Daily Commentary

MarketMinder’s View: The titular trend? America’s economic expansion chugs along despite lackluster jobs data. “That dichotomy of an expanding economy and a softening labor market presents a conundrum for policymakers at the Federal Reserve, complicating their efforts to determine whether the economy needs cooling or boosting.” A “jobless expansion” is an alleged negative because it presumes jobs support economic growth, i.e., if the labor market doesn’t rebound, the broader economy will eventually falter. That then supposedly raises the likelihood of a Fed policy mistake (e.g., not cutting rates to “support” the economy) or even recession ahead. And while monetary policy mistakes (i.e., leaving rates too low for too long or raising them too quickly) can have economic consequences, we see a couple of points worth noting here. For one, the argument relies heavily on some Fed official quotes to suggest increased uncertainty around upcoming policy decisions. Sounds spooky, but this is nothing new. Years of Fed meeting minutes show plenty of debate and disagreement among officials—we don’t see a novel threat here. Moreover, weak hiring doesn’t portend future economic weakness or contraction. We saw this through much of 2010 – 2012 and in the late 1990s (per FactSet). Yet no recession followed the former. The reason: Jobs are always and everywhere a lagging economic indicator, which is why you generally get handwringing about a “jobless recovery” early in a new cycle. Labor represents a big investment of time and money, and businesses tend not to add or reduce headcount unless absolutely necessary—which means action tends to follow a long stretch of economic weakness or contraction. To us, this piece is heavy on fearful speculation, not anything useful for investors.

MarketMinder’s View: A political update here, so please note MarketMinder prefers no party nor politician, assessing developments solely for their potential market and/or economic effects. Last Friday, Japan’s cabinet approved new Prime Minister Sanae Takaichi’s widely hyped economic package worth ¥21.3 trillion ($135.8 billion). It now goes to the legislature in the form of a supplemental budget, which will require opposition votes to pass given the government lacks a majority. So nothing here is final, but it is a starting point for debate. That means the provisions, which this article outlines, could get sanded down or left on the cutting room floor. So while there seems to be broad enthusiasm for things like targeted strategic investment across several industrial sectors, increased defense spending, public-private partnership investments and more, there is a risk of sentiment getting too far out over its skis. Note, too, that not all the measures here equate to direct government spending. A small example: “The government will set aside ¥2 trillion for its existing grant program that allows regional governments to flexibly decide how to use the funds to counter rising prices, hoping to encourage the introduction of measures such as the utilization of rice vouchers and electronic coupons.” A lot of this isn’t “stimulus” in the traditional sense of the word. So as the debate progresses, how expectations evolve and whether reality looks likely to disappoint will be worth watching.

MarketMinder’s View: Like recent auto loan worries, this piece points out the rising number of Americans falling behind on credit card payments, suggesting it signals underlying US economic weakness—especially among low earners. But, as always, scale and context are key. First and foremost, the article’s main data point is the share of credit card loan balances more than 90 days delinquent (courtesy of the New York Fed), which just hit 12.4%—the highest level since 2011. But the same New York Fed report notes credit card debt makes up just 7% of all US debt—not huge. With disposable incomes currently sufficient to cover this debt (and then some), we doubt this is a huge problem for households or the banks that lend to them both now and for the foreseeable future. Nor is this sneaking up on stocks. Credit card balances have been rising alongside household incomes for years, and NY Fed data show transitions into delinquency (both 30- and 90-days late) are right around historical averages. This is a slow-moving, well-known development, sapping any shock power. Mind you, we don’t dismiss the real hardships on households facing financial pressures right now—whether it be credit card debt, high living costs or anything else. But for investors, credit card debt lacks the scale or surprise to knock the economy or markets.