The outlook for the US economy has hit a rough patch lately, according to some indicators, but you wouldn’t know it from the weekly updates on jobless claims. This leading indicator continues to paint an upbeat profile for the labor market, which suggests that whatever’s weighing on the broad macro trend will soon fade.
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● Jobless claims fall to nearly 15-year low | USA Today
● US leading economic index rose 0.7% in May | MarketWatch
● Inflation Genie Slow to Emerge, Affirming Fed’s Gradual Path | Bloomberg
● Consumer Comfort in US Climbs After Falling Record 9 Weeks | Bloomberg
● Philly Fed Index Jumps To Six-Month High In June | RTT
● What happens next if Greece defaults on IMF? | Reuters

The Federal Reserve is talking about raising interest rates, but it’s also lowering growth expectations. No wonder the market’s uninspired to do much of anything at the moment. The benchmark 10-year yield was unchanged yesterday at 2.32%, based on Treasury.gov data. That’s still moderately elevated vs. the below-2% levels at various points in recent months. But the current rate is also below the 2.50% yield we saw earlier this month. For now, the upside bias is on hold.
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● Fed signals it’s on track for September rate hike | USA Today
● Fed holds off on interest rate hike, downgrades economic forecast | LA Times
● Mortgage applications drop 5.5% on rising interest rates | HW
● Eurozone return to inflation confirmed as energy impact wanes | Reuters
● U.K. Retail Sales Rise Unexpectedly In May | RTT
● Investors brace for more volatility as Greece eyes default | CNBC

Several economic reports in recent weeks have raised questions about the strength and durability of US growth for the near-term future, but a broad review of the numbers through May still suggest that the general trend remains positive. Certain corners of the economy paint a worrisome profile—industrial output, for example. Nonetheless, a diversified mix of indicators from across the US macro spectrum imply that NBER won’t declare May as the start of a new recession.
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● U.S. Housing Starts Pull Back, but Permits Point to Pickup | WSJ
● Preview – Fed eyes mixed bag of data as new rate “regime” nears | Reuters
● UK Jobless Remains At 7-year Low; Wage Growth Tops Forecast | RTT
● Bank of England officials unanimous in keeping rates on hold | WP
● Greek Central Bank Warns of ‘Uncontrollable Crisis’ if Bailout Talks Fail | WSJ

Is the US on the cusp of a new recession? The latest numbers on industrial production suggest that business-cycle risk is rising. Why, then, don’t we see confirming signals from other key indicators? Notably, payrolls are still rising at a solid pace (in year-over-year terms)—ditto for real personal consumption expenditures. The industrial sector is clearly weak, and getting weaker, but for the moment this appears to be an isolated downtrend. It could turn out to be something darker, although a broad review of the numbers suggests otherwise, based on current data.
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● US industrial output hurt by weakness in manufacturing, mining | Reuters
● NY Fed Manufacturing Index Unexpectedly Falls in June | WSJ
● US manufacturing sector said to be in a technical recession | MarketWatch
● US Housing Market Index Jumps To Nine-Month High In June | RTT
● UK Inflation Turns Positive In May | RTT
● ZEW: German economic sentiment hits 5-month low | MarketWatch

Housing starts are expected to total 1.083 million units (seasonally adjusted annual rate) in tomorrow’s update for May, according to The Capital Spectator’s average point forecast for several econometric estimates. The projection represents a moderate decline in residential construction vs. April.
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The US equity market has regained front-runner status for the trailing one-year return (250 trading days) among the major asset classes, but the edge is looking considerably less impressive compared with the glory days of recent years. In fact, rolling one-year returns overall are a diminished lot lately, based on our standard set of ETF proxies that track broad measures of the global opportunity set. There are fewer positive returns for the trailing 250-day period while the performance histories that are still in the black reflect relatively modest gains  vs. recent history. In short, earning a risk premium isn’t getting any easier.
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