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Economic Update

July 8, 2013

Economic themes: Employment Situation, International Trade, Earnings Season, Greece.

  • Employment Situation: Payroll jobs increased by 195k in June, well above expectations of 161k, and the unemployment rate was unchanged at 7.6%, as the labor force increased by 177k.  The private sector led the way with notable gains in leisure and hospitality, professional services, retail, and healthcare, with government jobs holding the figure back.  The payroll growth figure is much closer to the implied 200k/mo growth necessary for the Fed to begin tapering quantitative easing by year end.
  • International Trade: The trade deficit increased by more than expected to $-45 billion in May, as demand for nonpetroleum goods increased significantly.  Notable deficits were with China, European Union, OPEC, Germany, Japan, and Mexico, with surpluses among Hong Kong, Australia, Singapore, and Brazil.
  • Earnings Season: Alcoa kicks off earning season today after the close.  The past quarter saw earnings rise by 1.8% among S&P 500 companies, and 73% of companies beat forecasts as many analysts revised forecasts downward prior to earnings releases, though 55% of companies missed on sales.
  • Greece: Awaiting the next €8.1 billion bailout, the Troika reported that Greece is behind in some areas of policy implementation, though remain committed to taking the necessary corrective actions.
  • Economic highlights for the week ahead:
    • Wednesday, 7/10/2013: FOMC Minutes.
    • Thursday, 7/11/2013: Jobless Claims.
    • Friday, 7/12/2013: Producer Price Index, Consumer Sentiment.

Municipal market themes: F/ETC, North Las Vegas, Cal RANs.

  • F/ETC: The Foothills/Eastern Transportation corridor is working to refund $2.4 billion in bonds, contingent upon extending the management agreement with CalTrans by 13 years, as it is attempting to extend maturities.  The restructuring would help make the toll road sustainable for the long term.
  • North Las Vegas: Fitch Ratings downgraded North Las Vegas limited general obligation bonds to ‘BB+’ from ‘BBB’ due to a second year of declaring a financial state of emergency.  The city is working with unions to close an $18.8 million deficit.
  • Cal RANs: The improving credit environment for California issuers was reflected in this year’s tax revenue anticipation notes.  Total issuance stood at $3.8 billion, down from $5.9 billion, as less municipalities across the state issued the notes to cure short term cash flow issues.

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