[1]
Disco music, bell bottom pants, and low unemployment… Who does not love 1973???

So what is the deal with 1973? It was the last time initial unemployment claims were at the level reached last week, 247K. While March unemployment ticked up, that had to do with strengthening optimism in the job market. As I mentioned last week these figures are fantastic, not only due to historical lows, but rather the fact that the US population has grown substantially since 1973. This could lend to probability of a Federal Reserve Board (FRB) rate hike.

US Data
Sunday, last week, Oil producing countries came together to attempt to reach an agreement to apply caps on production. No agreement was reached. This should had led stock and energy prices lower, however the S&P 500 advanced 0.53% and Energy specifically advanced 5.2%[2]. Much of the remaining optimism in the energy markets comes from a meeting in Russia in May. Hope still exists (while moderate) for a cap agreement to be reached.

Housing Data
The data for the US housing market was mixed last week. Building permits and housing starts were lower than last month, as is expected for early spring. To the contrary, existing home sales came in strong, rebounding from a weak February. They increased 5.1% or 260,000[3]. Given the time of year it is not surprising to see existing homes sales out pace housing starts. This trend should balance out as reporting enters late spring.

International Data
The Eurozone manufacturing and services data softened as a region. France production improved, but the more impactful German production pulled back in April. European Central Bank President, Mario Draghi, warned of weak inflationary prices in the next few months as a short-term trend.

China GDP came in at 6.7% as expected, but some underlying risks are mounting. The redirection of economic activity towards industrial production signals a return to old financing of economic activity. Also, some state owned entities are struggling to meet their obligations. A failure by China to back these entities would cause concerns about the assurances previously believed to be there for these companies.

Conclusion
As the labor market strengthens the outlook for inflation should strengthen as well, causing the FRB to take action to moderate the economy… Moderate the economy… it just sounds foolish given the current state of the economy and likely is foolish! Markets are estimating one rate hike in 2016 and it likely is not coming in April…

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[1] http: www.freepik.comfree-vectorbright-disco-ball_778347.html Designed by Freepika

[2] www.jpmorganfunds.com – weekly market recap

[3] www.investing.com – economic calendar