“Silly season” for newsies is high summer, when there is so little news that “Man Bites Dog!” migrates to page one. In this late-spring week news is plentiful, but a lot of it is silly. Keep sense of humor close by.
The straight news aspects are brief, and pleasant. The surprise drop in long-term interest rates two weeks ago has held its new range, and the twin ISM reports for May rose just above the 55 level, the economy trending better than in the first four months of the year. But the level is not taking off: Imports are strong, exports sliding, the combination a GDP minus.
Today the monthly clincher, job data: 217,000 net new jobs. Some 63,000 in education and health, neither sector sustainable, one funded by debt, the other by theft. Lefties are thrilled to take presidential credit that we now have as many jobs as at the beginning of the recession. SEVEN years ago. Still, good news.
The most important aspect of jobs, by far: income. No significant growth there. Average hourly earnings rose by a nickel last month, 2.1 percent year over year, negative after inflation.
The Fed released its comprehensive Z-1 financial flows for the quarter ending March 31. Aggregate mortgage balances continue to fall, the pace slowing, but negative $38 billion in the first quarter. Write-offs of old trash still account for most of the decline, but every major category from Fannie to HELOCs declined. The net worth of U.S. households also hit a new high (trumpets on Left), but not much help to the half of the U.S. without any assets, or the ones they have underwater.
Despite the sourpuss attitude in the above, the U.S. economy is gradually creeping ahead and recovery may just be very, very long. We are in better shape by far than any other major region around the world.
President Obama had his most peculiar week in office. Isolation makes most of us odd (or odder, see Bergdahl). The EPA announced long-awaited CO2 limits on power plants, the president running around Congress to get it done. But the limits are why-bother timid: Here in Colorado we were already on 2030 track, and even coal states barely peeped.
L’affaire Bergdahl: worth doing, quietly and apologetically for a screw-loose AWOL. But the grandstanding was stupid, and running around Congress again stupider.
Immediately after, the president fled to Europe and asked for new support for eastern NATO. One billion dollars. ONE. An accounting error.
Europe understands these challenges to leadership, and misunderstanding by critics. Aside from U.S. job data, this week’s most anticipated global economic event: the European Central Bank at last to rescue Europe. Mario Draghi had created high expectations, and every trader was glued to screens Thursday morning, alert to big stuff. Instead, a fizzle in a fog of words. Embarrassing. Markets all over the world just sat there for hours, dumbfounded at pretentious thumb-twiddling.
In defense of the ECB, Europe’s predicament has always been beyond central bank repair (which a brave leader would say). The euro is a disaster made worse by predatory German behavior, insisting on its right to export to the others 3 percent of its GDP, loan them the money to pay the bills, and then insist on repayment in euro-gelt.
If you feel troubled by U.S. politics, consider France. Hollande’s socialists last week came in third — 18 percent — in French Euro-parliament voting. BNP Paribas has been caught red-handed laundering terrorist cash in huge volume, a $10 billion U.S. fine and demand for executive resignation pending. Hollande is outraged.
He has used the D-Day anniversary to explain to all that Vladimir is misunderstood and a fine fellow. He is also a customer. France refuses to cancel Russian orders for two helicopter carriers, worth about $1.6 billion. These two tubs are of no strategic importance, but France could pull them into what’s left of its navy. Silly me — neither France nor any in Western Europe is willing to spend for self-defense.
Back to reality. Markets are too quiet. The principal force holding down U.S. rates is trouble elsewhere, and growing strength here can overwhelm the external.
Lou Barnes is a mortgage broker based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.
