Six years after the US economic contraction ended, the Federal Reserve has still not raised interest rates. Inflation has not accelerated as so many predicted. The economy is chugging along in an irregular fashion. The US economy appears to have ground to a near halt in Q1 15.
Colorado has famously legalized marijuana in what many consider a grand experiment regarding legitimate drug sales. Moreover, by many accounts, it is a resounding success. However, the legalization of marijuana is about more than just economics. When considering the impact of legalized marijuana use on society, does the economic gain track with its social ramifications?
Huge Boost to Economy of Colorado
The US dollar has largely been confined to yesterday’s ranges, as it consolidates recent gains. Today’s March retail sales report in the US is important. Retail sales have fallen three consecutive months. Ideas that this weakness was a function of two transitory forces will be tested. Those forces are the poor weather and the pullback after the biggest shopping spree in a decade (Q4 14 consumption component of GDP).
The broadly higher US dollar is extending last week’s recovery. In addition to the strong technical momentum, shockingly poor Chinese trade data is bolstering the greenback, which crushed currencies linked to commodities from Australia to South Africa to Latin America. The Russian ruble bucks the trend and extends its recovery, helped by the Brent testing $60 a barrel.
The key take away from recent developments is that the divergence theme that has lifted the US dollar remains very much in play even after the dovish spin given to the March FOMC meeting and the disappointing jobs data. The new cyclical low in the weekly jobless claims and continued improved in the JOLTS report give investors reasons to doubt that the weak job growth in March represents anything significant.
Weak fundamental data and rising savings and investment rates in the U.S. and China indicate recent trends towards economic improvement might be reversing.
American consumers are spending less and saving more. Some interpret this as an indicator that aggregate demand is depressed and economic growth is set to slow. Others have noted an economic contraction in the first quarter may be a possibility due in part to exceptionally cold weather. This is despite an easy comparison, noting that economic growth was sharply negative for the same period a year ago.
The market shrugged off Last week’s soft US employment data as a one-off disappointment. The JOLTS report and new cyclical lows in weekly initial jobless claims provide evidence of the continued improvement in the labor market. The ECB’s bond purchases are continuing to push down European rates while halfhearted reception to the US Treasury auctions this week has seen US yields rise.
The US dollar is broadly higher on follow through buying after recovering in North America yesterday, helped in part by the FOMC minutes. The minutes suggested a greater risk of a June or even a September hike than many investors seem to appreciate. The December Fed funds futures contract, for example, has nearly unwound the move spurred by the disappointing jobs data at the end of last week.
Over the last several decades, recycling has grown into an extremely prominent industry, not just in the United States, but also around the world. However, economics realities impact “feel good” green industries just as much as the worst polluting companies. Indeed, one common target for environmental reform, the oil industry, may actually be harming recycling as it suffers its own price collapse.
Much has been made of the widening gap between the richest and poorest in America. But, a recent study shows a difference in the ways that the classes make and spend their money and helps explain why issues like inflation and economic recovery are of such differing degrees of importance to the rich and the poor, respectively.
