US Economy: Mostly Downward Revisions

      It seems that every year follows this same script. Every year beginning with 2010 since the US recovery begun anyway. The US economy shows strong signs of recovery but by later second quarter there is worry that the recovery is stuck in neutral.

      To be sure so much of the problem as been driven by Europe. Hey let's face it-the US is the one who deserves the most to blame as far as getting us here. However now that we're here we've done a better job. Why that is are a few factors.

      One is that we have actually managed to dodge the austerity bullet in the US. Yes we have had some austerity but not the comprehensive level we've seen in the EU and UK.

      Another large reason is that the monetary structure of the EU is so problematic where the euro countries have given up monetary sovereignty to a a central bank that is way to ginger about being aggressive happy to remain proud of 2% of inflation never mind if the whole thing goes up in smoke. It may well do so. Citigroup for example sees the chances of a Greek exit at 50-75%. Other analysts have moved from talk of "possibility" to "probability."

      While some may think that a Greek departure could be "orderly" Goldman Sachs doesn't see the odds of an orderly departure that good

       "If Greece unilaterally quit the euro zone and reintroduced the drachma, euro zone GDP could be reduced by up to 2 percentage points, even if "substantial" counter-measures were taken by policymakers (May 28)."

       http://www.cnbc.com/id/47617621

       There seems to be a consensus that the euro could end up in a rough parity with the dollar-the number you get a lot is $1.10.  In a bad market-treacherous for any retail investor, maybe it's a good time to short the euro or go long the dollar.

        Now the bad US data:

        "Private employers created 133,000 jobs in May, payrolls processor ADP said. That was below economists' expectations for 148,000 jobs."

        "The report comes ahead of Friday's closely watched employment report for May, which is expected to show that nonfarm payrolls increased 150,000, up from a paltry 115,000 in April. Job creation accelerated between December and February as the economy got a boost from an unusually warm winter."

          http://www.cnbc.com/id/47627947

          Unemployment claims trickled up:

           "Initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 383,000, a Labor Department report showed. Claims have now risen in seven of the last eight weeks."

           "Separately, gross domestic product increased at a 1.9 percent annual rate in the first quarter, down from the 2.2 percent the Commerce Department had estimated last month. The economy grew at a 3.0 percent rate in the fourth quarter."

           "The report also showed that after-tax corporate profits dropped for the first time in three years last quarter."

            So now corporate profits are finally taking a hit. There were a few bright spots with regard to certain types of business investment and consumption numbers revised upwards.

            "On the positive side, business spending on equipment and software was revised up to show a much firmer 3.9 percent growth rate instead of the previously reported 1.7 percent."

            "Consumer spending grew at a 2.7 percent pace instead of the previously reported 2.9 percent. It was still an acceleration from the fourth-quarter's 2.1 percent pace."

             "Growth in the second quarter is currently estimated at a pace of about 2.5 percent."

             So in any case, if things go true to form then we should expect to see the economy come back later in the year. Usually we get a good start, we stall in late Spring and Summer, and then it comes back in the Fall. True things look bad right now with the apparently very real possibility that Greece could be leaving the euro and that major contagion will result.

             But things didn't look any better last year. And in some ways the fall out in Europe of course only makes our debt and banks look even better.