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Better News Ahead?

It’s a new month, which is as good of a time as any to look around to see how the ongoing stories of the year are progressing. For an election year it’s been very dull, with Congress clearly running on their record of getting nothing done. As we slip into the daze of summer, there hasn’t been good news on the biggest stories running, the economy and Ukraine. But both stories have a chance of improving in the near future.  Here’s what to look for.

After a bit of a scare this winter, the economy is back in focus. First quarter GDP was revised downward to a net -1.0 growth, which is very scary all around. The main reason given was that inventories ran leaner than expected, which is also a god sign for quarters to come. It was all blamed on the bad weather across the nation, which may be true. We won’t know until we see how this quarter is doing. So what do we have to go on to hazard a guess as to whether we’re rebounding?

The short answer is that initial claims for unemployment are about the only real-time data that we have to go on. It’s generally accepted that the economy won’t rebound until we have a better employment picture (and that we won’t have better employment until the economy rebounds). Given that the two are linked so closely, we can take a guess from the net growth in jobs, which is to say the lack of a net loss of jobs. Here is a close-up of the data from mid 2011 on, about the time things started to seem a bit better:

InitClaims

Note that while the trend has been downward, there was a spike back up leading into January that only went back down in Spring. Initial claims are running about 30k per week (120k per month) less than they were last year at this time now, but last January were about where they were in 2013. There was a problem at the start of this year. We can see this in the ADP jobs report, which will give us new data for May on 4 June:

ADP

January was an unusually weak month according to ADP, but things have rebounded since then. April’s net gain of +220k was a surprise to the upside, a full 70k more than April 2013. If that continues in May, we can expect a reading of +240k jobs in May – a figure higher than the +200k that most analysts are expecting. It’s probably a good bet, given that initial claims are rebounding – we’re not gaining more new jobs as much as we are not losing the jobs we have. I expect a figure at least +240k, perhaps +280k, which is to say that the bad figure in January was real but we’re making up for it in Spring. It really was a bad Winter.

Petro Poroshenko.  He has a lot to get done, and fast.

Petro Poroshenko. He has a lot to get done, and fast.

The other story that has dominated in 2014 has been the ongoing Ukraine crisis, which may also be on a path to resolution. Last week Petro Poroshenko was elected President by a wide margin, which may yet bring stability to the nation. More importantly, sanctions against Russia combined with a feverish hunt for new sources of natural gas to ease European dependence on Russia seems to have eased the conflict considerable.

Poroshenko has pledged to sign the Deep and Comprehensive Free Trade Agreement with the EU as soon as he takes office, which brings the conflict full circle to where it started. In doing so, he is turning his back on the competing arrangement, a so called Eurasian Economic Union being formed with Belarus, Russia, and Kazakhstan, signed this week. It draws the lines in a very stark way, but Poroshenko has to make it work and keep his country from falling into more chaos.

Speaking of the eastern provinces where civil war is breaking out, Poroshenko said last month that 80% of the people have no interest in joining Russia. “The main issues for these 80 percent of the people are the standard of life, unemployment and corruption.,” he told the Washington Post. “Only for a very few is this a question of a separatist movement.”

These are all issues that point to the agreement with the EU, which promises a net inflow of cash if Ukraine can manage real reforms. Quelling the civil unrest is going to be his top job, but making it stick is going to mean making the EU partnership work on both sides of the border. It may be hard for him to keep his coalition together if he has to fight corruption, too. The situation may be getting better, at least to the extent that Putin is willing to back down.   The crisis over the unpaid gas bills of Ukraine is dissolving, but there are many perilous times ahead.

The two big stories of the year are in flux right now, so there is a lot of news to come. Look for a good jobs report to be what the economy needs, and look for real progress in cleaning up Ukraine as Russia backs down from economic suicide through isolation. That’s what good news will look like in the coming month, if good news is in the pipeline.

13 thoughts on “Better News Ahead?

  1. We will know soon enough if you are right on jobs. Ukraine is something I can’t follow but if something was to happen there I would bet it would have happened by now. Putin isn’t going to invade I would guess.

    • That is about where it is now – we know nothing too unreasonable will happen. From there, who knows? It seems like it has to get better eventually.

  2. Big miss on the jobs number. Up only 179,000. Thoughts? Mister Sunshine going to change his tune? 🙂

    • I think I may have to, this was a big miss. All the signs were present for another big gain, but we’re still in the same pattern we’ve been in for 3 years – up about 190k jobs every month. It should start accelerating here if we’re going to get where we need to be by the end of the year.

  3. Pingback: Greed Beats Fear – For Now | Barataria - The work of Erik Hare

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