We had some surprisingly good economic news this week. I’m not saying that the economy is doing well, but it may be the case that things aren’t as dire as they seem. The trade deficit report for June, for example, came in narrower than expected. The deficit for May was also revised favorably.
The trade suggests that the government’s initial estimate for Q2 GDP of 1.5% is too low and is perhaps closer to 2%. This is good news because it indicates that weakness in Europe and the strong dollar aren’t hurting us as much as was feared.
The other good news was that jobless claims fell by 6,000. This is a very volatile metric with a lot of noise, but the trend is still going in the right direction. What we’re seeing is that companies are working hard to become more efficient.
On Wednesday, the productivity report showed that worker productivity rose by 1.6% in the second quarter after falling by 0.5% in the first quarter. The short-term downside of rising productivity is that it may lead firms to be cautious about expanding their payrolls.
I was also impressed to see that the median price for a new home in the second quarter was up 7.3% from the same period a year ago. That’s the strongest growth rate in six years. The housing news is especially promising because a pick-up in the housing sector has often been the catalyst for U.S. economic expansions.
This time around, we had an enormous over-supply of homes so prices went nowhere. At last, we’ve finally worked off that inventory.