GDP Treads Water

The Lehmann Letter (SM) Yesterday this Letter spoke of the Federal Reserve treading water, waiting for more dispositive data before making a decision to increase interest rates. This morning’s Bureau of Economic Affairs release did not provide that assistance: The release began: “Real gross domestic product increased at an annual rate of 1.2 percent in the second quarter of 2016 … according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.8 percent (revised)…. “…The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures Continue reading

The Fed Treads Water

The Lehmann Letter (SM) Yesterday the Federal Reserve’s Open Market Committee, which sets the federal funds rate, the interest rate at which banks lend reserves to one another, said: The Committee said: “Information received since the Federal Open Market Committee met in June indicates that the labor market strengthened and that economic activity has been expanding at a moderate rate. Job gains were strong in June following weak growth in May. On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months. Household spending has been growing strongly but business fixed investment Continue reading

Existing-Home Sales Trending Higher?

The Lehmann Letter (SM) This morning the National Association of Realtors reported 5.57 million existing-home sales in June: The Relators’ bulletin said, “,,,existing-home sales maintained their upward trajectory in June and increased for the fourth consecutive month…” That gives the impression of a buoyant, growing market. But a glance at the chart reveals that existing-home sales remain in a range after recovering from 2009’s recessionary trough of under 4.0 million. Sales must break through 6.0 million before we can claim a true upward trajectory, and that level would still be well below the pre-recession 7.0+ million record. Existing Home Continue reading

Housing Starts Meander On Plateau

The Lehmann Letter (SM) This morning the Census Bureau reported 1.2 million housing starts in June: Housing starts continue to meander on a plateau that is only half their previous peak. Housing Starts (Recessions shaded) These figures are presented in thousands of homes started, so that 1.1 million is shown in its raw form of 1,080 for 1,080,000: 2013 January        888 February       970 March           994 April              826 May              920 June             852 July              891 August          898 September    860 October        921 November     1,104 December     1,010 2014 January        888 February       951 March           963 April              1,039 May              986 June             927 July              1,095 August          Continue reading

The Stock Market

The Lehmann Letter (SM) The economic and stock-market fundamentals are not strong. Economic output and corporate earnings, for instance, are stuck in neutral at best. So why is the stock market reaching new highs? Because interest rates are reaching new lows. The yield on 10-year US Treasury securities is less than 2.0%. Interest-bearing securities are an alternative to stocks. When interest rates fall, investors crowd into stocks. That sends the stock market higher. But interest rates can’t fall much further. But they could, at some future moment, rise. That would have a depressing effect on the stock market. Now the Continue reading

Unemployment Rises To 4.9%!

The Lehmann Letter (SM) This morning the Bureau of Labor Statistics reported that the June unemployment rate rose to 4.9%: Last month this Letter reported a 4.7% unemployment rate. Any rate below 5.0% represents full employment. So we should rejoice any time the unemployment rate rises and remains below 5.0%. In addition, job growth increased by a strong 287,000. All in all, a good report. Questions or comments? Contact Mike Lehmann at (To be fully informed visit © 2016 Michael B. Lehmann