April 03, 2013 | By Scott Minerd
The U.S. economy continues to improve, and the housing market and construction spending in particular will make larger contributions to GDP than they have in years. Markets, though, have a tendency to occasionally fall out of line with fundamentals. In 2011, for instance, the economy was gaining strength, but a temporary pull-back in the markets put stocks off nearly 20%, and high yield and bank loan spreads exploded.
Today it appears that the rally that has been in place since the fall of 2012 is becoming frayed. From credits to stocks, there are indications of tiredness, with each advance posting less robust gains than the prior one. This does not portend a bear market, but it does appear increasingly likely that despite the favorable longer-term economic outlook, we will see some sort of correction or consolidation in the near-term.
Five years since the last recession started, payrolls in the U.S. private sector are still 2.9 million less than pre-recession levels. The construction sector, which usually employs only 6% of U.S. total jobs in the private sector, has lost 1.7 million jobs during the same period. With the recovery in the housing market accelerating, hiring in the construction sector is regaining momentum. Over the past three months, construction payrolls have increased by 111,000, accounting for approximately 18% of total job growth in the private sector.
Source: Bureau of Labor Statistics, Bloomberg, Guggenheim Investments. Data as of 2/28/2013.
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Global CIO Scott Minerd and Head of Macroeconomic and Investment Research Brian Smedley provide context and commentary to complement our recent publication, “Forecasting the Next Recession.”
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