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Lonski: Economy Moving Sideways

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  • Description

    Moody's chief economist John Lonski gives his outlook for the markets and economy.

  • Duration 3:27
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Well thank you.

Says stocks struggling after a flurry of economic data jobless claims rising sharply that's the last week moving -- five year lows.

December personal income grilled by the largest to matinee here is that was helped by dividend payouts is everybody tried to avoid higher tax rates on those.

And the latest reading on Chicago area manufacturing came in -- the best level in nine months that's positive.

So this all following the GDP report which signaled the first contraction in the US economy in three and a half years that's not -- so what -- -- this say about the recovery it's confusing.

John -- he's chief economist for Moody's capital markets and he joins me now send you start to that list that we just laid out for you.

It's basically all bad except.

The Chicago PMI number what's your take.

Well my view is -- -- is -- Suggests.

That this remains the -- -- economic recovery since the Second World War and we ought to be happy.

If the US economy grows by 2% once again.

It 4013.

This is an economy broke wise that is simply moving sideways.

Yeah I mean sideways even it is optimistic at this point it could go backwards it feels like.

You know Saint Louis fed -- -- data last week's charting the recovery in terms of GDP growth and saying is the worst recover we've -- had basically.

That's exactly right and thus we can't forget that this latest rally by equities.

Always much more to the expectation of the continuation.

Of very low bond deals that it does.

To expectations.

Of stronger earnings growth.

-- -- fact if we strip away the financials drop from those S&P 500 companies that have already reported.

Quarter earnings your earnings from continuing operations.

Are rob why don't more than 4% year over year like -- -- This is -- we wait let's test that theory because.

It's absolutely true that it seems like right now the movement in stocks is totally divorced from what's going on in the economy and instead it has to do with what the Fed is doing and are keeping interest rates -- this is what you're saying.

That is driving people in the stocks because it's the only place you can get a return.

But it does the economy have to move.

At a certain pace.

In order for people to not lose faith in the stock market even though we're saying you know they're disconnected but.

How much can companies take about -- sideways economy before but it does it eventually official for the stock market.

But it eventually well -- of the utmost importance that the US economy grows by enough.

To lift rates of resource utilization.

Which is a fancy way of saying that the unemployment rate.

-- to continue to edge lower if investors are are to have sufficient confidence and the equity market.

I -- -- set us up perfectly for tomorrow's data and what is your -- and that number on the jobless number.

Well once again the unemployment rate stays at seven point 8% and perhaps we -- a 155000.

Jobs to payrolls however we continue to grow payrolls like 155000.

Jobs per month.

Maybe by year's done.

The unemployment rate will be at seven point 57 point 4%.

That's -- -- to the Fed's liking but as long as the unemployment rate is drifting lower that could be more than enough to keep the equity market happy.

John Lonsky great analysis thank you so much of radical circle right how we appreciate it good staff.

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