnings season unofficially begins on Friday, April 12.
- It kicks off with reporting from several major banks.
As of April 9, Refinitiv is forecasting a 2.5% drop in Q1 S&P 5001 profits.
It’s a stark contrast from double-digit growth in 2018.
On the first Friday of every month, at 8:30 a.m. ET, economists anxiously await the jobs’ report from the U.S. BLS. Over a longer view, an economy must generate jobs, period. But the monthly ritual probably gets too much attention. In the spirit of posting the numbers, the U.S. BLS reported that nonfarm payrolls rose by 196,000 (whew) in March and the unemployment rate held at 3.8%.