3 Stories in the global economy that should not go un-noticed
Despite some disappointing economic data, markets moved higher again last week. Retail sales contracted in March for the second time in three months, and consumer confidence tumbled in April in a double-whammy that sent equities into a spiral early last week.
For the week, the S&P 500 rose 2.29%, the Dow gained 2.06%, and the Nasdaq grew 2.84%.
Here are the 3 stories this week that rose above the noise:
The Jobs Machine
Recently, an article from The Economist cited how important immigration of high-skilled workers to the U.S. is for creating new innovative companies and more jobs. Roughly 40 percent of today’s Fortune 500 firms were founded by immigrants or their children. Many of these companies are in the high-tech sector, where every new job created is estimated to create more than four jobs in the local economy.
However, recent trends show the proportion of startups founded by immigrants is falling. Many believe this is a result of the government making it more difficult for immigrants to obtain permanent residency. If this trend continues, it could mean more jobs for U.S. competitors and less jobs here at home.
Housing Starts in U.S. Surge on Demand for Multifamily Units
Housing starts in March jumped more than expected, as detailed in this Bloomberg article. Starts in March reached over a 1 million annual rate, which is the highest level since June 2008. While single-family housing starts came in below expectations, multifamily starts rose 31 percent.
The rebound in housing starts back to close to historically normal levels has positive implications for economic growth and employment, with residential investment providing a boost to GDP in 2012 for the first time in seven years and looking set to provide a bigger boost in 2013. One modest concern in today’s report was a decline in building permits, an indicator of future construction. Nonetheless, the solid current level of housing starts is likely to continue providing an economic boost in the near term, helping to overcome the headwinds of higher taxes and spending cuts.
IMF Reduces Global GDP Forecast, but still sees 3.3% Global Growth in 2013
The International Monetary Fund (IMF) trimmed its global growth forecast but still expects the global economy will expand 3.3 percent this year, less than the 3.5 percent forecast in January, after 3.2 percent growth in 2012.
The IMF sees the 17-country euro area shrinking 0.3 percent with a 50 percent chance of recession the most immediate threat to global growth. Its outlook for Japan, the world’s third-largest economy, was raised to 1.6 percent growth this year from 1.2 percent previously. Its U.S. growth outlook was reduced to 1.9 percent from 2 percent. The forecast for global growth next year is 4 percent, compared to 4.1 percent in the IMF’s January projections.
Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team.
