Economists Divided on Direction of Economy, Inflation
Friday, July 11, 2008

With the second half of the year just beginning, economists are questioning if the worst of the U.S. downturn is already over, or whether uncertainty about rising prices spells more gloom and doom for the economy.

Thursday's BLS nonfarm payrolls report for June showed the sixth month of consecutive declines in the U.S. economy, totalling 438k net losses this year and indicating further deterioration is to come. However, economists say it is not job losses that are the major concern heading into the third quarter, but rising prices.

While there is pressure for the Fed to combat inflation, the central bank remains constrained not only by broad-based, anemic growth, but by the fact that soaring energy prices are caused by increased global demand rather than by U.S. consumers.


Charmaine Buskas, senior economics strategist at TD Securities, said the first half of 2008 "didn't see as much fallout as we would have expected," noting that the downswing in jobs was much weaker than in previous downturns. She noted job losses have yet to exceed 88k per month, whereas previous downturns have reported monthly declines of more than 100k and even as many as 200k, which "suggests recent deterioration has been tame."
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The Week Ahead
Thursday, July 10, 2008

This week will begin with a number of Federal Reserve speakers and see the release of housing data in both Canada and the U.S. on Wednesday. The relatively quiet week will culminate on Friday with Canada's employment report for June, which is expected to be a key market focus.

Whereas June's change in employment is anticipated to increase by 10k, following a previous increase of 8.4k, the unemployment rate is expected to hold steady at 6.1%.

Economists from Scotia Capital, however, are calling for an increase in the unemployment rate as well. "The impression that Canada's labour market is holding up better than in the U.S. is generally true. As markets look forward to next Friday's Canadian jobs report for June, however, it would be a mistake to ignore emerging pitfalls," they wrote in a research note to clients.


"Canada's buoyant housing market will continue to support construction employment, while public sector employment is expected to gain once again. Nonetheless, this will likely only lead to a gain of around 5,000 workers. As a result, we are expecting the unemployment rate to move up slightly to 6.2% in June."

In the U.S., meanwhile, June's University of Michigan consumer sentiment index is scheduled to be released. Economists are forecasting a preliminary reading of 55.5, down from May's 56.4.
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American Cities See Record Annual Foreclosure Rate Increases in Q2

Record high foreclosure rates in the second quarter were reported in Los Angeles, Seattle, Miami and New York, according to a report issued by PropertyShark.com.

Los Angeles led the four cities with a 282.01% increase in the second quarter compared to last year's Q2. Los Angeles reported a record 14,505 new residential foreclosures according to the report issued by PropertyShark.com. The amount of newly scheduled trustee sales soared by 63% in comparison to the previous year.

"The foreclosure chart is unfortunately starting to look like a ski jump, with the current number of new trustee sales this quarter increasing at one of the highest rates we have seen over the last two years," said Property Shark Foreclosures Product team member, Adina Dumitru.


New York City reported 961 new household foreclosures in Q2 2008, a 49.22% increase from the Q2 2007. Single family homes located in Queens and Brooklyn made up the bulk of properties that were being auctioned, the report noted.
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