Economy Shows Signs of Strength Despite Investor Pessimism

​Weekly jobless claims fell to their lowest level since December of 1969, showing signs of continued labor market strength. The U.S. trade gap narrowed in the second quarter thanks to increased foreign demand for U.S. goods and services, as well as repatriated cash. Lastly, Merrill Lynch’s survey of money managers revealed increased investor pessimism about the outlook of the economy for the next twelve months. 

• American investors say they are most pessimistic about the U.S. economy since the European debt crisis, a report last week details. In Bank of America Merrill Lynch’s monthly Fund Manager Survey for September, 24 percent of money managers say they expected global growth to slow down in the next twelve months, a sharp rise from the 7 percent in August. Trade tensions are not the only factors worrying investors. They also cited fears of a slowdown in Chinese economic growth and central banks raising interest rates, thereby shutting down easy access to credit.

• U.S. weekly jobless claims fell to a 49-year low last week, extending the labor market’s historically strong run this year. Initial jobless claims, according to the Labor Department, fell 3,000 to 201,000 for the week ending September 15th and are below the 210,000 expected by Wall Street Journal economists. The report also showed that the four-week moving average of claims, a steadier measure, is at its lowest since December 1969, as well, falling to 205,750. The Labor Department says there have been no disruptions to claims filed by Hurricane Florence.
  

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• The U.S. current account deficit narrowed in the second quarter as the country increased goods and services exports. The current account deficit is a measure of a nation’s trade and financial flows with other countries. According to the Commerce Department, the so-called “trade gap” narrowed from $121.71 billion deficit in the first-quarter to $101.46 billion in the second quarter. The report cites two reasons for the shrinking gap. One, U.S. companies are bringing more of their cash reserves back on-shore at a quicker pace. Second, foreign purchases of industrial supplies, ag products, consulting services, and intellectual-property use had driven export growth in the quarter.