This week we continue the theme begun last week—examining the economy and the stock market as we turn the page on a New Year.

This week we present three articles that in varying degrees, address the economy and markets from different angles.  The first article compares present conditions to those that existed prior to the last run-up in house prices and stock prices.  The second article reports on the U.S. spending bill that signals divided government is prepared to co-operate and pass a budget.  The third article further illuminates the jobs report of January 10, which sent mixed signals about the state of the economy.

Don’t fret about soaring asset prices—this time is different.   Despite rising house prices and stock indices breaking records, don’t worry. This time really is different.   “What matters for economic stability is not the level of asset prices, and their subsequent deflation, but leverage and contagion….loan to value ratios are rising again, but not yet to levels that are remotely dangerous…the upturn in the business cycle in the US and the UK

[also] reduces to some extent the conflict between economic stability and financial stability…the probability of a rerun of what happened in the past decade is thus comparatively low.” (Financial Times—tired subscription model)

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Budget negotiators present U.S. spending bill.  And for some good news, lead negotiators for the House and the Senate presented a $1.01 trillion spending bill that would give the U.S. government enough money to meet obligations through October and avert another shutdown.  The “omnibus” bill would cover all discretionary spending.  “Not everyone will like everything in this bill, but in this divided government a critical bill such as this simply cannot reflect the wants of only one party,” the lawmakers said in a joint statement.

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Both better, and worse, than it looks. Last week we examined the jobs report released January 10, and this week we look a little more closely.  “A surprisingly weak December jobs report suggests the optimism [entering the New Year] got ahead of itself.”  The headline number of just 74,000 jobs created is not the one to fret about.  The unemployment rate dropped from 7% to 6.7%, which on the surface may seem like good news.  A more fundamental reason to worry, however, is that the number of people in the labor forced dropped precipitously, to a participation rate of 62.8%, the lowest since 1978.  This latest news gives some credence to the ‘secular stagnation theory’ posed by Larry summers.  For further reading on the ‘secular stagnation’ thesis, click this link:  Thesis

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And in case you missed itclick here to read last week’s blog post which focuses on the mixed market signals in the New Year.

We hope you enjoy reading these articles along with us and that you find them informative.  Please forward this to your friends and family.

J. Mark Nickell & Co.

Disclosure – The articles mentioned in This Week with J. Mark Nickell & Co. are for information and educational purposes only. They represent a sample of the numerous articles that the firm reads each week to stay current on financial and economic topics. The articles are linked to websites separate from the J. Mark Nickell & Co. website. The opinions expressed in these articles are the opinions of the author and not J. Mark Nickell & Co. This is not an offer to buy or sell any security.  J. Mark Nickell & Co. is under no obligation to update any of the information in these articles. We cannot attest to the accuracy of the data in the articles.