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Economy Up

The economy is on the road to recovery and analysts are optimistic


Crutsinger 14 [Martin Crutsinger, “U.S. Economy Shrank at 1 Percent Rate in Q1” Real Clear Politics, May 29, 2014. http://www.realclearpolitics.com/articles/2014/05/29/us_economy_shrank_at_1_percent_rate_in_q1_122791.html#ixzz35WH7pYib]

While one definition of a recession is two consecutive quarters of contraction in the GDP, there is no concern that a negative reading in the first quarter could be a sign the economy is about to topple into a downturn. The widespread belief among analysts is that the weakness in the first quarter was based on a variety of temporary factors that will be quickly reversed once the weather warms up. Many economists estimate that the economy in the current April-June quarter is growing at an annual rate of between 3.5 percent and 4 percent as pent-up demand by consumers fuels stronger growth. Analysts are also optimistic that growth will remain above 3 percent in the second half of this year, giving the economy the kind of momentum that has been lacking for much of the first five years of recovery from the country's worst recession since the 1930s. If growth does pick up, that should promote stronger hiring and help drive the unemployment rate down further. In one of the strongest signs of improvement, employers added 288,000 jobs in May, the biggest hiring surge in two years. That helped push the unemployment rate down to 6.3 percent, its lowest point since 2008.¶ The economy is facing fewer hurdles this year than last year, when government spending cuts and higher taxes trimmed growth by an estimated 1.5 percentage points. A government budget truce has also lifted, at least through the rest of this year, much of the uncertainty that had been weighing on the economy over the potential threats of further government shutdowns or market-rattling battles over raising the government's borrowing limit.



The economy is expected to recover over the next few quarters – IMF agrees


Lee 6/22 [Don Lee, “5 years after the Great Recession: Where are we now?” LA Times, June 22, 2014. http://www.latimes.com/business/la-fi-recession-economy-20140622-story.html#page=1]

Despite this winter's doldrums, the U.S. economy is expected to outpace those of other major developed nations this year, including three of the world's top five economies — Japan, Germany and France. None of them is projected to come close to matching American growth, which economists expect will be about 3% for the rest of this year and next. "A meaningful rebound in U.S. economic activity is now underway, and we expect growth to exceed potential over the next few quarters," Christine Lagarde, managing director of the International Monetary Fund, said this month. China is likely to keep sprinting ahead as it closes in on supplanting the U.S. as the largest economy. But it started way behind economically, so big growth spurts are not unexpected.¶ With more than three times the population of the U.S., China has an income per person that is less than one-fifth of America's $53,000. So it will be decades before the average Chinese citizen approaches a standard of living comparable to the typical American's.


The economy is on the rise treasury drops, employment gains, rising payrolls, stable credit rating, governmental security yields, average wages, participation rate


Kruger 6/6 [Daniel, syndicated economics reporter, “Treasuries in Biggest Weekly Drop Since March after Jobs,” Bloomberg, 2014, http://www.bloomberg.com/news/2014-06-06/treasuries-advance-as-u-s-employment-growth-slows-in-may.html]

Treasuries posted the biggest weekly drop in three months as employment gains in May pushed U.S. payrolls past their pre-recession peak and the jobless rate held at an almost six-year low. The U.S.’s AA+ credit rating was affirmed by Standard & Poor’s, which cited the resiliency and diversity of the economy, almost three years after downgrading the nation for the first time. Yields on government securities in the euro-area fell to record lows a day after the European Central Bank cut interest rates, sparking a global rush for bonds. Federal Reserve Chair Janet Yellen said May 7 labor-market conditions “are still far from satisfactory.” “The overall economy from a job perspective is finally trending in a good way,” Jason Rogan, managing director of U.S. government trading at Guggenheim Securities, a New York-based brokerage for institutional investors. “From the Fed’s perspective, you’re starting to see very good job growth.” Benchmark 10-year yields rose less than one basis point to 2.59 percent as of 5 p.m. in New York after earlier dropping five basis points, based on Bloomberg Bond Trader prices. The price of the 2.5 percent security due in May 2024 dropped 1/32, or 31 cents per $1,000 face value, to 99 7/32. Yields on the securities climbed 11 basis points this week, the most since the five days ended March 7, and rose as high as 2.64 percent yesterday, the most since May 13. Two-year note yields added two basis points to 0.40 percent, the highest level since May 13, gained three basis points this week for a second five-day gain. Credit Rating New York-based S&P said today in a statement that there is a less than one-in-three probability that the U.S.’s credit ranking will change in the next two years. The outlook on the rating is stable. Since the August 2011 downgrade from AAA, record budget deficits have shrunk, economic growth accelerated, the dollar rallied, stocks climbed to all-time highs and Treasuries strengthened their hold as the world’s preferred haven from turmoil. Still, S&P said a polarized policy-making environment and high general government debt and budget deficits constrain the ratings. “After the rating of the U.S. came under pressure because of the debt ceiling and government shut down, we actually saw a better cost of funding for the government,” David Coard, head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors. “We’re still the safe haven everybody seeks when there’s uncertainty in the world. I don’t think that’s changed.” ‘Continued Growth’ Two-year notes dropped as employers added 217,000 jobs last month, according to the Labor Department, after a revised 282,000 increase in April. That compared with the median forecast in a Bloomberg survey for a 215,000 employment increase. Estimates ranged from increases of 110,000 to 350,000. The unemployment rate was unchanged at 6.3 percent. May marked the fourth-straight month payrolls have increased at least 200,000, the first time that’s happened since September 1999 to January 2000. “We’ve seen continued growth within the labor market,” Sean Simko, who oversees $8 billion at SEI Investments Co. in Oaks, Pennsylvania. “The sub-components continue to improve, but not to an extent that’s enough to shake up the bond market.” The participation rate, which indicates the share of working-age people in the labor force, held at 62.8 percent, matching the lowest since March 1978. Average hourly earnings rose 0.2 percent to $24.38 in May from $24.33 the prior month. They were up 2.1 percent over the past 12 months.



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