New filings for unemployment benefits fell 16,000 last week to a seasonally adjusted 269,000, according to this morning’s weekly report from the US Labor Department. The slide represents a timely challenge to the dark outlook that’s currently reflected in a markets-based forecast for the US economy. In other words, there’s enough ambiguity to keep the crowd guessing, which means that the days ahead could be decisive for deciding which side of the debate about the business cycle is accurate. But for today, at least, there’s a new number in town for the macro profile and it offers an upbeat data point to consider.
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Fed Chair Janet Yellen yesterday said that the recent weakness in financial markets may be a warning sign for the US economy. “Financial conditions in the United States have recently become less supportive of growth,” she advised in testimony before the House Financial Services Committee on Wednesday. “These developments, if they prove persistent, could weigh on the outlook for economic activity.” Yellen’s concern is well founded in the current climate. In fact, looking at the latest market numbers through yesterday (Feb. 1110) paints a grim picture.
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● Fed’s Yellen Sounds a More Cautious Note on US Economy | NY Times
● Assessing Yellen’s Warning That Markets Pose Threat to Economy | Bloomberg
● Mortgage refi applications spike due to low interest rates | HousingWire
● Ex-Fed’s Bernanke: Negative Funds Rate Unlikely in Near Future | MNI
● German bond yields sink as Fed seen cautious on rates | Reuters
● The global trade slowdown hits the US Northwest | Seattle Times

The positive bias to the US stock market over the long run means that drawdowns rarely exceed 10%. But this isn’t one of those times. The S&P 500 is posting a decline in excess of 10% from the market’s previous peak, offering one more sign that the trend is weak—the weakest, in fact, in several years, according to this metric.
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● Donald Trump and Bernie Sanders Win in New Hampshire | NY Times
● Yellen to face Congress amid uncertainty on Fed policy | WaPo
● US job openings at near-record 5.6 million in Dec | CNBC
● US small business optimism index falls to 2yr low in Jan | Fortune
● Redbook: US retail sales fell 2.6% in first week of Feb vs. Jan | WSJ
● US wholesale inventories edge lower in Dec | RTT
● UK industrial output falls sharply in Dec | MNI
● France’s industrial output surprisingly weak in Dec | MarketWatch
● Italy Industrial Production Falls Unexpectedly In Dec | RTT

Yesterday’s tumble in US equities fueled another leg down in Treasury yields. As the bear market in stocks rolls on, the crowd continued to rush into the safe-haven trade, pushing the 10-year yield down to 1.75% yesterday (Feb. 8)–the lowest level in about a year, based on daily data via Treasury.gov. Meanwhile, the 2-year yield—considered the most sensitive spot on the yield curve for rate expectations—tumbled to 0.66%, the lowest in nearly four months.
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● Fed’s labor index falls in Jan to lowest level in 10 mos. | MarketWatch
● US Employment Trend Index increased in Jan, But at slower pace | CB
● The World’s Economy Soared Last Year (or Plunged) | NY Times
● Central banks make global economy vulnerable, says OECD adviser | Bloomberg
● India’s GDP grows 7.3% in Q4:2015, outrunning China | AP
● Japan’s Bond Yields Follow Interest Rates Into Negative Territory | NY Times
● IEA Raises Estimate of Surplus Oil Supply on Higher OPEC Output | Bloomberg

The crowd piled into investment-grade bonds last week as economic worries triggered an exodus out of risky assets. Reviewing the major asset classes for the week just passed through an ETF lens reveals sharply divided results. The safe-haven trade generated handsome gains for several ETFs representing broad measures of the global fixed-income realm for the five trading days through Feb. 5. Even the usually weak corner of emerging-market government bonds caught a break. Stocks, REITs, and commodities, by contrast, suffered hefty losses.
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● US jobs growth slows in Jan; jobless rate hits 8-yr low | MarketWatch
● Sluggish jobs report raises questions about US economy | LA Times
● Yellen to Balance Confidence With Caution in Testimony | Bloomberg
● Strong US dollar stokes recession fears | Sydney Morning Herald
● U.S. consumer credit rose $21.3 billion in Dec | MarketWatch
● Global growth now fraying at the edges | FT

● Shrinking the Earth: The Rise and Decline of American Abundance
By Donald Worster
Summary via publisher (Oxford University Press)
The discovery of the Americas around 1500 AD was an extraordinary watershed in human experience. It gave rise to the modern period of human ecology, a phenomenon global in scope that set in motion profound changes in almost every society on earth. This new period, which saw the depletion of the lands of the New World, proved tragic for some, triumphant for others, and powerfully affecting for all. In this work, acclaimed environmental historian Donald Worster takes a global view in his examination of the ways in which complex issues of worldwide abundance and scarcity have shaped American society and behavior over three centuries. Looking at the limits nature imposes on human ambitions, he questions whether America today is in the midst of a shift from a culture of abundance to a culture of limits-and whether American consumption has become reliant on the global South.
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