E The Daily Shot And Data - June 20, 2016

Greetings,

1. Let's begin with the United States where we have more evidence of a softening labor market. To be sure, we don't see any significant layoffs as the jobless claims remain quite low. However, hiring may be slowing. Below is the Conference Board's online help-wanted index.

Source: The Conference Board

While job openings in the US are near record levels, the rate of increases in job openings has slowed. When combined with the May payrolls report, there are clearly some downside risks here.

2. US residential construction activity is still relatively soft as growth in US single-family home construction permits stalls. Will lower mortgage rates help?

3. The WSJ survey of economists suggests that the US recession probability is elevated relative to the 2014-2015 period.

Source:  ‏@WSJecon

4. On the other hand, the second quarter GDP growth is tracking 2.8% according to the Atlanta Fed's GDPNow.

Source: @AtlantaFed

The NY Fed's Nowcast, however, has Q2 GDP at 2.1%. Note that Goldman is projecting 3.2%. It will be interesting to see where US Markit PMI indicators come in for May - should know later this week.

Source: NY Fed

5. The ECRI US index of leading indicators is growing at the fastest rate in over 3 years, which is consistent with Goldman's forecast.

Source: @businesscycle

6. The US 5yr real rate moved lower again, which indicates easier monetary conditions.

7. The 10yr and 5yr inflation expectations are now the same - a flat breakeven curve. This trend suggests that the markets increasingly see "lower for longer" inflation dynamics. It's hard to reconcile this with some of the bullish oil price forecasts for the next decade.

1. Speaking of oil, crude prices jumped sharply as Brexit fears ease.

Source: Investing.com

2. US forward inflation expectations (5x5) completely decoupled from oil. Something has to give here - possibly after the EU Referendum vote in the UK.

  3. US oil rig count rises for the third week. Will US crude oil production follow?

Source: Investing.com

4. This next chart shows that the global oil price correction was mostly a supply issue, although softer demand expectations early this year have not helped.

Source: NY Fed, @joshdigga

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