First Week of June Bursting Out with Good News

It was a week that was flush with positive news stories.

1. Personal income in April was reported to rebound sharply. Personal income jumped 0.5 percent in April far better than the forecast by most economists for a 0.2 percent drop. House investor's rental income also spiked up 3.1 percent after several months of decline. The combination of higher overall income and cuts in personal income taxes from the Stimulus Act resulted in a 1.1 percent jump in disposable personal income after only a 0.1 percent rise in March. Year over year, personal income growth improved to +0.7 percent from +0.3 percent in March.

2. The ISM's manufacturing report is moving incrementally just as we forecast here since March. Their index rose to 42.8 in May vs. 40.1 April. New orders were big news in the report. They rose above 50 for the first time in 17 months to indicate month-to-month stability for durable goods orders. Order backlogs are also improving and production was up more than 5-1/2 points in May over April.

3. Construction spending unexpectedly bounced in April. Construction outlays improved by 0.8 percent. The April gain also came in much better than most economist's views. Most were wrong looking for a 0.8 percent decrease.

4. The Pending Existing-Home Sales index jumped a much sharper-than-expected 6.7 percent in the data for April.

5. The Challenger, Gray & Christmas, Inc. corporate job cut index continues to plummet. It is now down 55% since its peak in January.

6. NY Fed Treasury Spread Model continues to show significantly improving economic conditions. The New York Fed states that, "Research beginning in the late 1980s documents the empirical regularity that the slope of the yield curve is a reliable predictor of future real economic activity."

7. Payroll employment in May was unexpectedly and significantly less negative than in recent months. Initial and continuing claims for unemployment benefits are now both falling. We have now likely seen the worst of the jobs deterioration. The unemployment rate currently, might just well prove to be the high based on the confluence of this week's positive employment data.