Data Confirms Soft Patch, Market Shrugs

Economic data published today brought more evidence that a soft patch in the economy has arrived. Today brought the sixth straight week of initial unemployment claims above 400,000, the Conference Board’s Leading Economic Index fell more than expected with a -0.3% decline in April, existing home sales were subpar again, and the Philadelphia Fed manufacturing survey came in much less than expected. The good news contained in the Philly Fed report was that the prices paid measure fell and that the number of employees went up materially. The bad news was that new orders fell considerably, unfilled orders actually contracted, and the average workweek declined markedly.

The odd thing about the day was that markets appeared to shrug off the data, and the Dow Transportation Average, typically a good growth barometer, had a good day. Could it be that the commodity correction we’ve had is already enough to refresh the economy?  I'd like to believe that markets are already looking through the soft patch and pricing in a reacceleration of economic growth, but I think it’s way too early in the slowdown to get complacent right here...