Economic Update 06/10/13

A REASSURING JOBS REPORT

A jittery Wall Street liked the big picture it saw in the Labor Department’s May employment report. The economy added 175,000 jobs last month: decent hiring growth, not dismaying to investors, yet not impressive enough to signal the Federal Reserve to taper off QE3. Economists polled by Bloomberg forecast payrolls rising by 163,000. The jobless rate ticked up to 7.6% in May as more people started looking for work; the private sector hired 178,000 new employees and the number of discouraged job seekers hit a 52-month low. The Dow had its best day since January on Friday, rising 207.50 in response.

FACTORY ACTIVITY CONTRACTS IN MAY

That was the message sent by the Institute for Supply Management’s latest manufacturing PMI. The May reading dropped 1.7 points to 49.0%. On the other hand, the ISM service sector PMI rose 0.6 points in May to 53.7.

FED BEIGE BOOK HINTS AT SLOWER GROWTH

The central bank’s latest anecdotal survey of businesses, lenders and other segments of the private sector noted “modest to moderate” economic expansion, as opposed to the “moderate” growth referenced in the previous edition. It did report a “moderate to strong pace” of expansion in the real estate sector.

STOCKS RISE, 10-YEAR TIPS REAL YIELD GOES POSITIVE

Volatility didn’t stop stocks from advancing last week – the Dow rose 0.88% to 15,248.12, the NASDAQ 0.38% to 3,469.22 and the S&P 500 0.78% to 1,643.38. NYMEX crude soared 4.4% for the week to settle at $96.03 Friday. Another factoid of interest: the real yield of the 10-year note went into positive territory this week for the first time since January 23, 2012.

THIS WEEK: The data stream looks to be fairly light this week. Monday offers earnings reports from Lululemon, Pep Boys and Annie’s. Nothing major is scheduled for Tuesday. Men’s Wearhouse and H&R Block announce quarterly results on Wednesday. Thursday, the Census Bureau provides its May retail sales report, Casey’s General Store reports earnings, and the latest initial jobless claims figures arrive. Friday sees the release of May’s Producer Price Index, the Federal Reserve’s report on May industrial output and the University of Michigan’s preliminary June consumer sentiment survey.