Welcome to CrushTheStreet.com’s Weekly Market Wrap-Up!
Our top news item for the week is the growing schism between allegedly improving economic metrics versus underlying realities that contradict rational optimism. According to a recent Reuters article, the number of Americans filing new claims for unemployment benefits fell to the lowest level in nearly 8-1/2 years last week, indicative of positive traction in a highly embattled and politicized public issue. However, the Labor Department on Thursday reported deceleration in factory activity in the current month, and for June, a substantial decline was recorded for new home sales, all real-time warning signals that the economic recovery storyline parroted by the mainstream media is more fiction than fact.
The government agency stated that initial claims for state unemployment benefits declined by 19,000 to a seasonally-adjusted 284,000 for the week ended July 19th, the lowest level since February of 2006. Running in parallel are employment figures, which have grown by more than 200,000 jobs in each of the last five months, a stretch not seen since the late 1990s.
While the stats on paper appear impressive, the compositional context suggests a dilution in the labor market to make those numbers possible. According to ADP, one of the largest providers of business processing and cloud-based human resources solutions, hiring figures between January and June of this year is mostly coming from small businesses; in fact, this category never failed to achieve the top spot during the aforementioned time period. This is problematic for several reasons, key amongst them is that small businesses are, by nature, small : their relatively lower revenue cannot support a wide-ranging hiring effort, and various state laws impose regulations that can have a punitive effect on small business owners exceeding a pre-defined employment threshold.
What this translates to is a lift in menial or part-time labor at the expense of lower wages. Those that have work are stuck in place, with growth opportunities limited by the increasing scope of corporate layoffs. This condition is further evidenced by the hit in new home sales. While the mainstream media poses the argument that such data is inherently volatile, a research report released earlier this week by RBC Capital Markets forecasts that home-building rates will remain low over the next couple of years due to slowed population expansion and the hefty challenges to attain a mortgage. “Slower demographic growth, a soft labor market, tight lending standards, and a sharp increase in the cost of home ownership will make incremental volume growth more difficult to achieve if [economic growth] continues tracking in the range of 2% to 2.5%,” RBC analysts wrote.
Real estate performance has disappointed industry experts, with a weak first quarter negatively impacting sales estimates for the remainder of the year, a sentiment that investors should note. Meanwhile, Wall Street had a slow day on Thursday, with the major indices ending at parity against the prior session.
The precious metals complex disappointed as traders closely monitored developing fundamental headlines. Both gold and silver were down sharply, with silver taking the brunt of the damage with a 2-and-a-half percent loss of valuation. Palladium, on the other hand, managed to pare down its losses, losing a slight tenth of a percent. Bitcoin also disappointed when the digital currency moved sharply south towards the tail end of the week, although it managed to maintain the psychological threshold of $600 dollars.
And that will do it for this edition. Thanks for watching and we’ll see you next week!