Jobless claims reach four-decade low

Last week was quiet in terms of economic data and political risks.

Greece is heading into debt negotiations this week, which we hope will wrap up before the next debt payment is due to the European Central Bank (ECB) on August 20. Wednesday’s Federal Open Market Committee (FOMC) meeting is likely to shed further light on the prospects for a September liftoff. Global economic data pointed to softer manufacturing activity in China and Europe, with flash purchasing manager surveys for July slipping.

In the United States, weekly initial jobless claims reached the lowest reading since 1973, and the index of leading economic indicators grew 2% in the second quarter, accelerating from just 0.2% growth in the first quarter. Data appear consistent with solid U.S. gross domestic product (GDP) growth in the second quarter. The preliminary indication for second quarter U.S. GDP growth will be released on July 30. Consensus expectations are for the U.S. economy to accelerate to 2.7% in the second quarter from a decline of 0.2% in the first quarter.

We believe the U.S. economy remains on solid footing and should grow at an average pace of 2.5% over the course of this year. Outside the United States, developed economies will likely see improving, but slow, economic growth, while emerging market economies are likely to see slower growth.

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Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank.

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