Looking at the latest observations from the St Louis fed it appears the economy is close to bottoming. Using March 2009 as a baseline, unemployment has risen 0.6% in July from June, after double digit monthly increases in May and June. Hopefully August will show continued improvement.
|Civilians Unemployed – 15 Weeks & Over (thousands)||5715||6211||7002||7833||7880|
GDP is still contracting but the trend is similar to unemployment.
Inflation is virtually non existent. The big question is if the fed can control it down the road which depends on the governments ability to reign in spending in an effort to reduce/control the debt. That said my guess is inflation will eventually rear its ugly head, just don’t know if it will go high enough to kill any stock market rallies. In any event its not a problem in the near future.
The data may be an anomaly so another month or quarters worth of data should confirm a direction, hopefully positive. If this positive trend proves out, it may stop being a drag to the markets and more importantly improve consumer confidence when it comes to spending.